Sunday, 25 December 2016

Mind mapping the topic of subsidiary management (SM)

Mind mapping the topic of subsidiary management (SM)

Joseph Kim-keung Ho
Independent Trainer
Hong Kong, China



Abstract: The topic of subsidiary management (SM) is a main one in global business management. This article makes use of the mind mapping-based literature review (MMBLR) approach to render an image on the knowledge structure of subsidiary management. The finding of the review exercise is that its knowledge structure comprises four main themes, i.e., (a) Definitions of basic concepts, (b) Major underlying theories and thinking, (c) Main research topics and issues, and (d) Major trends and issues related to practices. There is also a set of key concepts identified from the SM literature review. The article offers some academic and pedagogical values on the topics of SM, literature review and the mind mapping-based literature review (MMBLR) approach.
Key words: Subsidiary management, literature review, mind map, the mind mapping-based literature review (MMBLR) approach, global business management

Introduction
Subsidiary management (SM) is a main topic in global business management. It is of academic and pedagogical interest to the writer who has been a lecturer on global business management for some tertiary education centres in Hong Kong. In this article, the writer presents his literature review findings on SM using the mind mapping-based literature review (MMBLR) approach. This approach was proposed by this writer this year and has been employed to review the literature on a number of topics, such as supply chain management, strategic management accounting and customer relationship management (Ho, 2016). The MMBLR approach itself is not particularly novel since mind mapping has been employed in literature review since its inception. The overall aims of this exercise are to:
1.      Render an image of the knowledge structure of subsidiary management  (SM) via the application of the MMBLR approach;
2.      Illustrate how the MMBLR approach can be applied in literature review on an academic topic, such as SM.
The findings from this literature review exercise offer academic and pedagogical values to those who are interested in the topics of SM, literature review and the MMBLR approach. Other than that, this exercise facilitates this writer’s intellectual learning on these three topics. The next section makes a brief introduction on the MMBLR approach. After that, an account of how it is applied to study SM is presented.

On mind mapping-based literature review
The mind mapping-based literature review (MMBLR) approach was developed by this writer this year (Ho, 2016). It makes use of mind mapping as a complementary literature review exercise (see the Literature on mind mapping Facebook page and the Literature on literature review Facebook page). The approach is made up of two steps. Step 1 is a thematic analysis on the literature of the topic chosen for study. Step 2 makes use of the findings from step 1 to produce a complementary mind map. The MMBLR approach is a relatively straightforward and brief exercise. The approach is not particularly original since the idea of using mind maps in literature review has been well recognized in the mind mapping literature. The MMBLR approach is also an interpretive exercise in the sense that different reviewers with different research interest and intellectual background inevitably will select different ideas, facts and findings in their thematic analysis (i.e., step 1 of the MMBLR approach). Also, to conduct the approach, the reviewer needs to perform a literature search beforehand. Apparently, what a reviewer gathers from a literature search depends on what library facility, including e-library, is available to the reviewer. The next section presents the findings from the MMBLR approach step 1; afterward, a companion mind map is provided based on the MMBLR approach step 1 findings.

Mind mapping-based literature review on subsidiary management (SM): step 1 findings
Step 1 of the MMBLR approach is a thematic analysis on the literature of the topic under investigation (Ho, 2016). In our case, this is the SM topic. The writer gathers some academic articles from some universities’ e-libraries as well as via the Google Scholar. With the academic articles collected, the writer conducted a literature review on them to assemble a set of ideas, viewpoints, concepts and findings (called points here). The points from the SM literature are then grouped into four themes here. The key words in the quotations are bolded in order to highlight the key concepts involved.
Theme 1: Definitions of basic concepts

Point 1.1.              A subsidiary is defined as a value-adding entity for a parent TNC, located in a host country. This definition allows a TNC [transnational corporation] group to have several subsidiaries in any given host country or in different countries, and they may be independent in their roles. A subsidiary can perform a single activity (for example, manufacturing) or an entire value chain of activities” (Iguchi, 2012);
Point 1.2.              “…subsidiary can refer to the totality of the MNC’s holdings in a host country or to a single entity, such as a manufacturing or sales operation. Subsidiaries are established for a variety of motives (e.g., resource seeking, market seeking, or efficiency seeking) and through a variety of modes (e.g., greenfield, acquisition, or joint venture). The relationship of the subsidiary to the parent company can be anything from legal holding company to fully integrated” (Birkinshaw and Hood, 1998);
Point 1.3.              Relationships between headquarters and foreign subsidiaries are among the most crucial issues concerning the management of multinational enterprises (MNEs) … MNEs are firms that engage in foreign direct investments (FDIs) by controlling and managing value-added activities abroad …..; thus, foreign subsidiaries contribute to their global value chain” (Beddi and Mayrhofer, 2013);
Point 1.4.              Competence-creating subsidiaries have strong autonomy levels as a result of either enhanced capabilities or charters which also require responsibilities for sourcing parts or components and managing R&D activities, as well as the cost efficiency and quality required by the TNC parent” (Iguchi, 2012);
Point 1.5.              Some subsidiaries may have responsibility for all of the firm’s products, others may have responsibility for a single product line or even a single product” (Enright and Subramanian, 2007);
Point 1.6.              “…it [subsidiary evolution] can be understood broadly as the process of accumulation or depletion of resources/capabilities in the subsidiary over time” (Birkinshaw and Hood, 1998);
Point 1.7.              “…some subsidiaries are capability makers and other subsidiaries are capability takers” (Enright and Subramanian, 2007);
Point 1.8.              “…some subsidiaries may rely more on knowledge sourced from their local environments in the process of building valuable subsidiary-level knowledge (“external knowledge”), whereas others might build knowledge assets based on knowledge inputs from other subsidiaries or corporate headquarters” (Asmussen, Foss and Pedersen, 2013);
Point 1.9.               “A network MNC strongly delegates decision rights to subsidiaries, while retaining some decision-rights at the HQ. It is often characterized by a low degree of formalization, extensive lateral communication and knowledge transfer. Its subsidiaries are often resource-rich, hence powerful. It is a change-oriented organization situated in high-dynamism environments in which local adaptation as well as integration pressures coexist” (Foss, Foss and Nell, 2011);
Point 1.10.          “Leaders are subsidiaries that create substantive capabilities through their research and development and managerial activities and are important users of capabilities in production, marketing and sales, and similar activities. Innovators are firms that generate capabilities, but have low levels of capability utilization such as engaging in the production or marketing or related activities that directly leverage capabilities into the local economy. ….Implementers are subsidiaries that have low levels of capability creation ….. but are important users of capabilities generated in other parts of the firm. Observers are not important to the firm as capability generators or users” (Enright and Subramanian, 2007);
Point 1.11.          “A subsidiary that generates capabilities used regionally or globally may be very different from one that generates important capabilities only used locally. The use of the terms ‘local implementer’…., ‘global innovator’ and ‘local innovator’ … and ‘world mandate’ …, also show that the geographic scope of the subsidiary’s influence allows one to distinguish one subsidiary type from another” (Enright and Subramanian, 2007);
Point 1.12.         “Different scholars have described subsidiary control in many different ways. Child …, for example, defined it as regulating the activities within an organization so that they are in accord with the expectations established in policies, plans and targets, whereas Wilkinson et al … conceptualized it as the process through which a parent companys interests are protected’..” (Pudelko and Tenzer, 2013);
Point 1.13.          “The MNC is viewed as a network of geographically separate but mutually linked nodes (or units), each possessing unique knowledge resources ... Possibilities for combining complementary knowledge resources, and for supporting their transfer and subsequent combination, drive overall value creation …” (Asmussen, Foss and Pedersen, 2013);
Theme 2: Major underlying theories and thinking
Point 2.1.              “…the TNC [transnational corporation] group is modelled as an ‘inter-organisational network’ … of loosely coupled entities, rather than a singular hierarchy, which gives the subsidiary the necessary freedom to develop and shift its own unique resource profile, including human and technological resources, within the host country. This view provides a valuable perspective on the emergence of competence-creating subsidiaries” (Iguchi, 2012);
Point 2.2.              From this perspective [resource based view], rather than seeking foreign markets for exploiting rent-yielding firm-specific advantages, multinationals pursue knowledge-seeking strategies not just for exploitation but also for enhancement or development of new capabilities (Moore, 2001; Madhok, 1997). In that sense, some subsidiaries are given mandates for exploring local knowledge and access to expertise complementary to the multinational, which, when leveraged by the transfer of knowledge among MNC units, leads to a competitive advantage for the whole corporation” (Miravitlles, Guitart-Tarrés and Nuñez-Carballosa, 2014);
Point 2.3.              The PLC [product life cycle] model helps us to understand the development process as subsidiaries’ roles shift toward high value-added activities – from servicing the local market to “adapting” the technology to local specifications, then exporting back to the home country, and eventually to contributing to product development…. However, it is limited in two ways: (1) the subsidiary is always subordinate to the center, and (2) the possibility of subsidiary decline is not considered” (Birkinshaw and Hood, 1998);
Point 2.4.              The benefits of concentrating any function in the value chain at a few sites lie fundamentally in obtaining economies of scale, learning and scope, while the advantages of dispersing activities in different countries include, among others, the degree of specialisation at each location, the diversification of political or exchange rate risks and the flexibility to respond to competitors in different ways in each country” (Miravitlles, Guitart-Tarrés and Nuñez-Carballosa, 2014);
Point 2.5.              “…a large segment of the international business literature argues that multinational corporations (MNCs) can derive advantages relative to purely domestic firms from their superior access to heterogeneously distributed knowledge… and their ability to transfer and exploit such knowledge within the MNC” (Asmussen, Foss and Pedersen, 2013);
Point 2.6.              “…local market knowledge, which can be acquired by the parent MNE through own (prior) investment experience or through the involvement of a local partner, negates the effect of psychic distance on subsidiary performance because such market knowledge eliminates the factors that prevent a firm’s learning about a foreign environment” (Dikova, 2009);
Point 2.7.              “…the longer a subsidiary has operated and built internationally integrated relationships, the more it will have been able to evolve away from a primarily domestic orientation, thereby finding opportunity to accumulate capability and autonomy” (Iguchi, 2012);
Point 2.8.              “…the uniqueness of the subsidiary’s knowledge in an MNC context tends to be larger, ceteris paribus, if that knowledge is acquired in the subsidiary’s external host country environment rather than from other MNC units. This enhances the benefit of knowledge transfer as it may stimulate innovation by increasing diversity of knowledge in the receiving unit” (Asmussen, Foss and Pedersen, 2013);
Point 2.9.              A multinational subsidiary can assimilate knowledge from a set of six exhaustive and mutually exclusive sources. The first three operate under a unified corporate identity: the subsidiary itself (i.e., utilizing own knowledge); MNC headquarters (located in the home country of the MNC); and other MNC subsidiaries (located in other countries). The three sources located outside the firm’s boundaries are: other firms in the host country (where the subsidiary is located); other firms in the home country (where the MNC headquarters are located); and firms in other countries” (Phene, and Almeida, 2008);
Point 2.10.         A useful starting model for analyzing subsidiary capacity building is the “global factory” …  the key macro analytical decisions in the global factory are very simple—control and location. The planning center of the global factory has to ask two very straightforward questions of each activity in the global network: Where should this activity be located? How should this activity be controlled? The second question concerns the means of control. Should the activity be managed by the market via a contract and price relationship, or should it be internalized and controlled by management?” (Horn, 2016);
Point 2.11.         Deciding on an appropriate ownership strategy is a critical task for multinational enterprises (MNEs) that wish to effectively and efficiently manage foreign subsidiaries in host markets …The choice between a wholly owned subsidiary (WOS) and a joint venture (JV) ownership structure is determined by various factors. These factors include strategic intent …., capability level …, organizational characteristics …, and the type of internal knowledge to be transferred between foreign subsidiaries” (Lee, Kwak and Kim, 2014);
Point 2.12.          Head-office assignment of roles is a critical determinant of subsidiary evolution, but in our reading of the literature, it is just one of three broad mechanisms that are responsible for driving the process. The second we refer to as subsidiary choice, which reflects the decisions taken by subsidiary management to define for themselves the role of their subsidiary. The third we refer to as local environment determinism, in that the role of the subsidiary can be understood as a function of the constraints and opportunities in the local market” (Birkinshaw and Hood, 1998);
Point 2.13.         “Two main kinds of subsidiary control can be distinguished: HQ may either directly influence their foreign operations by centrally controlling subsidiary activities or exert more indirect control through staffing key subsidiary positions with expatriates. Whereas the former option should guarantee the subsidiarys compliance with corporate strategy, it is not always possible to implement it in full. If this is the case, an MNC uses global staffing, particularly in the form of expatriation, as the primary means to coordinate and control its spatially dispersed operations” (Pudelko and Tenzer, 2013);

Theme 3: Main research topics and issues
Point 3.1.              A number of researchers have developed typologies that attempt to identify the salient features that distinguish subsidiaries …. Recent research has largely focused on the structural aspects of the MNC, particularly the mechanisms of coordination and control to classify MNC subsidiaries …, or on examining specific roles of subsidiaries such as Centers of Excellence …, or on studying how such subsidiary roles are gained or lost” (Enright and Subramanian, 2007);
Point 3.2.              A source of competitive advantage for contemporary multinational enterprises (MNEs) is their ability to leverage distinct competencies of internationally dispersed subsidiaries. Much research under the modern stream of subsidiary development has focused on the different roles that subsidiaries can play within the MNE system, drawing on subsidiary-specific competencies” (Dimitratos, Liouka and Young, 2014);
Point 3.3.              Despite its significance, the notion of subsidiary entrepreneurship, in terms of competencies that could contribute both to subsidiary- and MNE-level development, has largely been neglected in the relevant literature” (Dimitratos, Liouka and Young, 2014);
Point 3.4.              “…when recipients acquire new knowledge that conflicts with their existing beliefs, they may inadvertently alter their existing knowledge structures—a process that cognitive constructivists call “accommodation” …. In the context of the MNC, this may lead a foreign subsidiary to alter or discard preexisting knowledge that happened to be valuable to other MNC units. This implies that knowledge inflows from the environment may be value destroying, an effect that cannot be captured if we assume knowledge to be cumulative” (Asmussen, Foss and Pedersen, 2013);
Point 3.5.              “…while the benefits of individual subsidiaries interacting with their particular local environment to create knowledge and initiatives for dissemination across the MNC is increasingly accepted …, the potential for a subsidiary to exploit their local environment through developing subsidiary entrepreneurship has been underexplored” (Scott, Gibbons and Coughlan, 2010);
Point 3.6.              During the past couple of decades, numerous studies have been made on heterogeneity among subsidiaries …showing that subsidiaries within the same MNC often have different roles. The focus has mainly been on internal conditions. …. Few studies have more explicitly examined the importance that a subsidiary’s external network of specific business relationships has on its market performance and strategic role within the MNC” (Ljung and Pahlberg, 2015);
Point 3.7.              Given that control is of paramount importance for the implementation of an MNCs global strategy …, it represents the central issueof headquarters (HQ)-subsidiary relationships” (Pudelko and Tenzer, 2013);
Point 3.8.              MNE subsidiaries are distinctive from independent firms because of their status as affiliates, and hence, are subject to the ultimate control of their parent firms. Thus, their cross-border relationships with their parent corporation and other subsidiaries create very distinctive opportunities and challenges in developing entrepreneurial competencies” (Dimitratos, Liouka and Young, 2014);
Point 3.9.              The control of foreign subsidiaries by headquarters (HQ) poses a particularly interesting area of research. Foreign subsidiaries are often culturally and socially distant from their parents. They may resent HQ’s formal control mechanisms, discarding them as signs of inflexibility and unwillingness to adapt to the local environment. And they may welcome informal control up to a certain point but consider it interference beyond that” (Scott, Gibbons and Coughlan, 2010);
Point 3.10.         “It is accepted that the latitude provided by federal MNC structures has enabled subsidiaries to engage in strategy development ….which is concerned about the future direction of an organisation …, but little is known about the drivers of variation in subsidiary strategy” (Scott, Gibbons and Coughlan, 2010);
Point 3.11.         “The attributes of headquarters-subsidiary relations make them very similar to principal-agent relationships … As the principal, the headquarters cannot effectively make all the decisions in the MNC since it does not possess and must, therefore, depend on the unique knowledge of the subsidiaries. At the same time, the headquarters cannot relinquish all decision-rights to the subsidiaries since the local interests of subsidiaries may not always be aligned with those of the headquarters or the MNC as a whole” (Nohria and Ghoshal, 1994);
Theme 4: Major trends and issues related to practices
Point 4.1.              The traditional Thai antipathy to downsizing – particularly by Western-parented company – is reflected in a labour law which makes layoffs difficult and potentially costly. The nature of social relationships in Thai culture is such that the need for externally imposed change programmes is invariably construed as a ‘loss of face’ by senior local executives accustomed to the traditional top-down management system” (Andrews, 2010);
Point 4.2.              For MNEs originating from mature markets, managing subsidiaries in emerging economies appears to be a difficult task because the local environment of these foreign subsidiaries usually presents important differences from the home-country environment of the parent company. In fact, the distance separating the headquarters of the MNEs from their local subsidiaries may affect relationships between them” (Beddi and Mayrhofer, 2013);
Point 4.3.              Host developing countries have promoted inward FDI in order to link host countries’ technology or firms with global technology and innovation networks through TNC subsidiaries” (Iguchi, 2012);
Point 4.4.              Over the last few years, MNEs from mature economies have increased their investments in developing countries…, mostly in emerging markets. The role of foreign subsidiaries located in emerging countries is, thus, likely to change over time” (Beddi and Mayrhofer, 2013);
Point 4.5.              “As the complexity of the local environment in which the subsidiary is located increases, the importance of local knowledge increases and the subsidiary must be allowed greater influence in decision making. At the same time, as the level of resources possessed by the subsidiary increases, agency costs or the risk associated with the subsidiary acting in its own partisan interests increases” (Nohria and Ghoshal, 1994);
Point 4.6.              Historically, the role of subsidiaries is to adapt products developed in the parent TNC’s [[transnational corporation] home country to local tastes or customer needs, and to adapt processes to the availability of local resources and production conditions. This type of traditional subsidiary was dependent on the competence of its parent TNC, and its role was competence-exploiting” (Iguchi, 2012);


Each of them has a set of associated points (i.e., idea, viewpoints, concepts and findings). Together they provide an organized way to comprehend the knowledge structure of the subsidiary management (SM) topic. The bolded key words in the quotation reveal, based on the writer’s intellectual judgement, the key concepts examined in the SM literature. The referencing indicated on the points identified informs the readers where to find the academic articles to learn more about the details on these points; readers are also referred to the Literature on multinational corporation Facebook page. The process of conducting the thematic analysis is an exploratory as well as synthetic learning endeavour on the topic’s literature. Once the structure of the themes, sub-themes[1] and their associated points are finalized, the reviewer is in a position to move forward to step 2 of the MMBLR approach. The MMBLR approach step 2 finding, i.e., a companion mind map on SM, is presented in the next section.

Mind mapping-based literature review on SM: step 2 (mind mapping) output
By adopting the findings from the MMBLR approach step 1 on subsidiary management (SM), the writer constructs a companion mind map shown as Figure 1.




Referring to the mind map on SM, the topic label is shown right at the centre of the map as a large blob. Four main branches are attached to it, corresponding to the four themes identified in the thematic analysis. The links and ending nodes with key phrases represent the points from the thematic analysis. The key phrases have also been bolded in the quotations provided in the thematic analysis. As a whole, the mind map renders an image of the knowledge structure on SM based on the thematic analysis findings. Constructing the mind map is part of the learning process on literature review. The mind mapping process is speedy and entertaining. The resultant mind map also serves as a useful presentation and teaching material. This mind mapping experience confirms the writer’s previous experience using on the MMBLR approach (Ho, 2016). Readers are also referred to the Literature on literature review Facebook page and the Literature on mind mapping Facebook page for additional information on these two topics.

Concluding remarks
The MMBLR approach to study SM provided here is mainly for its practice illustration as its procedures have been refined via a number of its employment on an array of topics (Ho, 2016). No major additional MMBLR steps nor notions have been introduced in this article. In this respect, the exercise reported here primarily offers some pedagogical value as well as some systematic and stimulated learning on subsidiary management (SM) in global business management. Nevertheless, the thematic findings and the image of the knowledge structure on SM in the form of a mind map should also be of academic value to those who research on this topic.



Bibliography

1.      Andrews, T.G. 2010. “Downsizing the Thai Subsidiary Corporation: A Case Analysis” Asia Pacific Business Review 8(2): 149-170.
2.      Asmussen, C.G., N.J. Foss and T. Pedersen. 2013. “Knowledge Transfer and Accommodation Effects in Multinational Corporations: Evidence from European Subsidiaries” Journal of Management 39(6) September, Sage: 1397-1429.
3.      Beddi, H. and U. Mayrhofer. 2013. “Headquarters-subsidiaries relationships of French multinationals in emerging markets” The Multinational Business Review 21(2), Emerald: 174-194.
4.      Birkinshaw, J. and N. Hood. 1998. “Multinationality subsidiary evolution: capability and charter change in foreign-owned subsidiary companies” Academy of Management Review 23(4): 773-795.
5.      Dikova, D. 2009. “Performance of foreign subsidiaries: Does psychic distance matter?” International Business Review 18, Elsevier: 38-49.
6.      Dimitratos, P., I. Liouka and S. Young. 2014. “A missing Operationalization: Entrepreneurial Competencies in Multinational Enterprise Subsidiaries” Long Range Planning 47, Elsevier: 64-75.
7.      Enright, M.J. and V. Subramanian. 2007. “An organizing framework for MNC subsidiary typology” Management International Review 47 December: 895-924.
8.      Foss, K., N.J. Foss and P.C. Nell. 2011. “MNC organizational Form and subsidiary motivation problems: controlling intervention hazards in the network MNC” December 6, SSRN.com (url address: Electronic copy available at: http://ssrn.com/abstract=1969402) [visited at December 25, 2016].
9.      Ho, J.K.K. 2016. Mind mapping for literature review – a ebook, Joseph KK Ho publication folder October 7 (url address: http://josephkkho.blogspot.hk/2016/10/mind-mapping-for-literature-review-ebook.html).
10. Horn, S.A. 2016. “Subsidiary Capacity Building in Emerging Markets: How Japanese MNEs Sequence Market Entry and Development Strategies in India” Thunderbird International Business Review 58(1) January/February: 55-74.
11. Iguchi, C. 2012. “Globalisation of R&D by TNC subsidiaries: The Case of South-East Asian countries” Asian Business & Management 11(1), Palgrave: 79-100.
12. Lee, J.Y., J.Y. Kwak and K.A. Kim. 2014. “Subsidiary goals, learning orientations, and ownership strategies of multinational enterprises: evidence from foreign direct investments in Korea” Asia Pacific Business Review 20(4), Routledge: 558-577.
13. Literature on multinational corporation Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.multinational.corporation/).
14. Literature on literature review Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.literaturereview/).
15. Literature on mind mapping Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.mind.mapping/).
16. Ljung, A. and C. Pahlberg. 2015. “Subsidiary strategy processes in Latin America” European Business Review 27(5), Emerald: 535-550.
17. Miravitlles, P., L. Guitart-Tarrés and A. Nuñez-Carballosa. 2014. “Competitiveness of Spanish foreign subsidiaries” Competitiveness Review 24(3), Emerald: 171-189.
18. Nohria,  N. and S. Ghoshal. 1994. “Differentiated fit and shared values: Alternatives for managing headquarters-subsidiary relations” Strategic Management Journal 15: 491-502.
19. Phene, A. and P. Almeida. 2008. “Innovation in multinational subsidiaries: The role of knowledge assimilation and subsidiary capabilities” Journal of International Business Studies 39: 901-919.
20. Pudelko, M. and H. Tenzer. 2013. “Subsidiary control in Japanese, German and US multinational corporations: Direct control from headquarters versus indirect control through expatriation” Asian Business & Management 12(4), Palgrave: 409-431.
21. Richards, M. and M.Y. Hu. 2003. “US subsidiary control in Malaysia and Singapore” Business Horizons November-December: 71-76.
22. Scott, P., P. Gibbons and J. Coughlan. 2010. “Developing subsidiary contribution to the MNC-Subsidiary entrepreneurship and strategy creativity” Journal of International Management 16, Elsevier: 328-339.




[1] There is no sub-theme generated in this analysis on SM.

1 comment:

  1. Pdf version at: https://www.academia.edu/30609449/Mind_mapping_the_topic_of_subsidiary_management_SM_

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