Abstract
The paper explores the link between subsidiary evolution and public policy towards multinational enterprises (MNEs). The cases of two peripheral EU economies (Portugal and Ireland) are contrasted, both in terms of their “inward investment” policy stances and as regards differential evolutionary processes at subsidiary level unveiled by empirical results from a new survey of subsidiaries operating in those two host countries. After examining issues such as motivations underlying investment, subsidiaries roles/strategies and evolution (addressing distinct paths in subsidiary transition), the paper discusses the potential contribution of subsidiaries to host country development and what constitutes an appropriate policy towards multinationals. Explicit consideration is given to subsidiaries’ value-added scope and the density and quality of local linkages as key determinants of host country impact.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Amin, A. and Thrift, N., (eds), Globalisation, Institutions, and Regional Development in Europe. Oxford University Press: Oxford, 1994.
Andersson, U., Subsidiary network embeddedness, Published thesis No. 66, Department of Business Studies, Uppsala University, 1997.
Barry, F. and Bradley, J., “FDI and trade: The Irish host country experience,” The Economic Journal, vol. 107 (November), pp. 1798–1811, 1997.
Barry, F., Bradley, J., and O'Malley, E., “Indigenous and foreign industry: Characteristics and performance.” In Barry, F. (ed.), Understanding Irish Economic Growth, Macmillan: Basingstoke, 1999.
Bartlett, C. and Ghoshal, S., Managing Across Borders: The Transnational Solution. Harvard Business School Press: Boston (MA), 1989.
Birkinshaw, J., “Entrepreneurship in multinational corporations: The characteristics of subsidiary initiatives,” Strategic Management Journal, vol. 18no. 3, pp. 207–229, 1997.
Birkinshaw, J. and Hood, N., “Multinational subsidiary evolution: Capability and charter change in foreign-owned subsidiary companies,” Academy of Management Review, vol. 23no. 4, pp. 773–795, 1998.
Blömstrom, M., Kokko, A., and Zejan, M., “Host-country competition, labour skills, and technology transfer by multinationals,” Weltwirtschaftliches Archiv, pp. 520–533, 1995.
Buckley, P.J. and Castro, F., “A time-series analysis of the locational determinants of FDI in Portugal,” Paper presented at the AIB Conference, Vienna (October), 1998.
Cantwell, J.A. “The reorganisation of European industries after integration: Selected evidence on the role of multinational enterprise.” In Dunning, J.H. and Robson, P. (eds), op. cit., 1987.
Cohen, W.M. and Levinthal, D.A., “Absorptive capacity: A new perspective on learning and innovation,” Administrative Science Quarterly, vol. 35 (March), pp. 128–152, 1990.
Cowling, K. and Sugden, R. “Industrial strategy: A missing link in british economic policy,” Oxford Review of Economic Policy, vol. 9no. 3, pp. 83–100, 1993.
Crookell, H., “Specialisation and international competitiveness.” In Étemad, H. and Louise Séguin-Dulude (eds), Managing the Multinational Subsidiary: Response to Environmental Changes and to the Host Nation R & D Policies, Croom Helm: London, 1986.
Crookell, H. and Caliendo, J., “International competitiveness and the structure of secondary industry in Canada,” Business Quarterly, vol. 45no. 3, pp. 58–64, 1980.
Dunning, J.H., “Trade, location of economic activity and the multinational enterprise: A search for an eclectic approach.” In Ohlin, B., Hesselborn, P.O., and Wjkman, P.M. (eds), The International Allocation of Economic Activity, Macmillan: London, pp. 395–418, 1977.
Egelhoff, W.G., Gorman, L., and McCormick, S., “Using technology as a path for subsidiary development.” In Birkinshaw, J. and Hood, N. (eds), Multinational—Corporate—Evolution and Subsidiary Development, Macmillan: Basingstoke, 1998.
Forsgren, M. and Johanson, J., Managing Networks in International Business. Gordon and Breach: Philadelphia, 1992.
Ghoshal, S. and Bartlett, C., “The Multinational corporation as an Interorganisational network,” Academy of Management Review, vol. 15no. 4, pp. 603–625, 1990.
Görg, H. and Ruane, F., “Linkages between multinationals and indigenous firms: Evidence for the electronics sector in Ireland,” Trinity Economic Papers Series, Technical Paper No. 98/13, 1998.
Granovetter, M., “Economic action and social structure: The problem of embeddedness,” American Journal of Sociology, vol. 93no. 3, pp. 481–510, 1985.
Goncçalves, O. and Guimarães, P., “O Investimento Directo Estrangeiro na Indústria Transformadora Portuguesa: Uma Abordagem Sectorial e Regional Através do Emprego para o Período 1982–1992,” Documento, APDR, No. 5 (Outubro), 1996.
Hedlund, G., “The hypermodern MNC: A heterarchy?,” Human Resource Management, vol. 25no. 1, pp. 9–35, 1986.
Hood, N. and Young, S., “Inward investment and the EC: UK evidence on corporate integration strategies.” In Dunning, J.H. and Robson, P. (eds), op. cit., 1988.
Hood, N., Taggart, J., and Young, S., “German manufacturing investent in the UK: Survey results and economic impact.” In Barrell, R. and Pain, N., (eds), Innovation, Investment and the Diffusion of Technology in Europe: German Investment and Economic Growth in Postwar Europe, Cambridge University Press: Cambridge, 1999.
McAleese, D. and McDonald, D., “Employment growth and the development of linkages in foreign-owned and domestic manufacturing enterprises,” Oxford Bulletin of Economics and Statistics, vol. 40no. 4, pp. 321–339, 1978.
Molle, W. and Morsink, R., “Intra-European direct investment.” In Burgenmeier, B. and Mucchielli, J.-L., (eds), Multinationals and Europe 1992: Strategies for the Future, Routledge: London, 1991.
Myrdal, G., Economic Theory and Under-Developed Regions. Duckworth: London, 1957.
North, D., Institutions, Institutional Change and Economic Performance. Cambridge University Press: Cambridge, 1990.
O'Farrell, P.N. and O'Loughlin, B., “New industry input linkages in Ireland: An econometric analysis,” Environment and Planning A., vol. 13no. 3, pp. 285–308, 1981.
O'Gráda, C. and O'Rourke, K., “Economic growth: Performance and explanations.” In O'Hagan, J.W. (ed.), The Economy of Ireland: Policy and Performance of a Small European Country, Macmillan: Basingstoke, 1995.
Pearce, R.D., “The evolution of technology in multinational enterprises: the role of creative subsidiaries,” International Business Review, vol. 8, pp. 125–148, 1999.
Pearce, R.D., “Multinationals and industrialisation: the bases of ‘Inward Investment’ policy,” Forthcoming, International Journal of the Economics of Business, 2001.
Pearce, R.D. and Papanastassiou, M., “European markets and the strategic roles of multinational enterprise subsidiaries in the UK,” Journal of Common Market Studies, vol. 35no. 2, pp. 241–266, 1997.
Pearce, R.D. and Tavares, A.T., “Strategies of multinational subsidiaries in a context of regional trading blocs,” University of Reading Discussion Papers in International Investment and Management, XI, Series B, No. 257, 1998.
Penrose, E., The Theory of the Growth of the Firm. Basil Blackwell: Oxford, 1959.
Porter, M., “Competition in global industries: A conceptual framework.” In Porter, M. (ed.), Competition in Global Industries, Harvard Business School Press: Boston, 1986.
Simões, V.C., “European integration and the pattern of FDI inflow in Portugal.” In Cantwell, J.A. (ed.), Multinational Investment in Modern Europe, Edward Elgar: Aldershot, pp. 256–297, 1992.
Storper, M., The Regional World: Territorial Development in a Global Economy. The Guildford Press: New York, 1997.
Taggart, J.H., “Multinational manufacturing subsidiaries in Scotland: Strategic role and economic impact,” International Business Review, vol. 5, pp. 447–468, 1996.
Tavares, A.T., Systems, Evolution and Integration: Modelling the Impact of Economic Integration on Multinationals' Strategies, Unpublished Ph.D. Thesis, Department of Economics, University of Reading, 2001.
Tavares, A.T. and Pearce, R.D., “Regional economic integration and the strategic (Re)positioning of multinationals' subsidiaries: A conceptual investigation,” University of Reading Discussion Papers in International Investment and Management, XI, Series B, No. 254, 1998.
Tavares, A.T. and Pearce, R.D., “The industrial policy implications of the heterogeneity of subsidiaries' roles in a multinational network,” Industrial Development Policy Discussion Paper No. 5, Birmingham, Ferrara and Milwaukee: L'Institute, 1999.
Tavares, A.T. and Pearce, R.D., “European integration and structural change in the multinational: Evidence from foreign subsidiaries operating in Portugal.” In Hughes, M. and Taggart, J. (eds), International Business: European Dimensions, Palgrave: London, 2001.
White, R. and Poynter, T., “Strategies for foreign-owned subsidiaries in Canada,” Business Quarterly, vol. 48no. 4, pp. 59–69, 1984.
Young, S. and Hood, N., “Designing developmental after-care programmes for inward investors in the European community,” Transnational Corporations, vol. 3no. 2, pp. 45–72, 1994.
Young, S., Hood, N., and Dunlop, S., “Global strategies, multinational subsidiary roles and economic impact in Scotland,” Regional Studies, vol. 22no. 6, pp. 487–497, 1988.
Young, S., Hood, N., and Peters, E., “Multinational enterprises and regional economic development,” Regional Studies, vol. 28no. 7, pp. 657–677, 1994.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Tavares, A.T. Multinational Subsidiary Evolution and Public Policy: Two Tales from the European Periphery. Journal of Industry, Competition and Trade 2, 195–213 (2002). https://doi.org/10.1023/A:1021586124011
Issue Date:
DOI: https://doi.org/10.1023/A:1021586124011