The Effect of Strategic Leadership Competences on Dynamic Capabilities and Firm Performance: An Empirical Evidence from MNCs’ Manufacturing Subsidiaries in Indonesia.

Abstract

Research on FDI mostly take the perspective of the headquarters of the multinational companies (Frost, Birkinshaw & Ensign, 2002), while this research will study from the perspective of their subsidiaries. Specifically, the purpose of this research is to investigate the effect of strategic leadership competences on dynamic capabilities (Teece, Pisano & Shuen, 1997) of MNC’s subsidiary, and thus, its performance, in the context of manufacturing activities in Indonesia.However, some scholars argue that strategic leadership is one of the key roles in searching for competitive advantage in strategic management (Ireland & Hitt, 2005), and in turn plays very important influence to firm performance (Ireland & Hitt, 2005; Hitt & Ireland, 2002; Barnett, Greve, & Park, 1994), specifically MNCs’ subsidiaries in this study (Bartlett & Ghoshal, 1986). This study examines the influence of subsidiary’s strategic leadership competences on subsidiary performance, being moderated by subsidiary’s external environment, mediated by its dynamic capabilities, and influenced by its parent MNC, which this research framework has not been thoroughly explored. This research has its context on MNCs’ subsidiaries in their manufacturing activities in Indonesia.With an empirical study of 115 MNCs’ manufacturing subsidiaries in Indonesia, this study finds that subsidiary’s strategic leadership competences, moderated by the influence of external environment, while its parent MNC has a role as antecedent on dynamic capabilities, significantly do positive effect on its dynamic capabilities, and in turn influence subsidiary performance.