Autonomy delegation to foreign subsidiaries: An enabling mechanism for emerging-market multinationals

Stephanie Lu Wang, Yadong Luo, Xiongwen Lu, Jinyun Sun and Vladislav Maksimov
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Stephanie Lu Wang: Department of Management, School of Business Administration, University of Miami, Coral Gables, USA
Yadong Luo: 1] Department of Management, School of Business Administration, University of Miami, Coral Gables, USA[2] Sun Yat-Sen Business School, Sun Yat-Sen University, Guangzhou, China
Xiongwen Lu: School of Management, Fudan University, Shanghai, China
Jinyun Sun: School of Management, Fudan University, Shanghai, China
Vladislav Maksimov: Department of Management, School of Business Administration, University of Miami, Coral Gables, USA

Journal of International Business Studies, 2014, vol. 45, issue 2, 130 pages

Abstract: Current theory on foreign subsidiary autonomy is insufficient to examine a situation where a multinational lacks experience to organize global operations, and yet intends to compete extensively with established multinational enterprises (MNEs) from advanced economies. By building on theoretical perspectives developed for emerging-market multinational enterprises (EMNEs), we advance the idea that foreign subsidiary autonomy is a strategic mechanism to overcome the EMNE’s weaknesses in managing globally dispersed businesses and their home-country disadvantages after foreign entry. Subsidiary autonomy delegation assists in performing the learning functions necessary for overcoming resource and capability voids, as well as for distancing the subsidiary administratively from the parent’s negative home-country institutional heritage. Analyses of survey data collected from headquarter senior executives of 240 Chinese MNEs suggest that subsidiary autonomy delegation is higher among firms relying on foreign markets as a springboard to acquire strategic assets, whose top managers at the headquarters perceive high domestic institutional constraints, and which do not count on government assistance to expand internationally. Further, we demonstrate that these relationships are strengthened with greater inward foreign direct investment cooperative experience, and with the use of merger and acquisition entry modes. These findings have important implications for theories on subsidiary autonomy.

Date: 2014
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