Subsidiary Agency in Gender Equality Practice Implementation: The Case of Korean MNE Subsidiaries in Sweden.

VerfasserSong, Ji-Won
PostenRESEARCH ARTICLE - Multinational enterprises

1 Introduction

Multinational enterprises (MNEs) operating across multiple institutional environments possess unique characteristics. Consequently, their strategic response to the institutional distance between home and host countries is an important topic for international business (IB) studies (Henisz & Swaminathan, 2008; Kostova, 1999; Kostova & Roth, 2002; Kostova et al., 2008; Peng et al., 2008; Rosenzweig & Nohria, 1994). While most scholars in the field focus on the institutions as constraints (institutional determinism) (Jackson & Deeg, 2008), far less attention has been given to the interactions between institutional environments and MNE agency, including strategic responses (Edwards et al., 2013; Ferner et al., 2012; Henisz & Swaminathan, 2008). Likewise, few studies have explored how MNEs respond strategically to host country institutions or promote institutional change (Cantwell et al., 2010; Fortwengel & Jackson, 2016; Regner & Edman, 2014).

The growing body of literature on MNE subsidiaries' strategic actions involving institutional distance or host institutions constitutes an important contribution to the field. However, critics have pointed to the lack of a contextualized understanding of national institutional environments and MNE agency (Ahmadjian, 2016; Fortwengel, 2017; Saka-Helmhout, 2020). To address this issue, recent contributions leveraging ideas from comparative institutional analysis (CIA) have shown how the national institutional environment interacts with MNEs' agency (Becker-Ritterspach et al., 2017; Fortwengel & Jackson, 2016; Saka-Helmhout & Geppert, 2011; Tsui-Auch & Chow, 2019). Such works have overcome IB's emphasis on the constraining effects of institutions, pointing out that they can also play an enabling role (Jackson & Deeg, 2008). This gives us a more contextualized approach with which to understand the agency of MNEs and enables us to consider national institutional settings more thoroughly, including aspects such as institutional thickness and strengths (Fortwengel, 2017).

In line with the current literature, this study illuminates subsidiary agency regarding institutional distance, while also focusing on how subsidiaries perceive host institutional settings and respond to them. In particular, I examine how MNE subsidiaries take strategic actions during the implementation of gender equality practices. Gender equality institutions and related practices in the workplace vary greatly between countries (Cooke, 2010; Terpstra-Tong, 2017) and depend on other institutional domains, such as corporate governance, employment systems, and inter-firm relations (Estevez-Abe, 2006). Thus, the institutional distance in terms of gender equality practice between home and host countries can also be important for subsidiaries when adjusting to the host institutional environment (Alhejji et al., 2018; Frenkel, 2017; Kemper et al., 2019). For example, some MNE headquarters (HQs) might actively engage with gender equality initiatives by implementing gender equality and diversity-related practices, such as having more female board members and managers. Yet, this engagement with gender equality does not necessarily translate to the priorities of their subsidiaries, which may face pressure from host countries with institutional environments that feature male-dominated cultures and norms. However, other HQs and subsidiaries with less of a focus on gender equality - due to the home country institutional environment - may struggle to manage their business in host countries with high demand for female employment and gender equality.

In this article, I seek to answer the following questions: (1) How do subsidiaries perceive host institutions that are distant from home institutions while they implement gender equality practices? (2) What strategic responses do subsidiaries take to adapt to host institutions and why? (3) How do subsidiaries' strategic responses change or evolve? To address these issues, I examine the implementation of gender equality practices in Sweden by Korean MNE subsidiaries. If we measure the institutional distance at the macro level using comparative capitalism (CC) approaches, Sweden is seen as a collaborative business system (Whitley, 1999) or a coordinated market economy (CME) (Hall & Soskice, 2001), whereas Korea is seen as a state-organized business (Whitley, 1999) or state-led market economy (Kang, 2010). Both countries have widely differing views on gender equality, which I discuss in more depth below. For example, according to the Gender Gap Index by World Economic Forum (Leopold et al., 2016), Sweden leads the world in gender equality (ranking 4th in 2016), whereas Korea is ranked 116th out of 144 countries. Given this disparity, we may assume that Korean MNE subsidiaries in Sweden face high pressure to deal with gender equality and to implement the necessary practices.

This study also aims to make several contributions to IB literature. First, it advances our understanding of subsidiary agency. By applying ideas from CIA literature to institutional distance literature, I provide a contextualized understanding of how subsidiaries perceive and respond to institutional distance and host institutional environments. Crucially, it investigates mechanisms behind subsidiary agency toward institutional fit or incompatibilities between home and host countries. Some studies have shed light on subsidiary agency with actor-centric institutionalism (Becker-Ritterspach et al., 2017; Fortwengel & Jackson, 2016; Saka-Helmhout & Geppert, 2011), but these works offer a nonetheless limited understanding of how subsidiaries really view and respond to institutional distance. Second, I contribute to the literature on subsidiary agency by focusing on organizational conditions. Although autonomy from HQ and identity of subsidiaries, for example, have been dealt with in existing scholarship (Edman, 2016; Kemper et al., 2019), little is known about how organizational conditions and attached micro politics between actors and institutional settings co-evolve and influence subsidiaries' actions. This study fills this void by highlighting the effects of organizational conditions and institutions on subsidiaries' strategic responses to gender equality issues. Third, this study adds nuance to the literature on gender equality practice implementation in MNEs by identifying subsidiaries' strategies. The present case study - Korean subsidiaries in Sweden, which are institutionally distant home-host countries - explores the unique strategic responses of subsidiaries to particular institutional settings. By covering under-researched contexts, this article makes an empirical contribution to the study of gender equality practice transfer and implementation activities in MNEs.

2 Theoretical Background

2.1 Institutional Distance and CIA

During practice transfer and implementation across countries, MNEs encounter dual pressures in their HQs and subsidiaries (Ghoshal & Bartlett, 1990; Kostova & Zaheer, 1999; Zaheer, 1995). MNE HQs may try to impose uniform practices in subsidiaries in host countries, believing that their way of management style has given the firm's particular advantage and will operate effectively in all contexts (Zaheer, 1995). However, because of the institutional distance between home and host countries, HQs may struggle to transfer practices to subsidiaries (Kostova, 1999; Rosenzweig & Singh, 1991). MNEs and their subsidiaries may thus face dual institutional pressures: both to adapt to the host countries' institutional environments and to maintain consistency within MNEs when transferring practices. In defining these pressures, Kostova and Zaheer (1999, p. 71) use the idea of "institutional distance" between two countries, which is defined as "the difference/similarity between the regulatory, cognitive, and normative institutions of the two countries." Similarly, Kostova and Roth (2002, p. 216) use the term of "institutional duality" to describe how MNE subsidiaries are subjected to two distinct pressures from their home and host countries.

The notion of institutional distance stems from viewing institutions as placing constraints on an organization's actions (North, 1990; Scott, 1995) and refers to the differences in institutional environment between countries (Fortwengel, 2017; Kostova & Zaheer, 1999). While research on this subject highlights institutional differences as barriers to MNEs, there is often a limited sense of contextualized understanding of home and host countries' institutional environments (Greenwood et al., 2011). Yet recent IB studies - embracing the CC literature and its view of institutions as resources or enablers - have demonstrated new implications or benefits of using this perspective to understand institutional distance (Ahmadjian, 2016; Becker-Ritterspach et al., 2017; Fortwengel, 2017; Jackson & Deeg, 2008). Both the CC literature and the CIA approach highlight how countries coordinate multiple institutions in their market economies and recognize the heterogeneity of institutional environments differently. Thus, incorporating the CIA approach into institutional distance research illuminates distinct national institutional environments that influence particular firms' activities. In line with recent contributions, this study holds that the field of IB can learn important lessons from the CIA view of institutions, especially on the relationship between complex national institutional settings and subsidiary agency.

Drawing on the CC literature, Fortwengel (2017) argues that current institutional distance studies have not explained various characteristics belonging to the institutional environments of home and host countries. To move beyond the aggregated dimension of distance, he provides a configurational framework of institutional distance composed of coordination, strength, thickness, and resources. As Fortwengel (2017) and Ahmadjian (2016)...

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