Subsidiary Role and Skilled Labour Effects in Small Developed Countries

Zusammenfassung

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This paper considers the proportion of skilled labor employed by subsidiaries in small countries in the context of the strategic role of subsidiaries. Strategic role is connected to autonomy and intra-organizational relationships and the mandates given to the subsidiary. In the paper, the researchers draw on the literature on the strategic development of multinational corporations, and insights from inward foreign direct investments in small developed countries. The paper derives two propositions that postulate interactions between three roles containing different levels of autonomy and intra-organizational relationships in small developed countries that lead to different proportions of skilled labor in subsidiaries. They predict the highest proportion of skilled labor by subsidiaries located in small developed countries in the case of world mandates when autonomous-based operations are emphasized. When there is an emphasis on intra-organizational relationships, measured by product flows and integrated international value-chain configurations, they predict the proportion of skilled labor to be highest in the cases of specialized contributors.

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Auszug

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Subsidiary Role and Skilled Labour Effects in Small Developed Countries

Introduction

Studies of the strategic objectives of the multinational corporation (MNC) have been associated to themes such as role categorizations (White/Poynter 1984, Birkinshaw/Morrison 1995) autonomy (Luo 2006) organizational relationships (Holm/Holmström/Sharma 2005, Mu/Gnyawali/Harfield 2007) and competence (Moore 2001, Cantwell/Mudambi 2005). These studies offer important insights into the configurations of MNC and role of subsidiaries, but do not directly investigate the composition of skilled labour employed in subsidiaries. Furthermore, subsidiary role has not been extensively examined in the context of small countries. This paper conceptualizes the effects of inward foreign direct investments (FDI) into small developed countries in relation to subsidiary role and the consequent impact on their demand for skilled labour.

The growth of international trade and investment flows and the subsequent changes in the employment of labour has called into question whether the globalisation process leads to beneficial outcomes for labour (Gray 1998, Bakan 2004, Stiglitz 2006). In developed countries there is a fear of a loss of jobs as MNCs engage in FDI that is thought to lead to a transfer of employment from developed to developing countries (Giddens 2004, Dobbs 2004). There has arisen a popular opinion that MNCs are creating major problems for employment in developed economies. Managers of parent companies and also in the subsidiaries of MNCs face considerable pressures to justify and defend their trade and investment policies in the face of the criticism that they are exporting jobs to developing countries. Government and regional development policy makers are also caught up in the controversy that surrounds the globalisation debate as they seek to defend ...

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