Academic journal article Management International Review

Subsidiary Role and Skilled Labour Effects in Small Developed Countries

Academic journal article Management International Review

Subsidiary Role and Skilled Labour Effects in Small Developed Countries

Article excerpt

Abstract and Key Results:

* This paper considers the proportion of skilled labour employed by subsidiaries in small countries in the context of the strategic role of subsidiaries. Strategic role is connected to autonomy and intra-organisational relationships and the mandates given to the subsidiary. In the paper, we draw on the literature on the strategic development of multinational corporations, and insights from inward foreign direct investments in small developed countries. This is presented in a unifying framework in order to predict diverse categorizations of the impact of subsidiary role on the proportion of their employment of skilled labour.

* The paper derives two propositions that postulate interactions between three roles containing different levels of autonomy and intra-organisational relationships in small developed countries that lead to different proportions of skilled labour in subsidiaries.

* We predict the highest proportion of skilled labour by subsidiaries located in small developed countries in the case of world mandates when autonomous-based operations are emphasized. When there is an emphasis on intra-organizational relationships, measured by product flows and integrated international value-chain configurations, we predict the proportion of skilled labour to be highest in the cases of specialized contributors. We propose the proportion of skilled labour to be lowest in the case of local implementers.

Keywords: Subsidiary Roles * Small Developed Countries * Employment * Skilled Labour * Autonomy * Intra-Organisational Relationships


Studies of the strategic objectives of the multinational corporation (MNC) have been associated to themes such as role categorizations (White/Poynter 1984, Birkinshaw/Morrison 1995) autonomy (Luo 2006) organizational relationships (Holm/Holmstrom/Sharma 2005, Mu/Gnyawali/Hatfield 2007) and competence (Moore 2001, Cantwell/Mudambi 2005). These studies offer important insights into the configurations of MNC and role of subsidiaries, but do not directly investigate the composition of skilled labour employed in subsidiaries. Furthermore, subsidiary role has not been extensively examined in the context of small countries. This paper conceptualizes the effects of inward foreign direct investments (FDI) into small developed countries in relation to subsidiary role and the consequent impact on their demand for skilled labour.

The growth of international trade and investment flows and the subsequent changes in the employment of labour has called into question whether the globalisation process leads to beneficial outcomes for labour (Gray 1998, Bakan 2004, Stiglitz 2006). In developed countries there is a fear of a loss of jobs as MNCs engage in FDI that is thought to lead to a transfer of employment from developed to developing countries (Giddens 2004, Dobbs 2004). There has arisen a popular opinion that MNCs are creating major problems for employment in developed economies. Managers of parent companies and also in the subsidiaries of MNCs face considerable pressures to justify and defend their trade and investment policies in the face of the criticism that they are exporting jobs to developing countries. Government and regional development policy makers are also caught up in the controversy that surrounds the globalisation debate as they seek to defend employment levels in their regions in the face of the challenges arising from globalisation. Small developed countries may be considered to be especially vulnerable to the employment effects that arise from the present globalisation process because they lack the political power to limit the ability of MNCs to relocate to lower cost locations. Small countries also lack large market size. There is likely to be a size advantage that induces MNCs, located in large countries, to retain these locations in order to benefit from the supply channels to significant markets. …

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