The Determinants and Consequences of Subsidiary Initiative in Multinational Corporations

Abstract

This paper examines corporate entrepreneurship in multinational corporations through a detailed study of initiatives taken by foreign subsidiaries. We develop a theoretical model in which two levels of organizational context (corporate and subsidiary) promote or suppress subsidiary initiative, and initiative in turn has a feedback effect on both subsidiary and corporate context. Using a multi-method study (229 questionnaire returns plus 5 in-depth case studies), the key findings are as follows: Subsidiary initiative is promoted by a high level of distinctive subsidiary capabilities, and is suppressed by a high level of decision centralization, a low level of subsidiary credibility, and a low level of corporate-subsidiary communication. Over time, we find evidence that subsidiary initiative leads to an enhancement of credibility (vis-à-vis the head office), head office openness, corporate-subsidiary communication, and distinctive capabilities.