Explaining autonomy variations across value‐chain activities in foreign‐owned subsidiaries

• DOI: http://doi.org/10.1002/tie.22019
• Published date: 01 March 2019
• Author: Suthikorn Kingkaew,Sven Dahms
• Date: 01 March 2019

INTERNATIONAL BUSINESS THEORY AND APPLICATION

Explaining autonomy variations across value-chain activities

in foreign-owned subsidiaries

Suthikorn Kingkaew

1

| Sven Dahms

2

1

Thammasat Business School, Thammasat

University, Bangkok, Thailand

2

Centre for International Trade, Economic

Policy, and Business in Asia, James Cook

University Singapore, Singapore, Singapore

Correspondence

Sven Dahms, Lecturer in Business; Centre for

International Trade, Economic Policy, and

Business in Asia, James Cook University

Singapore, 149 Sims Drive, Singapore 387380,

Singapore.

Email: svendahms@hotmail.com

This article is one of the first to combine the asset bundling model and neo-configurational per-

spective to explain autonomy variations across different value-chain activities in foreign-owned

subsidiaries. We develop tentative answers to three research questions based on survey data of

subsidiaries located in Taiwan and Thailand. We use fuzzy set qualitative comparative analysis

technique to analyze the data. We found that competence bundles in primary and support activ-

ities are key for autonomy development across basic and advanced value-adding activities.

Strong relationships with local business networks are more important for autonomy develop-

ment than links to universities or governmental institutions. The global city location plays a

lesser role than expected and the geographic distance is a hindrance to autonomy development

in basic as well as advanced value-chain activities.

KEYWORDS

asset bundling, autonomy, emerging market, foreign-owned subsidiaries, fsQCA, neo-

configurational perspective

1|INTRODUCTION

Decision-making autonomy is the freedom; managing directors of

foreign-owned subsidiaries have, to make decisions without having to

refer back to their headquarters (Cavanagh, Freeman, Kalfadellis, &

Herbert, 2017; Paterson & Brock, 2002; Young & Tavares, 2004). It is

seen as a crucial element for understanding subsidiary development

and the balance of power within multinational enterprises (MNEs; Bir-

kinshaw & Ridderstråle, 1999; Li, 2018; ul Haq, Drogendijk, & Holm,

2017). Autonomy is also of concern for policy makers because it is

often assumed that subsidiaries with greater autonomy can make a

more valuable economic contribution (Holm & Pedersen, 2000; Nar-

ula & Pineli, 2017).

While autonomy has a long research record, the concept keeps

changing along with the very nature of MNEs themselves (Cavanagh

et al., 2017; Dahms, 2017a). With increasing global competitive pres-

sures and recent technological advancements, autonomy in foreign

subsidiaries seems even more elusive (Cavanagh et al., 2017; Kostova,

Marano, & Tallman, 2016). For instance, to remain globally competi-

tive, MNEs have to bundle their resources and competences (or firm-

specific advantages) with resources and competencies embedded in

local networks (location-specific advantages) (Dunning, 1988; Horn,

2016; Johanson & Vahlne, 2009). Yet, access to those location-

specific advantages is not freely available to the MNE; instead, it has

to compete for access to those assets with other multinationals as

well as local competitors (Hennart, 2009; Hennart, Sheng, & Pimenta,

2015). Furthermore, due to technological advancements, MNEs are

able to finely slice their value-adding activities and distribute those

throughout a worldwide network (Alcácer, Cantwell, & Piscitello,

2016; Blomkvist, Kappen, & Zander, 2017; Rugman & Verbeke, 2001).

This degree of specialization in certain value-adding activities creates

information costs and requires headquarters to cede decision-making

powers to subsidiaries (Ambos, Andersson, & Birkinshaw, 2010;

Blomkvist et al., 2017; ul Haq et al., 2017). While those broader devel-

opments have been addressed in extant literature, their interconnec-

tion is still ambiguously understood at best.

While there are a plethora of studies on the topic across various

fields of the management literature (Cavanagh et al., 2017; Paterson &

Brock, 2002; Young & Tavares, 2004), most fail to address the com-

bined effects of costs in accessing location-specific advantages and

finely slicing value-chain activities. However, the success of the sub-

sidiary depends to a large extent on its ability not only to gain access

to such location-specific advantages, but also to combine them with

firm-specific advantages (Fenton-O'Creevy, Gooderham, & Nordhaug,

DOI: 10.1002/tie.22019

Thunderbird Int. Bus. Rev. 2019;61:425–438. wileyonlinelibrary.com/journal/tie © 2018 Wiley Periodicals, Inc. 425