How subsidiaries leverage institutionally derived influence in headquarter strategy initiatives

Abstract

Research on headquarters–subsidiary relationships has shown how subsidiaries respond to local institutions, but less is known about how they leverage those same institutions to gain internal influence. Drawing on multiple case studies of three Nordic multinational enterprises (MNEs) and their longstanding subsidiaries in Japan, the United States, and Western Europe, we develop a model of how institutionally derived enablers of subsidiary influence facilitate subsidiary avoidance of and involvement in headquarter strategy initiatives. We uncover how subsidiaries mobilize different sets of rationales and tactics when wielding such influence. This study contributes to the literature on institutions in headquarters–subsidiary relationships by showing how subsidiaries actively interpret rather than passively relay information on local institutions and how local institutions foster longstanding subsidiary influence within the MNEs. Additionally, we broadly contribute to the subsidiary boundary-spanning literature by providing a more fine-grained understanding of the role of local institutions, as filtered through subsidiaries, in the implementation of headquarter strategies.