Why Are Some Subsidiaries of Multinationals the Source of Novel Practices while Others Are Not? National, Corporate and Functional Influences

DOIhttp://doi.org/10.1111/1467-8551.12090
Date01 April 2015
Published date01 April 2015
Why Are Some Subsidiaries of
Multinationals the Source of Novel
Practices while Others Are Not? National,
Corporate and Functional Influences
Tony Edwards, Rocio Sanchez-Mangas,1Jacques Bélanger2and
Anthony McDonnell3
Department of Management, King’s College London, 150 Stamford Street, London SE1 9NH, UK, 1Dpto de
Análisis Económico: Economía Cuantitativa, Universidad Autónoma de Madrid, Calle Francisco Tomás y
Valiente 5, 28049 Madrid, Spain, 2Département des relations industrielles, Pavillon J.A. DeSève, Université
Laval, Québec, Canada G1V 0A6, and 3Queen’s University Management School, Queen’s University, Belfast,
Northern Ireland
Corresponding author email: tony.edwards@kcl.ac.uk
It has frequently been argued that multinational companies are moving towards network
forms whereby subsidiaries share different practices with the rest of the company. This
paper presents large-scale empirical evidence concerning the extent to which subsidiaries
input novel practices into the rest of the multinational. We investigate this in the field of
human resources through analysis of a unique international data set in four host coun-
tries – Canada, Ireland, Spain and the UK – and address the question of how we can
explain variation between subsidiaries in terms of whether they initiate the diffusion of
practices to other subsidiaries. The data support the argument that multiple, rather than
single, factor explanations are required to more effectively understand the factors pro-
moting or retarding the diffusion of human resource practices within multinational
companies. It emerges that national, corporate and functional contexts all matter. More
specifically, actors at subsidiary level who seek to initiate diffusion appear to be differ-
entially placed according to their national context, their place within corporate struc-
tures and the extent to which the human resource function is internationally networked.
The project was supported by Canada’s Social Sciences and Humanities Research Council (the SSHRC Major
Collaborative Research Initiatives, Initiatives on the New Economy and International Opportunities Fund), the Fonds
québécois de recherche sur la société et la culture (Équipes and Regroupements stratégiques), the Canada Research
Chair on Globalization and Work, the Interuniversity Research Centre on Globalization and Work (CRIMT);
Ireland’s Labour Relations Commission, the Irish Research Council for the Humanities and Social Sciences, the
University of Limerick Research Office; Spain’s Ministries of Education and Science (Ref. SEJ2007-03096, Award
01/0010/2006) and Science and Innovation (Ref: ECO2009-10287) and Economy and Competitiveness (Ref: ECO2012-
32854), the Directorate-General for Scientific Investigation of the Madrid region (Award 06/0009/2000), the BBVA
Foundation (Ref. 216/06), the Autonomous University of Madrid/Banco Santander (Ref: CEAL-AL/2011-28), IESE
Business School; the UK’s Economic and Social Research Council (Awards RES-000-23-0305 and RES-062-23-2080);
and the European Commission’s International Research Staff Exchange Scheme (FP7 IRSES-GA-2008-230854 –
INTREPID). The international survey data set is available from the Economic and Social Data Service (http://
www.esds.ac.uk), deposit Ref: SN 7057 ‘Surveying Employment Practices of Multinationals in Comparative Context’.
Further details about the design, administration and results of the surveys employed can be found in the introduction
to a symposium from this cross-national survey, ‘Multinational companies in cross-national context’ by Tony
Edwards, Paul Marginson and Anthony Ferner (2013).
© 2015 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
British Journal of Management, Vol. 26, 146–162 (2015)
DOI: 10.1111/1467-8551.12090
Introduction
Multinational companies (MNCs) are commonly
argued to be moving towards network forms in
which subsidiaries take on key roles, sharing prac-
tices with the rest of the company (Birkinshaw,
1997; Birkinshaw, Hood and Jonsson, 1998; Frost
and Zhou, 2005; Govindarajan and Ramamurti,
2011; Nohria and Ghoshal, 1997; Veliyath and
Sambharya, 2011). Persistent national diversity in
the context in which organizations operate pre-
sents the opportunity for MNCs to capitalize on
local patterns of distinctive practices and spread
these internationally. As Cantwell and Zhang
(2009) put it, given that expertise ‘is in part
location-specific as well as firm-specific, the MNC
has come increasingly to draw upon a diversified
locational portfolio of capabilities’ (p. 46). There
is growing evidence that the competitive position
of MNCs can be enhanced through the effective
utilization of knowledge developed in different
parts of their worldwide operations rather than
adopting an ethnocentric attitude (e.g. Doz,
Santos and Williamson, 2001; Minbaeva, 2007).
Realizing the benefits of the diverse capabilities
and knowledge that reside within the firm,
however, is far from straightforward (Gupta and
Govindarajan, 2000; Whitley, 2009).
The diffusion of human resource (HR) prac-
tices is a key part of MNCs’ attempts to fully
exploit at the international level the diverse capa-
bilities and knowledge that they possess at sub-
sidiary level. HR activities such as training and
development are central to the development of
skilled and knowledgeable staff, for example,
while others such as communication and consul-
tation are key elements of management style (e.g.
Bjorkman and Lervik, 2007). Whilst strategically
important, HR practices are also strongly shaped
by firms’ context, arguably more so than practices
in other areas of management (Rosenzweig and
Nohria, 1994), giving them a degree of ‘stickiness’
(Jensen and Szulanski, 2004; Szulanski, 1996).
In this paper we explore the diffusion of HR
practices from the foreign operations of MNCs to
the rest of the firm. This has been termed reverse
diffusion (RD) in the sense that the direction of
diffusion is inverted from that which is the main
focus of research concerning MNCs. It has been
broken down into strict RD (Edwards, 1998)
whereby practices from subsidiaries are trans-
ferred to the domestic operations and horizontal
diffusion in which practices from subsidiaries are
diffused to other foreign operations (Boussebaa,
Sturdy and Morgan, 2014). For simplicity, we use
the term RD to capture both elements of this
phenomenon. The RD literature has almost
entirely employed the case study research method,
which has revealed much about how it occurs and
the importance of actors’ interests and power in
either initiating or blocking RD (see, for example,
Edwards and Tempel, 2010; Edwards et al., 2005).
This scholarship has also suggested that RD is
promoted by certain corporate characteristics,
such as an international growth strategy focused
on achieving synergies between worldwide opera-
tions and the presence of international manage-
ment structures (Edwards, 1998). However, there
are two main gaps in this literature. Theoretically,
the literature has generated only the most basic
understanding of how national context shapes the
position of MNC subsidiaries to initiate diffusion.
Empirically, there are rather few studies that dis-
tinguish between the various directions that
diffusions can take and, amongst those that do,
hardly any quantitative evidence concerning the
factors which promote or retard RD or draw on
data from multiple countries (Michailova and
Mustaffa, 2012).
This paper helps fill these gaps by examining
how the national context of the subsidiary creates
variation in the potential for subsidiaries to initi-
ate diffusion within MNCs through analysis of a
unique, representative, cross-country data set. We
consider the role of the national context alongside
other explanations for variation in the incidence
of RD and argue that the national, corporate and
functional contexts all matter, demonstrating the
benefits in adopting a multiple, rather than single,
factor explanation (Hansen and Lovas, 2004).
Specifically, actors at subsidiary level who initiate
diffusion are differentially placed according to
their national context, their place within corpo-
rate structures and the extent to which the HR
function is internationally networked.
The four countries that we study – Canada,
Ireland, Spain and the UK – have important fea-
tures that make them interesting contexts in which
to investigate RD. All have established property
rights and markets, prerequisites for a substantial
amount of foreign direct investment (FDI)
(Murtha and Lenway, 1994). Despite some
© 2015 British Academy of Management.
147
Diffusion from the Subsidiaries of Multinationals

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT