In Search of Theory: Towards an Integrating Conceptual Framework for Subsidiary Research

Despite the importance of the strategic choices taken by subsidiary managers to the long terms survival of their unit, little is known about the phenomenon. (Dörrenbächer & Geppert, 2009, Scott, Gibbons, & Coughlan, 2010). This paper analyses and synthesises the research streams on subsidiary management to date to provide critical conceptual insights and proposes a new theoretical approach to subsidiary analysis, applied to the critical routine of subsidiary strategy. The adoption of more global business structures by MNEs has led to additional strategic constraints on subsidiary managers (Buckley, 2009, Buckley & Ghauri, 2004, Mudambi, 2008), which we categorise as the dual embeddedness constraint, the domain constraint and the resource constraint. Paradoxically despite these exacerbating constraints, expectations on subsidiary managers to create knowledge and innovation and develop their mandate are escalating, forcing them to evaluate the range of strategic decisions remaining under their control, While the literature implicitly assumes that subsidiary managers can respond to MNC pressures by reconfiguring resources and developing capabilities (Birkinshaw & Hood, 1998), improving performance (Subramaniam & Watson, 2006) and influencing the strategic direction of the MNE as a whole (Andersson, Bjorkman, & Forsgren, 2005, Williams, 2009), there is an absence of guidance on how subsidiary managers develop strategies to achieve these options, and influence strategy from below (Andersson, Forsgren, & Holm, 2007). Our review of the empirical and theoretical research on subsidiary management identifies how the tensions between the headquarters perspective and the subsidiary perspective have resulted in the application of inappropriate conceptual frameworks. Platforming from the four primary theoretical approaches applied to date, and combining critical tenets of both the resourced based and transaction cost approaches, we develop a conceptual framework which overcomes prior theoretical limitations and offers a new perspective of subsidiary to apply to the subsidiary unit of analysis.