Purpose
Subsidiaries act as both creators and contributors of knowledge and innovation within the Multinational Enterprise (MNE), (Ghoshal and Bartlett, 1983; Birkinshaw, 1995, 2000; Almeida and Phene, 2004; Cantwell and Mudambi, 2005; Andersson et al., 2008; Phene and Almeida, 2008), but according to the literature, how this occurs, and how this contributes to a differentiated role for the subsidiary within the MNE, demands attention (Frost, 2001; Cantwell and Mudambi, 2005; Figueiredo, 2011, Mudambi 2011). This paper seeks to address this research gap. Specifically, the paper examines whether, how, and under what conditions, subsidiaries develop innovative capabilities through innovations and/or initiatives, within their internal and external multinational networks, and examines the manner in which this innovative activity can contribute to role evolution for the subsidiary within the MNE. The initiative-taking process enables any inherent tensions to become unfolded in examining its linkages and relationships at the nexus of interfacing contexts. There is however, little specific empirical evidence on subsidiary initiatives, on their emergence and their consequences for subsidiary role development.
This paper examines how initiatives (such as new product, services or processes) as strategy have shaped the evolution of an exemplar case subsidiary in the ICT sector over a ten-year timeframe. The paper takes a microfoundational qualitative approach focusing on subsidiary initiative emergence and the role of the individual manager in this process. Semi-structured interviews were conducted over a ten year timeframe with key functional respondents in a highly innovative global function subsidiary in ICT sector, to assess the implications of the outcomes of the initiatives as well as their emergence.
The findings demonstrated showed important discoveries in relation to a number of traditional tensions between the subsidiary, and its interfacing networks. First, the paper provides a more fine-grained insight into how subsidiaries generate innovation through the mechanism of proactive and self-determined subsidiary initiatives. In particular, subsidiaries, through these innovations, initiate and develop meaningful linkages with key actors in the local external environment, which creates credibility and legitimacy for future initiative-taking in a reinforcing cycle. Subsidiaries strategically develop their network through these deliberate strategies of the subsidiary managers. The paper also sheds light on the controversies surrounding the exercise of, and role of, autonomy and influence and the building of bargaining power within the subsidiary, and its relevance to innovative capability within the subsidiary.
Overall, the paper has implications for how subsidiary role development is pursued, the significance of the role of the subsidiary manager in this process and has significant implications for the elongation of s subsidiary in a given location. It is argued that initiative-taking is the core vehicle for the evolution of the subsidiary, and the manner in which initiatives are pursued changes the subsidiary relationship to sister subsidiaries and the parent is at the heart of subsidiary role development.
Keyword (subsidiary manager, subsidiary initiative, microfoundations)
