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

Employee relations in Germany in transition: a path dependent trajectory of change?

The paper discusses whether in view of the accumulated contextual pressures the evolving new German employee relations model will resemble a more flexible version of the current one or whether it will emerge as an "Anglo-Saxonised" German model. It ascertains that despite the current contestation of the German model, erosion tendencies, though not negligible, are not as widespread as is often assumed and that far reaching reforms along neo-liberal lines are not desirable in the German context. It is suggested that a large proportion of German employers have a vested interest in maintaining the fundamentals of the current system. Proposes a path dependent reform trajectory internal to the system. The paper shows that the series of reforms carried-out so far has been accomplished within the parameters of the existing system, taking the form of regulated flexibility and centrally co-ordinated decentralisation. It ascertains that the German model is more adaptable and more flexible than its actual reputation, allowing companies to operate with more flexible collective employee relations' responses. Yet, evidence suggests that firms are already under-utilising the broadened framework. Nevertheless, the author predicts a continuation of the reform process and an emerging new flexible German employee relations model that remains essentially a collective one

Staffing foreign subsidiaries with parent country nationals or host country nationals? Insights from European subsidiaries

This paper investigates the relationship between the use of parent company nationals (PCN) and home country nationals (HCN) and various attributes in foreign owned subsidiaries in Denmark, Germany and the UK. The study explores whether the existing literature on international staffing adequately captures the effects of PCN verses HCN managers on key characteristics of subsidiaries. The results of the study indicate that the PCN/HCN dichotomy widely used in the international staffing literature needs to take account of the following issues: First: The study confirms theoretical assumptions based on social capital theory that subsidiaries led by HCNs are more embedded in the host country's external environment (by having more frequent relationships with host country customers, suppliers and competitors). However, the study reveals that the assumed advantages PCN led subsidiaries have with headquarters do not extend to their relationships with competitors in other parts of the MNC. Second: HCN led subsidiaries are more autonomous than PCN led subsidiaries with regard to operational and strategic decisions that relate to the market issues (market areas supplied, product range) and with respect to the local institutional environment (HRM). Our study finds that this is also the case with regard to strategic decisions on financial control as well as on R&D and new product development. Third: On average, HCN led subsidiaries perform significantly better than PCN led subsidiaries with regard to sales growth by value, productivity and innovation. This is in line with the findings of Beechler et al. (2005), the only other study investigating European subsidiaries. It also confirms the study of Konopaske et al. (2002). However, it contradicts the findings of Segiguchi et al. (2011) and Bebenroth and Li (2010) on the same matter.Dieser Aufsatz untersucht die Auswirkungen unterschiedlichen Managementbesatzes in ausländischen Tochtergesellschaften in Dänemark, Deutschland und Großbritannien. Im Ergebnis wird gezeigt, dass die in der Literatur vorzufindende Dichotomie zwischen lokalen Managern und Expatriates (Stammhausdelegierte) nur eingeschränkt haltbar ist. So kann u.a. gezeigt werden, dass sich angenommene Fühlungsvorteile von Expatriates nicht auf Schwestergesellschaften beziehen und dass lokale Manager nicht nur hinsichtlich marktrelevanter Entscheidungen, sondern auch bezogen auf die Finanzkontrolle sowie Forschungs- und Entwicklungsaktivitäten eine größere Autonomie besitzen. Auch hinsichtlich verschiedener Leistungskriterien wie wertmäßiges Umsatzwachstum, Produktivität und Innovationsrate schneiden ausländische Tochtergesellschaften, die von lokalen Managern geleitet werden, besser ab als Tochtergesellschaften, die von Expatriates geleitet werden

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

German multinationals in the UK and the German model of labour relations: diffusion and reverse diffusion effects

The paper examines whether in light of heightened globalisastion pressures, German multinational companies operating in an Anglo-Saxon setting have developed approaches to employee relations which may point to the diminishing international competitiveness of the German approach. It also assesses whether the wider knockon effect may exert pressures o the German model of labour relations to converge towards the Anglo-Saxon model. The paper is based on a survey of German subsidiaries in the UK, their parent companies and a comparative analysis to the Workplace Employee Relations Survey 1998. The study reveals the existence of a country-of-origin effect in the UK subsidiaries and finds little evidence of attempts to import Anglo-Saxon style practices into the parent companies German locations, despite some indications of possible reverse diffusion effects with regard to direct employee involvement schemes. With the current reforms in the German industrial relations system already providing a broader scope for more flexible collective employee relations responses, evolving pattern in German multinationals may be described as a "flexible collective approach with a HRM dimension". Taking into account possible wider knock-on effects onto other companies in the German economy, the paper predicts a continuation of the path dependent reform trajectory in the German model

The evolution of foreign subsidiaries and employment: the case of German direct foreign investment into North West England

This paper investigates the evolution of foreign subsidiaries in promoting employment in their host regions. The implications for employment are considered using a theoretical frameworks on how Multinational Corporations (MNCs) develop their network of subsidiaries. The theoretical framework suggests that (when parent companies are based in economies with similar levels of development as the host economy) the development of subsidiaries should follow a time path beginning with export enhancing investments that diversify into more complex operations. An analysis is then made on how this would affect employment. The theoretical framework is assessed using evidence from a survey of German subsidiaries in North West England. The survey suggest that German MNCs may not be providing the expected benefits that are sought from the large increase in Direct Foreign Investment (DFI) flows that have followed from the integration programmes of the European Union (EU). The results of the survey are reinforced by evidence from other research work, which suggests that European MNCs are less likely than non- European to create diversified networks of subsidiaries within the EU. Some policy implications and a future research agenda are drawn from the results

The development of foreign-owned subsidiaries and the supply of European markets

The major relationships between regional economic integration and foreign direct investment (FDI) are well established, and have been extensively explored in the context of economic integration in the European Union (EU). Several studies have been conducted on the impact of FDI of intra-EU trade liberalisation and single market policies, and agglomerations and industrial clusters. However, with the exception of a few studies such as that by Pearce and Papanastassiou (1997) very little research has been done that is focused on the links between the strategic development of foreign-owned subsidiaries in Europe and their supply of European markets. This paper summarizes the literature on the implications of European economic integration for FDI; it highlights that there have been few studies that are centred on the strategic responses of MNCs to integration. The paper, then, assesses the impact of the strategic development of subsidiaries on the likelihood of them supplying Europe as the main or as a secondary market. This paper’s finding support the view that strategic and operational decision-making autonomy is important for those subsidiaries that export to Europe. In the case of Europe as a secondary market it seems that only strategic decision-making autonomy is important. The evidence for embeddedness factors reveals that they are less important than autonomy factors

What shapes industrial relations in foreign affiliates? Comparative case study results from Germany

Purpose: The purpose of this paper is to develop an analytical framework to categorize the quality of industrial relations in foreign affiliates. Using the case of foreign affiliates in Germany, this paper further explores what factors shape the quality of industrial relations in foreign affiliates. Design/methodology/approach: Given the scarcity of research on industrial relations in foreign affiliates, this paper is based on conceptual work as well as on a comparative case investigation of 21 foreign affiliates in Germany, involving informants from both labor and management. Findings: Industrial relations in foreign affiliates in Germany can take four different qualities, based on the following: social partnership; conflict partnership; latently adversarial; and adversarial relations. While previous literature focused on country-of-origin effects, the authors’ case-based investigation further revealed that both affiliate effects and multinational corporation (MNC) effects have a strong impact on the quality of industrial relations in foreign affiliates in Germany. Originality/value: This paper provides systematic evidence on the presumption that micro-organizational and MNC-specific factors are necessary to gain a deeper understanding of industrial relations in MNCs. Moreover, this paper contributes to the discussion on the quality of industrial relations in foreign affiliates in Germany, by placing results from both single-case studies and management surveys into perspective

Performance Effects of Subsidiary Developments in Collaboration, and Decision Making Power

The paper investigates the consequences of interactions between autonomy, intra and inter-organizational networks for the performance of subsidiaries. Furthermore, the paper analyzes the impact of changes in autonomy and network relationships rather than investigating levels. This introduces the concept of adjustment of subsidiary strategies to changes in the international and host country business environment. Based on a survey of 350 foreign owned subsidiaries located in the UK, Germany and Denmark, we find evidence that increases in the inter-organizational network relationships of subsidiaries lead to increased subsidiary performance. Further, increased subsidiary autonomy positively affects subsidiary inter-organizational network relationships, and to some degree negatively affects intra-organizational network relationships. Finally, overlapping effects between inter- and intra-organizational network relationships are found

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