This study reports the results of interviews with 65 managers in 11 German headquarters and in their 13 Hungarian subsidiaries. We focused on the role of the subsidiary with regard to market, product and value-adding mandates. Further, we investigated whether the Hungarian subsidiaries had experienced an upgrade of their role during the first 10 years of transition. The host country economy was supportive to role development, but inadequate subsidiary capabilities and headquarters ’ assignments prevented the subsidiaries from being upgraded. We propose that the corporate immune system, ie, ethnocentric behaviours emanating from the headquarters should be included in future upgrading analyses
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