Competence Development Through Business Relationships or Competitive Environment? - Subsidiary Impact On Mnc Competitive Advantage

Zusammenfassung

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This paper examines the question as to whether two alternate environmental factors - competence development in subsidiary business relationships and competitive pressure of the subsidiary business environment - relate to the impact of subsidiaries on the competence development and performance of the larger MNC organisation. Using data from 501 foreign-owned MNC subsidiaries in three Nordic countries; Sweden, Finland and Denmark, the paper develops and tests four hypotheses using the Lisrel package.

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Competence Development Through Business Relationships or Competitive Environment? - Subsidiary Impact On Mnc Competitive Advantage

Introduction

The need for studies of how MNCs make extensive use of the knowledge of subsidiaries is stressed in the literature. The relevance of such studies has its origins in the belief that an MNC is a knowledge-seeking organisation and that knowledge transfer between its separate units leads to competitive advantage (Cantwell 1990, Kogut/Chang 1991, Madhok 1997, Teece/Pisno/Shuen 1997, Frost 2001). An important condition, though, is that subsidiaries actually do develop unique knowledge, a "fact" confirmed in several studies which partly has been explained by the characteristics of subsidiary environments (Bartlett/Ghoshal 1986, Andersson, Forsgren, and Holm 2002, Foss/Pedersen 2002). For instance, besides other explanations, such as the internal co-ordination of resources and the entrepreneurship of individual managers, the environment is assumed to contribute to the development of corporate "strategic leaders" (Bartlett/Ghoshal 1989), "centers of competences" (Sölvell/Zander/Porer 1991), and "centers of excellence" (Forsgren/Johanson/Sharma 2000, Holm/Pedersen 2000) and, thus, competitive advantages for the MNC (Cohen/Levinthal 1990, Dunning 1998, Nobel/Birkinshaw 1998).

The characteristics of the environment and the mechanisms of knowledge creation have been variously described. This study concentrates on two environmental perspectives.1 The first perspective concerns the environment as constituting an aggregated force manifested as the degree of competition, rivalry, pressure from customers, and quality of suppliers. For instance, it is sometimes argued that intensive competition or customer pressure provides incentive for innovation (Porter 1980, Scherer/Ross 1990). The competitive advantage of firms is associated with competitive pressure from environmental actors, implying that firms should seek dynamic and competitive environments as they create pressures to innovate (Porter 1990). This environmental perspective also typifies contingency theory (Lawrence/Lorsch 1967, Stopford/Wells 1972), and has often been applied in studies of MNCs (Prahalad/Doz 1987, Hedlund 1986, Nohria/Goshal 1997).

The second, som...

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