Subsidiary network embeddedness : Integration, control and influence in the multinational corporation

Abstract: This thesis deals with subsidiaries in multinational corporations and especially how thespecific operational environment of the subsidiaries affects integration, control andinfluence in the multinational corporation. This study demonstrates that subsidiaries'embeddedness in their business networks does not only influence them, but also thebehaviour and development of the multinational corporation of which they form a part.By using a network approach, one can detect and study the specific operationalenvironment, in terms of suppliers, customers and other counterparts, such ascompetitors, government agencies, and labour unions. Interdependence is createdbetween the subsidiaries and their counterparts through the gradual adaptation ofresources and activities. Interdependence makes it possible for the subsidiaries and thecounterparts to influence each other's activities and operations. In this study we havemade a distinction between external embeddedness, that is relationships withcounterparts outside the legal system to which the subsidiaries belong, and corporateembeddedness, meaning relationships with sister units.The empirical base of this thesis comprises 100 subsidiaries in 20 divisions inSwedish multinational corporations. The main empirical findings are as follows: Thesubsidiaries' embeddedness in their networks effects their headquarters' integrativeendeavour and the subsidiaries' perceived control. The more the subsidiaries are highlyexternally embedded, the more restricted headquarter's possibilities to control theirbehaviour and development, while the opposite is true the more corporately embeddedthe subsidiaries are. The resources created in the network can be used by thesubsidiaries to influence the strategic behaviour of the multinational corporation if theyare providers of technological knowledge.