Characteristics of Low-autonomy Foreign Subsidiaries: Value Chains, Staffing, and Intra-organizational Relationships

Jens Gammelgaard, Frank McDonald, Andreas Stephan, Heinz Tüselmann, Christoph Dörrenbächer

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This paper examines several characteristics of foreign subsidiaries with low autonomy. Data derived from a survey of 381 MNC subsidiaries located in Denmark, Germany and the UK demonstrate that lowautonomy subsidiaries are highly embedded in their respective MNC networks and that they establish a high number of intra-organizational relationships. Furthermore, such subsidiaries are typically managed by nationals of the MNC’s headquarters home country. Despite the fact that such subsidiaries have low autonomy, they employ a high proportion of professional staff members. We find a negative relationship between lower autonomy and the production activities carried out by the subsidiary. In fact, low-autonomy subsidiaries appear to be specialized in that they focus on a few value-chain activities and they typically serve as marketing outlets.

Keywords

Round Building

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