Subsidiary performance in multinational corporations: the importance of technology embeddedness

Subsidiaries have access to different types of resources and therefore perform differently in their market-place and within a multinational corporation (MNC). Yet, even though subsidiaries are the object of intense interest, remarkably little has been written about the assessment of subsidiary performance. In short, the strategic opportunities of subsidiaries seem to generate more attention in the literature than their results. The two distinctive features of this paper are the development of the concept of subsidiary performance and the exploration of the linkage between subsidiary business context and performance. More specifically, by drawing on the literature about organizational learning, absorptive capacity and embeddedness in business relationships, some hypotheses will be formulated about the causal link between subsidiary environment and subsidiary performance. These hypotheses are then tested in a LISREL model based on data concerning 98 subsidiaries belonging to Swedish MNCs. Our empirical results indicate that technology embeddedness has a positive, direct, impact on subsidiary market performance, and a positive, but indirect, impact on subsidiary organizational performance.