The Janus-Faced Subsidiary: A Coevolutionary Framework of Dual Network Embeddedness

The Janus-Faced Subsidiary: A Coevolutionary Framework of Dual Network Embeddedness Importance and Key Contributions This paper contributes to the emerging literature on the subsidiary in its dual context (Achcaoucaou et al,... [ view full abstract ]

The Janus-Faced Subsidiary: A Coevolutionary Framework of Dual Network Embeddedness

Importance and Key Contributions

This paper contributes to the emerging literature on the subsidiary in its dual context (Achcaoucaou et al, 2014; Ciabuschi et al, 2014, Figuereido, 2012; Meyer et al., 2011; Mudambi and Swift, 2012). However, this paper departs from the above studies, which all take a rather static view of the dually embedded subsidiary. We take a dynamic co-evolutionary perspective, by longitudinally tracking the guided coevolution of subsidiary role and local network’s knowledge stock over a number of years. We subscribe more to the complementarity for balanced coevolution in both contexts (Ciabuschi et al., 2014) over the trade-off thesis in that reliance on one context for resources may limit its access to resources in the other context (Gammelgaard and Pedersen, 2010). Furthermore, the heterogeneous evolution of competence creators and competence exploiters is empirically proven.

We show how the subsidiary is both a catalyst and coordinator of resource and knowledge flow in a form of guided coevolution to ensure requisite variety and hence we accentuate the importance of subsidiary dual embeddedness in understanding subsidiary evolution. The significance of this paper's contribution can be understood by looking at the theoretical base underpinning this area of research.

Theoretical Base

A subsidiary's combinative capability (Kogut and Zander, 1992; Phene and Almeida, 2008) to manage knowledge both accumulated from within the MNE and absorbed from external sources is known to be critical to its knowledge creation capability. The subsidiary has been characterised as a ‘janus-faced’ organisation with a dual allegiance to its local network and the MNE (Birkinshaw, 1998). It is at one and the same time dually embedded as part of its external local knowledge network and its internal MNE corporate network (Achcaoucaou et al., 2014; Andersson and Forsgren, 1996; Figueiredo, 2011; Meyer at al., 2011). Subsidiaries operate in these dual networks with an aspiration for self-preservation and advancement through the fusion of knowledge absorbed from its dual networks.

The networks for the dually embedded subsidiary coevolve over time, though not always in a temporally synchronised form. A dis-synchronisation effect most commonly occurs due to initiatives in the external network outpacing those in the internal network leading to a coevolutionary imbalance (Madhok and Liu, 2006). Another challenge for the subsidiary is to achieve a position of optimal embeddedness so as not to be either under- or over-embedded in either network (Andersson et al, 2007; Garcia-Pont et al, 2009) and out of sync.

In this paper, we illustrate the underexplored coevolutionary process of how the dually embedded subsidiary drives its own self-interests through simultaneously guiding its internal role expansion and enhanced external knowledge stock and quality in the local network.

Research Question and Method

The dual context literature has tended to take a static and cross-sectoral exploration of MNE activity in a local knowledge network, which is restrictive. This paper aims to redress this shortcoming by empirically investigating the dynamic coevolution of subsidiary innovation development role in the internal corporate network and quality of knowledge in the external local network. The research question asks how the janus-faced subsidiary creates knowledge to resolve its self-preservation and pursue its self-interested survival and advancement in its coevolving dual context.

This study adopts a [longitudinal] mixed-method multi-case study approach (Eisenhardt 1989, Welch et al. 2011). The approach chosen allows us to understand the evolution of subsidiary role within the internal MNE network and the simultaneous expansion of knowledge stock within a local network over time.

The setting carefully chosen for this case study is the medical technology local knowledge network in the West of Ireland. The core elements of the study are the MNE subsidiary cases – (four cases in total comprising of Medtronic, Boston Scientific, Abbott and Merit Medical) - and the local knowledge network in which the subsidiaries are situated.

Semi-structured interviews were conducted with MNE subsidiary managers at the firm-level in 2005 and 2008, where a total of twenty-three interviews were carried out across the four subsidiaries. This continuity between the two sets of interviews allows for an analysis of the evolution of the subsidiaries over the three-year period. Along with the interviews, documentary analysis was also conducted, which allowed for a more comprehensive understanding of the subsidiary and the context.

To understand the evolution of the local knowledge network, both qualitative and quantitative data was gathered. The qualitative data was collected from semi-structured interviews in 2005 and in 2010, with three main stakeholder groups: indigenous enterprises, academic research institutions, and industrial agencies. This qualitative data was combined with quantitative data to provide descriptive statistics on how the sector has evolved in the region. The two primary sources of quantitative data are a historical company database and patent data.

Collecting qualitative data at the two core levels – MNE subsidiary and local knowledge network levels - and enriching this with mixed method research on the regional medical technology sector as a whole allows for a comprehensive understanding subsidiary evolution.

Findings

The findings focus on the evolution of the MNE subsidiary within the local knowledge network, which is delineated into five phases of development identified from the data. These phases are:
Phase 1 (t0) - Execution of HR directive for product assembly in knowledge-deficient local network; Phase 2 (t1) - Manufacturing process improvement; Phase 3 (t2) - Move to product embellishment and adaptations; Phase 4 (t3) - New product development (NPD) in related technology; Phase 5 (t4) - Earned contributor role as NPD excellence centre within MNE, responsibility for diversified areas of activity and the pursuit of unrelated technological areas.

To briefly summarise the findings, we show that the evolution of MNE subsidiaries in the location influences how the local knowledge network evolves and, subsequently, the evolution of the local knowledge network affects how MNE activity evolves.

Implications

While MNE activity can play a role in creating a specialisation of technological activity in a local knowledge network which creates important localisation economies, as the local knowledge network evolves MNE activity can also act both as a source of requisite knowledge for a diversification of technological activity to occur and as a conduit for disseminating the new knowledge generated outside the local knowledge network. The local knowledge network then reshapes itself by learning from and building on the knowledge of existing MNE subsidiaries as well as other types of organisations. The dually embedded subsidiary can cannily guide this coevolution with a singular allegiance to its own preservation and well-being.

References

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MNE Subsidiary Dual Embeddedness Coevolutionary Local Knowledge Network MNE Chain [ view full abstract ]

MNE
Subsidiary Dual Embeddedness
Coevolutionary
Local Knowledge Network
MNE Chain