Reflecting the inverted U-shaped model of the relationship between HQ attention to subsidiary and business performance (Bouquet et al. A final paper comparing the impact of country-of-origin on HQ-subsidiary relationships for German, Japanese, British and US MNCs at two. lished as well as a negative correlation between adec and vertical knowledge flows. Key Words: economic culture, headquarter–subsidiary relationship.
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Bouquet and colleagues concluded that subsidiary managers are required to do a lot of follow-up tasks after such visits, while also feeling that the flow of information is working only one-way. In other words, subsidiary managers often get the feeling that HQ representatives come to get the information they are interested in and leave asking for more information they are interested in, without being open for the questions from and reciprocal dialogue with local staff.
Finally, the time and workload issues highlighted above become even more critical in the light of perceived lack of understanding and realism of headquarters executives. Hence the justified question: In contrast to the implicit assumption about converging perceptions between HQ and subsidiary managers, the researchers stated that the differences in perceptions are actually natural phenomena, rather than a rare and unexpected occasion.
Indeed, based on differences in experiences, world-views, situational circumstances etc. The study found that subsidiary role overestimation leads to more control from the HQ side, which in turn leads to a lower level of cooperation between HQ and subsidiary.
HQ-Subsidiary Relationships in MNCs
Generally, I would suggest that the gaps in perceptions and lack of alignment in terms of roles, expectations and aims between HQ and subsidiaries underlie most of the remaining critical issues, including general under- or over-involvement from HQ.
In essence, I believe that if headquarters and subsidiary managers would share the same goals in terms of visits and contact more broadly, and similarly understand the need of follow-up reporting and communication, the working time and workload topics could be managed better and would be less acute.
Open dialogue and cooperative communication ideally on both sides are something to start from to create this common understanding and eliminate perception gaps. Common understanding and mutual acceptance of roles, goals and expectations would, in turn, support further development of open dialogue and help to establish the right amount of headquarters involvement that suits both parties.
Consequences of perception gaps in the headquarters—subsidiary relationship.
International Business Review, 9, 3, This is usually a smaller company whose business operations and investments are controlled by the parent corporation. Sometimes, the parent company owns a majority interest in the subsidiary and has little control over the company beyond marketing and financial agreements.
While a multinational can be based anywhere, almost all the major ones are American, Western European or Japanese. Many times their subsidiaries are located in less developed nations where labor and costs of production might be less. How and Why They Are Formed A multinational can form a subsidiary by negotiating with a foreign government to open an office or production facility in the country. In return, the multinational may receive financial incentives to locate in a certain area.
Relations Between International Companies and Their Subsidiaries | dayline.info
Other times, a multinational may have a controlling interest in a smaller foreign company but choose not to merge with the company. This could be because there is a significant difference in the brands or the products the two produce.
A multinational will form a subsidiary to produce goods and services that cannot be produced in its home country. Economic Reasons for Subsidiaries The main reason for subsidiaries is economics.
- Relations Between International Companies and Their Subsidiaries
- Emerging Issue Paper 1 — Managing Relations Between Headquarter and Subsidiary
- HQ-Subsidiary Relationships in MNCs
Of the incentives a country can offer a multinational are tax incentives. The country may offer the business a lower rate or a number of years without national taxes to aid in establishing the subsidiary. Corporations also create subsidiaries for the specific purpose of limiting their liability in connection with a new product or just for operating in a new country. The parent and subsidiary have separate legal identities, which means one is not liable for the actions of the other.