Subsidiary Autonomous Activities in Multinational Enterprises: A Transaction Cost Perspective

Zusammenfassung

---

This paper investigates the implications of subsidiary autonomous activities for the governance of the multinational enterprise (MNE). Bounded rationality constraints faced by MNE corporate level management lead to severe limits imposed on subsidiary autonomous activities. The bounded rationality construct is revisited, and decomposed into information selection and information judgment in the context of subsidiary autonomous activities.

Siehe den Gesamtinhalt dieses Dokumentes

Auszug

---

Subsidiary Autonomous Activities in Multinational Enterprises: A Transaction Cost Perspective

Introduction

Rugman and Verbeke (2001, 2003) have provided an in-depth analysis of the internal functioning of the MNE, linking conventional transaction cost thinking (Buckley/Casson 1976, Hennart 1982, 2001, North 1990, Rugman 1981, Williamson 1975, 1985), with recent advances in international strategic management, as exemplified by the influential work of Professor Julian Birkinshaw from the London Business School and his co-authors (Birkinshaw 1995, 1997, 1999, 2000, 2001, Birkinshaw/Hood 1998, Birkinshaw/Hood/Jonsson 1998).

Rugman and Verbeke have focused on the issue of subsidiary entrepreneurship, more specifically subsidiary autonomous activities. First, Rugman and Verbeke observe the increasingly dispersed knowledge base (and innovation capabilities) in many MNEs, with new ideas to develop products and markets, originating in foreign subsidiaries (Hâkanson/Nobel 2000). This knowledge dispersion does not simply result from corporate level management granting more autonomy to subsidiaries, but primarily from the maturing of these subsidiaries over time, building upon endogenous growth, interactions with local economic actors, and the resulting development of market or technological capabilities, etc. The key transaction cost reduction problem is thus not one solely related to the efficient, one-directional transfer of knowledge from corporate center to foreign operations.

Second, they suggest that one of the core transaction cost theory behavioral assumptions should be revisited, namely by substituting simple self-interest seeking behavior for the concept of opportunism (defined as self-interest seeking behavior with guile). In the realm of subsidiary autonomous activities, the main managerial problem is not primarily an agency problem, with subsidiary managers requiring more coordination and control to keep their actions aligned with corporate level objectives; rather it is a question of cost-effective, mutual alignment and developing shared cognitive maps at the subsidiary and corporate levels.

Third, they argue that corporate level management may have little affinity with the full spectrum of subsidiary competences/weaknesses and opportunities/ threats that drive the development of subsidiary autonomous activities. These are entrepreneurial initiatives instigated at the subsidiary level and requiring resources, but they do not result directly from roles attributed to the subsidiary (its charter) or from corporate-level guidelines for resource allocation (which would lead to induced projects). The problem is thus not one of one-sided, optimal align...

Siehe den Gesamtinhalt dieses Dokumentes

---