Attention or Autonomy? The challenges MNCs face in
organizing foreign subsidiaries explored in a systematic
literature review
A thesis presented by
Jaap-Jan Venema (S2003848)
to
University of Groningen - MSc International Business and Management
Supervisor: drs. A. VisscherABSTRACT
This study investigated the role of executive attention and autonomy in the context of subsidiaries. By exploring the academic literature in a systematic literature review, the
definitions, theories and characteristics of both constructs have been reviewed. Additionally, the most important elements have been indicated and discussed extensively. Providing a clear overview of these elements, combined with findings of the research on the topic of monitoring and control suggestions have been made how exactly these concepts relate to each other within the MNC-subsidiary relationship. Finally, five overarching contingencies have been discovered.
ACKNOWLEDGEMENTS
Table of content
Chapter 1. Introduction……….. 3
1.1 Context of the study………. 3
1.2 Research question………. 4
1.3 Objective & research process……… 5
Chapter 2. Theoretical background……… 7
2.1 Underlying research theories………... 7
2.1.1 Autonomy………. 7
2.1.2 Executive attention……….. 8
2.1.3 Monitoring & Control ………. 10
Chapter 3. Methodology………. 11
3.1 Systematic Literature Review……… 11
3.2 Planning the review………... 12
3.2.1 Research gap………... 12
3.2.2 Development of the research questions……….. 13
3.2.3 Development of the research protocol………... 15
3.3 Performing the review………... 19
Chapter 4. Results and analysis………... 21
4.1 Descriptive analysis………. 21
4.1.1 Journals………. 21
4.1.2 Authors………. 21
4.1.3 Core years……….... 22
4.2 Thematic analysis………... 23
Chapter 5. Concluding remarks……….. 37
5.1 Contribution and implications………... 37
5.2 Limitations………. 39
5.3 Propositions for future research………. 40
5.4 Conclusion………. 41
References………... 42
Chapter 1: Introduction
1.1 Context of the studyIn the increasingly globalizing world we live in today, multinational corporations (MNCs) tend to shift their business or significant parts of their business to foreign subsidiaries more and more (Steenkamp and Geyskens, 2012). However, organizing these activities abroad requires a cooperative relationship between headquarters and subsidiary since the interests of headquarters and subsidiary are not always similar (Hewett and Bearden 2001; Lee et al. 2008; Grewal et al. 2013). Subsidiary’s interests could focus primarily on local business, where headquarters wants to focus on the MNC’s profitability as a whole. In order to organize a subsidiary within an MNC, attention of executives is necessary and it is the most critical resource within the organization (Haas and Hansen, 2001) as it entails which organizational units the MNC will focus on. While attention is important in any organization, most MNCs nowadays have many dispersed, separated subsidiaries and the MNC headquarters tries to organize and manage them in a powerful, high-performing portfolio. Organizing and managing such subsidiary-portfolio requires a continuous process of giving and taking attention and autonomy. (Boland et al. 1994; Moore, 2001; Birkinshaw et al. 2007; Gammelgaard et al. 2012).
Scholars have focused on high-performing subsidiaries and this view of subsidiaries as powerful units breaks from previous research where subsidiaries were considered marketing outlets with little autonomy (Luo, 2003). However, due to rapid globalization of markets and in a world where MNCs have to manage both high and low autonomous subsidiaries continuously, it is important to consider the different aspects of subsidiary activities that are assumed to be important for strategic development (Gammelgaard et al. 2012), whether or not the subsidiary is a simple marketing outlet or a key R&D center. It is also important to improve academic understanding regarding the influence of subsidiary activities and the way different activities receive different degrees of attention, because research has shown that positive executive attention is an important mechanism for subsidiaries and it can enhance subsidiary’s development (Bouquet & Birkinshaw, 2008).
needed to handle subsidiary operations in order to deal with the local environment and enables the subsidiary to adapt to local demands (Roth et al. 1991; Harzing, 1999). Luo (2001) underpins this idea and formulates local responsiveness, describing the attempt to respond to specific needs within a variety of host countries as the opposite of global integration. Global integration concerns the attempt of MNCs to build effective and efficient operation networks while focusing on the similarities between locations. This implies that subsidiaries must be differentiated enough to successfully operate in the foreign cultures and markets accommodated by a structure that will provide maximum contribution to corporate performance (Luo, 2001). The way a subsidiary responds to its environment depends on numerous factors on environmental, structural and organizational level either positively or negatively influencing local responsiveness. Only in recent times, attention is being viewed as an organizational resource for MNCs and just a few scholars have tried to show its importance for subsidiary performance (Haas and Hansen 2001; Bouquet and Birkinshaw, 2008). The importance of autonomy however, has been neglected and the results from the studies on attention are rather inconclusive and contradictory. This study aims to contribute to these research voids and provide theoretical implications for several domains within international business management.
1.2 Research question
In order to examine the constructs of executive attention and autonomy within subsidiaries and the contingencies affecting these constructs, a systematic literature review is conducted, pursuing one main research question and four sub-questions.
1. How do executive attention and autonomy influence subsidiary performance?
1.1 What are the definitions, theories and characteristics of executive attention regarding subsidiaries?
1.2 What are the definitions, theories and characteristics of subsidiary autonomy? 1.3 How does monitoring and control affect executive attention and autonomy within
subsidiaries?
1.3 Objective & research process
This research aims to clarify and contribute to the concept of how attention and autonomy influence each other and how they influence subsidiary performance in international business management by answering the research questions. Through analyzing former research on these topics a clear overview will be provided, patterns and overlap will be uncovered and conclusions will be drawn. Simultaneously, the influence of monitoring and control will be reviewed and analysed in specific regard to its relevance for subsidiaries. Also the overarching contingencies will be taken into account and the implications will be considered. This research however, will not offer a guideline for subsidiaries of how to gain or exploit executive attention but it aims to clarify the influence of executive attention on foreign subsidiary performance considering the relevant overarching contingencies, different levels of monitoring and control and the differences in autonomy between subsidiaries. Finally, research gaps, theory enhancing propositions and suggestions for further research will be discussed. The research process of this study is visualized in Figure 1.1.
Chapter 2: Theoretical background
This chapter establishes the general and theoretical background of this study. The underlying theories are presented regarding autonomy, executive attention and monitoring and control. 2.1 Underlying research theories
2.1.1 Autonomy
generally agree upon this element, as subsidiary autonomy is considered to arise from a shared decision-making process between subsidiary and its headquarters (Taggart and Hood, 1999; Dörrenbächer and Gammelgaard, 2010). To continue this line of thought, it is important to realize where the need for autonomy comes from. Subsidiaries need to deal with the local environment and the more autonomy they have, the better they can adapt their business to local demands (Harzing, 1999; Ambos and Birkinshaw, 2010). They also state that “maintaining a high level of connectedness to the parent without losing any autonomy” would be the most optimal situation for subsidiaries, where connectedness to the parent relates to executive attention since support (either in resources or in knowledge) from the corporate headquarters would be beneficial to the subsidiary as well. While some researchers suggest autonomy could have a moderating effect on the relationship between executive attention and subsidiary performance and call for greater research on this topic, there is no evidence that supports this suggestion. This research aims to answer this call by clarifying the concept of autonomy and discover new insights in its relationship with executive attention.
2.1.2 Executive attention
Executive attention is within the international business literature arguably one of the most popular topics and the importance of it is clear amongst researchers. At first, scholars focused on the significance of formal structures in the process of directing headquarters’ attention to the most attractive opportunities (Ocasio, 1997) and viewed organizational attention, by its nature, as a scarce and limited resource (Cyert & March, 1963; Ocasio, 1997). At this point, attention was seen as a selective capability since executives have to divide their attention between many different organizational units and research by Haas and Hansen (2001) suggests attention would lead to an internal market for headquarters’ attention. Other researchers focused on how attention should be handled more strategically by executives since there are important implications for those organizational units receiving attention, but also for the organizational units receiving no or less attention (Monteiro et al. 2008).
implies that the subsidiary can’t independently respond to emerging developments in the local environment.
Recent research contributed on this matter by providing evidence that subsidiaries with a high level of strategic choice benefit from headquarters’ attention even more compared to subsidiaries with a lower level of strategic choice (Ambos and Birkinshaw, 2010). While this sounds rather straightforward, the implications are not, as subsidiary managers are expected to endeavor both strategic choice ánd attention. This requires managers to focus on both their own subsidiary with its own market and its own goals, as well as the overall global connection with the MNC headquarters. Research has shown that such a combination of tasks and focus may require “ambidextrous” managerial mindsets (Gibson and Birkinshaw, 2004) while subsidiary managers typically focus on only their own subsidiary.
2.1.3 Monitoring and control
Viewing attention as a value-enhancing mechanism also means investigating monitoring and control. While the importance of monitoring and control in business in general is well-known, it is especially relevant for MNC-subsidiary relations as it entails mechanisms which can be used by the MNC to ensure that the subsidiary conforms to the interests of the MNC (Yan & Gray, 2001; Foss and Pedersen, 2002; Nelson & Ambrosini, 2007). As MNC-subsidiary relations tend to hold a difference in institutional pressures (Olivier, 1991) and more environmental uncertainties (Sartor & Beamish, 2014) compared to MNC relations with domestic organizational units, monitoring and control is more relevant. Whether it's the foreign institutions that apply more pressure, the local environment holding more uncertainties or it's simply the geographic distance between headquarters and subsidiary that inclines MNCs to exert tighter control over its subsidiaries than over its domestic counterparts (Parmigiani, 2007), as there is more ‘room for error’. Two primary types of control can be distinguished. Organizational control, focusing on the nature of the organization, the goals and the strategic plans is represented in the form of reviewing and evaluating the performance of the organizational unit (Chen, Park & Newburry, 2009). The goals and plans are being translated into specific performance measures which are then evaluated to see whether or not the organizational unit performs sufficiently. On the other hand, operational control serves to regulate the daily operations within the organizational unit. Where organizational control seeks to evaluate the overall relevance of the subsidiary unit within the MNC, operational control allows for fine-tuning of the operational processes (Volkmar, 2003). Monitoring and control is essentially a manifestation of executive attention, supporting the idea of attention as a multidimensional construct. In this study however, we refer to monitoring and control as a tool allowing headquarters to apply evaluative pressure (Lee et al, 2008; Hunton et al, 2008) separating it from the supportive, relative and visible aspects of attention as established in the previous subchapter.
Chapter 3: Methodology
This chapter presents the systematic literature approach that is used in this research. First, more in general, the usefulness and advantages of a systematic literature review are argued for. Then, more specific, the process of the systematic literature review model is established, comprising the research gap, review protocol and the pilot trial. This chapter concludes with the sample composition of the review.
3.1 Systematic literature review
According to Brereton et al. (2007) and Fink (2014), a systematic literature review is conducted in three phases. The first phase is planning the review, followed by the implementation of the review and the final stage is reporting the review. Chapter 3.2 will describe the first stage, Chapter 3.3 will present the second stage and the final stage will be presented in Chapters 4 and 5.
3.2 Planning the review
This section presents the first phase of the systematic literature review and describes the research gap and the development of the research questions. Then, the development of the research protocol is presented included search terms, inclusion/exclusion criteria and a pilot trial is conducted.
3.2.1 Research gap
While there is some consensus amongst researcher regarding the implications of autonomy and executive attention for business seperately, research about the relationship between both concepts and the combination of both is rather conflicting. So far, research has focused on how individual actors can effectively capture the attention of the headquarters (Dutton, 1997; Hansen & Haas, 2001) and only in recent times, attention is being viewed as an organizational resource for MNCs. Just a few scholars have tried to show its importance for subsidiary performance (Haas and Hansen 2001; Bouquet and Birkinshaw, 2008). The importance of autonomy however, has been neglected and the results from the studies on attention are rather inconclusive and contradictory. Also, a complete, systematic overview of current theories, characteristics and models on this topic is lacking (Gammelgaard et al., 2012; Ambos & Birkinshaw, 2010). This research aims to contribute to these research voids and provide theoretical implications for several domains within international business management. By identifying and analyzing current academic knowledge on the topic of executive attention and autonomy in subsidiaries, this research aims to provide a systematic overview, discover trends and links between constructs and fill the current research gap.
review”, “Monitoring” + “Control” + “Subsidiaries” + “Systematic literature review” as well as “Literature review” + “Autonomy”, “Literature review” + “Executive attention”, “Literature review” + “Monitoring” + “Control” + “Subsidiaries” (Date of search 7-5-2016). There were a few results corresponding with our search terms, however after carefully reading the abstracts it became clear that the results were not connected without research topic. After specifically checking the International Journal of Management Reviews through University of Groningen’s online library “Smart Cat” according to our search terms, we conclude that this is the first systematic literature review on this topic.
3.2.2 Development of the research questions
Now that the research gap is confirmed, the development of the research questions will be discussed. The main theme of this research is the combination of autonomy and executive attention within subsidiaries. The interaction between both concepts and the way they influence each other is our main topic of interest. Where both concepts have been investigated separately and yield diverging and contradictory results, this research aims to discover the areas where these concepts connect and the areas where they diverge. Hence, this research extends the debate on both autonomy and executive attention within subsidiaries. By addressing both concepts the aim is to improve practical implications compared to other studies as one of the most common limitations of previous research the practical implications of the findings due to the research being “too specific” as other important constructs were either missing or disregarded. Therefore the research question has been divided into 4 sub-questions addressing the most important concepts related to the overarching research question.
1. How do executive attention and autonomy influence subsidiary performance?
1.1 What are the definitions, theories and characteristics of executive attention regarding subsidiaries?
1.2 What are the definitions, theories and characteristics of subsidiary autonomy? 1.3 How does monitoring and control affect executive attention and autonomy within
subsidiaries?
It is clear that positive executive attention can be viewed as a powerful mechanism to leverage subsidiary resources. Either through supportive attention, relative attention or visible attention, subsidiaries can gain advantages in the form of tangible resources or more intangible resources such as knowledge and information. Visible attention might even be beneficial for the subsidiaries reputation (Tallman and Koza, 2010). All these factors can lead to an increase in subsidiary performance, whether they influence performance through structural determinants like subsidiary weight or through relational determinants such as subsidiary voice (Bouquet and Birkinshaw). These two ways of why subsidiaries would receive attention differ in nature as subsidiary weight entails the importance or significance of the subsidiary for the MNC forcing or ‘pushing’ executives into paying attention to a certain subsidiary, in a top-down manner, due to the strategic significance of the local environment and the strength of the subsidiary in the MNC network. The relational determinants suggests attention could be the outcome of a bottom up process ‘pulling’ executives into paying attention by manipulating their relationship with headquarters either through initiative taking or profile building. Both however are essential in gaining resources in order to improve subsidiary performance. To be able to thoroughly understand the concept of executive attention, the definitions, theories and characteristics on this topic are reviewed, analysed and put in perspective guided by the first sub-question.
In order to maintain consistency and clarity within this research, the concept of autonomy within subsidiaries is analysed in the same manner (definitions, theories and characteristics are reviewed), even though there is a bit more consensus between researchers on this topic. According to Birkinshaw and Morrison (1995) and Gammelgaard et al. (2012), autonomy is often associated with subsidiary performance because granting more important, profitable jobs and tasks to the subsidiary (a change in strategic role) correlates with an increase in autonomy. Some studies found evidence for the emergence of highly autonomous subsidiaries with highly advanced tasks in the form of key R&D centers, resulting in high subsidiary performance (Frost et al., 2002). In addition, higher autonomy can lead to an increase in entrepreneurial activities within the subsidiary (Boehe, 2007) which opens up opportunities for an increase in performance. Subsidiary performance will increase even further when subsidiaries engage in activities or receive permission to take decisions regarding product adaptation to the local market and local demands.
general, the impact of monitoring and control depends on so many variables that researchers found it difficult to establish its exact influence. Applied to the context of MNC-subsidiary relationships, both the importance and complexity of monitoring and control rises (Sartor & Beamish, 2014). In order to provide a legitimate analysis, the influence of monitoring and control has to be taken into account as it closely relates to both the constructs of executive attention and autonomy.
Expanding the research in this field, the last sub-question concerns the analysis of relevant overarching contingencies. Due to the fact that the constructs in this study are closely related and research findings on these topics are contradictory, accounting for confounds and artifacts is important in order to achieve both high internal and external validity (Crano & Brewer, 2002). By exploring whether or not there are certain conditions affecting our research constructs we endeavor to expand current academic literature and increase academic knowledge. 3.2.3 Development of the research protocol
In order to minimize bias, a research protocol is developed. To ensure replicability and transparency, the research protocol describes how exactly the information sources are selected, what search terms have been used and which inclusion and exclusion criteria have been applied (Fink, 2014). Finally, the way the data is stored and documented as well as the process of the pilot trial are described.
The University of Groningen provides access to the electronic database EBSCO, aggregating not only Academic Search Premier and Business Source Premier but lots of other databases as well. EBSCO provides access to the best academic journals and ebooks allowing analysis of high-quality articles within the research area of business. In order to produce a complete overview and a thorough analysis on all relevant literature the Google Scholar database is also used in this study. Where the databases utilized through EBSCO allows for search tasks directly in the academic journals, Google Scholar offers access to a lot of other publishing formats and research fields as well. In order to locate all important and relevant studies the articles that are included in this systematic literature review will receive additional attention as both the references in these articles and other articles citing these articles will be reviewed.
contingencies, subsidiary management, MNC & subsidiaries are searched for in order to find literature according to the relevant theoretical background. According to Page (1996), it is important to use the appropriate coding when researching for multiple theoretical concepts at the same time. To ensure that the findings are coherent with all search terms, the search terms are utilized in 1) separate boxes in the EBSCO database and 2) the “+” sign is used when searching for multiple terms in Google Scholar.
Hence, the search terms “Executive attention”, “Autonomy”, “Monitoring and Control”, “Subsidiary performance” where all first searched for individually. Then, these keywords were separately combined with the search terms “Subsidiary contingencies and “Subsidiary management”. Finally, the search terms were combined and searched for in the following matter: “Executive attention” + “Autonomy”, “Executive attention” + “Monitoring and Control”, “Executive attention” + “Subsidiary performance”, “Autonomy” + “Monitoring and Control”, “Autonomy” + “Subsidiary performance”, “Monitoring and Control” + Subsidiary Performance”. All search tasks were performed simultaneous in both EBSCO and Google Scholar.
autonomy within subsidiaries but not using these exact terms are selected as these articles could lead to a better understanding of the key constructs or provide different perspectives on these constructs. In order to collect and arrange the selected articles in a systematic matter, all important details of each article are stored according to our data extraction sheet (Table 3.1). The development of such an extraction sheet both allows a systematic and efficient analysis of the specifications of the articles as well as it provides a structured overview.
The pilot trial
To assess the feasibility of this study and the appropriateness of the selected search terms, we decided to run a pilot trial. Pre-testing the research instrument during a pilot trial allows the researcher to uncover potential problems and establishing the effectiveness of the sampling technique (van Teijlingen & Hundley, 2001). In order to ensure the
literature review is done in the most optimal way Table 3.1: Data extraction sheet
Search topics pilot trial EBSCO results
Executive attention within subsidiary management 185
Autonomy within subsidiary management 119
Monitoring and control within subsidiary management 4092 Subsidiary performance within subsidiary management 1303
Subsidiary contingencies 102
Total 5801
Table 3.2: Results pilot trial
3.3 Performing the review
This subchapter describes the characteristics of the review, applying the adjustments discovered in the pilot study.
The review has been performed on 21-05-2016, searching for the developed key terms on the EBSCO database and Google Scholar. After adding articles discovered through citation search on key papers and removing the duplicate results our search methods have indicated a total of 766 relevant articles. In table 3 below, the results of the search quests are visualized and categorized on the different research topics.
Search topics systematic review EBSCO Google Scholar
Executive attention within subsidiaries 20 44
Executive attention + Autonomy 0 0
Executive attention + Monitoring and control 11 19
Executive attention + Subsidiary contingencies 3 4
Autonomy within subsidiaries 71 126
Autonomy + Monitoring and control 60 43
Autonomy + Subsidiary contingencies 2 3
Subsidiary performance + Executive attention 8 14
Subsidiary performance + Autonomy 32 51
Subsidiary performance + Monitoring and control 143 80 Subsidiary performance + Subsidiary contingencies 4 28
Total 766
Reviewing the abstracts of the discovered articles indicated 628 papers which did not meet the selection criteria developed in chapter 3.2 and these papers have been removed. The remaining 138 articles have been reviewed in more detail, reading the introduction and conclusion and if necessary the full text. This enabled a more thorough and in-depth inspection of the articles in regards to the selection criteria. As a result, 96 articles were removed from the research either because they did not meet the selection criteria or due to the lack of relevance to the context of this study. Finally, 42 articles have been selected as sample of this study. Half of the articles in the sample is established through the EBSCO database, 13 through Google Scholar and 9 were discovered through browsing the reference list and citations of important papers. The full research sample can be found in Appendix A.
Chapter 4: Results and analysis
This section presents the reporting stage of the systematic literature review. The literature included in the systematic review is described and analysed, presenting the findings of this study. Using the data extraction form developed in chapter 3.2.3 (table 1), the articles are systematically reviewed providing a clear overview of the literature. First, the descriptive analysis describes the examination of the publication details including journals, authors and core years. Then, the thematic analysis describes the examination of the content of the literature in regards to the research questions.
4.1 Descriptive analysis
4.1.1 Journals
The 42 selected articles have been published in a wide variation of different journals. Strategic Management Journal provided seven of the articles included in this study. Four articles were published in Management International Review. The other journals included are: Organizational Science, Journal of World Business, MIT Sloan Management Review, Administrative Science Quarterly, Journal of International Business Studies, Journal of International Marketing, Organization Science, Journal of Transnational Management, Journal of Management Studies, European Management Journal, Journal of International Business Studies, Banck Accounting & Finance, International Entrepreneurship Management Journal, International Business Review, Journal of Leadership and Organizational Studies, Journal of International Marketing, Journal of Marketing, Journal of International Business and Economy, The accounting Review, Academy of Management Journal and the Journal of Marketing Research. While the majority of the journals cover research fields regarding international business, there are specific journals included on the fields of marketing, finance and leadership. These articles might provide interesting insights and different perspectives on the constructs of this study compared to the articles published in other research area.
4.1.2 Authors
organizational resource in 2001. Their article, which is included in this research, provides insights about how attention initially was viewed in the academic literature. While Haas and Hansen mostly focused on the concept of attention in regards to knowledge markets and knowledge management within organizations, the fact that they are the first to write about it is worth noticing. Subsequently, both Tina Ambos and Julian Birkinshaw have published two of the articles included in this study on both the topics of innovation and control within multinational firms (Ambos and Schlegelmilch, 2007) and on the topic of headquarters attention within subsidiaries (Ambos and Birkinshaw, 2010). They are building on the article of Haas and Hansen and are most cited in the academic literature. Furthermore, Jens Gammelgaard, professor at the Copenhagen Business School, is specialized in both the strategic development of subsidiaries and internationalization processes and his work published in the Journal of International Business and Economy regarding intra-organizational networks (Dörrenbachër and Gammelgaard, 2010) and autonomy within subsidiaries (Gammelgaard et al., 2012) is also included in this review multiple times. All the remaining 35 articles are written by different authors
4.1.3 Core years
Figure 4.1 below reveals the core years of the articles included in this study. While there are a few articles included which are published before 2001, it is clear that since that year there has been an increase in published articles. With peaks in 2001, 2007 and 2010 chances are the articles written before those years have provided important insights and ideas on which prospective papers could build upon since it usually can take a few years for an article to be written and subsequently be published.
4.2 Thematic analysis
In order to answer the main research question of this study of how executive attention and autonomy influence subsidiary performance, first the concept of executive attention will be analyzed in subchapter 4.2.1, followed by the concept of autonomy within subsidiaries in subchapter 4.2.2. Then, the influence of monitoring and control will be discussed in subchapter 4.2.3. Finally, the most important discovered contingencies will be presented and placed in perspective in the last section.
4.2.1 What are the definitions, theories and characteristics of executive attention regarding subsidiaries?
While there is general consensus amongst scholars about the idea of executive attention as a multidimensional construct, there is a lot of debate about what these dimensions are and how exactly they vary (Dutton, 1997; Ocasio, 1997; Hansen & Haas, 2001; Cho & Hambrick, 2006; Bouquet & Birkinshaw, 2008; Raziq et al., 2014). This can be observed in the definitions of executive attention that are being used within the academic literature. Authors as Ocasio, Cho & Hambrick and Blankenburg et al., define executive attention in a more organizational perspective as:
“The noticing, encoding, interpreting, and focusing of time and effort by organizational decision-makers on both (a) issues: the available repertoire of categories for making sense of the environment: problems, opportunities, and threats; and (b) answers: the available repertoire of action alternatives: proposals, routines, projects, programs, and procedures.”
Where authors like Chandler, Bouquet, Ambos and Birkinshaw attempt to highlight the positive aspects by defining executive attention as:
“The extent to which a parent company recognizes and gives credit to a subsidiary for its contribution to the MNE as a whole.”
The first definition views executive attention like an organizational process where the second definition views executive attention more like a tool or an organizational skill, waiting to be used. Although these two definitions are the ones most frequently used, other articles also mention the importance of other aspects of executive attention. For example, the facilitating role (Haas & Hansen, 2001) executive attention can play in subsidiaries by increasing trust and providing resources and the competition inducing role (Jones & Baumgartner, 2005), as there is only a limited “amount” of attention available, subsidiaries have to compete with each other as well as with other organizational units in order to gain attention.
Interpretation
The majority of the articles mentioned, explored or discovered elements relevant to either the top-down approach or the bottom-up approach. These two ways of how subsidiaries gain executive attention differ in nature. The top-down approach entails the importance or significance of a specific subsidiary for the MNC as a whole, forcing or pushing executives into paying attention to a that subsidiary as it is likely executives will give more attention to subsidiaries that are very important to the MNC network.. One of the ways the importance of a subsidiary varies is based on the strategic significance of the local environment of the subsidiary. When the local environment is essential to the MNC or its market is critical to the MNC performance, the amount of attention the subsidiary receives will increase. The two other ways the importance of a subsidiary varies is based on the binary strength of the subsidiary in. The first part of subsidiary strength is in regards to the MNC as a whole, the second part has a relativity element and requires an increase in relative strength compared to other subsidiaries. When a subsidiary is responsible for activities or products on which the entire MNC depends, the subsidiary strength increases. Additionally, the strength of a subsidiary is higher when other subsidiaries are dependent on the operations or output of a specific subsidiary. The elements of the top-down approach as well as the articles by which they are indicated are listed in table 4.1 below.
Top-Down Approach: Indicated by:
Increasing strategic significance of the local environment. Ocasio, 1997; Luo, 2003; Bouquet and Birkinshaw, 2008; Hansen and Haas, 2001. Increasing strength of a subsidiary within MNC network. Ocasio, 1997; Jones and
Baumgartner, 2005; Bouquet and Birkinshaw, 2008. Increasing relative strength of a subsidiary compared to
the other subsidiaries within the MNC network .
Jones and Baumgartner, 2005; Raziq et al., 2014; Rugman and Verbeke, 2001.
Bottom-up Approach: Indicated by:
Taking initiatives in the local environment O’Donnel, 2000; Raziq et al., 2014; Rugman and Verbeke, 2001; Ambos and Birkinshaw, 2010; Bouquet and
Birkinshaw, 2008; Grewal et al., 2013; Gammelgaard et al., 2012; Blankenburg et al., 2015; Dörrenbächer and
Gammelgaard, 2010.
Using procedural and communication channels Ocasio, 1997; Blankeburg et al., 2015 Improving subsidiary reputation Raziq et al., 2014; Hansen and Haas,
2001; Birkinshaw et al., 2007
Consistently transcending MNC expectations Raziq et al., 2014; Cho and Hambrick, 2006; Birkinshaw et al., 2007
Increasing commitment to the MNC O’Donnel, 2000; Cho and Hambrick, 2006; Birkinshaw et al., 2007
4.2.2 What are the definitions, theories and characteristics of subsidiary autonomy?
The definitions of subsidiary performance have been examined in order to provide an overview of how the concept of subsidiary autonomy is being viewed in the academic literature. In general, the definitions of subsidiary autonomy can be divided into two groups. In the first group, authors like Ambos, Birkinshaw, Gammelgaard, Homburg and Prigge define subsidiary autonomy in relation to the parent company as:
“the extent to which the subsidiary is given operational and strategic decision-making authority vis-à-vis headquarters”
and
“the decision-making rights that are granted by parent companies”
These definitions clearly focus on the idea that the decision-making rights are granted by the parent company. The other group also defines subsidiary autonomy in relation to the parent company but do not specifically mention where the decision-making rights derived from. Authors like Raziq, Borini, Perry and Manalopoulos define subsidiary autonomy as:
“the degree to which an MNE subunit may make significant decisions, referring to the whole spectrum of inter- and intra-firm relationships, with or without the consent of the HQs”
and
acquired and earned by the subsidiary without consent of the parent (Manalopoulos, 2006). Since subsidiaries may face unexpected opportunities and threats, a degree of subsidiary autonomy can help subsidiaries to react positively to these situations (Raziq et al., 2014). Within the academic literature two types of subsidiary autonomy are considered. The first type, focusing on long term decisions and related to policy decisions is called strategic decision-making autonomy. The second type of autonomy focuses more on managing short term, tactical decisions and activities related to the the operational process; operational decision-making autonomy. The findings related to subsidiary autonomy are presented in table 4.3 below.
Strategic subsidiary autonomy: Indicated by:
Development of new markets or products Manalopoulos, 2006; Raziq et al., 2014 Reduces transaction costs Manalopoulos, 2006
Increases innovations Manalopoulos, 2006; Gammelgaard et al., 2012 Increases learning Foss and Pedersen, 2002; Raziq et al., 2014 Increases knowledge sharing Foss and Pedersen, 2002; Raziq et al., 2014 Reduces intra-organizational
relationships
Gammelgaard et al., 2012; Johnston and Menguc, 2007; Homborg and Prigge; 2014 Increases diffusion of locally-developed
innovations
Taggart and Hood, 1999
Operational subsidiary autonomy: Indicated by:
Improves access to local assets Dörrenbächer and Gammelgaard 2010; Johnston and Menguc, 2007; Homborg and Prigge; 2014
Improves operations Raziq et al., 2014; Johnston and Menguc, 2007; Gammelgaard et al., 2012; Homborg and Prigge; 2014
4.2.3 How does monitoring and control affect executive attention and autonomy within subsidiaries?
The two types of control discussed in chapter 2.1.3; organizational control and operational control, closely relate to strategic decision-making autonomy and operational decision-making autonomy. This does not necessarily imply that an increase in organizational control leads to a decrease in strategic decision-making autonomy or the other way around. Both types of control can be applicable to both types of autonomy, subsidiaries can be controlled either through organizational control, operational control, both or none (Yan and Gray, 2001; Volkmar, 2003; Hunton et al., 2010). The ambiguity of the concepts of control and autonomy will become even more clear considering that on the one hand, control reduces initiative taking within a subsidiary as employees in tightly monitored business units face less incentives to take initiative and learn from it in their decision-making process (Gammelgaard et al., 2012; Raziq et al., 2014), reducing the chances of getting attention. While on the other hand, control can enhance cost efficiencies (Lin, 2014), improving subsidiary revenues and therefore increasing the chances of getting attention (Bouquet and Birkinshaw, 2008; Blankenburg, 2015). However we also found that there are arguments that this process could work the other way around, as an increase in executive attention due to an increase in the local environment or due to an improvement of the subsidiary strength (chapter 4.2.1) can lead to more monitoring and control (Chen et al., 2009; Lin, 2014).
One of the contingencies underlying this concept is the strategic role. Within the reviewed literature, some authors mention this concept as ‘value-chain activities’, ‘subsidiary competence’, ‘subsidiary role’, ‘strategic choice’ or a combination of such (see table 4.4).
Definition: Author’s:
Value-chain activities Gammelgaard et al., 2012; Lin, 2014 Subsidiary competence Frost et al., 2002; Monteiro et al., 2007;
Bouquet and Birkinshaw, 2008;
Subsidiary role Raziq et al., 2014; Johnston and Menguc; 2007; Taggart and Hood, 1999.
Strategic choice Ambos and Birkinshaw, 2010
Table 4.4: Alternative definition’s strategic role
All definitions however, refer to the position of the subsidiary within the MNC and to the description of the subsidiary’s strategic configuration. We define this position and configuration as the strategic role of a subsidiary and it is relevant to all constructs of this study; executive attention, subsidiary autonomy, monitoring and control and subsidiary performance. Some subsidiaries fulfill different strategic roles than others, as some subsidiaries are highly advanced R&D or manufacturing key centers, where others are responsible for simple sales or marketing tasks. In general, with a different role comes a difference in subsidiary autonomy (Frost et al; Ambos and Birkinshaw), a different amount of executive attention (Bouquet and Birkinshaw;
4.2.4 What are the most important contingencies affecting executive attention and autonomy within subsidiaries?
After reviewal of the academic literature, five contingencies have been established and are presented in table 4.5. While the discovered contingencies were sometimes indicated only within construct specific literature, once an article indicated the possible existence of a certain contingency we’ve reviewed the other articles specifically on that subject as well. Only once a significant number of authors either have discovered, mentioned or suggested a certain contingency it got included in this study. For example, the strategic role was initially discovered in research on the topic of subsidiary autonomy (subchapter 4.2). However, after specifically analyzing the literature of executive attention, monitoring and control and subsidiary performance on the concept of strategic role, a lot of articles appeared to indicate this contingency in some way. Through this analysis protocol, the relevance of the contingency as well as the overarching quality is being secured. All the findings are analyzed and constructed in the same manner and are presented in Table 4.5 below.
Discovered contingencies: Indicated by:
Strategic role Frost et al., 2002; Johnston and Menguc, 2007; Ambos and Birkinshaw, 2010; Gammelgaard et al., 2012; Lin, 2014; Blankenburg et al., 2015
Cultural distance Gammelgaard et al., 2012; Homborg and Prigge, 2014
Geographic distance Monteiro et al., 2007; Bouquet and Birkinshaw, 2008, Gammelgaard et al., 2012; Homborg and Prigge, 2014
Initiative taking Ambos and Birkinshaw, 2010; Gammelgaard et al., Raziq et al., 2014; Blankenburg et al., 2015
Subsidiary size Taggart and Hood, 1999; Johnston and Menguc, 2007
Chapter 5: Concluding remarks
5.1 Contribution and implicationsThis systematic literature review extends the debate on both autonomy and executive attention within subsidiaries by providing a systematic overview of current academic knowledge on these topics, discussing the different definitions of the theoretical constructs that are being used and discovering both areas where overlap exists as well as areas where author’s draw different conclusions. Also, this systematic review is the first to provide the theoretical background of all the relevant research constructs combined in one study. By establishing two approaches to executive attention, combining the work of numerous prominent authors an important contribution to the existing literature. Through both connecting and analyzing academic knowledge three elements of the top-down approach and five elements of the bottom-up approach have been discovered. In addition, subsidiary autonomy has been reviewed and an overview of the most important elements of this construct have been indicated. Finally, five overarching contingencies are discovered and discussed. While the research constructs are closely related, the contingencies discovered in this study will provide a solid base for future research on the topics of executive attention, subsidiary autonomy, monitoring and control and subsidiary performance by presenting the most relevant concepts and discussing the academic knowledge on these topics. The overarching research question “How do executive attention and autonomy influence subsidiary performance” wondered about the role of executive attention and subsidiary autonomy in relation to subsidiary performance. By dividing this research questions into four sub-questions, the concepts of executive attention, autonomy, monitoring and control were able to be studied. While the exact link to subsidiary performance was hard to establish due to the inter-relatedness of the research constructs, more on this in the following chapters, the discovered contingencies add to the understanding of executive attention and autonomy.
5.2 Limitations
There are several main limitations of a systematic literature approach in general, while structuring the research process, developing research protocols and selection can improve the validity, in the end selection bias is always present in this type of research as the researcher is the one deciding which literature to include (Fink, 2014). Based on the search results, 766 articles have been discovered and the abstracts have been scanned. However, due to the relatively small scale and limited resources available for this thesis only a limited amount of articles could be included in the research sample. As this research is based on only a part of the literature there might be elements or insights missing, indicated by articles not included in this study. Also, a wider range of literature could enhance and strengthen the findings of this research. In addition, the findings of this research are mainly theoretical in nature, as is expected in a literature review. However, both the theoretical and the practical implications that have been discovered should be tested empirically first in order to be established more certainly.
5.3 Propositions for future research
5.4 Conclusion
Based on the systematic literature, several conclusions can be drawn; Firstly, by reviewing the definitions, theories and characteristics of executive attention three streams of literature on this topic have been discovered. Also, several aspects of attention has been discussed establishing the multidimensional characteristic of it. Then, based on the two identified approaches to executive attention, the conclusion can be drawn that executive attention can be viewed as a more delicate, but concentrated mechanism for subsidiary management. Subsidiary autonomy and monitoring and control can be viewed as a more forceful mechanisms. Both types of mechanisms however have the same goal; to improve subsidiary performance. From the subsidiary perspective, initiative taking, using procedural and communication channels, improving reputation, consistently transcending expectations and increasing commitment to the MNC are found to be the most established ways of gaining executive attention from the bottom up. From the MNC perspective, increasing strategic significance of the local environment, increasing strength of a subsidiary in the MNC network and increasing relative strength compared to other subsidiaries are the three most established ways of gaining executive attention from a top down perspective. By establishing two types of subsidiary autonomy and indicating most important elements of this concept, first the importance of strategic role has been discovered as well the link with subsidiary initiatives linked to the bottom up approach to executive attention. The ambiguity of subsidiary control and autonomy and the concept of local responsiveness has been introduced and its link with control and subsidiary performance indicated. So, after discussing the most important elements of executive attention, subsidiary autonomy, monitoring and control and the link between these concepts, five overarching contingencies have been discovered affecting these relationships and the links to subsidiary performance. Strategic role, cultural distance, geographic distance, initiative taking and subsidiary size are the most important contingencies discovered in this study, based on our literature sample.
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Appendices
Appendix A: Articles included in the study Ref
ID
Year Author(s) Title of publication
1 2002 Foss and Pedersen
Transferring knowledge in MNCs: The role of sources of subsidiary knowledge and organizational context.
2 2013 Grewal et al. Marketing Channels in foreign markets: Control mechanisms and the moderating role of multinational corporation
headquarters-subsidiary relationship.
3 2001 Haas and Hansen
Competing for attention in knowledge markets: Electronic document dissemination in a management consulting company
4 2014 Sartor and Beamish
Offshoring innovation to emerging markets: Organizational control and informal institutional distance
5 2001 Hewett and Bearden
Dependence, trust, and relational behavior on the part of foreign subsidiary marketing operations: Implications for managing global marketing operations.
6 2007 Ambos and Schlegelmilch
Innovation and control in the multinational firm: A comparison of political and contingency approaches
7 2010 Ambos and Birkinshaw
Headquarters’ Attention and its effect on subsidiary performance
8 2006 Cho and Hambrick
Attention as the mediator between top management team characteristics and strategic change
9 2010 Dörrenbächer and
Gammelgaard
Multinational corporations, inter-organizational networks and subsidiary charter removals.
10 1990 Jarillo and Martinez
Different roles for subsidiaries - The case of multinational corporations in Spain
11 1997 Ocasio Towards an attention-based view of the firm.
New Zealand and Brazil.
13 2002 Frost et al. Centers of excellence in multinational corporations. 14 2007 Birkinshaw et
al.
Managing executive attention in the global company
15 2015 Blankenburg et al.
How subsidiaries attempt to direct HQ attention to new business opportunities
16 2004 Mudambi and Navarra
Is knowledge power? Knowledge flows, subsidiary power and rent-seeking within MNCs
17 2007 Johnston and Menguc
Subsidiary size and the level of subsidiary autonomy in multinational corporations: a quadratic model investigation of australian subsidiaries.
18 2005 Manalopoulos et al.
Technology sourcing m multinational enterprises and the roles of subsidiaries: an empirical investigation.
19 2012 Gammelgaard et al.
Characteristics of low-autonomy foreign subsidiaries
20 2012 Gammelgaard et al.
The impact of increases in subsidiary autonomy and network relationships on performance
21 2007 Parmigiani Why do firms both make and buy? An investigation of concurrent sourcing
22 1999 Taggart and Hood
Determinants of autonomy in multinational corporation subsidiaries
23 2014 Lin Subsidiary performance: The contingency of multinational corporation’s international strategy
24 2005 Jones and Baumgartner
The politics of attention: how government prioritizes problems.
26 2010 Hunton et al. Continuous monitoring and the status quo effect. 27 2001 Rugman and
Verbeke
Subsidiary-specific advantages in multinational enterprises.
28 2004 Young and Tavares
Centralization and autonomy: Back to the future.
29 2008 Bouquet and Birkinshaw
Weight versus voice: How foreign subsidiaries gain attention from corporate headquarters.
30 2011 Campbell et al. The learning effects of monitoring. 31 2014 Homburg and
Prigge
Exploring subsidiary desire for autonomy: A conceptual framework and empirical findings.
32 2003 Luo Market-seeking MNEs in an emerging market: How parent-subsidiary links shape overseas success
33 2003 Volkmar Context and control in foreign subsidiaries: Making a case for the host country national manager.
34 2009 Chen et al. Parent contribution and organizational control in international joint ventures
35 2001 Moore A strategy for subsidiaries: Centres of excellences to build subsidiary specific advantages
36 1998 Nobel and Birkinshaw
Innovation in multinational corporations: Control and communication patterns in international R&D.
37 2010 Tran et al. The effect of quantity, quality and timing of headquarters-initiated knowledge flows on subsidiary performance
38 2000 O’Donnel Managing foreign subsidiaries: Agents of headquarters, or an interdependent network?
39 2001 Yan and Gray Antecedents and effects of parent control in international joint ventures
40 2010 Tallman and Koza
41 2007 Nelson and Ambrosini
Enterprise risk management and controls-monitoring automation can reduce compliance costs
Appendix B: Tables included in this study
Search topics pilot trial EBSCO results
Executive attention within subsidiary management 185
Autonomy within subsidiary management 119
Monitoring and control within subsidiary management 4092 Subsidiary performance within subsidiary management 1303
Subsidiary contingencies 102 Total 5801 Tabl e 3.2: Res ults pilot trial
Search topics systematic review EBSCO Google Scholar
Executive attention within subsidiaries 20 44
Executive attention + Autonomy 0 0
Executive attention + Monitoring and control 11 19
Executive attention + Subsidiary contingencies 3 4
Autonomy within subsidiaries 71 126
Autonomy + Monitoring and control 60 43
Autonomy + Subsidiary contingencies 2 3
Subsidiary performance + Executive attention 8 14
