How TNC subsidiaries shine in world cities: policy implications of autonomy and network connections

The study examines the relationship between performance and patterns of autonomy and the network relationships used by the foreign subsidiaries of transnational corporations (TNCs) in world cities compared to those subsidiaries outside these locations. This is done by exploring if these patterns differ in foreign subsidiaries in Greater Copenhagen compared to elsewhere in Demark. The findings reveal that there are important differences in the relationships between performance and the autonomy and network structures in foreign subsidiaries. These findings are discussed and policy implications distilled. The study finds that the scope of inward foreign direct investment (FDI) policy could be usefully extended to encompass urban development thereby helping cities develop assets, institutional support and infrastructure that can enhance agglomeration benefits and global connectivity. The findings indicate policies, aimed at helping subsidiaries embed in host location networks and incorporate these networks into other parts of the parent company, could be beneficial. The paper also discusses economic and social inequality that can stem from network patterns and the inclination of subsidiaries to operate autonomously in world cities. It proposes policy options that can lead subsidiaries to undertake high-value activities and innovation in world cities

Is there evidence to support Porter-type policies?

The paper examines the views, often associated with Porter, that clusters with deep collaborative networks and established local supply chains have good performance. The view that good cluster performance is not connected to the industrial sector is also assessed. Data from a Department of Trade and Industry (DTI) study on UK clusters are used to assess the impact on performance (employment growth and international competitiveness) of cluster depth, the stage of development of local supply chains, and industrial sector. The results of the analysis of the DTI data on clusters do not provide strong support for Porter-type views on cluster policy. Although established clusters are linked to employment growth, deep clusters are not associated with employment growth or international competitiveness, and clusters in the services, and media, computer-related and biotechnology sectors are more likely than manufacturing clusters to have good performance. Some of the major policy implications of the results are discussed in the light of the literature on the importance of regional, national, and international networks for the performance of clusters

The impact of autonomy and organisational relationships on subsidiary employment of skilled labour

The paper develops a conceptual model on relationship between the strategic development of subsidiaries, in developed economies, and the development of higher valued operations that leads to increased employment of skilled labour. A concept of effective autonomy is developed in the paper. Effective autonomy is conceived as the ability of the subsidiary to implement and finance its desired increase in skilled labour. The interrelated effects between effective autonomy and intra and inter organisational relationships and employment of skilled labour are found to be uncertain because effective autonomy can be supportive of the development of intra and inter organisational relationships that requires a higher proportion of skilled labour, but effective autonomy can lead to deterioration in intra-organisational relationships thereby leading to a more peripheral role played by the subsidiary thus lowering the need for skilled employment. The conceptual model is based on changes in effective autonomy and intra and inter organisational relationships and is therefore set in the context of the evolution of the development of subsidiaries

Human Resource Flexibility as a Mediating Variable Between High Performance Work Systems and Performance

Much of the human resource management literature has demonstrated the impact of high performance work systems (HPWS) on organizational performance. A new generation of studies is emerging in this literature that recommends the inclusion of mediating variables between HPWS and organizational performance. The increasing rate of dynamism in competitive environments suggests that measures of employee adaptability should be included as a mechanism that may explain the relevance of HPWS to firm competitiveness. On a sample of 226 Spanish firms, the study’s results confirm that HPWS influences performance through its impact on the firm’s human resource (HR) flexibility

The emerging approach to employee relations in German overseas affiliates: A role model for international operation?

In light of current changes in the German industrial relations¿ landscape and the wider and deeper integration of German multinationals into the world economy, this study investigates the relative importance of the country-of-origin effect in employee relations of German affiliates in an Anglo-American setting. The paper addresses important issues that relate to the wider international business domain. The comparative analysis to US affiliates in the UK and British owned firms points to a distinctively German flavored hybrid approach that integrates the best practice elements of the US model with the collective orientation of the German model. This bears a resemblance to an emerging trend in the parent companies¿ home locations. The intra-German analysis revealed that affiliates of multinationals that face pressures for international integration are at the forefront of this development. The findings suggest that this might provide a suitable model of international operation for multinationals from strongly institutionalized countries

Employee relations in German multinationals in an Anglo-Saxon setting: Towards a Germanic version of the Anglo-Saxon approach?

NoThis study examines whether German multinationals operating in an Anglo-Saxon setting design their employee relations primarily on the German or the Anglo-Saxon model. The authors¿ cross-sectional comparison with UK-owned firms provides no evidence of a transfer of the current German approach but does point to a distinctive Germanic version of the `high-road¿ variant of the Anglo-Saxon approach. Intra-German analysis shows that this is most pronounced among the types of subsidiaries that are particularly significant for disseminating employment relations innovations across the multinational, but that these also have the highest incidence of collective arrangements and the lowest incidence of the `low-road¿ variant of the Anglo-Saxon approach. In the light of recent reforms in the German industrial relations system, the findings point to an emerging new flexible collective approach with a comprehensive direct employee involvement dimension

Employment relations in German multinational companies in the UK and the future of the German model: empirical evidence on country-of-origin effects and industry internationalisation.

noInterest has grown in the significance of the country-of-origin impact on the Employment Relations (ER) approaches in the international subsidiaries of Multinational Companies (MNCs). In this article, a comparative cross-sectional analysis of German subsidiaries with indigenous UK firms will be provided. The central issues concern the extent to which German MNCs in deregulated Anglo-American industrial relations settings draw on the German ER model, adjust to the host-country context or adopt current ¿best practice¿ prescriptions frequently associated with leading US MNCs. Here, the key questions are: How and to what extent do different industry-specific forces interrelate with country-of-origin effects and pressures to adopt ¿best practice¿ approaches to shape subsidiary ER outcomes?Hans Blocker Foundatio

Employment in host regions and foreign direct investment.

noThis paper examines the relationship between foreign direct investment inflows and employment using international business strategy literature to identify the factors influencing the development of subsidiaries that might affect employment growth in host regions. A survey of German subsidiaries in North West England is used to test the significance of the variables that are identified as likely to affect employment. The results of logit regression indicate that entry mode, technology transfer, and firm age affect the growth of employment. The study also highlights that other factors, such as sector, organisational structure, the level of diversification of operations by subsidiaries in the local economy, and range of markets supplied may have important affects on employment. The research indicates that further conceptual and empirical work is required to clarify our understanding of how the organisational, operational, and diversification characteristics of subsidiaries affect employment

The Strategic Development of Subsidiaries in Regional Trade Blocs.

noPurpose This paper explores the relationships between the strategic development of subsidiaries and the likelihood of subsidiaries exporting on an intra-regional basis to European markets. Research Approach The paper defines the strategic development of subsidiaries as increases in, autonomy, embeddedness in host locations, the use of networks and host country sourcing. The location of subsidiaries in industrial clusters is also considered. Use is made of multinomial probit analysis of a survey of 391 UK based subsidiaries to identify the relationships between the strategic development of subsidiaries and supplying European markets. Findings The study finds some evidence that there are links between increasing networks and supplying European markets, but there is no evidence that developing host country sourcing is associated with European supply. Location in an industrial cluster is consistently associated with supplying European markets and autonomy also appears to be closely associated with supplying European markets. Research Limitations Extension of the research is required to other regional trade blocs such as Mercosur and NAFTA. The role of networks and the links to location in industrial clusters requires further exploration and future research needs to include the services and knowledge-intensive sectors. Value The paper extends our understanding of subsidiary development in the context of intra-regional trading and thereby expands the literature on the regional strategy of multinationals. It highlights the importance of different types of autonomy for encouraging intra-regional trade by foreign-owned subsidiaries, and the central role of location in industrial clusters