Overseas Subsidiaries Positioning, Coordination And Control Research

Confronted with the global environment characterized by increasingly furious competition for knowledge and intelligence as well as rapid change, Multinational companies (MNCs) as a whole (rather than only the headquarter or individual units) have to continuously build marginal competitive advantages to maintain the market position. It is key to building this kind of advantages to exert the initiative of many overseas subsidiaries. Subsidiaries' initiative has great potential in the respect of promoting local response, worldwide learning and global integration.Based on the existing theoretical study on the origin of corporate competitive advantages and the position, coordination and control of overseas subsidiaries, the dissertation probes into the systematic way to position, coordinate and control the overseas subsidiaries, which are growing in the number and importance. The main objective is to exert their initiative to advance the creation and transferring of marginal knowledge and capability as well as to consolidate the intelligence foundations of the whole company.The dissertation is divided into 8 sections to address this theme. The first chapter of introduction sets forth the study background, motives, basis of the specific theme, the thinking thread, research course, the sections planning, points of innovation and the basic concepts.The second chapter reviews and comments the theoretical study on the position, coordination and control of overseas subsidiaries in the first place. It shows that the angle of view is gradually transferred from the headquarter to the subsidiaries; accordingly, the study object goes down from the whole and parent company to the subsidiaries. There is some insufficiency in this area. Firstly, the positioning of overseas subsidiaries is characterized by introversion and after-action reviewing, dominated by the headquarter and rarely examined from the angle of view of the subsidiary-consumers interaction and beforehand arrangement. Secondly, the mode of position, coordination and control themselves is addressed too much, but there is lack in the study on the development and diffusion of subsidiary initiative through appropriate mode of such kind. Thirdly, the research is still greatly impacted by the theory of internalization which is costs and risks minimum oriented. Lastly, the research pays too much attention to the management's authority and responsibilitythemselves and largely neglects the demands essence reflected by them. In the next place, the second chapter sets forth the evolution of the theory of origin of corporate competitive advantages and its revelation for the parent-subsidiary management in the MNCs. The sustainable competitive advantages of modern MNCs mainly originate from continuous exploration and exploitation of marginal core knowledge and capability. In addition, it is key to building and maintaining the sustainable competitive advantages to create characteristic knowledge and capability as well as cross-border transfer them to share in.Grounded on the strategic framework of Global Integration(GI)—Local Response (LR) , the third and fourth chapters integrate the three factors affecting the difference of subsidiary position, that is, the environment, the headquarter assignment and subsidiary choice, introduce the concept of embeddedness, establish an integrated position model based on the framework of dual embeddedness, and discuss the position mechanism and its transitions. In the respect of environment, with the expansion of businesses, functions and regions by MNCs as well as the conflicting and interweaved basic environmental forces of GI and LR, overseas subsidiaries are confronted with a kind of complex, dynamic and solid structure of pressure. Such kind of pressure structure provides MNCs and their worldwide overseas subsidiaries with multi-sources of global scale economy and learning. In the aspect of headquarter assignment, in order to cope with the furious competition for capability, it need to, based on understanding the pressure structure and the opportunities embedded within it, adjust the barycenter of strategic responsibility and position between the parent and subsidiaries so that they can respond to the environmental forces and tackle these opportunities. As for the subsidiary choice, their independent activities of internal and external embeddedness reflect their initiative to exploit the existent parent advantages and explore marginal ones respectively. By doing so, they become the flourishing nodes within the corporate network.Thereinto, the third chapter puts forth an integrated position model based on the dual embeddedness, and classifies subsidiaries into four kinds of position of Active, Autonomous, Receptive (Jarillo and Martinez, 1990)and Quiescent(Taggart, 1997). Then it also validates the existence of such kind of classifications. The model indicates that under the interacting solid environmental pressure, overseas subsidiariesneed to, based on the headquarter's strategic choice and resources commitment, keep the balance between parent advantages exploitation and marginal advantages exploration through initiative internal and external embeddedness from the angle of view of themselves.The fourth chapter discusses that during the dynamic development and balance of the two kinds of environmental pressure, and with the evolution of the overseas development, the imbalanced development in the aspect of internal and external embeddedness by overseas subsidiaries transfers the position from the traditional one of parent advantages exploitation to the new one of marginal advantages exploration.The fifth and sixth chapters analyze the way to coordinate and control the resources and activities of overseas subsidiaries to accomplish the global strategic goal by MNCs. Thereinto, the fifth chapter focuses on overseas subsidiary coordination. More integrated relationship among subsidiaries can contribute to the effective transferring and sharing among them as marginal advantages explorer so as to realize capability increment, strengthen the whole firm specific advantages and better the whole corporate performance. The buildup of such kind of integration means that the relationship pattern among them changes from separate to integrative. During the process of transition, MNCs can choose a good many formal and informal coordination mechanisms according to different degree of coordination requirements. With the increasing interdependence among subsidiaries, the knowledge flow especially the tacit one is expanding, and activities addressed by subsidiaries need more non- programmed decision and reaction. As a result, there is strong requirement for informal coordination mechanisms.The sixth chapter focuses on overseas subsidiary control. It divides the control mechanisms into inputs control, bureaucratic organizational control, output control and socialization. But it is more necessary to adopt more flexible informal control mechanisms adapted to different subsidiaries' position and the transition of their development stages. At the same time, the chapter points out that under the background of more prominent position mode of marginal advantage exploration, increasingly integrated among subsidiaries as well as more dynamic host environment, the headquarter needs to transform the past parent-subsidiary relationship ofdominating and being dominated in the "single center" pattern. That is, the headquarter should practise supportive and service control, further the parent-subsidiary partnership through flexible and highly responsive control and parenting advantages, and intensify the effectiveness of subsidiaries' local response and marginal capability accumulation in the "multi-center" pattern.Warranted by the above separate discourse upon overseas subsidiary position, coordination and control, the seventh chapter proposes an integrated model based on overseas subsidiaries' initiative, and demonstrates the correlations between them. It shows that the dynamics of the host environment, coordination and control by headquarter, the strength of subsidiaries' resources and capability as well as their dual embeddedness are significantly related with their initiative to create marginal competence.The eighth chapter of summary brings forward the conclusions, puts forth the main limitations of the dissertation and advice for the future research, and also relates the revelations and meaning to the parent-subsidiary management of position, coordination and control in China and foreign countries' MNCs.The main academic innovation and contribution: (1) contrary to the historical development logic of the theory on overseas subsidiary position, coordination and control, the author obeys the general organizational management logic of modern MNCs, that is, structure following strategy, considers the parent and its overseas subsidiaries' strategic position before the organizational coordination and control. (2) the dissertation integrates the separate theme of position, coordination and control into a systematic model. In addition, it emphasizes strategically the overseas subsidiaries' entrepreneurship to create new firm specific advantages, surmounting the traditional logic of internalization and with the orientation of value creation. (3) the dissertation goes deep into overseas subsidiary creativity, gathering large amount of evidence to support the assumption that overseas subsidiaries strengthen the marginal basis of resources and capability.