MNC closures in the Netherlands: An explorative study on the implications
of subsidiary closures for the value of human capital
Master Thesis University of Groningen Faculty of Economics and Business MSc BA Strategic Innovation Management
22nd January 2018
Supervisor: Dr. Pedro de Faria Co-assessor: MSc. Aneta Oleksiak
Name: Dominik Battisti Student number: S3290689 E-Mail: d.battisti@student.rug.nl
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Abstract
The closures of Multinational company (MNC) subsidiaries have recently received more attention by academic literature. Recent literature investigated what the consequences of MNC subsidiary closures are for the employees that lose their job. Nevertheless, little is known if a subsidiary closures trigger knowledge transfers between MNCs and host-country organizations. Therefore, I investigate in this study the implications of MNC subsidiary closures with respect to knowledge flows that occur after the closure. In this context it is also important to examine why the human capital coming from closed MNC subsidiaries could be valued by host-country organizations. Based on an explorative study approach, I interviewed individuals that were recently affected by a subsidiary closure themselves. In addition, by creating a mapping about recent subsidiary closures in the Netherlands, I want to identify reasons why MNCs divest. Based on human capital, international business, MNC capability literature and the interview data I argue that working within the socially complex and demanding work environment of an MNC allows employees to absorb valuable knowledge, skills and social ties. The results also suggest that subsidiary closures can lead to unique knowledge flows between host-country entities. Further I argue that those knowledge transfers depend on the recipient’s firm to recognize potentially valuable employees. Additionally, I provided insights into the closure topic with the mapping by identifying the reasons for recent subsidiary closures in the Netherlands. The mapping provides additional confirmation for existing literature. The findings hold important implications for policy makers, domestic organizations and provide a less negative view of the closure event for affected individuals.
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Table of Content
1. Introduction ... 4
2. Theoretical Background ... 8
2.1. MNC Subsidiary Closures ... 8
2.2. Human Capital and the Capabilities view ... 9
2.3. Social Networks in the MNC context ... 12
3. Method ... 13
3.1. Research design ... 13
3.2. Case and Interview Selections ... 13
3.3 Data Collection ... 15
3.4 Data Analysis ... 17
4. Results ... 18
4.1 Mapping of MNC subsidiary closures in the Netherlands ... 18
4.2 Structuring of the Interview-Data ... 27
4.3 Employee Tasks and the Absorption of Knowledge ... 27
4.4 Social Capital at the MNC subsidiary and the MNC as a network ... 32
4.5 Knowledge Flows between MNCs and new Employer ... 35
4.6 Value of HC from MNC in the job market ... 36
4.7 Additional Findings ... 37
5. Discussion ... 39
5.1. Conclusion ... 44
5.2 Implications ... 45
5.3 Limitations and Future Research ... 46
References ...Fehler! Textmarke nicht definiert. Appendix I ... i
Appendix II ... ii
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1. Introduction
MNC subsidiary closures typically create a lot of attention since a closure of an organization represents a structural challenge for local governments and economies (Henderson, 1984). Nevertheless, international business literature has until recently only focused its attention on the interaction between MNC subsidiary and host country from the MNC perspective as well as how MNCs can maximize their net spillovers through strategic location choices and the competition for skilled employees (Alcacer & Chung, 2007; Almeida & Kogut, 1999; Backer & Sleuwaegen, 2003). These studies focus on the reasons and underlying mechanisms of why and how MNCs enter certain countries through a subsidiary, but they do not explain the implications of an MNC subsidiary closure and divestment and its consequential effects on the local economy. A firm or factory closure is an impactful event for both employees, policy makers and the responsible managers at the subsidiary, since a considerable amount of individuals lose their jobs (Tomaney, Pike, & Cornford, 1999). Subsidiary closures could create spillovers between host-country entities, since the displaced employees of MNC subsidiaries could transfer knowledge to domestic organizations.
5 of organizational environment, in which they interact with several home and host country entities (Almeida & Phene, 2004; Kogut & Zander, 1993; Krause, Handfield, & Tyler, 2007). This suggests that within this context employees might acquire a special, valued and unique set of KSAO. Since MNCs most often make an effort to reduce negative spillovers by protecting their knowledge, positive knowledge spillovers for host-country organizations often do not occur (Alcacer & Chung, 2007). This in return could mean that the HC coming from closed MNC subsidiaries might be valued by domestic organizations, since it represents an otherwise not accessible resource. Displaced employees could represent a source of knowledge for domestic organizations. Consequently, the hiring of such employees could then lead to the spillovers between entities in the host country. So far international business research has failed to explain if the closure of MNC subsidiaries represents a trigger event that leads to unique knowledge flows between organizations, which would not have taken place if the subsidiary was still open. In the following I want to further explore if based on the assumption of Sofka et al. (2014), knowledge transfers take place after a subsidiary closure. To achieve the laid-out research objective the following research question needs to be answered:
Research Question: Does the closure of an MNC subsidiary lead to unique knowledge transfer between organizations, that would not occur otherwise?
6 valuable knowledge. The unique embeddedness of a subsidiary and its interaction with host and home country entities (Almeida & Phene, 2004), could lead to the acquisition of a unique set of KSAO by the employees. Nevertheless, until so far it remained opaque how the work context in which employees of subsidiaries act, influences their value in the job market after a subsidiary closure.
Subsequently, the question arises why HC that is coming from MNCs might be valued by domestic firms. Existing literature suggests that there are several potential origins for the value of the HC an employee brings with after getting hired at a new firm. This leads to following sub-question:
Sub-Question: Why is human capital of displaced employees of MNCs valued by the job market after a subsidiary closure?
To accomplish the research objective an explorative approach is required to investigate how the closures of MNC subsidiaries could lead to knowledge transfers between MNC subsidiaries and domestic organizations. Since a subsidiary closure ultimately leads to the disintegration of an organizational entity, it is important to get a sufficient overview of the topic. First, I will assemble a mapping and a comprehensive overview of MNC subsidiary closures in the Netherlands. I identified more than 20 relevant cases of subsidiary closures in the Netherlands. Those closures led to the displacement of more than 4.500 employees in the last ten years. Second, based on the described closures and the mapping, I identify former MNC employees which have been affected by one of the closure. Interviews with displaced employees will provide insights into how knowledge flows from closed MNC subsidiaries towards domestic firms occur. The findings of this study will be linked to the HC and MNC capability literature to gain an improved understanding on how MNC subsidiary closures can represent an opportunity for domestic firms to gain valuable HC.
The practical importance of this study is underlined by two recent closures in the Netherlands. Owen Illinois, an American glass manufacturer, announced in January 2017 that the factory in Schiedam in South Holland would be closed in June 2017. The consequence was that 230 employees of the MNC became unemployed.1 Siemens, a German industrial
manufacturing company, closes its plant in Hengelo in Overijsel. This decision was part of a worldwide reorganization and led to the displacement of 600 employees in Hengelo.2
1https://nos.nl/artikel/2154722-glasfabriek-schiedam-dicht-230-banen-weg.html
7 The results of this paper illustrate the range of those events, but also hold a possible silver lining for displaced employees. I found that the closure leads to unique knowledge transfers between MNCs and domestic organizations. Employees gain valuable KSAO from working at MNCs, which are unique and rare for domestic firms. Hence, displaced employees’ MNC work experience helps them to positively differentiate themselves from their colleagues that only gained experience in domestic firms.
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2. Theoretical Background
In this section I will provide a structured overview on the MNC closure, MNC capability and human capital literature. First, I provide an overview on what an MNC subsidiary closure implies for domestic organizations and individuals. Second, I will provide insight into how valuable human capital is built in the MNC context by considering MNC capability literature. Third, I will offer an overview on why (social) networks matter in the context of MNC subsidiary closures.
2.1. MNC Subsidiary Closures
The phenomena of MNC subsidiary closures did not get a lot of attention from scholars for a long time. It was only until recently that Sofka et al. (2014) showed that the event of an MNC subsidiary closure holds several implications for employees, policy makers and domestic organizations. MNCs often make a considerable effort in protecting their knowledge and want to reduce negative knowledge spillovers. Therefore, knowledge flows between domestic organizations and MNCs often do not occur, because of the counter measures MNCs undertake to reduce negative knowledge spillovers (Alcacer & Chung, 2007; Feinberg & Majumdar, 2001; Zhao, 2006). A subsidiary closure, however, might trigger very special knowledge streams, because an MNC’s restructuring, might lead to the creation of a valuable source of HC in the host country (Sofka et al., 2014).
Berry (2013) pointed out that MNC subsidiary closures are often not only influenced by productivity implications. The closure reasons might often not be comprehensible for outsiders, because they stem from comparisons within the MNC. On a host-country-level the subsidiary might be performing well compared to its host-country competitors. The decision to close a subsidiary often stems from restructuring efforts made within the MNC. Such reorganization efforts of an MNC inevitably lead to the divestment at one location (closure) and to a reinvestment of those assets at another location (Chakrabarti, Vidal, & Mitchell, 2011).
9 Grant, 2002; Ghoshal, Korine, & Szulanski, 1994; Gupta & Govindarajan, 2000). Having access to all those sources of knowledge (home and host country) puts a subsidiary into a unique position compared to host-country competitors. The embeddedness in this structure helps subsidiaries to generate and absorb proactively knowledge and improve their capabilities accordingly (Schmid & Schurig, 2003). This unique position, lets the employees of a subsidiary appear differently, when compared with their host country colleagues. This suggests that an MNC subsidiary closure could represent an eventual opportunity for domestic firms, since a pool of valuable HC becomes available in the job market for host-country firms.
Sofka et al. (2014) suggested that the value of the HC of closed subsidiaries depends on how specific and MNC-bound the KSAO (that employees hold) are. KSAO which employees obtained during their tenure at the subsidiary are only valuable in the job market if they are not too MNC specific and applicable at host-country organizations. In this context Sofka et al. (2014) found that displaced MNC subsidiary employees could expect higher wages when they held managerial roles, since managerial skills are not bound to the organization. This might suggest that the job market values HC differently and that certain KSAO are more valuable for domestic organizations than others. Therefore, the value of HC in the job market might stem from the tasks and responsibilities an employee held during his tenure at the MNC subsidiary. Sofka et al. (2014) also assumed that MNC subsidiary employees acquire a certain set of skills and knowledge that could not be created at domestic firms otherwise. The displaced subsidiary employees seem to be valued in return by domestic organizations, because they are exposed to certain practices within the MNC subsidiary. This leads to the assumption that displaced employees could benefit from MNC practices that help them absorb KSAO and make them eventually valuable in the job market, after a subsidiary closure. In the following I will further discuss the value of HC of subsidiaries based on the MNC capability view.
2.2. Human Capital and the Capabilities view
10 To better understand the underlying value of HC in form of displaced MNC subsidiary employees it is necessary to build on existing human capital literature. Ployhart and Moliterno (2011) define HC as a unit-level resource that is created from the emergence of individual’s knowledge, skills, abilities, or other characteristics (KSAO). Their multilevel model provides insights into how HC emerges from psychological attributes of individuals and how certain practices in organizations let those attributes thrive. Ployhart and Moliterno (2011) see a strategic value of creating HC resource on an organizational level. The reasons for the strategic importance of the creation of HC can be traced back to the resource based view of a firm (Grant, 1991; Teece, 1982; Wernerfelt, 1984, 1984). The idea of the resource based view (RBV) is that a firm’s resources can be a source of competitive advantage. This concept, has next to many other fields, been applied to HC literature (Barney & Wright, 1998; Wright, Dunford, & Snell, 2001). A previous study of Wright, McMahan, and McWilliams (1994) which integrated the micro-level organizational behaviour/human resource management research with the macro-level resource-based view of the firm, identified how HC meets the criteria to be a valuable, rare, inimitable, non-substitutable (VRIN) resource to a firm. Firms make a considerable effort to invest in HC since it can positively influence the performance on both an individual- as well as an organizational-level (Becker & Huselid, 2006; Boudreau & Ramstad, 2005; Bowen & Ostroff, 2004; Subramony, Krause, Norton, & Burns, 2008).
11 sources. This suggests that based on the subsidiaries generative and sourcing capabilities (Michailova & Zhan, 2015) the internal knowledge base of a subsidiary becomes unique, novel and heterogenous compared to its domestic competitors (Huber, 1991).
These practices are naturally executed by the employees of an MNC. Following this logic, these unique characteristics of MNCs are not only bound to the organization itself but to its workforce (Dokko & Rosenkopf, 2010). Knowledge that has been sourced and generated has a highly social and tacit quality to it due to a subsidiary’s embeddedness (Kogut & Zander, 1992, 1993, 1995). This social aspect makes it difficult to transfer knowledge. Best practices are required to transfer knowledge from one entity to another and to overcome the stickiness of knowledge. Therefore, employees of subsidiaries must absorb the subsidiary specific knowledge through explicit HRM practices (Minbaeva, 2005). At the same time, however, in the MNC subsidiary context a high level of broad management skills are required, that are not necessarily specific to the MNC. For example the ability to communicate with different personnel across different levels of education or of different cultural backgrounds (Heimer & Vince, 1998). Hence, HC of MNCs can be seen as both, something specific to a firm in which it has been acquired and as a general set of skill that is useful in multiple environments (Kletzer, 1998). This suggests that not all KSAO of employees might be valued equally by the domestic organizations and that there are types of knowledges and skills that might require time and effort to be integrate in a new context.
Nevertheless, the MNC context provides a special stimulus for its employees to improve in their social capabilities, since employees of subsidiaries are often required to work across different organizational units and likely different cultures (Harzing & Feely, 2008; Kogut & Zander, 1993). The ability to work in such an environment stands in contrast to more firm-specific KSAO that are socially bound and difficult to transfer from one firm to another. The way how certain procedures are followed internally, or specific details of the industry might only be relevant in the context of the MNC and are potentially not important for a recipient firm. This type of HC is then only valued in a certain context or at a certain organization (Kletzer, 1998).
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2.3. Social Networks in the MNC context
As mention above, the unique characteristics of an MNC is down to its special structure. Simultaneously those characteristics are also bound to an MNC’s workforce (Dokko & Rosenkopf, 2010). Nevertheless, knowledge is not an object that can be passed easily like tangible objects. It requires social interaction, time and trust (Easterby‐Smith, Crossan, & Nicolini, 2000). The coordination of knowledge in multiple contexts is a socially complex capability, that represents potentially a competitive advantage for an MNC (Doz, Santos, & Williamson, 2001; Williams & Lee, 2011). The socially complex context of an MNC requires a lot of interaction of different individuals. This leads to the creation of relationships and social ties, which consequently lead to the creation of social capital within and outside of the firm structure (Coleman, 1988). Social capital is relevant from an organizational perspective, since it represent an important resource that helps to improve a firm’s performance and its survival chance (Uzzi, 1996). Social capital provides also the basis for efficient and effective information sharing. Which then builds the foundation for action and interaction, since the existence of ties and trust are required for collaboration in an organizational context (Coleman, 1988). Björkman, Barner-Rasmussen, and Li (2004) found for example that inter-unit meetings and events, that involved teams from several units (irrespective of the organizational hierarchy) positively impact the knowledge flows between the units. An MNC’s organizational structure provides the right foundation for the creation of social capital. MNCs hold values and norms that help them to create social ties in the first place (Coleman, 1990; Portes & Sensenbrenner, 1993; Putnam, 1995).
13 In sum, I argue that the exposure to this structures to the creation of valuable social and business ties leads. Those ties are bound to the employees of a focal subsidiary, since they are the ones that make the interactions. I argue further that these ties and networks outlast the closure of the MNC subsidiary and therefore can represent a valuable resource for domestic organizations.
3. Method
In this section I will describe the methodological approach. I implemented it with the aim of giving an answer to the above stated research question. The literature review highlighted the importance of this study, since scholars have failed to answer the research questions so far. In the following this section shall provide an overview of the selected research design and approach. Additionally, I will explain how the data collection and analysis are conducted.
3.1. Research design
As shown in the above literature review there is still a gap in the literature about the implications of MNC subsidiary closures and their potential knowledge transfers. Additionally, existing literature is calling for in depth qualitative research about the topic (Sofka et al., 2014). Accordingly, an explorative research design represents the most sensible approach (Eisenhardt, 1989). Van Aken, Berends, and van der Bij (2012) state that to develop theory it is necessary to observe business phenomena in one or more cases, to then compare them to existing theories. Eisenhardt (1989) is in line with this reasoning and suggests that to be able to explore new phenomena, it must be observed in the field so that eventually new theories can be developed and induced. Yin (2009) is also in line with this and argues that interviews are a necessity to dive deep enough into socially complex phenomena. Additionally, I applied triangulation between the collected interview data and the additional information collected on the closure cases to retrieve a complete understanding of the phenomena.
3.2. Case and Interview Selections
14 The selection of cases and the identification of subjects is a crucial part in a qualitative study. In contrary to a theory testing approach not the population of the study defines the outcome of the study, but the systematic and logical identification and selection of cases that will help to better understand the phenomena. It is important to interview individuals that will provide new insights so that new theoretical concepts can be derived from the interviews. The selection is based on logical and theoretical reasoning and not statistical criteria (e.g. sampling) (Strauss & Corbin, 1990). To overcome the lack of data regarding the closure of MNC subsidiaries in the Netherlands it will be necessary to break the data collection down into several steps. First, I identified MNC subsidiary closures of recent years within the Netherlands. To do so, I used the business research service LexisNexis to search for Dutch newspaper articles that talked about MNC subsidiary closures between 2007 and 2017 (query list in Appendix I). Second, I analysed the detected newspaper articles one by one, to make sure that the articles’ content is in line with the search goal. Third, I analysed the selected newspaper articles in detail one by one regarding their content and checked if they are in line with the research objective. In the following I further searched information on the identified cases until sufficient explanations for each case emerged. I used the following criteria to look for additional information on the closures: (i) moment of opening, (ii) moment of closure, (iii) location within the Netherlands, (iv) industry of subsidiary, (v) industry of MNC (if different), (vi) Type of subsidiary (Factory, domestic HQ, other type), (vii) location of MNC headquarter, (viii) potential new location for subsidiary and (ix) number of displaced employee’s. I summarized the results of this investigation in Table 2.1 and Table 2.2 and Figure 1.
15 are contributing less to innovation at the MNC. Nevertheless, excluding them from the search would have meant that a considerable amount of cases would not have been viable anymore. Fourth, cases where there was exact information about the opening of the MNC subsidiary were also helpful. I assumed that the longer the tenure of the subsidiary in the Netherlands the better it would be. This is down to the assumption that firm-specific and country-specific knowledge takes time to be transferred onto individuals since knowledge has a social component and is therefore “sticky” (Kogut & Zander, 1992, 1993, 1995). Subsidiaries that were open only for a very short period of time might not have had enough time integrate themselves sufficiently into the MNCs network. Nevertheless, during the research it emerged that only in rare cases it was possible to retrieve data that provided information on the opening date of the subsidiary. Often those dates were of domestic companies that were later incorporated into the MNC (e.g. Merck/Organon case). The criteria represent on the one hand a guideline to work more efficiently and on the other hand helped me to choose cases that are especially interesting.
Finally, I decided, based on the criteria, to look at one recent case of a subsidiary closure of an American manufacturing company. All identified individuals were employed at the same subsidiary. Their former employer was a large American manufacturing firm. The MNC has several factories in the Netherlands, Europe and overseas. The fact that I can interview several employees of the same organization makes it possible for me to dive deeper into the actual case and get more out of their specific experience. The case was particularly interesting, because the MNC employs in Europe alone 6.400 individuals (Switzerland, Germany, Spain, the Netherlands, France and the Czech Republic), which is a considerable amount of people and indicates that it could be a complex organization. I assumed that employees that work at such a large and global company might provide interesting examples.
3.3 Data Collection
16 would be suitable or not. Table 1 shows all identified displaced employees that were interviewed in the following.
Table 1: Overview of the interview partners
The circumstances into which employees get after a firm closure was an important point that I considered in this study. Since for most of the displaced employees the topic of their displacement is very sensitive, I provided each contacted individual detailed information of the topic. Because former colleagues of a closed subsidiary do not necessarily work at the same employer after their displacement I asked those who responded my request if they could provide me further contact information of their colleagues. For additional information on MNC subsidiary closures and data on the matter I contacted (without any reward) the Kamer van Koophandel (KVK), The centre for Research on Multinational Corporations (SOMO) and one job agency in the Groningen area.
In order to be able to provide structure to the interviews, I created an interview guideline. This interview guideline was first written down in English and then translated into Dutch (the English guideline can be found in Appendix II). The interview guideline was checked by one person and slight changes have been implemented. I held the interviews in Dutch, the mother tongue of all interviewed individuals. This is in line with Emans' (2004) interview techniques and van Aken et al. (2012) since it increases the internal validity of the study because the interviewees could express themselves freely and without a language barrier. After the first interview I decided to provide the interviewees more room to speak about the closure experience, since I had the impression that the interviewees were really interested in telling their experiences.
The interviews were mostly held through Skype and telephone. The reason for that was mainly related to time constraints, since the individuals that responded are in the ‘randstad’
Old Position New Position Education
Person A Plant Energy Leader Team Leader University Person B Manufacturing
Manager
Project Leader University of Applied Sciences
Person C Jobchange Coordinator Team Coordinator University of Applied Sciences
Person D Interim Mechanical maintenance supervisor
Management level in Development
17 area, which made it more difficult to meet them in person. Before each interview the career path of each interviewed individual was analysed by looking at his or her LinkedIn profile. This was done to adopt slightly the questions according to his or her current situation.
In accordance with van Aken et al. (2012) I recorded and transcribed the interviews and while the person was interviewed I took notes to be able to recall my thoughts afterwards. These increases both the controllability and reliability of the study, since the research results need to be controllable with the transcribed material. Additionally, a clear description of results is only possible by transcribing and coding the results.
3.4 Data Analysis
Eisenhardt (1989) provides a reliable and probed framework on how to analyse case study and interview data. After the data collection, I started to analyse the interviews. To do so, I conducted an open coding on the Dutch version of the interviews, by looking through the lens of the research questions. In the following I translated the most important sections into English. Then I made the next necessary step, which was to search for patterns within and across the cases (Strauss & Corbin, 1990). Since the interview was divided into different topic sections (subsidiary context of the employee, the closure process of the subsidiary, finding a new job and the context of the new employer after closure) the coding of the interview became easier, since there was a certain shared chronology across the interviews. However, to stay in line with Eisenhardt (1989) it was necessary to cross-analyse the sections and make sure to detect as many categories as possible, to then condense them down again to the most relevant topics. I performed selective coding to further summarize the collected data. Those results were then organized into 2nd order concepts. Those 2nd order concepts were finally summarized into
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4. Results
In this section I present the results of the inquiry on past multinational subsidiary closures in the Netherlands and the interviews with four former employees of the selected case. The results of the interviews will provide an overview on how the closure could lead to special knowledge streams between MNCs and domestic organizations and why the job market values the Human Capital coming from MNCs.
4.1 Mapping of MNC subsidiary closures in the Netherlands
As mentioned in the methodology section a core element of this paper was the identification of MNC subsidiary closures in the Netherlands. In total 23 closures have been identified in various Dutch provinces.
I summarized the results of the data collection about MNC subsidiary closures in the Netherlands into a map. Figure 1 shows all the identified closures of the last 10 years. The information about subsidiary closures was retrieved from the LexisNexis database, by reading through newspaper articles about this issue. Table 1 provides a summary of the key data of each closure. In the following I will provide additional insights into results of this mapping.
4.1.1 Economic Regions and Subsidiaries
19 Figure 1: Mapping of MNC subsidiary closures in the Netherlands of the last 10 years
20 Various explanations come along why closures are concentrated in those areas. First, the ‘Randstad’ area, the province of Brabant, the region of Twente and the region around Nijmegen represent the most industrialized areas in the Netherlands and are also highly competitive on a European-level (DG Regional and Urban Policy, 2016). Being located in certain technological and economic agglomerations is an important aspect for MNCs when they chose a location for their subsidiary. Having a subsidiary located in these kind of densely industrialized areas can be a boost for the productivity of the MNC or helps an MNC in his innovation aspirations (e.g. Almeida & Phene, 2004; Haskel, Pereira, & Slaughter, 2007; Martinuzzi, 2002; Shaver & Flyer, 2000). The universities in those areas are an important factor that make the regions attractive for MNCs. Especially the province of Brabant, the none-administrative region of Twente and the ‘Randstad’ area benefit notably from their universities as a source for knowledge, valuable scientists and other highly skilled individuals in the host region (Alcacer & Chung, 2007).
The technical university of Eindhoven (TU Eindhoven) has several alumni at MNCs (e.g. Organon3 and Unilver4). The university holds ties with the industry in the region and is
part of the Eindhoven-Leuven-Aachen triangle, that makes this region to one of the most innovative in Europe5. The future TU/e Science Park will further contribute to the
competitiveness of the region. Unsurprisingly, companies from several industries had located their subsidiaries in this region. Especially for high-tech companies this province seems very attractive. Chormally, a producer of gas turbines had a subsidiary in this area in form of a factory with 180 employees. Bosch Security Systems held a factory and an important office until 2010 in Brabant. Wärtsila, a producer of ship screws, closed a factory in the region in the same year. Interestingly, MSD-Organon had been located, before a merger in 2009 and closure through the American pharmaceutical company Merck Co. in 2011, in Oss. Oss lies in the middle of a triangle of the universities of Nijmegen, Wageningen and Eindhoven. The prior owning a reputable Institute for Molecular Life Science, the University of Wageningen being a leading institution in science and the latter holding a reputable institute for biomedical technologies. In this region the only outlier regarding industry represents Philip Morris, a tobacco producer, which decided to close its factory in Bergen op Zoom in 2014, because of changing consumer preferences. Although Xerox, an American IT company, was located with a service centre and
3Adriaan Sanders 4Harry Jongeneelen
5
21 office in the province of Limburg until 2016, it was still very close to both the TU Eindhoven and the Radboud University in Nijmegen.
The ‘Randstad’ region (provinces of Utrecht, North & South Holland) represents a similar agglomerative structure. Compared to the province of Brabant the region holds a similar amount of top ranked universities, that are leading in various fields. Another technical university sticks out and might be the reason why many MNCs are lured into this area. The TU Delft represents again a valuable source of highly skilled workforce and knowledge for companies. Unsurprisingly, we find a number of technological sophisticated companies in the region. Avery Dennison, an American packaging company, held in the North of South Holland a factory until 2014. Similarly, O-I Manufacturing, an American glass bottle producer, had a factory in Schiedam close to Rotterdam until mid-2017. Stergenics, a company specialized in sterilization of hospital instruments, had to close its factory in (2010). Kuwait Petroleum, a raw oil refinery, underwent a severe restructuring in 2016 after a takeover by Gunvor, which led to the closure of several departments. Other subsidiaries closures in the ‘Randstad’ region such as Unilever (closed in 2008) and Eaton (closed in 2014) were also located in highly industrialized areas of the country and were based close to the University of Utrecht.
The region of Twente shows again a comparable picture, but on a smaller scale. The Technical University Twente (UT Twente) represents an important provider of highly skilled workforce for the region. Flowserve, an American company active in the construction of diversified machinery, was located with a factory until 2017 in the city of Hengelo. Similarly, Eaton was there with a factory, but also left the area in 2017.
Nevertheless, subsidiaries with less technologically sophisticated products might still be located in those technologically developed areas. Sitel, a call centre service provider, closed its doors in Henglo in 2014, but it is likely that less highly skilled workforce educated at the UT Twente were affected by this event. Similar goes for Cargill, an American food producer, that closed the doors of a factory in the region of Twente in 2012. Also, the area of Nijmegen seemed attractive for MNC subsidiaries in the past. Several closures happened in the area around Nijmegen. General Electric closed a factory in 2015, Sappi, a paper producer a factory in 2013, Staples closed one of its online-warehouse in 2012 and lastly RPC Packaging closed a factory and a main-office in 2014.
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4.1.2 Why did those subsidiaries close?
As pointed out in the literature review the reasons for subsidiary closures are often not comprehensible for outsiders, since the closure decision stems most often from a comparison within the MNC (Berry, 2013). Nevertheless, the examination of the data unveiled that sometimes the reasons for subsidiary closures are getting through to the public. Sometimes even official explanations or statements are given by the MNC, but more commonly internal information seems to leak through and is then picked up by local media. Only in three cases no information was found about the closure reason (General Electrics, Bosch Security Systems & Wartsila). This translates to 13% of the identified cases. The most common reasons for a closure were efficiency reasons. Six cases have been identified were the subsidiary had to close because of this specific reason. This is followed by the reason that the subsidiary is not competitive enough. Four closures have occurred under that reason, which translates into 17% of all identified cases. In most cases not competitive enough meant that changes in the industry made it too difficult for the MNC to keep up with the competition. This reason was closely followed by reasons cost saving (13%) and not profitable enough/KPIs not reached (9%). Then a number of unique closure reasons were found. As mentioned before, the Philipp Morris factory was closed because of the decline of tobacco consume in form of cigarettes. This led to a strategic reorganization of the company and to the closure of the factory in Bergen op Zoom. In 2017 Philipp Morris communicated to reopen a production line in Bergen op Zoom to produce their ‘smoke-free’ tobacco products.6 Sitel lost its major client which ultimately made the subsidiary
unprofitable. The sterilization specialist Steregenics had to close down its activities in 2010, as a result of a law suit with the municipality of Zoetermeer, because the company allegedly put environmental pollutants in the water. Staples mentioned strategic reasons for the closure that have not been further explained by the company. Lastly, Kuwait Petroleum underwent a heavy restructuring after an acquisition by Gunvor but was not entirely closed. Although Organon represents a similar case I did not include this case in this category, because there was a two-year period between the merger and the closure and Organon was not threatened by bankruptcy.
4.1.3 What Types of Subsidiaries closed?
Not only is it important to understand why a subsidiary closed, but also what its mandate was (Cantwell & Mudambi, 2005). Of course, it was not entirely possible to deconstruct every MNCs organizational structure. A definitive answer on the exact role of each closed subsidiary
23 cannot be delivered. But based on the descriptions provided in the newspaper articles I was able to make a few clear distinctions here. The majority of the closed subsidiaries seemed to have an exploitative mandate, since the they were described as “fabrieken” (factories) in the articles. 15 of the 23 closures cases got this descriptions in newspaper articles (65%). I included all service-oriented subsidiaries with an obvious exploitative mandate (e.g. call centre) in this category. The second closest was a combination of both a main country office and a factory. I have identified five cases that fit this description (22%). Two cases emerged, that deserved a different description. MSD-Organon represented a laboratory/main country office and before its closure in 2011 it held an explorative and exploitative mandate. Stringenics also falls under the category laboratory and ran both exploitative and explorative activities. I identified one case that falls under the description main country office (Eaton, Hoevelaken, 2014). No statement regarding the mandate could be made here.
4.1.4 What happens after a closure?
It is clear now that the closure of a subsidiary can be explained by various reasons. The reasons why a subsidiary was closed provides indications, what strategy a firm follows regarding the reinvestment of their divested assets or saved financial flows towards the now closed location (Berry, 2013).
For eight closure cases no information was found about plans for the reallocation of assets. Interestingly the closures of those eight subsidiaries were explained by the following reasons: not competitive enough in the market (Wabco, Cargill), an important client was lost (Sitel), very drastic changes of the consumer behaviour (Philipp Morris), law suits with the municipality (Sterigenics) and a not profitable activity (Invista). Those closure reasons imply form an economic point of view that the MNC probably had no other option but the closure. When changes in the environment, such as drastic changes in the market or changes in legislation, make the profitable activity impossible, a closure might seem inevitable (Berry, 2013). Similar goes for subsidiaries that might not have received investment in the past and became uncompetitive.
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Table 2.1: Overview of the Findings of the Mapping
Date of
Closure Company Name of Subsidiary Name of
Location within the Netherlands Headquarters Reallocation of Resources Type of
Subsidiary Industry Reason for Closure Employees 2017 Manufacturing O-I Manufacturing Schiedam O-I USA Poland and Germany Factory Glass bottles Cost-efficiency 230 2017 Flowserve Flowserve Hengelo USA Italy, Spain, Netherlands Factory Diversified Machinery Efficiency reasons 87
2017 Eaton Eaton Hengelo USA Romania Factory Diversified Machinery Cost-efficiency 750
2016 Xerox Xerox Venray USA Already existing
locations Factory Printing Cost Savings 150
2016 Wabco Wabco Meppel Belgium N/A Factory Supplier for Vehicle
Industry
Not Competitive
enough 145
2016 Petroleum Kuwait Petroleum Kuwait Rotterdam Kuwait Still exists to some degree Factory/Refinery Oil Refining Acquisition 80
2015 GE Gasturbinen GE
Fabriek Rheden USA Italy Factory
Gas Turbine
Factory N/A 142
2014 Eaton Eaton Hoevelaken Ireland Poland Office Management Power Cost-efficiency 13
2014 Sitel Sitel Almelo USA N/A Call-Centre Call Centre Service
Provider Loss of a big Client 250
2014 Dennison Avery Dennison Avery Alphen USA Germany Facotry Packaging Cost Savings 186
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Table 2.2: Overview of the Findings of the Mapping
Date of
Closure Company Name of Subsidiary Name of
Location within the Netherlands Headquarters Reallocation of Resources Type of
Subsidiary Industry Reason for Closure Employees
2013 Sappi Sappi Nijmegen South Africa N/A (Likely outside
Europe) Factory Paper Not Profitable 192
2013 Chromalloy LLC Chromalloy Tilburg USA Thailand Factory Gas Turbines Cost Savings 180
2012 Cargill Cargill Denekamp USA N/A Factory Food Not Competitive enough 29
2012 Staples Staples Nijmegen USA Netherlands (Almere) Main-Office Office Supply Strategic Reason 27
2011 Merck Co. Organon MSD- Oss USA European Several
countries Office/Laboratory Pharmaceutical Industry Not Profitable 1000 2010 Bosch Security Bosch
Systems Breda Germany N/A
Factory/Main-Office Products Security N/A 98
2010 Sterigenics Sterigenics Zoetermeer USA/South Africa N/A Laboratory Sterilization Products Law suit with the municipality N/A
2010 Wärtsila Wärtsila Drunen & Zwolle Finland N/A Factory/Main-Office Ship Screws N/A 420
2009 Invista Invista Dordrecht France N/A Factory Fabrics Not Profitable 150
2008 Johnson & Johnson Cordis Roden USA USA (R&D) Mexico and Factory/Main-Office Consumer Products Goals not achieved 800 2008 Unilever Knorr Loosdrecht Kingdom/The United
Netherlands
Germany, Switzerland,
France and Poland
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4.2 Structuring of the Interview-Data
This sub-section shall provide insights into why Human Capital from displaced subsidiary employees can be a valuable source for domestic organizations. At the same time, the results provide insight into the aspects of knowledge flows after subsidiary closures.
As the literature review showed, MNC subsidiary employees are exposed to a socially complex environment at their subsidiary. To find out why organizations in the host country could value HC coming from closed MNCs and if subsidiary closures lead to unique knowledge flows, I wanted to understand in which context the employees worked at the MNC subsidiary and what the transition looked like after they were displaced.7
To analyse the collected interview data, the interviews have been coded. 37 codes emerged in the first round of coding. This number has been reduced to 4 main categories: Employee tasks over tenure at MNC, Social Capital at the MNC subsidiary Knowledge flows between MNCs and new Employer and Value of HC from MNC in the job market. The coding led to those major categories. The 14 2nd-order concepts, which I derived from the 41 open
codes, help to better understand and describe the phenomena by explaining “What’s going on here?”. These concepts then helped me to further condense the observations into aggregated dimensions (Gioia et al., 2013). Please find the categorized interview data in Appendix III.
4.3 Employee Tasks and the Absorption of Knowledge
MNCs represent a socially complex environment that demands a lot of interaction between its employees within and across its units. These interactions lead to knowledge flows between units and its employees and make it possible for MNC employees to gain a tacit understanding of the employer’s organization and their respective industry. By holding functionally different positions over their tenure, MNC subsidiary employees can absorb effectively knowledge. An MNC typically does not only provide the right environment for knowledge exchange, but also the opportunity for employees to gain valuable capabilities through job rotation (positions in different domains of the company) and promotion prospects (Minbaeva, 2005; Minbaeva, Pedersen, Björkman, Fey, & Park, 2003).
7Information regarding industry, employee names, size of companies, name of companies or any other sensitive information
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4.3.1 Functional Diversity of an employee
The interviews showed that former MNC employees that held several different and functionally diverse positions at their respective MNC can gain KSAO on different levels. On the one hand, they obtain a high-level understanding of the company they are working at and the respective industry the company is active in. On the other hand, working in functionally different positions yields the opportunity for employees to gain a tacit understanding of details in the manufacturing processes, but also how their respective organization is coordinated. Holding different functions over an employee’s tenure makes it possible for them to learn about many processes and technical domains, but more importantly they have the opportunity to understand how processes and mechanisms are interconnected. The interviews show that by holding more than one position over the tenure employees learn about different business process and domains that would have remained opaque for them if the employee only held one position. As one of the displaced employees mentioned:
“I started as a trainee. That means I did many different things. The first few months I was walking around and observed the manufacturing process and supported the maintenance of the machines…then the production line was my responsibility. That means I was completely responsible for the manufacturing and the packaging of our products…After that I did something completely different and I was supporting our company in reducing the energy consumption of several plants…After this time I returned to the plant and took complete responsibility, including the management of the raw materials… I worked there for a relatively short period of time, for this specific industry. But I held many different positions during that time” – Person A
He added later:
“…I had something like a helicopter view of the factory…”- Person A
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4.3.2 Management Responsibilities
Another valuable element of HC which emerged during the interviews, are management responsibilities of displaced employees at the MNC. All interviewed displaced employees held to some degree management responsibilities at their respective MNC subsidiary. Management responsibilities require a high degree of awareness from the employee. Holding a position that involves the management of personnel, suggests that the former MNC employee is capable of handling social complex situations and has an understanding how to communicate technically complex topics and assign workforce in accordance to the organizations’ needs. The fact that the employee works at an MNC, adds another layer of complexity to this context. At an MNC stakeholders from other units and other countries are involved in the decision-making processes and in the definition of best practices (Minbaeva, 2005). This requires also a certain degree of cultural and linguistic awareness. Furthermore, especially in a shift environment in which the production is running 24 hours a day, a high degree of coordinative capabilities is required from the responsible MNC employee. As one former MNC subsidiary employee put it:
“I was responsible for a team of five people. With me six. That was a ‘daily’ team, which was responsible for the manufacturing process and the raw material supply. Rather than that it was not very hierarchical…I was functionally responsible for this team, because the manufacturing process is running 24 hours a day. That requires a lot of attention.” – Person A
The interaction and responsibility over personnel can be an important task to acquire so called “softer skills”. Both the management of personnel and the planning and management of the manufacturing process play a role in gaining valuable interpersonal skills for employees, since it requires both a sophisticated understanding of the technical process as well as a higher-level understanding of interpersonal mechanisms. As another of the displaced employees put it:
30 Person B can apply experience as manufacturing manager, which involved the coordination of personnel, to apply again in a higher position at his new employer. This indicates that holding management and coordination responsibilities are important for employees to obtain social skills.
4.3.3 Absorption of Technological and Industry Knowledge
There emerged two common concepts about the absorption of industry knowledge that can be distinguished into two main categories, (i) an explicit understanding of the specific industry, technology and domain in which the MNC is active and (ii) a tacit understanding about the processes at the respective company.
The interviews suggest that the employees of MNC subsidiaries obtain a special set of specific knowledge in a certain domain in which the MNC is active. This specific knowledge which employees absorbed at MNCs might not visibly distinguish them from employees of domestic firms at first sight. But since employees of MNC subsidiaries can gain experience and knowledge across borders and organizational units, they have access to a much greater pool of knowledge than their colleagues from domestic firms. Collaborating across different units with different knowledge bases allows employees to acquire such knowledge.
Person D started specifically in maintenance at the manufacturing company and was trained effectively on how the machineries at the MNC work, which is a highly specific process. The knowledge he obtained was very useful for him and his later career path. Person D said:
“I started a couple of years ago here. And I started in the department of maintenance together with a group of other colleagues. And we were pretty much all mechanics…After that I became leader of 25 men, because one of my colleagues retired earlier…I did that for two years. This was maintenance of the machines. I was responsible for the maintenance of a couple of machines. This was also the moment when I was trying to get into the management positions of the company…and it was also the moment when we have been informed that we are going to close” – Person D
31 multinational and stepped up the career ladder into management, after working in a very specific area of the company in the beginning, namely as a mechanic in maintenance.
Simultaneously Person D, like the other individuals, acquired knowledge through cross-country collaboration with colleagues in the Asia Pacific room and in the US. The knowledge he obtained about the machinery and the processes helped him to make a step up and achieve a position in management of the MNC.
“…We were in contact with each other and that was also with factories abroad. Here in Europe, so to say. When you had questions and… that goes through more people [and not just one location]. Some are in America, others in Asia Pacific, where other expertise is to be found...” – Person D
Another employee is referring to the network as a source of knowledge and that it helped him to obtain knowledge about the industry. He said:
“…[the idea of the network] is that I can use my experience to improve the knowledge of others. So that you are not going to make anything wrong…So when technical problems emerged then you could ask those people…” - Person B
This absorbed knowledge can be of direct use at the new employer, after the MNC subsidiary closes. Holding positions in which the employee was able to pick up specific knowledge about technologies and the industry signals future employers that the employee’s knowledge can be directly useful for the implementation of projects at the new employer.
“Yes…we [new employer] are also consulting, but we really try to practically apply our knowledge and not only to deliver a report and say, ‘that is it’. We really want to implement it ourselves with the customer.” – Person A
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4.4 Social Capital at the MNC subsidiary and the MNC as a network
A crucial element that helps facilitate knowledge exchange across units effectively is the creation of social capital (SC) (Inkpen & Tsang, 2016). The interviews indicate that this can be done by creating knowledge networks and letting employees work across different units. The results show that the creation of social capital within the MNC structure has several implications for the displaced employees of subsidiaries. First, by working across different teams and units, employees can obtain social competences (Harzing & Feely, 2008; Heimer & Vince, 1998; Henderson, 2005). Second, they can later use their connections in their new job or even find a new employer through their ties.4.4.1 Working in a knowledge network
An MNCs complexity is not only manifested through its contextual complexity – many different units and departments with different competencies – but also more explicitly through its structure. To make communication and knowledge transfers more efficient, MNCs are often organized in networks (Cantwell & Piscitello, 1999). The results show that these networks are crucial for employees to learn new practices and share knowledge across the boundaries of the unit. They can also access different domain experts to find quickly solutions. As one of the employees stated:
“We called it a network. It was actually a team of people for each discipline manufacturing, production, inspection. There was for each discipline an expert and I had regular contact with them. But many plants in Europe shared them. Plants in the Netherlands, United Kingdom, Germany.” - Person A
Person A added:
33 This indicates that working for a subsidiary can positively influence the knowledge base of an employee, because he or she has access to a heterogeneous knowledge base through a knowledge network.
Another former MNC employee said, that the network was there to avoid issues:
“So, if certain mistakes had been made then we spoke about them, to get improvements done on the technical side. So, when technical problems emerged then you could ask those people…” – Person B
4.4.2 Working in international teams
Another aspect that is related with the interpersonal capabilities of subsidiary employees is the international work environment. All the employees had the opportunity to visit other factories abroad or be in regular contact with experts or colleagues from other countries. As Person A mentioned:
“….I was supporting our company in reducing the energy consumption of several plants [across Europe]…”– Person A
Other employees were in contact with the headquarters for product design and development. Knowledge had to be exchanged so the products could be adjusted correctly to machinery. Additionally, they visited other factories in Europe to gain new knowledge and share best practices there. As stated by one of the employees:
“Yes, I was in contact with other factories and partially also with the headquarters of the product development. This means the designing of new products. I did that sometimes. I was also in 6 different factories in Europe, to learn new things there.” – Person C
34
4.4.3. Inter-firm relationships
Finally, the record of interacting with clients or suppliers emerged also as a common resource that employees held.8 All the interviewed employees mentioned that they had occasional
contact with clients or suppliers. A contact to a client or a supplier could represent a valuable resource for a new employer. One employee pointed out that his new employer (also an MNC) already tried to access certain suppliers directly through him. He said:
“You mean my connections to suppliers, for example? I had contact with certain suppliers, which only I knew and yes they try to make use of them now.” – Person B
Another observation I have made, was the of social and business ties within the MNC that were valued by the new employer. So is one of the displaced employees still working for the MNC through his new employer as an adviser and consultant. One employee said the following:
“I knew the company [current employer] already. I worked with them together in development [in our factory]. Therefore, I knew the company already and I knew it is a good company.” – Person A
Further he said:
“What I do now is, that I advise the people of my old employer…We look at the future of the industry [with them]… I still have a lot of contact with people from my old employer” – Person A
This indicates that valuable relationships can appear in different forms. Employees can be attractive in the job market because of their social and business ties to suppliers, clients or the former employee (MNC). The connections made during their time can on the one hand help them to find a job afterwards at one of the MNC business partners or they can also be a valuable resource for the new employer in form of a supplier or client contact.
8The employees did not mention any company names as legally required by them. The industry of the focal subsidiary implies
35
4.5 Knowledge Flows between MNCs and new Employer
A core observation of this study was that knowledge which was obtained by the employees at the MNC can be applied at their new employer. However, in the interviews emerged that knowledge transfers between the old employer (MNC) and the new employer seem to happen most of the time uncoordinated and implicit. The interviewees stated that the new employer usually has not made a clear and structured approach to integrate the knowledge hold by the employees. Very often things have happened “on the go”. Especially the individual that works for smaller companies, felt that there was less resistance from his new employer when it comes to applying new ideas. He stated:
“The biggest difference is that I work now in a company with only a few employees, before I worked in a factory with a few hundred people. The dynamic is completely different. If I want something to be implemented or invest into something, then I go to my boss and until midday it can be done. If I wanted to do something like that at my old employer [MNC], sometimes it went quickly, but if you had to invest money then it could take quite some time, let’s say. Here everything is much more dynamic.” – Person A
There is a clear indication that the employee’s track record of successfully working at an MNC allows him to continuously apply his KSAO at the new employer. Nevertheless, Person A mentioned that his knowledge was not integrated in an explicit way. It appears that his knowledge is mostly shared through social interactions and his motivation as seen in the above statement. He further said:
“No there was no fixed process or anything. I am sure at this small company there are no such processes or protocol that they are following. So, there was no really structure or anything.” – Person A
Another employee, whom is working now at another MNC, stated that the following:
36 Organizations that are hiring displaced employees did not show to make any structured approach to integrate the knowledge explicitly but chose generally a more flexible and dynamic approach. But as pointed out by both interviewees, it is not clear why that was. Person A pointed at the small size of his new employer, which makes the formal integration unnecessary. Person B was employed only recently. There was probably not sufficient time to integrate the knowledge of the newly hired employee, that probably still must receive training from his new employer. It could also mean that that his employer is not sufficiently aware of his new hire (Ishihara & Zolkiewski, 2017).
4.6 Value of HC from MNC in the job market
To summarize the findings, it is necessary to understand why the HC of displaced MNC subsidiaries can be a valuable resource in the job market. As pointed out in the sections above it emerged that the KSAO, which was obtained at an MNC subsidiary could also be gained to some degree in a none-MNC environment. KSAO such as understanding for organizational processes, specific industry knowledge, management skills and the ability to work across different units are not MNC exclusive capabilities. One of the employees stated:
“I worked there for six years. That is relatively short in my industry, but I worked in many different positions and on the project management side we did many special things in the optimization of ovens. I had a helicopter-view let’s say, how a plant should be build and work. So that is why they offered me a job in the direction of project management [which he didn’t accept]… If you work in this area for a couple of years, then you know quite something, I would say.” – Person A
This clearly indicates that the practices at an MNC helped Person A to obtain a high-level understanding of organizational, but also technical process. He stated further:
“You know, I speak ‘the language of the factory’. That was quite useful for my new employer…” – Person A
37 MNC he held several positions at the MNC and worked across borders. At the same time, he absorbed the specific knowledge of the technology and industry.
It emerged that social capital is another relevant quality an employee can hold. A subsidiary’s embeddedness clearly helps employees to obtain ties within and outside the MNC. This ultimately might help them to find quickly a new employer after their displacement, either through ties created at the MNC or because of them.
4.7 Additional Findings
Lastly, I observed that not only the experiences collected at the MNC are important for the value of a displaced employee in the job market, but also an employee’s backstory and pre-MNC track-record. Age, education, personality or prior job experience all play a role in how an employee is performing in the MNC environment and after the closure. These antecedent experiences and characteristics might logically moderate his post-closure job market value. One employee stated the following asked about his job market value:
“I am young and still have a lot of future. I also have a lot of experience in the manufacturing process and also because I did a technical study. I think those things helped [getting a new job].” – Person C
38 Figure 2: Conceptual Model of the Interview Results
Antecedents of MNC HC Education of employee Personal traits of employee Pre-MNC work experience Age
KSAO gained at the MNC by employee None-MNC specific KSAO
Understanding for organizational processes Specific knowledge about technology and industry Management Capabilities
Ability to work across teams
Working with major (multinational) clients or suppliers
MNC specific KSAO
Ability of working across teams and boarders Access to a bigger knowledge base through network Ability of working in a knowledge network with
colleagues of different mandates across borders
‘Gatekeeper’ for new employer to maintain or get access to the MNC
Value of HC (displaced subsidiary employees) in
the job market
39
5. Discussion
This section presents the discussion and conclusion, as well as the implications this research holds. Finally, a section about the limitations of this study and potential future research in this field is provided.
I focus in this study on the implications of closures of MNC subsidiaries. I investigated if closures of MNC subsidiaries lead to unique knowledge transfers between MNCs and domestic firms in the host country and why the HC from MNC subsidiaries might be valued by the job market after a subsidiary closure. An important objective of this study was to highlight the prevalence of MNC subsidiary closures, at the example of the Netherlands. Almost 1.4 Million full-time jobs are created directly or indirectly through international companies in the Netherlands. That represents 20% of all full-time jobs of the country. This shows how much influence international firms have on the economy of the host country.9 To gain a better
understanding of the phenomena of subsidiary closures, I attempted to look at it on country-level in the first place. By assembling a mapping of subsidiary closures in the Netherlands of the last ten years, I could show how prevalent the topic of subsidiary closures is. The mapping shows, that even in stable economic times closures of subsidiaries still occur. It also underlines the far-ranging effect of the subsidiary closure on the local economy, since a considerable number of individuals lose their jobs. The map showed that subsidiary closures can occur in any economic region, but are most likely concentrated in the most industrialized areas of the country. MNCs seek through their subsidiaries to gain valuable knowledge and compete for highly-skilled individuals in the respective host-region (Alcacer & Chung, 2007; Almeida & Phene, 2004; Shaver & Flyer, 2000). Most subsidiaries, which were closed in the last ten years, are to be found either in the ‘Randstad’ area, the province of Brabant, the Nijmegen area and the non-administrative region Twente. Unsurprisingly, those are the regions with the most industry and innovation activity in the Netherlands (DG Regional and Urban Policy, 2016). A higher density of firms and subsidiaries in that area, might ultimately lead to higher numbers of subsidiary closures in those areas. Further provides the mapping additional insight into the logic behind subsidiary closures. It was most often stated that subsidiaries had to close because of efficiency reasons. It appeared that “efficiency-closures” are followed by a reallocation of resources to cheaper locations. Other reasons such as cost savings, too much competition in the market or unprofitability appeared often as well. Closures related with these kinds of reasons
