Autonomy delegation to foreign subsidiaries: An enabling mechanism for emerging-market multinationals

Abstract

Current theory on foreign subsidiary autonomy is insufficient to examine a situation where a multinational lacks experience to organize global operations, and yet intends to compete extensively with established multinational enterprises (MNEs) from advanced economies. By building on theoretical perspectives developed for emerging-market multinational enterprises (EMNEs), we advance the idea that foreign subsidiary autonomy is a strategic mechanism to overcome the EMNE’s weaknesses in managing globally dispersed businesses and their home-country disadvantages after foreign entry. Subsidiary autonomy delegation assists in performing the learning functions necessary for overcoming resource and capability voids, as well as for distancing the subsidiary administratively from the parent’s negative home-country institutional heritage. Analyses of survey data collected from headquarter senior executives of 240 Chinese MNEs suggest that subsidiary autonomy delegation is higher among firms relying on foreign markets as a springboard to acquire strategic assets, whose top managers at the headquarters perceive high domestic institutional constraints, and which do not count on government assistance to expand internationally. Further, we demonstrate that these relationships are strengthened with greater inward foreign direct investment cooperative experience, and with the use of merger and acquisition entry modes. These findings have important implications for theories on subsidiary autonomy.

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Acknowledgements

The authors are grateful to Professor Gabriel Szulanski and three JIBS anonymous reviewers for their insightful comments and suggestions. The second author also acknowledges a funding support by the National Natural Science Foundation of China (NSFC) (Priority Grant No. 71232010).

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Correspondence to Stephanie Lu Wang.

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Accepted by Gabriel Szulanski, Area Editor, 3 July 2013. This paper has been with the authors for four revisions.

APPENDIX

APPENDIX

Table A1

Table A1 Major measures and factor loading results

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Wang, S., Luo, Y., Lu, X. et al. Autonomy delegation to foreign subsidiaries: An enabling mechanism for emerging-market multinationals. J Int Bus Stud 45, 111–130 (2014). https://doi.org/10.1057/jibs.2013.40

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Keywords

  • subsidiary autonomy
  • emerging-market multinationals
  • parent–subsidiary links