The subsidiaries of multinational enterprises operate regionally, not globally
Abstract
Purpose
The purpose of this paper is to examine the determinants of home-region strategy of the multinational subsidiary and the impact of such a strategy on its performance. The author draws upon new internalization theory to develop a theory-driven model and empirically tests the simultaneous relationships between home-region strategy and performance of the subsidiary.
Design/methodology/approach
The author tests the model using a simultaneous equation statistical technique on an original, new data set of publicly listed multinational subsidiaries operating in the ASEAN region, with parent firms’ headquarters across the broad triad.
Findings
There are three significant findings. The first finding is that subsidiary-level downstream knowledge (marketing advantages), and the geographic location of the subsidiary in the same home region as of the parent firm are key antecedents of a subsidiary’s home-region strategy. The second finding is that a subsidiary’s profitability reduces home-region orientation; however, home-region strategy has an insignificant effect on performance. The third finding is that these subsidiaries generate on average 92 per cent of their total sales in the home region (the Asia Pacific).
Originality/value
The author advances the existing literature on the regional nature of parent-level multinational enterprises by demonstrating that their quasi-autonomous subsidiaries also operate mainly on a home-region basis.
Keywords
Acknowledgements
The author would like to express her deepest gratitude to the late Professor Alan M. Rugman for his valuable advice and guidance. She is very grateful for his helpful comments on the earlier version of this paper. She would also like to thank the special issue editor Dr Chang Hoon Oh and two anonymous reviewers for their helpful comments and suggestions. She also appreciates the insightful comments from Daniel O’Connell.
Citation
Nguyen, Q.T.K. (2015), "The subsidiaries of multinational enterprises operate regionally, not globally", Multinational Business Review, Vol. 23 No. 4, pp. 328-354. https://doi.org/10.1108/MBR-05-2015-0017
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited