دانلود مقاله ISI انگلیسی شماره 11697
عنوان فارسی مقاله

پیوند شرکت ها و استراتژی رقابتی در شرکت های چند ملیتی: یک چشم انداز از شرکتهای تابعه به دنبال نفوذ در بازار میزبان

کد مقاله سال انتشار مقاله انگلیسی ترجمه فارسی تعداد کلمات
11697 2004 29 صفحه PDF سفارش دهید محاسبه نشده
خرید مقاله
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عنوان انگلیسی
Corporate link and competitive strategy in multinational enterprises: a perspective from subsidiaries seeking host market penetration
منبع

Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)

Journal : Journal of International Management, Volume 10, Issue 1, 2004, Pages 77–105

کلمات کلیدی
پیوند شرکت های بزرگ - شرکت های چند ملیتی - بازار میزبان
پیش نمایش مقاله
پیش نمایش مقاله پیوند شرکت ها و استراتژی رقابتی در شرکت های چند ملیتی: یک چشم انداز از شرکتهای تابعه به دنبال نفوذ در بازار میزبان

چکیده انگلیسی

This study examines how the corporate link between a foreign subsidiary and its corporate members (parent and peer subsidiaries) is influenced by the subsidiary's competitive strategy in a specific host country. The mainstream logic, especially that of Michael Porter, suggests that corporate link should be stronger when a multinational enterprise (MNE) focuses on cost leadership than on product differentiation because of greater needs for system-related efforts, such as sharing global economies of scale, optimizing factor costs across countries, and leveraging existing knowledge. Departing from this view, we present that this logic may not hold true for an MNE's foreign subsidiaries seeking local market penetration in promising yet increasingly competitive emerging markets. Corporate link may be stronger when these subsidiaries emphasize product differentiation than using low cost due to heightened needs of corporate resource support tailored to the specific host market and due to declined contributions of system-related efforts to maintain a differentiation-based competitive foothold there. Our analysis of subsidiaries that emphasize host market penetration in China demonstrates that the strength of corporate link increases along cost leadership, strategic focus, and product differentiation strategies. Subsidiaries with such configurations tend to perform better than those without these configurations in terms of profitability. Moreover, there is a stronger correspondence between corporate link and competitive strategy when subsidiaries are wholly owned (compared to joint ventures), involve larger scope of products, or become more important to overall success of their corporate groups.

مقدمه انگلیسی

Corporate link between an overseas subsidiary and its parent as well as peer subsidiaries in other countries has been rigorously addressed in numerous studies on multinational enterprises (MNEs). As described in the research, corporate link is concerned with the extent (or strength) to which a focal subsidiary is linked to its corporate members (parent firm and peer subsidiaries) via sharing strategic resources and activities (Bartlett and Ghoshal, 1989). Parent–subsidiary relations comprise both strategic (flows of critical resources and activities) and administrative (communication and control) dimensions, and corporate link captures the strategic dimension in parent–subsidiary relations and reflects the interdependency between a focal subsidiary and the corporate group Bartlett et al., 1990 and Gupta and Govindarajan, 2000. Corporate link also differs from global integration in that the former emphasizes only resource sharing and value chain activity integration, but the latter involves not only resource sharing and activity integration but also corporate governance integration along dimensions, such as decision-making centralization, reward systems, frequency and openness of communication, socialization, and staffing. With the increasing globalization of world economy, corporate link is becoming an important means for creating global competitive advantages (Govindarajan and Gupta, 2001). Cross-border competition now wrests competitive initiatives by harnessing knowledge from sources in multiple nations to gain more returns from exploiting existing resources and upgrading new capabilities. Research on global integration suggests that MNEs are no longer able to compete as a collection of independent subsidiaries Bartlett and Ghoshal, 1989, Prahalad and Doz, 1987 and Yip, 1995. Competition has become based in part on the ability of the corporation to link its subsidiary activities across geographic locations Birkinshaw et al., 1995 and Kobrin, 1991. Studies on parent–subsidiary relations document that corporate link is shaped by knowledge flow patterns (Gupta and Govindarajan, 1991), headquarters mandates (Jarillo and Martinez, 1990), subsidiary competencies (Marcati, 1989), local environment conditions (Bartlett and Ghoshal, 1989), and organizational slack (Poynter and White, 1985). The literature on subsidiary mandates states clearly that corporate link is influenced by subsidiary characteristics, such as host country experience, operational capabilities, strategic goals, market position, and strength of local management Golden, 1992, Roth and Morrison, 1992 and Roth et al., 1991. To extend extant research, this study suggests that corporate link is also determined by competitive strategy at the foreign subsidiary level. The mainstream logic, especially that of Porter, 1980, Porter, 1985 and Porter, 1991, suggests that corporate link should be stronger when an MNE focuses on cost leadership than on product differentiation because of greater needs for system-related efforts, such as sharing global economies of scale, optimizing factor costs across countries, and leveraging and sharing existing knowledge among geographically dispersed business units around the world. In this study, we argue that this logic may not apply to the situation wherein foreign subsidiaries target centrally at their host market penetration, especially in immensely promising yet increasingly competitive emerging economies. For MNEs that focus on the global strategy, that is, seeking global economies of scale for more standardized products (subsidiaries are a part of global platform for system-wise cost reduction), Porter's logic evidently holds true. This is because a stronger corporate link is needed to streamline and facilitate system-related cost reduction efforts within an MNE's centrally coordinated global network. However, for highly diversified MNEs that do not pursue the global strategy but emphasize transnational or multidomestic solutions, corporate link may be stronger when these subsidiaries emphasize product differentiation than using low cost due to heightened needs of corporate resource support tailored to the specific host market and due to declined contributions of system-related efforts to maintain a differentiation-based competitive foothold in that market. We posit that, for MNE subsidiaries emphasizing the penetration in a foreign emerging market, corporate link between a foreign subsidiary and the rest of the MNE network increases with cost leadership, strategic focus, and product differentiation strategies. The corporate link is strongest if the emphasis is on product differentiation, followed by strategic focus, and then by cost leadership. We realize the important relationship between corporate link and competitive strategy because different competitive strategies implemented in a host country involve different levels of dependence on parent resources, interactions with host markets, and proactiveness in risk taking, adaptation, and innovation. These in turn jointly affect a subsidiary's required corporate link or strategic interdependence. For subsidiaries targeting an important host market, corporate link is an internalized device that can mitigate challenges in implementing varying competitive strategies. We also suggest that an appropriate alignment between corporate link and competitive strategy may result in better performance at the subsidiary level. The logic is that such alignment reduces external transaction costs as well as internal coordination costs. This alignment helps subsidiaries reap benefits from foreign market opportunities or attenuate host country threats through corporate support without incurring unnecessary costs or wasting MNE resources. Furthermore, we propose that the strength of the relationship between corporate link and competitive strategy may be moderated by other factors, such as entry mode, product scope, and the importance of a focal subsidiary to the corporate group. The corporate link-competitive strategy relationship may be stronger when (1) MNE subunits are wholly owned subsidiaries (compared to joint ventures), (2) the product scope in a host market is larger, and (3) a subunit is more important to the parent. As noted in the integration–responsiveness (I–R) paradigm, corporate link is shaped by a large number of external and internal factors associated with required global coordination or required national adaptation Bartlett and Ghoshal, 1989, Birkinshaw et al., 1995, Kobrin, 1991, Prahalad and Doz, 1987, Roth and Morrison, 1990 and Taggart, 1998. Many of these factors seem realistically unable to be included or controlled in a single study. To overcome this issue, we delimited the particular boundary of the study, which should be noted when one interprets our results. First, we focus on MNE subunits seeking host market expansion or penetration, rather than export benefits or using a host country as a production platform for the MNE's global products and global standardization; that is, our results do not apply to the MNEs using global strategy. For subsidiaries under global strategy, their corporate link is mainly determined by the headquarters' global mandates and less affected by a competitive strategy tailored to a specific host market (Gupta, 1987). Second, we examine competitive strategies and advantages that occur at the subsidiary level, rather than at the corporate level. Corporate-link-competitive strategy relations vary according to these levels. For instance, the cost-driven global strategy at the corporate level will require stronger corporate link to streamline global integration and pursue global economy of scale associated with global standardization (Yip, 1995). Contrarily, the cost-driven competitive strategy for a local-market-seeking subsidiary may not need this strong link. Third, our sample subsidiaries operate in the same host country with an emphasis on the technology-intensive electronics and electrical product industry. This partially helps us to remove some national or industrial environment correlates that might affect corporate link. Lastly, we operationalize competitive strategy by the degree of an emphasis on product differentiation, cost leadership, and strategic focus placed by each individual subsidiary (a continuous variable), instead of categorizing sample firms into one of these three dichotomous types. Kotha and Vadlamani (1995) demonstrate that the dichotomous approach is limited in capturing intended strategies of managers in a complex environment.

نتیجه گیری انگلیسی

This study addresses how corporate link is shaped by competitive strategy used by subsidiaries in a host nation. It seeks a better understanding of how corporate group–business unit relations may change in an international setting, depending on varying competitive strategies implemented overseas. Accumulated extant research has already identified or verified a large array of factors that affect corporate link, along two dimensions including global integration mandates (e.g., homogeneity of products and customers, knowledge diffusion and sharing, global competition, MNE objectives, vertical integration, economies of internalization, and capabilities in coordination and communication) as well as local responsiveness mandates (e.g., subsidiary role and initiative, uniqueness of host market structure, volatility of local environment, demand differentiation, and market growth opportunities). To extend the research, we argued that corporate link between a nodal subsidiary and the rest of the MNE community is contingent on the choice of competitive strategy (product differentiation, cost leadership, or strategic focus). This choice itself is often selected with considerations of both local responsiveness factors and global integration imperatives. In today's competitive marketplace, subsidiaries are searching for competitive advantages through using appropriate competitive strategies and their underlying building blocks. To fulfill this goal, it is inevitable for subsidiaries to depend on corporate link to the point that resource support from, and knowledge sharing with, the corporate family will fortify their market power or competitive position vis-à-vis overseas rivals. Our analysis of 121 MNE subsidiaries in China validates that corporate link is stronger for those emphasizing differentiation than for those emphasizing on strategic niche, which is in turn stronger for those emphasizing cost leadership. We developed a theoretical logic that explains the interrelationship between corporate link and competitive strategy. The mainstream logic, especially that of Porter, suggests that corporate link should be stronger when an MNE focuses on cost leadership than on product differentiation because of greater needs for system-related efforts, such as sharing global economies of scale, optimizing factor costs across countries, and leveraging existing knowledge. Departing from this view, we present that this logic may not hold true for an MNE's foreign subsidiaries seeking local market penetration in emerging markets. Corporate link will be stronger when these subsidiaries emphasize product differentiation than using low cost due to heightened needs of corporate resource support tailored to the specific host market and due to declined contributions of system-related efforts to maintain a differentiation-based competitive foothold there. Competitive strategy involves actions to gain a competitive edge in a particular setting where a subsidiary must interact with and depend on various stakeholders. In most emerging markets, local stakeholders, especially regulators, often control imperative resources or inputs needed by foreign firms, thus creating a dependency situation. We expect that firms with differentiation strategy are more susceptible to the endowment conditions of local resources and the supportiveness of stakeholders than those with niche strategy, which are in turn more prone to these conditions than those with a cost minimization strategy. Corporate link should thus be flexibly designed in response to such differing needs. We documented that an appropriate alignment between competitive strategy and corporate link, as suggested above, is generally associated with higher profitability for subsidiaries. Previous studies offered many insights into how subsidiary-level imperatives are unilaterally or causally related to corporate link (e.g., Birkinshaw and Morrison, 1995, Gupta, 1987, Nohria and Ghoshal, 1994, Roth and Morrison, 1990 and Taggart, 1998). Nevertheless, the performance implications of the above configuration have not yet been adequately articulated. Corporate link itself is endogenous, variably designed to reinforce overseas success. Mismatch between corporate link and competitive strategy may escalate costs of resource dispersion, create unnecessary stocks of redundant resources in a subsidiary, or otherwise temper international operations due to the shortage of resource support or knowledge flows. From the lens of internalization, a proper alignment between them increases gains from improved capability exploitation and utilization. MNEs are increasingly competing against each other in offshore battlefields. Home-developed resources cannot generate the highest possible returns unless they are deployed, shared, or utilized in overseas battlefields through appropriate corporate links. From the lens of foreign expansion, this alignment is critical as it buffers hazards from local resource dependence or from indigenous hostility. We stepped further by exploring the extent to which the connection between corporate link and competitive strategy will remain stable or hold the same under different circumstances, such as different entry modes, product scope, and perceived importance of host country operations. This study introduced a contingency view toward the relationship between corporate link and competitive strategy. It suggests that this relationship does not hold the same vigor in various situations. The competitive strategy–corporate link association becomes stronger when subsidiaries are wholly owned (compared to joint ventures), involve greater scope of products, or become more important to the group's success. The existence of such moderating effects demonstrates that the design of corporate link should consider not only the required alignment with a chosen competitive strategy but also other strategy contingencies that moderate this alignment. This accords with a view that corporate link is so complex that not only should subsidiaries in different nations be differentiated in structuring headquarters–subsidiary relationships but different subsidiaries within the same host country should also be distinguished in this structuring course (Nohria and Ghoshal, 1994). We presented that within the same country, entry mode, product scope, and subsidiary importance are important contingencies that undercut or reinforce the relationship between corporate link and competitive strategy. Empirically, this study tested several hypotheses using market-seeking MNE subsidiaries in China, the largest emerging market in the world. Corporate link is influenced by many factors aside from competitive strategy, so we controlled for these factors by deliberately defining sample firms as those seeking gains from the host market opportunities (not from export nor economy of scale for global products) in the same location (Shanghai) and in the same manufacturing industry (electronics and electrical products) that has been virtually deregulated by the government. An emerging market seems an interesting and rich setting to test how corporate link is shaped by competitive strategy because of the fact that most MNEs tend to emphasize the local market if the industry is characterized with strong local demand. A right competitive strategy is fundamental to building the firm's competitive position and achieving abnormal returns. Because different strategies depend differently on local conditions, thus subject to varying risks, exposure, and deterrence, corporate link should be elastically designed to cope with such differences. We do find some unexpected results from our sample that should be noted. First, strategic focus is strongly associated with corporate link variables in both high-performance and low-performance groups. This implies that the alignment between strategic focus and corporate link is not associated with subsidiary performance. A possible explanation is that firms using the focus strategy, even without a proper configuration with corporate link, may still be able to succeed. The significant and positive correlation coefficient between focus and ROI in Table 2 seems to accord with this possibility. An alternative explanation for this result is the likelihood that firms using the focus strategy are relatively stable in relation to corporate link regardless of their performance. Second, for firms emphasizing cost leadership, the configuration between low cost and corporate link is not significantly affected by proposed moderators, such as entry mode, product scope, and subsidiary importance. This means that the importance of this configuration is rather stable, not shaped by these moderating factors. A theoretical explanation for the finding is that parent firms may maintain a more stable, or less variable, corporate link with those subsidiaries that emphasize low cost, no matter whether subsidiary importance, product scope, or entry mode remains the same or is changed. By contrast, parent firms may treat corporate link more variable and adjustable with subsidiaries that use differentiation or focus when these parameters change. Future research should verify these possible explanations. Several limitations ought to be redressed by future studies. First, this study addresses competitive strategy only at the subsidiary (host country) level and delimits only local-market-seeking subsidiaries in an emerging market. It did not unveil how corporate link is shaped by competitive strategies used at the global level and how this link is affected by competitive advantages generated at the corporate level through varying integration strategies, such as global, multidomestic, and transnational. Second, this study restricts the research setting as one single host country, and we do not know how competitive strategy and many other factors jointly and simultaneously affect the design of corporate link for MNEs with different goals or capabilities and operate in different nations and industries. Third, this study focuses on host-market-seeking subsidiaries, and we do not know how corporate link is aligned with competitive strategy for those with dual orientation—that is, targeting both local and export markets to sharpen strategic flexibility, as claimed by the option theory Kogut, 1985 and Kogut, 1994. It is possible that firms with dual orientation may use different competitive strategies in different market domains, thus requiring more complicated corporate links in strategic planning, resource allocation, knowledge sharing, information flow, and communication systems. Fourth, for the simplicity to test several major research questions within a single study, we treat corporate link, which is multidimensional in nature, as a single construct. We thus do not know how competitive strategy should be configured with specific aspects (e.g., information sharing, organizational practice, or R&D transfer), specific directions (unilateral inflow vs. bilateral sharing), or specific units (parent, peer units within a region, or peer units in a different region) of corporate link. To explore insights of corporate link, decomposing these elements in a single or multiple studies is warranted. Finally, this study is weak in revealing the dynamic nature of how corporate link corresponds to competitive strategy. We do not know the evolutions of this correspondence, especially how this correspondence changes along the levels of subsidiary experience, age, and knowledge. Exploring such evolutionary insights is indispensable because both corporate link and competitive strategy are not prefixed but developed gradually.

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