International Marketing Review

Purpose – The purpose of this paper is to extend the knowledge of marketing strategy antecedents of industrial value adding in foreign markets. It attempts to answer the following two questions: how is the marketing strategy of a foreign subsidiary associated with the extent of its value-adding activity? Is there an association between the extent of value-adding activity and financial performance of the subsidiary?

Design/methodology/approach – A model is developed and hypotheses are tested. Data are collected from 191 subsidiaries of Swedish manufacturing firms in Germany, the UK, and the USA.

Findings – Product-market breadth and market experience positively affect the extent of foreign value adding. Also, market experience has a moderating effect and strengthens the positive association between product-market breadth and the extent of value adding. A foreign subsidiary's financial performance is positively associated with the number of value-adding activities of the subsidiary.

Research limitations/implications – The study shows that the marketing strategy of a foreign subsidiary needs to be acknowledged to understand the antecedents of foreign value-adding activity. In addition, the extent of value-adding activity contributes to the implementation of an effective international strategy.

Practical implications – An industrial firm wanting to implement an effective international marketing strategy needs to pay attention to the links between the marketing strategy of a foreign subsidiary and the extent of the subsidiary's value-adding activity.

Originality/value – The study is unique in that it applies a subsidiary perspective and focuses on foreign subsidiary strategy associations. The study both extends the common approach, which argues that the value adding of a foreign subsidiary is determined only by the corporate marketing strategy, and explores associations with foreign subsidiary performance.