Subsidiary Strategy - How the Subsidiary of the Multinational Corporation Succeeds

Abstract

The objective of this study was to examine how the subsidiary of the multinational corporation succeeds. The research method used is holistic single case study with a successful subsidiary of a multinational corporation as the unit of analysis. The study s sources of evidence were interview, documentation, and archival records.

First, the results show that a successful subsidiary has a strategy of dual embeddedness. It builds and maintains social capital in both the internal corporate environment and the external host country environment and achieves competitive advantages and high performance as a consequence. The subsidiary pursues dual embeddedness through strategic alignment in the internal environment and entrepreneurial orientation in the external environment. The successful subsidiary s internal embeddedness facilitates substantial advantages in its external environment; similarly, its external embeddedness promotes certain advantages in its internal environment.

Second, the results show that a successful subsidiary has a strategy of ambidexterity. It pursues both exploitation and exploration in combination with its MNC, though the former yields better results than the latter. The subsidiary heavily exploits explicit and tacit knowledge from its internal environment for successful use in its external environment. Simultaneously, it pursues explorative activities such as innovative inter-subsidiary collaboration; moreover, it wishes to pursue subsidiary initiative. The successful subsidiary views its parent as highly facilitative for both exploitation and exploration.

This study provides texture into the relations between the internal and the external environment from the perspective of the subsidiary. It shows the existence of a successful subsidiary strategy involving both entrepreneurship and strategic alignment. Furthermore, this study gives support to the relevance of ambidexterity on subsidiary level. Last, the present study points to the subsidiary s struggle of achieving exploration in combination with its MNC.