Academic journal article Management International Review

Headquarters' Attention and Its Effect on Subsidiary Performance

Academic journal article Management International Review

Headquarters' Attention and Its Effect on Subsidiary Performance

Article excerpt

Abstract:

* Drawing on a sample of 283 subsidiaries in three countries, we investigate how headquarters' attention affects subsidiary performance.

* Scholars have recently argued that top management's attention is the most critical, scarce and sought-after resource in organizations (Haas and Hansen 2001; Bouquet and Birkinshaw 2008). However, the question how headquarters' attention affects subsidiary companies remains largely unexplored.

* Our study shows that subsidiaries which have a high level of strategic choice and receive attention from headquarters perform better than their peers. More specifically, we find that the interactions of subsidiaries' autonomy, inter-unit power and initiatives with attention increase subsidiary performance.

Keywords: Headquarters-subsidiary relationships * Attention * Strategic choice * Subsidiary performance

Introduction

Scholars have recently argued that--even compared to information--attention is the most critical, scarce and sought-after resource in organizations (Haas and Hansen 2001). In the context of the modern multinational corporation (MNC) that aims to integrate a portfolio of dispersed and differentiated subsidiaries, the allocation of headquarters' attention to these units has arguably become a key strategic issue (Campbell 1989; Boland et al. 1994; Simons 1991; Bouquet and Birkinshaw 2008; Birkinshaw et al. 2007). By its nature, organizational attention is limited and selective in its focus (Simon 1947; Ocasio 1997), leading to the emergence of an internal market for headquarters' attention in many MNCs (Haas and Hansen 2001).

Different actors, especially headquarters and subsidiary managers, will have divergent ideas how attention should be optimally allocated creating a non-trivial matching problem of attention seekers and providers in the organization. Headquarters, for their part, may want to support subsidiaries' operations, transfer knowledge, ensure coordination or strengthen their control and limit disruptive behavior. Subsidiaries, on the other hand, are competing for headquarters' attention to acquire resources, to augment their market mandate, to increase their bargaining power, or try to avoid intervention. Notwithstanding diverse motivations to attract or buffer attention, it is far from clear whether subsidiaries actually benefit from headquarters' attention. Is headquarters' attention indeed a valuable resource for subsidiaries? And under which circumstances are subsidiaries able to leverage headquarters' attention to increase their performance?

Drawing on a sample of 283 subsidiaries in three countries, this study aims to address the question how headquarters 'attention impacts subsidiary performance. Prior research has made contributions in two separate areas, which this study seeks to combine: Since the 1980s, scholars have highlighted the importance of cognitive factors in the management of large organizations (Daft and Weick 1984; Thomas et al. 1993; Sharma 2000), but studies have almost exclusively addressed the individual level or the level of top/middle management teams. Only recently, a few authors have investigated attention as an organizational resource for corporate entities and have taken first steps to reveal the impact of attention on relationships between headquarters and subsidiaries (Haas and Hansen 2001; Bouquet and Birkinshaw 2008). While a relatively large stream of research has examined the factors that shape how top managers interpret and scan their strategic environment (Daft and Weick 1984; Dutton et al. 1983; Sharma 2000), we know little how these interpretations (and the attention allocated to specific issues) affect organizational actions and firm performance (for rare exceptions see Garg et al. 2003; Smith et al. 1991; Thomas and McDaniel 1990).

The second stream of literature we are drawing on is the work on strategic configurations of subsidiaries. …

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