Subsidiary units must respond to emerging threats including disaggregation of value chains and increased headquarters monitoring and control which have lead to a cycle of subsidiary decline. We recognize the value of subsidiary initiatives as a short term response but argue that subsidiary long term survival and growth will depend on the unit’s ability to align with its parent strategic activities and knowledge base.
This research is part of an ongoing quantitative and qualitative study programme of Irish subsidiary operations of foreign MNCs. This paper integrates our broader research to date with both in-depth interviews of a focal case with a comprehensive review of the literature relating to MNC and subsidiary management to identify how subsidiaries can respond to current challenges.
In contrast to the dominant view in the literature, our research found that subsidiaries can respond to emerging threats by integrating their activities and deepening their alignment with their parent operation. We identify three significantly important features in developing alignment – strategic embeddedness or ensuring development of subsidiary strategy in line with headquarters stated objectives, relational embeddedness determined by trust relationships and a history of consistent subsidiary delivery and finally knowledge embeddedness facilitated through coalescent knowledge creation and collaborative effort in line with headquarters strategy and direction.
Results from the survey are subject to the standard limitations and a larger pool of interviewees may have reinforced the qualitative findings.
Subsidiary managers need to be aware of how closer integration of unit activities with headquarters
and the management of knowledge outflows can reduce the risk of relocation and better position subsidiaries for survival and growth.
By demonstrating the benefits of alignment with headquarters, this paper provides a valuable alternative perspective to the predominant view in the literature that subsidiary survival is dependent on subsidiary initiative. Capturing both the subsidiary and parent perspectives addresses a significant limitation of many studies and provides valuable insights.