What determines the value an MNC's headquarters adds to its own affiliates? In this paper, we shed light on this question by linking the embeddedness view of the multinational corporation to the literature on parenting advantage. We test our hypotheses on an original dataset of 124 manufacturing subsidiaries located in Europe. Our results indicate that the external embeddedness of the MNC is an antecedent to headquarters' value creation. We find that headquarters' investments into their own relationships with the subsidiaries' contexts are positively related to the value added by headquarters. Furthermore, this relationship is stronger when the subsidiary itself is strongly embedded. We discuss implications for the MNC literature, embeddedness research, and the literature on parenting and headquarters' roles. (authors' abstract)

As a part of multinational corporations (MNCs), subsidiaries operate in distinct host countries and have to deal with their external context. Host country political embeddedness, in particular, helps subsidiaries to obtain knowledge and understanding of the regulatory and political context, and to get access to local networks. Moreover, they get some guidance and support from their headquarters. Distance between MNC home and host countries, however, alienates subsidiaries from the MNC and influences the extent of subsidiary host country political embeddedness. We suggest that the host country political and regulatory context moderates the effect of distance on subsidiary host country political embeddedness by reducing the need and/or value of headquarters support. Using a sample of 124 European manufacturing subsidiaries, we find that distance (space) and context (place) matter jointly: the impact of distance is stronger for subsidiaries that operate in host countries with low governance quality and low political stability in place.

Integrating distance research with the behavioral strategy literature on MNC headquarters-subsidiary relations, this paper explores how the distance between headquarters and subsidiaries relates to value added by the headquarters. We show for 124 manufacturing subsidiaries in Europe that, on average, distance is unrelated to value added by headquarters but that this effect is contingent upon the extent to which the subsidiary is locally embedded. Only after a certain threshold level of subsidiary embeddedness, distance is negatively related to headquarters value added. This effect is more pronounced for cultural, economic, and administrative distances than for pure geographic distance, highlighting the critical role of contextual variation for MNCs.

Modern management literature highlights the importance of headquarter and country organisations working together in an interdependent fashion to improve their performance. However, empirical support for this link is scarce; moreover, the theoretical framework on the factors that may affect these relationships and the prerequisites for fostering them is limited. Current literature highlights the importance of high levels of interdependency between HQs and subsidiaries for the performance of the subsidiary, but a direct relationship has not been established. In this research, the link between headquarter-subsidiary interdependence and subsidiary-level performance is empirically probed and explored, using a longitudinal, multi-method approach that combines quantitative and qualitative data. Responses to surveys from 53 marketing and business managers are used to describe the interdependence levels, which are then combined with actual launch outcomes data for Xarelto® in their respective countries. Based on the survey results, a direct link between headquarter and subsidiary interdependence and the launch success of Xarleto® could not be established and subsidiary interdependence and uptake levels were used to select 10 countries for further explorative interviews. The results of these highlighted that, through fully collaborative and supportive headquarter subsidiary relationships, improved knowledge transfer, avoidance of duplication and leveraging of materials and expertise, product launch outcomes in the subsidiary could be enhanced. Moderators to these relationships and factors to maintain these relationships will be presented and this research and a link to network theory and social capital will be made. This research provides several practical recommendations that can be taken into consideration when planning future launches to enhance product uptake in subsidiary markets.

This paper proposes an agency model for headquarters subsidiary relationships in multinational organizations with headquarters as the principal and the subsidiary as the agent. As a departure from classical agency theory, our model is developed for the unit level of analysis and considers two root causes of the agency problem - self-interest and bounded rationality. We argue that in the organizational setting, one cannot assume absolute self-interest and perfect rationality of agents (subsidiaries) but should allow them to vary. We explain subsidiary level variation through a set of internal organizational and external social conditions in which the headquarters-subsidiary agency dyad is embedded. We then discuss several agency scenarios reflecting various levels of selfinterest and rationality that lead to different manifestations of the agency problem. The proposed framework can inform more relevant applications of the agency perspective in organizational studies and motivate future research.

Modern management literature highlights the importance of headquarter and country organisations working together in an interdependent fashion to improve their performance. However, empirical support for this link is scarce; moreover, the theoretical framework on the factors that may affect these relationships and the prerequisites for fostering them is limited. Current literature highlights the importance of high levels of interdependency between HQs and subsidiaries for the performance of the subsidiary, but a direct relationship has not been established. In this research, the link between headquarter-subsidiary interdependence and subsidiary-level performance is empirically probed and explored, using a longitudinal, multi-method approach that combines quantitative and qualitative data. Responses to surveys from 53 marketing and business managers are used to describe the interdependence levels, which are then combined with actual launch outcomes data for Xarelto® in their respective countries. Based on the survey results, a direct link between headquarter and subsidiary interdependence and the launch success of Xarleto® could not be established and subsidiary interdependence and uptake levels were used to select 10 countries for further explorative interviews. The results of these highlighted that, through fully collaborative and supportive headquarter subsidiary relationships, improved knowledge transfer, avoidance of duplication and leveraging of materials and expertise, product launch outcomes in the subsidiary could be enhanced. Moderators to these relationships and factors to maintain these relationships will be presented and this research and a link to network theory and social capital will be made. This research provides several practical recommendations that can be taken into consideration when planning future launches to enhance product uptake in subsidiary markets. / Bayer Corporation (US)

In the past several decades research has emphasized innovation development and transfer as key issues when investigating the multinational enterprise (MNE). This thesis focuses on the question of what factors make headquarters involve itself in innovation transfer projects taking place between a sending and a receiving subsidiary within the MNE. This relates to headquarters active participation and role in the organization of resources (structure) and flows (processes) within the MNE. Using a database covering 169 innovation transfer projects the empirical analysis reveals that distances influence headquarters involvement, albeit in different directions. Systematic differences based on subsidiary and innovation characteristics and headquarters involvement is found. Not only subsidiary characteristics are of importance for headquarters involvement, but also the embeddedness of the subsidiary hosting the innovation transfer project. More specifically, physical and cultural distance between the sending and receiving subsidiaries influence headquarters involvement in the transfer negatively, whereas linguistic and economic distance between the subsidiaries conducting the transfer have a positive influence on headquarters involvement in innovation transfer. Looking more closely at the innovations subject to transfer the results suggests that innovations perceived as complex and important are favored for headquarters support. The same is true for innovations that are related to the core business of the subsidiary. At a subsidiary level, powerful subsidiaries initially receive more of headquarters support, but as subsidiary power increase, headquarters becomes less involved, i.e., a curvilinear effect of power is found. Acquired subsidiaries tend to become favored for headquarters involvement in transfer relative to greenfield subsidiaries. Finally, the results indicate that headquarters involves itself in transfer projects when the subsidiaries hosting the transfer projects have been relationally embedded during the innovation development phase. Theoretically, headquarters involvement can be conceptualized as orchestration of innovations within the MNE, and as a form of resource allocation. Thus, this thesis contributes to the understanding of what influences intra-MNE resource allocation, as well as what factors capture the attention of headquarters leading to innovation orchestration. Headquarters involvement in innovation transfer has implications for setting subsidiaries on evolutionary trajectories.

Background: MNEs are more relevant than ever in today’s economy as MNEs stand for one third of global production and 50% of global exports. In Sweden there are roughly 3 958 Swedish owned international companies with at least one subsidiary abroad. As the world has become interconnected and digitalization makes it easier for MNEs to gain customers, the competition has grown tremendously. Subsidiaries within MNEs play a vital role in enhancing competitive advantage through strategic embeddedness and competence development. The vast expansion of MNEs comes of course with problems when expanding quickly and creating subsidiaries. New questions arise as they must choose what market and entry mode they want to conduct, how to utilize, manage, and align the subsidiaries abroad.    Problem: The thesis formulates a research problem by reviewing literature on the topic of internationalization, entry modes, and HQ-subsidiary relationships. It finds that the influence that entry modes have on HQ-subsidiary is an under-researched subject. Most studies on this subject are quantitative studies, so this thesis aims to contribute to the discussion by providing findings from a qualitative approach.   Purpose: The objective of this thesis is to develop insights on relationship dynamics between headquarters and subsidiaries in MNEs, and to illustrate how these interactions vary with the choice of entry strategy.   Research question: “What influences does entry modes have on HQ-subsidiary relationships”.   Method: This thesis adopts a relativist ontology and a social constructionist epistemology. A holistic multiple case study was used, and qualitative data was gathered from four case companies through eleven semi structured interviews. When the data was collected, a thematic analysis was conducted on each of the cases, which generated codes, which are grouped into sub-themes, and then into within-case themes. After this a cross-case analysis was conducted, where the within-case themes were grouped into cross-case themes. These cross-case themes then in the next step turned into the main themes which serve as the foundation for the analysis.    Conclusion: This thesis aimed to explore what influences entry modes has on HQ-Subsidiary relationships, which led to the development of the Jönköping Entry-Relations Model. The research involved discussions with managers at both HQs and subsidiaries, leading to the identification of a process starting from internationalization catalysts to strong relationships and a sense of unity. While entry modes serve as triggers for relationship dynamics, the research found that other factors play a more substantial role in shaping HQ-Subsidiary interactions. Entry modes indirectly influence relationships by presenting challenges that firms must address to foster unity. This thesis contribution to the literature underscores that regardless of entry mode, organizational unity remains the goal. Therefore, while entry modes initiate distinct challenges, they do not directly dictate relationship outcomes.

In this thesis, we investigate how multinational (MNC) parents can use the way they finance their subsidiary firms in order to constrain subsidiary management. In the first essay, we develop a theoretical framework in which we consider a number of alternative decisions related to the financing of MNC subsidiary firms. We show that, from the MNC parent's perspective, the optimal choice is to delegate the monitoring of the subsidiary to host-country banks and finance the subsidiary using short-term and short-term external debt. This arrangement will guarantee that the MNC subsidiary management exerts an optimal amount of effort and abides by the objectives set by the MNC parent. In the second essay, we propose and test four hypotheses addressing how MNC parents can use short-term and short-term external debt to constrain the rent-seeking behaviour of subsidiary management. One set of hypotheses analyses the use of short-term debt. The second set of hypotheses investigates the use of short-term external debt. Moreover, we investigate these two hypotheses in two different settings to measure: (i) the subsidiary effect by comparing between UK domestic and UK subsidiary firms and (ii) the location effect by comparing UK and US subsidiary firms. We find support for our hypotheses, namely that UK subsidiaries have more short-term debt and more short-term external debt as compared to equivalent UK domestic firms, and that US subsidiaries have more short-term debt and less short-term external debt compared to equivalent UK subsidiaries. Our results are both statistically and economically significant and are robust to the use of a matched sample approach to test our hypotheses. The third essay investigates the relationship between the bargaining power of MNC subsidiary firms and the way these firms are financed by analysing the source and the maturity of financing arrangements. We argue that the financing arrangements used to finance the subsidiary are linked to its ability to engage in rent-seeking behaviour and the latter depends on the amount of bargaining power that the subsidiary possesses. We use four different measures of bargaining power, namely age, size, presence of foreign sales and percentage of foreign sales. Using data relating to UK and US MNC subsidiaries between 2001 and 2010, we test two sets of hypotheses linking the bargaining power of the MNC subsidiary firms with the use of short-term debt and the use of external short-term debt. Our results provide strong support for our short-term debt hypotheses while support for our external debt hypotheses is more limited. The results are also economically significant when using the percentage of foreign sales as a bargaining power proxy. We also notice that the use of debt to constrain subsidiary management behaviour appears to differ across UK and US MNC subsidiary firms.