Technology sourcing and performance of foreign subsidiaries in Greece: the impact of MNE and local environmental contexts.
| Verfasser | Manolopoulos, Dimitris |
| Posten | RESEARCH ARTICLE - Multinational enterprise |
Abstract and Key Results:
* The purpose of this study is to investigate the influence of two categories of sources of technology on subsidiary performance. These technology sources can be associated either with the internal Multinational Enterprise (MNE) system; or, the local environment in which the subsidiary is based.
* A questionnaire-based survey was carried out on 88 subsidiaries located in Greece and results were derived through the use of ordered probit analysis.
* Internal MNE technology sourcing has a positive impact on subsidiary performance, which is stronger than that of local (Greek) technology sourcing. Contrary to our expectations, technology sourcing linked to the local context primarily has a negative influence on subsidiary performance.
Keywords: Foreign Subsidiary * Technology Sourcing * Performance * MNE * Local Environment
Introduction
Technology is a core imperative for modern organizations. Nowadays firms seeking sustained competitiveness need to generate and exploit technological capabilities on a worldwide scale. Early conceptualization of the multinational enterprise (MNE) linked its expansion into foreign markets to the exploitation of MNE proprietary advantages (technology and associated knowledge) generated in the home base of the headquarters (Frost 2001). Two factors seem to have accounted for the initial rejection of the foreign subsidiaries' creative technological activities. First, the only motivation that could encourage such activities would be the need to adapt the MNE centrally-derived capacities to local conditions that were considered of secondary importance (Pearce 1999). Second, factors related to the nature of technology provided an overwhelming "gravitational" force pulling such activities towards a focused centralized facility (Manolopoulos et al. 2007). These factors had to do with the need for precise coordination, control and security of technology inasmuch as interdependent operations were geographically dispersed.
Generally the viewpoint that the sources of technological ideas and projects for MNE subsidiaries originate at home reflects the "head office assignment" perspective. This approach posits that the foreign subsidiary is an instrument of the MNE and that management at the headquarters is responsible for defining the imperatives of subsidiaries abroad (Vernon 1966). The significance of MNE subsidiaries can be decisive if they provide key resources in the form of technology, knowledge, resources etc. to other MNE actors (Andersson et al. 2001, Gupta/Govindarajan 2000); but still the role of headquarters is of primary importance in the "head office assignment" view.
However, in recent years the benefits of a more decentralized technological approach have gained growing recognition (Hedlund/Rolander 1990). Following Pearce (1999), we can summarize our understanding of MNE decentralized technology operations in two main conclusions. First, MNE competitiveness is increasingly associated with overseas innovative activities and original product development rather than mere technological adaptation. Second, the accelerating impact of local environmental forces can often determine the location, extent and scope of decentralized technological operations of the subsidiary. Such forces may derive from the level and distinctiveness of a host country's scientific background and infrastructure.
In the main, this decentralized approach signals the advent of a liberalism era, whereby innovative technological ideas and projects can emerge from subsidiaries around the world rather than exclusively MNE headquarters (Birkinshaw 2000, Birkinshaw/Hood 2001). This "subsidiary-focused" perspective stresses the fact that embeddedness of the subsidiary within its local context of suppliers, customers, distributors, customers, competitors etc. provides the impetus to creative technological ideas (Birkinshaw/Hood 2000, Paterson/Brock 2002). This is because the foreign subsidiary in its local market possesses the specific knowledge to compete in that market and can be the generator of significant technological outflows to other MNE actors worldwide.
Despite the abundance of research seeking to capture the determinants of de/centralized MNE knowledge-related competitiveness, the majority of studies deal with the ability of subsidiaries to generate distinctive technologies (Birkinshaw/Hood 1998a, Kogut/Zander 1996); or, the organizational designs to accommodate this goal (Gupta/ Govindarajan 1994, Nahapiet/Ghoshal 1998). Relatively little research seems to exist on the direct impact of de/centralized technology sources on foreign subsidiary performance. In this paper, we use the term "technology sourcing" to refer to those sources in the MNE or local contexts, which pertain to technology acquisition, development, application and diffusion in the foreign subsidiary. Our research objective is to explore how internal MNE (centralized) and local environmental (decentralized) technology sources affect foreign subsidiary performance. In other words, how do the "head office assignment" and "subsidiary- focused" perspectives influence MNE subsidiary performance in its local market as regards technology sourcing? And, which of the two approaches is more valuable in explaining subsidiary performance?
Apart from its research interest, such a study has apparent managerial and public policy importance since it may inform corporate and governmental decision-makers about the implementation of appropriate strategies. Particularly the public policy significance is key because enhanced subsidiary performance is likely to generate positive externalities in terms of development of local employee skills, resistance to downsizing, and spillovers of technological and management know-how to the local economy (Birkinshaw/Hood 1998b, Blomstrom/Kokko 1998, Tavares/Young 2005).
An additional valuable characteristic of this research pertains to the fact that most studies that investigate MNE technology-related effects examine local (host) markets of advanced economies (mainly the US or the UK); or, large emerging markets, such as China. In the current study, we seek to investigate the impact of technology sourcing on MNE subsidiary performance in a small advancing economy, notably Greece. This country, which has a population of just above ten million inhabitants, is an interesting case to examine because of its dualism. It is a geographically peripheral EU country with an advancing economy that could either restrict MNE subsidiary technological activities to routine adaptation, reflecting a primarily market-seeking rationale for investments; or, provide a valuable and creative positioning for subsidiaries in a broad MNE strategic programme aiming at possible expansion from Greece into the emerging Southeast European economies.
The remainder of this paper is organized as follows. The second section explores the state-of-art on de/centralized technology sourcing and advances the research hypotheses to be tested. In the third section, we present the methodological details linked to the research design and operationalization of variables. In the fourth section, we discuss the results of the statistical analysis. The concluding section explores the implications of the study and future research directions.
Research Background and Hypotheses
Researchers have pointed out that the performance of MNEs is positively associated with their ability to generate and utilize effectively technological resources. According to Caves (1996) and Dunning (1988), the creation and exploitation of technology is the main reason explaining the success and growth of MNEs over time. Dunning (1993) notes that technology embraces all forms of the firm's physical assets, human learning and capabilities, which lead to efficient production of goods and services. Technology is viewed as a major proprietary asset that allows firms to develop unique capabilities, which, in turn, may induce and facilitate expansion into foreign markets (Buckley/Casson 1976, Hakanson 1981). Both internal MNE and local environmental technology sources can affect performance of the foreign subsidiary in the market in which it operates.
MNE Technology Sourcing
Early writings argued that technology should be diffused internally within the firm so that management can exploit the advantages related to cost minimization and hierarchical control systems (Barney 1991). Vernon (1966) argued that the exploitation of MNE competitive advantage is mostly derived from technological knowledge transfers from headquarters to subsidiaries. This is a perspective largely associated with transaction cost economics (Williamson 1985). MNEs exploit technological asset interdependencies internally in order to develop unique organizational competencies through accumulating proprietary knowledge rather than outsourcing (Cantwell 1989, Pavitt 1990). This viewpoint is consistent with the "head office assignment" approach and the traditional roles played by the overseas MNE subsidiary.
These roles of dispersed affiliates are determined by the MNE headquarters and pertain to factors linked to the availability and cost of physical inputs in the production process. Once a role is allocated to the MNE subsidiary, its technology is sourced from the MNE group's established knowledge resources (Ivarsson/Jonsson 2003, Papanastassiou/Pearce 1994). Although the ability of MNEs to engage in centralized technology sourcing "does not imply that such knowledge transfers are necessarily easy, successful, or routine" (Allred/Swan 2004, p. 261), the MNE has to find the best processes and mechanisms to disseminate these technology transfers between its subsidiaries (Zander 1997).
In support of this centralized view, there is recent evidence suggesting a strong link between the involvement of subsidiaries in the innovation network of the MNE system and the knowledge management mechanisms they develop...
Um weiterzulesen
FORDERN SIE IHR PROBEABO ANCOPYRIGHT GALE, Cengage Learning. All rights reserved.
