Subsidiary role and skilled labour effects in small developed countries.
| Verfasser | Gammelgaard, Jens |
| Posten | RESEARCH ARTICLE |
Abstract and Key Results:
* This paper considers the proportion of skilled labour employed by subsidiaries in small countries in the context of the strategic role of subsidiaries. Strategic role is connected to autonomy and intra-organisational relationships and the mandates given to the subsidiary. In the paper, we draw on the literature on the strategic development of multinational corporations, and insights from inward foreign direct investments in small developed countries. This is presented in a unifying framework in order to predict diverse categorizations of the impact of subsidiary role on the proportion of their employment of skilled labour.
* The paper derives two propositions that postulate interactions between three roles containing different levels of autonomy and intra-organisational relationships in small developed countries that lead to different proportions of skilled labour in subsidiaries.
* We predict the highest proportion of skilled labour 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, we predict the proportion of skilled labour to be highest in the cases of specialized contributors. We propose the proportion of skilled labour to be lowest in the case of local implementers.
Keywords: Subsidiary Roles * Small Developed Countries * Employment * Skilled Labour * Autonomy * Intra-Organisational Relationships
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/Holmstrom/Sharma 2005, Mu/Gnyawali/Hatfield 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 employment levels in their regions in the face of the challenges arising from globalisation. Small developed countries may be considered to be especially vulnerable to the employment effects that arise from the present globalisation process because they lack the political power to limit the ability of MNCs to relocate to lower cost locations. Small countries also lack large market size. There is likely to be a size advantage that induces MNCs, located in large countries, to retain these locations in order to benefit from the supply channels to significant markets.
There is however a debate on whether the globalisation process is stimulating an increase in the demand for skilled workers in developed countries as lower value-added work is transferred to developing countries thereby creating incentives for subsidiaries in developed countries to move up the value chain (Wolf 2005). In this scenario the globalisation process is stimulating a new international division of labour, which is inducing developed countries to specialise in higher valued added activities that normally require highly skilled labour. This outcome is crucially dependent on the strategic development of subsidiaries in ways that permit them to move up the value chain and thereby to demand a higher proportion of skilled labour.
There is an extensive literature on the employment effects of FDI (Barrell/Pain 1997, Driffield 2006), but most of the studies focus on the spillover employment effects of investments rather than the direct employment effects of the strategic development of MNCs and their subsidiaries. The strategic development of MNCs should lead to the creation of skilled jobs in areas that are connected to the competitive advantages that exist and are being developed in the various host locations of MNCs. In developed countries, given the relatively high cost of labour, this will tend to increase the demand for skilled labour in order to obtain high productivity to compensate for high wage and non-wage costs. The ability of subsidiaries to increase employment of skilled labour is likely to be associated with the level of autonomy and intra-organisational relationships because subsidiaries need to be able to develop competencies that permit them to increase their use of skilled labour. Therefore, the globalisation process should stimulate demand for the employment of a higher proportion of skilled labour by subsidiaries. There are only few studies on the links between the strategy of subsidiaries and their employment of skilled labour (e.g., McDonald et al. 2005). Further, there is also a lack of developed conceptual models that link the role of subsidiaries to their direct employment of skilled labour. Using a framework proposed by Birkinshaw and Morrison (1995) this paper develops a conceptual model that considers the links between the demand for skilled labour by subsidiaries in small developed countries, and the strategic role of such entities.
The paper is structured in the following way. First, the debate on inward FDI in small developed countries is outlined. This is followed by a section outlining the major existing literature on the role of subsidiaries, with a focus on small developed countries. The next sections develop a conceptual model and derive propositions on the relationships between the proportion of skilled labour employed by subsidiaries in small developed countries and the 'local implementer', 'specialized contributor' and 'world mandate' types of subsidiaries. The paper concludes with consideration of some of the implications of the model for the managers of parent companies, subsidiary managers and regional development policy makers.
Definitions of Small Countries and Skills
This paper investigates FDI and subsidiary developments in small developed countries, such as, Belgium, Denmark, Finland, Ireland, and New Zealand. A small country is defined by the size of gross domestic product (GDP), which is a proxy for the quantity of labour, capital assets, and natural resources bases, whereas the level of development is estimated by GDP per capita which is a estimate of social infrastructures such as life expectancy, percentage of urban population, and education levels (Allred/Steensma 2005). Thus small developed countries have relatively small GDP but high GDP per capita. In defining skilled labour we follow the logic of Nelson and Winter (1982) in regarding skills as a "capability" and exemplify this as "the ability to serve a tennis ball well" (Nelson/Winter 1982, p. 73). Skills would, using this line of argumentation, relate to the ability or cleverness of an employee executing a specific task, or at an aggregated level the skills of the organization, often represented by best practices or routines.
FDI Inflows into Small Developed Countries
Most theories of FDI suggest that the size of countries is an important determinant of FDI inflows because of host location advantages and from the large size of domestic markets that are available in large countries. These benefits lead to abilities to generate economies of size and scope in production, and sales and distribution activities (Buckley/Casson 1976). However, FDI can also be driven by resource seeking motives to gain access to pools of assets that can help promote innovation and learning. In this context, a study of Nordic manufacturing companies found that there was a significant transfer of knowledge intensive operations to EU countries from those Nordic countries that were not members of the EU (Oxelheim/Gartner 1994). Denmark, the only EU member at that time, did not experience an increase in FDI of this type from the other Nordic countries. This was taken to indicate that the benefits of the size of some EU countries had enabled them to attract this FDI, rather than Denmark, because they had more desirable resources in terms of both the width and depth of their resource base.
The development of regional blocs such as NAFTA and the EU should expand both market and resource seeking motives for FDI, because it provides, for those firms inside the bloc, a larger market and access to a larger pool of resources. However, evidence is mixed on whether FDI inflows can be enhanced by increasing the economic size of countries by developing regional economic integration policies in blocs such as the EU and NAFTA (Buckley et al. 2001). This study found that the creation and development of NAFTA had a positive, but small, effect, and no clear evidence of this effect was found for the EU. Market size has also been found to be an important driver of...
Um weiterzulesen
FORDERN SIE IHR PROBEABO ANCOPYRIGHT GALE, Cengage Learning. All rights reserved.
