Academic journal article Multinational Business Review

Rethinking the Literature on "Multiple Embeddedness" and Subsidiary-Specific Advantages

Academic journal article Multinational Business Review

Rethinking the Literature on "Multiple Embeddedness" and Subsidiary-Specific Advantages

Article excerpt

Introduction

The crucial actors in a global, knowledge-based economy are multinational enterprises (MNEs). These companies can generate superior performance by implementing highly centralized, international strategies ([46] Meyer et al. , 2011). Today, there is a broad consensus that an MNE is "an international network that creates, accesses, integrates, and applies knowledge in multiple locations" ([2] Almeida et al. , 2002, p. 148). To respond effectively to its environmental heterogeneity, the MNE must differentiate the activities of its subsidiaries, but it must also integrate them ([29] Ghoshal and Nohria, 1989). Since [38] Hymer (1976), the unit of analysis in international business (IB) studies has shifted from the country level to the firm level and, currently, to the subsidiary level in light of network thinking from strategic management ([69] Rugman et al. , 2011a). Moreover, within the general area of international management strategies, mainly in the last ten years, a number of interesting studies have emerged on the "embeddedness" of MNEs. In particular, embeddedness of the MNE is analyzed by IB scholars using transaction cost (TC) and internalization, resource-based, networks, micro-political, and institutional approaches ([34] Heidenreich, 2012).

In this paper, I rethink the concept of MNE embeddedness and the centrality of the subsidiary. Thus, this paper focuses on the MNE's multiple embeddedness and subsidiary-specific advantages ([65] Rugman and Verbeke, 2001). An innovative framework is developed to fully analyze different types of embeddedness. This framework builds on four main relationships at the subsidiary and corporate level to better understand "multiple embeddedness" in MNEs[1] . The four key relationships are:

home country-specific advantages (CSAs)-headquarters (HQ);

HQ-subsidiary;

subsidiary-host CSAs; and

subsidiary-HQ.

In addition, I highlight the importance of several links between these four main relationships, finding several interesting interdependencies.

To investigate this phenomenon, it is important to consider simultaneously the home and host CSAs and the two-way relationships between the HQ and the subsidiary, as well as the interdependencies between them.

The remainder of the paper is organized as follows: the first section focuses on the review of literature, which refers to the four main relationships of this framework; the second section analyzes the relations and interrelations between the four main relationships; and the last section presents the conclusions.

The four main relationships

To better understand embeddedness in MNEs, I build a new framework based on the four main relationships that facilitates the analysis of the multidimensionality and dynamics of this phenomenon. They are:

home CSAs-HQ;

HQ-subsidiary;

subsidiary-host CSAs; and

subsidiary-HQ.

In Table I [Figure omitted. See Article Image.], the main aspects of each relationship, as well as the key literature for each relationship, are presented. In this framework, the subsidiary is the unit of analysis ([10] Birkinshaw, 1997) and the development of subsidiary-specific advantages (SSAs) becomes fundamental.

Home CSAs-HQ

Firms are generally shaped by the home context from which they originate and typically build their firm-specific advantages (FSAs) on the home CSAs. In general, CSAs are benefits associated with locating certain activities in particular countries. Thus, local contexts vary in terms of resource endowments and institutional framework ([46] Meyer et al. , 2011). While resource endowments are increasingly mobile, formal and informal institutions tend to be internationally immobile ([48] Mudambi and Navarra, 2002). Following [77] Wan and Hoskisson (2003), resources can be divided into endowed factors (derived from natural resources), advanced factors (a country's physical infrastructure, capital goods accumulation, and financial resources), and human factors (labor quality). …

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