Corporate Entrepreneurship
in
Subsidiary Management
Søren Heinrichs
Student-No.: sh83179
Examination-No.: 992935
Study Course: MSc in International Business
Supervisor: Toke Bjerregaard
Aarhus School of Business
Abstract
The topic of Corporate Entrepreneurship (CE) in subsidiary management is of
contemporary importance due to its possibilities to gain sustainable competitive advantage by
better exploiting capabilities inherent in each subsidiary. Yet as the subsidiary is concerned
subsidiary role must not be neglected. As subsidiary role is defined by international strategy,
subsidiary capabilities and its environment understanding how these contexts are related to
subsidiary initiative is of utmost relevance in order to gain deeper knowledge concerning CE
in subsidiary management. Though knowing the influence of subsidiary role on subsidiary
initiative does not enhance per se CE in subsidiary management as major facilitators can be
found in the internal environment of the MNC. As this major area within CE is not fully
understood yet this thesis aims at enhancing academic understanding of this phenomenon. The
research questions will be addressed by reviewing literature systematically. The first main
section explores the influence of international strategy, subsidiary capabilities and external
environment on CE. The second main section analyzes how structure, communication,
environmental scanning, organizational support, rewards, control, staffing, allocation of
resources, training, culture and values determine CE. Concerning the relationship between
subsidiary role and subsidiary initiative it is shown that different kinds of subsidiary initiative
require different kinds of strategy, capabilities and environmental conditions. In this way the
relevance of subsidiary capability development for CE is confirmed. Furthermore by the
means of subsidiary role MNCs are able to differentiate between different configurations of
subsidiary initiative. In terms of a CE supportive internal environment environmental
scanning, organizational support, allocation of resources and values are identified as generally
supportive for CE. Interestingly concerning structure, communication, rewards, control,
staffing, training and structure a contingency approach is useful. Yet more research is required
in this area. In this way this thesis can be considered as a good starting point for further
investigation in this area. Hence this thesis analyzes the issue of CE in subsidiary
management by assessing first the impact of subsidiary role on subsidiary initiative. Secondly
it is analyzed how contextual and other influences must be incorporated into a CE supportive
environment. In this way valuable insights are gained how CE is related towards subsidiary
management.
Corporate Entrepreneurship in Subsidiary Management
Section Page
Abstract
Outline
1 Introduction 1
1.1. Background 1
1.1.1 Internationalization and Innovativeness 1
1.1.2 Decentralization in MNCs 2
1.2 Corporate Entrepreneurship 2
1.2.1 Relevance of CE 2
1.2.2 Definition 4
1.2.3 Potential Pitfalls 7
1.3 Problem Statement and Research Questions 9
1.4 Research Approach 11
2 RQ1: “How is subsidiary initiative influenced by subsidiary role?” 13
2.1 Theoretical approach 13
2.2 Subsidiary roles and international strategy 15
2.2.1 Mission Strategy 19
2.2.2 Strategy making 20
2.3 External Environment 21
2.3.1 Local Competition 21
2.3.2 Industry growth and industry life cycle 22
2.3.3 Technology 23
2.3.4 Dynamism 23
2.3.5 Hostility 24
2.4 Capabilities and Resources 26
2.5 Findings 30
3 RQ2: “What determines an environment favorable for CE?” 34
3.1 Theoretical approach 34
3.2 Structure 36
3.3 Communication 41
3.4 Environmental Scanning 43
3.5 Organizational Support 43
3.6 Rewards 45
3.7 Control 47
3.8 Staffing 49
3.9 Allocation of resources 50
3.10 Training 50
3.11 Culture 53
3.12 Values 55
3.13 Findings 56
4 Discussion 61
5 Limitations 64
6 Future Research 65
7 Conclusion 68
References
Appendix
1
1. Introduction
1.1 Background
1.1.1 Internationalization and Innovativeness
MNCs all over the world experience fundamental shifts in their economic environment.
Increasing trade liberalization led to increased foreign investments and the possibility to grow
rapidly abroad from the MNC's domestic territory. Supported by the rapid evolution of information
technologies many corporations are now geographically dispersed as it was hardly believable in the
last century. In the same time global competition got so tough, that responding to the needs of local
customers is not enough anymore. Global efficiency often appears to be the only key in order to
survive for the MNC without merging or getting acquired by another MNC (Prahalad & Oosterveld
1999). This is usually achieved by centralizing business activities in order to achieve economies of
scale (Birkinshaw 1995).
Following Duane Ireland et al. (2006a) increasing size and centralization often leads to
increased bureaucracy in order to provide a structure which allows the MNC to fulfill all their
current tasks. Although this process appears to be logical it is still an impediment to innovation.
Edralin (2010) states as well that MNC's increasing “size, bureaucracy, complex processes,
centralized control, procedural focus, resource consciousness, and hierarchy, have gradually
diminished their innovative, flexible, speedy, and risk taking efforts (p. 25)”. So one can state the
creative potential of most MNCs diminishes due to the increasing global competition. But
innovation can be seen as a source of competitive advantage (Kuratko 2009). Due to the increasing
globalization of the economy and the development in technology classical competitive advantages
are harder to sustain than ever before. The competitive landscape has changed and can be described
nowadays as hard to predict, ambiguous, discontinuous and increasingly risky (Kuratko 2009).
However the aim of gaining sustainable competitive advantage remains the same and innovation
appears to be the solution. This is especially the case as the years of downsizing and cost cutting are
gone (Garvin & Levesque 2006). MNCs are as lean as they can be and therefore these measures
cannot provide competitive advantage any more. Therefore companies are asked to innovate
constantly and to serve customers with great products in this way in order to sustain competitive
advantage.
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1.1.2 Decentralization in MNCs
Confirming the ambiguity in today’s competition one can observe opposing trends at the
same time. Contrary to centralization and global efficiency issues one can observe trends “such as
the empowerment movement, delayering, re-engineering and network organizations are all shifting
power away from the centre and towards front-line employees.” (Birkinshaw 1998). However this
does not mean that MNCs are using this development in order to leverage the decentralized
knowledge for fostering innovation.
It seems as if many MNCs are still not aware about the creative potential of their
subsidiaries (Birkinshaw 1997). But as to Bartlett and Ghoshal (1989) leveraging the innovation
potential is from a strategic point of view of utmost importance in order to maintain market
positions and competitive advantages. Therefore “well-established and mature companies need to
experiment with new ways of organizing and organizational structures that are known to enable
innovation to take place, e.g. networks, loosely coupled organizations, and project organizations, as
a supplement to the classic hierarchy” (Christensen 2005, p. 306).
1.2 Corporate Entrepreneurship
1.2.1 Relevance of Corporate Entrepreneurship
Corporate Entrepreneurship (CE) appears to be one solution for solving MNCs' dilemma of
managing huge corporations without eliminating their potential for innovation. Thornberry (2003)
states CE “can be a powerful antidote to large company staleness, lack of innovation, stagnated
top-line growth, and the inertia (p. 330)”. McFadzean et al. (2005) consider CE as a means of
renewal and change for the MNC enabling a shift from bureaucracy to innovation. Birkinshaw
(1995) states CE is one way to mitigate risk of not efficiently leveraging local markets at subsidiary
level. Although CE can take different forms which are going to be explained further in the next
section it is evident that financial performance is of MNCs is positively affected by CE. This turns
out to be especially true for the long-term performance (e.g. Zahra and Covin 1995, Stopford and
Baden-Fuller 1994, Zahra 1991).
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From a network point of view this can be explained as financial performance is not only
improved due to the creation of new ventures and modifications of the organization's structure, but
especially as to the extended creation of firm-specific advantages. Birkinshaw et al. (1998) are
describing subsidiaries with contributions to the MNC exceeding by far their own immediate
market. Thus these authors document the importance of competence-creation abroad of the mother
company. This is especially important as foreign markets may require different competencies than
those of the domestic market (Zahra & Garvis 2000).
As to Bartlett & Ghoshal (1989) and Ghoshal and Bartlett (1990) subsidiaries are not simple
subordinate elements of their parent company, but can be regarded as autonomous and differentiated
entities having multiple linkages with other parts of the MNC and organizations outside of the
MNC's boundaries. Viewing the subsidiary as an own entity one can quickly conclude that there is
both creative potential within the parent company and the subsidiary. Following a knowledge-based
logic literature reveals (Schotter & Bontis 2009) that knowledge is not only transmitted in top-down
manner, but also bottom-down and laterally. This is especially important as there is a virtuous circle
between knowledge creation and CE. Zahra et al. (1999) state CE can contribute to the creation of
new knowledge whereas e. g. Hayton (2005) considers knowledge as a prerequisite for CE. This is
particularly the case as knowledge is beneficial for opportunity recognition and hence CE.
This is coherent with the findings of Birkinshaw et al. (1998) reporting that the development
of firm-specific advantages can also be driven by subsidiaries through their own initiative as it is the
case with e. g. centers of excellence. Manolopoulos (2006) confirms that “some subsidiaries
possess distinctive capabilities and demonstrate unique abilities, that is, they manifest a unique
source of competitivenessv (p. 47)”. This argument can be even extended using the reasoning of
Schindehutte et al. (2008) stating that subsidiaries can contribute or even lead a market-driving
behavior. Roth & Morrison (1992) are showing as well the case of subsidiaries with global
mandates for developing and producing certain product lines. Cantwell & Mudambi (2005) extend
this argument by following a Marchian (1991) reasoning arguing that development of competence-
creating subsidiaries, in comparison with competence-exploiting subsidiaries, creates diversity
within the MNC which is on its own beneficial for the creation of competences. In this way another
virtuous circle is shown with competence-creating subsidiaries enabling other subsidiaries to
develop in the same way.
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Another interesting aspect of CE is that this concept is especially revitalizing for troubled
firms. Due to their special situation these firms tend to be more innovative, risk-taking and
proactive (Naman & Slevin 1993). Therefore these organizations have an entrepreneurial
orientation as further described in the following section. In this way Stopford & Baden-Fuller
(1994) state these companies can “shed past behaviors, adopt policies fostering entrepreneurship
and accumulate innovative resource bundles (p. 521)”. Therefore this thesis agrees with Duane
Ireland et al. (2009) stating that “conditions in the global business environment demand that
established firms adopt entrepreneurial strategies (e.g., McGrath & MacMillan, 2000; Morris,
Kuratko, & Covin, 2008) as a path to success (p. 19)”.
1.2.2 Definition
Reviewing the CE literature one can quickly observe the ambiguity within the definitions of
the CE concept. Especially striking is the partially interchangeability of CE with related concepts
such as e. g. intrapreneurship or corporate venturing: For Example Mc Fadzean et al. (2005)
emphasize the interchangeability whereas Åmo & Kolvereid (2005) make clear distinctions
between the different concepts. The aim of the current section is to provide a clear definition of CE
and show as well its boundaries to related concepts. Based on this definition the problem statement
and related research questions are going be elaborated.
Starting from a rather broad point of view researchers claim that both CE and
intrapreneurship topics are concerned with entrepreneurship within existing organizations (Antoncic
2007, Antoncic & Zorn). Following Åmo & Kolvereid (2005) and Pinchot & Pellmann (1999) one
can also state that both concepts are related towards an incremental innovation process based in the
ideas and the knowledge of the employees of an organization. The aim is to incorporate skills and
mindset shown by start-up entrepreneurs into existing organizations (Thornberry 2003) in order “to
develop the way they operate their business (p. 120)” (Brunåker & Kurvinen 2006). The reason
why start-up entrepreneurs are taken as an example lies in their ability to recognize market gaps in
advance and to fill out these gaps with novel products or services. This behavior turns out to be also
beneficial for existing organizations (e. g. Zahra 1991). As to Stopford & Baden-Fuller (1994)
pursuing internal entrepreneurial activities ”require changes in the pattern of resource deployment
and the creation of new capabilities to add new possibilities for positioning in markets (p. 522)”. A
further commonality between both concepts consists in the fact that ideas have to be realized.
5
Neither intrapreneurship nor corporate entrepreneurship is about dreaming, but about realizing
visions.
Although closely related both concepts are slightly different regarding the origin of
innovation activities. Åmo & Kolvereid (2005) point out that CE activities are rooted in requests of
the organization and coincide with corporate strategy. In contrast intrapreneurship activities
represent rather autonomous activities of the individual itself (See Appendix – Figure 1). Campbell
(2000) elaborates the necessity of a corporate entrepreneurship strategy in order to benefit from
intrapreneurial personalities. Vice versa, such kind of strategy is rather inefficient without
intrapreneurs in the organization (Åmo & Kolvereid 2005). This kind of separation is also coherent
with Zahra’s (1991) separation between formal and informal corporate entrepreneuship activities
with informal activities representing autonomously performed activities having their origin in
“individual creativity or pursuit of self-interest (p. 261)”.
Birkinshaw (1997) separates intrapreneurship from CE in a different way. As to his analysis
intrapreneurship, or dispersed CE, represents an approach underlying the assumption that “all
individuals in the company have the capacity for both managerial and entrepreneurial acts (p.
121)” (Brunåker & Kurvinen 2006). This view is contrasted by the so-called focused corporate
entrepreneurship, or corporate venturing, approach where innovation initiatives are placed centrally
a new division. Although both Åmo & Kolvereid’s (2005) and Birkinshaw’s (2000) categorizations
underlie different criteria it is obvious that intrapreneurship is an integrative part of the corporate
entrepreneurship literature but not necessarily vice versa.
This hierarchy between CE on the one hand and intrapreneurship on the other hand is also
supported by Thornberry’s (2003) classification of CE. He identifies four different categories:
Corporate Venturing, Organizational Transformation, Intrapreneuring and Industry Rule Bending.
These categories are consistent with Veenker et al.’s (2008) findings and can be considered as an
extension of Stopford & Baden-Fullers’ (1994) categories. Corporate Venturing is the process
leading to new ventures related to the organization’s core business. Stopford & Baden-Fuller (1994)
include intrapreneurship in this category whereas Thornberry (2003) uses an extra category. The
underlying reason is the current insight that intrapreneuring is a bottom-up process as shown e. g.
by Åmo & Kolvereid (2005). As a consequence ventures having their origin in intrapreneurial
activities are not necessarily related to core-business activities (Antoncic & Hisrich 2003).
Furthermore Intrapreneurship is not only related to the creation of new ventures, but also to
innovation in processes (Antoncic & Hisrich 2003). In this way it is logical to use intrapreneuring
6
as an extra category within CE. Thornberry’s (2003) third category is organizational transformation
which is related to the improvement of organizational efficiency. Key ideas of the MNC are
reviewed involving rethinking of business concepts, reorganization, strategic repositioning (Hisrich
2001). Industry Rule Bending relates to the rather Schumpeterian (1911) approach of real
innovations which completely change the rules in competition. Hence intrapreneurship can be
considered as an integrative part of the research area on CE.
CE activities can also be classified as to their direction. Current research reveals that
corporate entrepreneurship can be either internally directed or externally orriented. Zahra (1991)
states “external efforts entail mergers, joint ventures or acquisition (p. 261)” whereas internal
measures cover activities such as R&D or intrapreneuring programs. However the expected
outcomes remain the same: new ventures, new products, new services, improved processes,
improved organization, new strategies, etc. (Antoncic & Zorn 2004).
From a behavioral point of view MNCs achieving regularly these outcomes can be described
as having a high entrepreneurial orientation (EO) (Covin & Slevin 1991). EO describes the firm
behavior and involves the dimensions of risk-taking, innovativeness and proactivness. Being
entrepreneurial is always risky as implementing innovation bears always the risk of failure
(Thornberry 2003). However the potential benefits of innovation (as described under 1.2.1)
outweigh these risks and therefore MNCs are expected to take risks. This does not mean, that
MNCs shall allow subsidiaries to hit on every possible opportunity, but that calculated risk-taking is
integrative part of the behavior of successful entrepreneurial firms (Zahra et al. 2001).
Innovativeness can be described as creating and implementing new products, systems and
organizational forms. Proactiveness refers as MNCs’ willingness to implement internally change, to
pursue opportunities and to compete aggressively in the market (Covin & Slevin 1991).
Furthermore proactive subsidiaries can be seen e. g. as first movers in either the internal or external
market. Additionally Schindehutte et al. (2008) consider all organizations as having an EO although
developed to a different degree. There may be differences as to the industry, but as well within one
industry.
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In summary CE can be defined as the MNC’s risky, innovative and pro-active attempts to
continuously redefine both the organization and the market through innovation by the means of
seizing opportunities. By seizing opportunities resources and capabilities are deployed in a new way
leading in the case of success to superior market positions in comparison to the competitors. As this
competitive advantage is limited temporally the continuous aspect of CE is of high relevance in
order to create a sustainable competitive advantage. In contrast to intrapreneurship CE activities
entail a clear focus on responding to corporate strategy. Yet CE covers as well intrapreneurship
literature. Thus strategy must not be neglected when talking about CE.
1.2.3 Potential Pitfalls
Yet when talking about CE and its beneficial contribution for e. g. financial performance
(see section 1.2.1) one has to be aware that CE may as well entail certain drawbacks. Organizational
complexity grew rapidly in the past two (Vachani 1999) decades due to “technology, aging and
diversity of the workforce, information, change, environmental dynamics, globalization and more”
(Molina & Calahan 2009, p. 388). MNCs responded to this challenge by increasing coordination
and control diminishing in this way the innovative potential of the organization (Thornberry 2003).
CE however is directed towards the opposite as excessive control reduces MNCs’ innovation
capabilities (Zahra 1991). Therefore one has to be aware that CE creates an organizational setting
which is even harder to coordinate. Business day life gets more difficult to predict as subsidiary
initiatives are expected.
Several dangers can be identified. Birkinshaw and Ridderstråle (1996) mention especially
the Corporate Immune System. The Corporate Immune System describes organizational resistance
towards new or unproven activities. Not all initiatives can be expected to be fruitful; therefore
certain initiatives have to be rejected in order to reduce the uncertainty and vulnerability inherent in
the exploratory nature of CE. However MNCs tend to avoid risk reducing the probability of
innovations to occur. Therefore one big issue is to balance the maintenance of the old and the
creation of the new (Garvin & Levesque 2006). Current operations are predictable and yield very
probably. New ones may bring one day greater benefits but the probability is unsecure especially as
it lacks often hard data: MNCs are facing questions like “Does the potential new product really
work?”, “Is there really a market and will the product be in the market at the right time?” and “How
much does the production really cost?”. Therefore in times of austerity new ventures often
experience financial cuts. From a cultural point of view corporate venturing may also cause
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problems. Due to their size and location often at the periphery of the MNC new ventures may have
a different business model and a different culture. The more the new venture develops the more
problems may occur as “Emerging businesses seldom mesh smoothly with well-established systems,
processes, and cultures (p. 102)” (Garvin & Levesque 2006).
Furthermore one has to be aware that the character of the MNC will change automatically
once the organizational environment is designed more entrepreneurially. Routines and traditions
will be amended, personnel turnover increases with some people leaving being unsatisfied with the
individual challenges occurring in such an environment (Kuratko et al. 2001). Thornberry (2003)
extends this reasoning by highlighting that due to downsizing trends in the industry employees have
few time left for pursuing opportunities and own ideas. In other cases downturns in productivity
have been reported once a CE program is established.
Additionally Birkinshaw (1998) highlights it is possible for MNCs to have too much CE.
Extensive CE may lead to empire building of subsidiary management and a lack of focus within CE
activities. CE may become too extensive in a way that pursuing ideas is not anymore beneficial for
the MNC as a whole, but serves the corporate entrepreneur for building up his own little empire. In
these cases collaboration within the MNC becomes difficult endangering the realization of the
MNC’s goals. By ‘lack of focus’ it is understood that too many ideas are pursuit without having a
joint goal. Major dangers lie in financial shortages due to the realization of many entrepreneurial
ideas and incoherent product lines.
Secondary Birkinshaw (1998) reveals additional costs occurring by the use of CE. First
administrating an internal market may contain additional costs, e. g. by “defining the conditions und
which sourcing relationships can be challenged and setting rules for transfer prices” (Birkinshaw
1998, p. 362). Similarly internal unemployment may cause as well problems (Birkinshaw 1998). If
one subsidiary manages to produce certain goods in a better or less costly way this may result in
unemployment in the original production place. As lay-offs are not always possible due to legal
restrictions and not necessarily beneficial due to the loss of knowledge coping with this internal
unemployment may as well be costly.
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1.3 Problem Statement and Research Questions
As shown under 1.2.1 CE is a very relevant concept for MNCs’ subsidiary management.
Kuratko (2009) states “the entrepreneurial spirit must be integrated into the mission, goals,
strategies and structure and values (p. 422)” in order to be sustainable. Similarly Åmo & Kolvereid
(2005) note the necessity of CE to respond to strategy. Consequently we can state that international
strategy plays an important role for CE in subsidiary management. As the topic is related towards
subsidiary management considering solely international strategy as determining the subsidiary’s
position within the MNC would be misleading. The main reason for this assumption can be found in
the network perspective covered by this thesis (as explained under section 2.1). Therefore this thesis
agrees with Hoffman (1994) stating that subsidiary strategies or subsidiary roles are as well
influenced by the subsidiaries environment and its capabilities and resources. As the expected
outcome of CE in subsidiary management is subsidiary initiative (e. g. Birkinshaw 1999, 1998,
1997) and the subsidiary is influenced by international strategy, the environment and its capabilities
and resources it is expected that these factors to have as well an influence on subsidiary initiative.
Consequently the first research question of this master thesis is
RQ1: “How is subsidiary initiative influenced by subsidiary role?”
Given the influence of MNC strategy, environment and subsidiary capabilities and resources
(Hoffmann 1994) on subsidiary roles and hence subsidiary initiative the underlying rationale for
this RQ can be identified in the dependence of the subsidiary on external factors such as the MNC
strategy and its environment. Consequently one could assume that subsidiary initiative cannot fully
be self-determined. Therefore understanding the influence of the above-mentioned factors on
subsidiary initiative is a must. Although several researchers, such as e. g. Birkinshaw & Hood
(1998) or Birkinshaw et al. (1998) worked on determinants of subsidiary initiative this thesis
proposes new insights due to the explicit strategic focus on subsidiary role. In this way our
understanding of the CE phenomenon is sharpened. As subsidiary initiative is analyzed majorly
from a network perspective both influences of the HQ and the subsidiary are revealed. Hence,
further insights are gained concerning the “understanding of Headquarter-Subsidiary relationship”
which is “an ongoing and central academic task for international business scholars” (Johnston &
Menguc 2007, p. 787).
From a practical point of view this research question is extremely relevant as further
knowledge on designing viable CE strategies is developed. This is extremely relevant as Kuratko
10
(2009) emphasizes the need for CE to become a corporate strategy in order to become a sustainable
competitive advantage. Furthermore Haugland (2009) states that MNCs need to pay more attention
to the management of their subsidiaries because of increasing globalization in the industries.
Therefore analyzing the impact of subsidiary role on subsidiary initiative is of utmost importance
for supporting subsidiary initiative and securing thus the competitiveness of the whole MNC.
Furthermore the aforementioned problem of lack of focus within CE activities is addressed.
MNCs which understand the influence of subsidiary role on subsidiary initiatives have the
possibility to align their entrepreneurial efforts according to subsidiary roles and related issues such
as international strategy. In this way the danger of pursuing too many entrepreneurial ideas is
reduced. Furthermore these ideas are aligned with major issues such as international strategy
ensuring the focus of entrepreneurial efforts.
The next step within this thesis shall be the analysis of internal environmental factors
enhancing entrepreneurial efforts within corporate subsidiaries. Kuratko (2009) emphasizes that
integrating CE into corporate strategy is not sufficient as mission, goals, structures and values play
as well an important role. The latter plays an important role in the literature regarding internal
environments supporting CE (e. g. Zahra 1991). However a brief review on factors of the internal
environment influencing CE revealed partially contradictory results. In major areas, such as e. g. CE
supportive structures, authors like Veenker et al. (2008) and Birkinshaw (1999) posit decentralized
structures would have a positive influence on CE whereas Zahra (1991) and Hornsby et al. (1993)
argue for integrative structure. Therefore more detailed research on the internal environment and its
influence on subsidiary initiative is necessary.
RQ2: “What determines an internal environment favorable for CE?”
The underlying relevance of this RQ for CE in subsidiary management can be found in the
direct influence of the MNC on the internal environment and its immediate relevance for CE (e. g.
Antoncic 2007, Antoncic & Hisrich 2001). In this way assessing the internal environment is a
central issue within the research area of CE. As reasoned in the problem statement it appears this
influence is not fully understood yet. Consequently Christensen (2005) highlights the relevance of
this issue
“Clearly, there is a need for further research into factors that enable and encourage
intrapreneurship […]. Studies related to the enablers are important (p. 320)”.
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Hence this thesis will contribute to the academic understanding of CE. Furthermore
literature lacks a current review on research on internal environmental determinants for CE. In this
way other researchers may as well benefit from this thesis. Thus tackling the influence of the
internal environment on CE is highly relevant.
From a practical point of view this research question is especially relevant as “organizations
need guidelines to direct or redirect resources towards establishing effective intrapreneuring
strategies” (Hornsby et al. 1993, p. 29). This is especially the case for subsidiary management as
major determinants of the subsidiary role can hardly be influenced by the MNC. Influencing
seriously the environment to become more supportive towards CE appears at least time-consuming
if at all possible. Adapting the international strategy towards the subsidiary requirement is not
always possible as the needs of the MNC are partially opposed to those of the subsidiary. Therefore
MNCs willing to influence CE within their subsidiaries have only one possibility which is
supporting their subsidiaries in developing and using their capabilities. Thus the internal
environment is extremely relevant for practitioners willing to foster subsidiary initiative.
Additionally the aforementioned problem of subsidiary managers building their own empire
is addressed. With the knowledge gained in this section readers shall be able to understand how to
give subsidiary managers sufficiently freedom to develop and implement locally ideas without
fragmentizing the MNC as a whole. Last but not least insights can be gained how a corporate
immune system towards CE can look like.
1.4 Research Approach
The research questions will be addressed in a purely theoretical way. Addressing the
problem in an empirical way turned out to be hardly possible as time is constrained for this master
thesis. Furthermore access is a critical point for research on MNCs. For a quantitative study access
to various MNCs or subsidiaries must be granted. Getting sufficiently access is doubtful for
students. Similarly a qualitative approach may be appropriate with sufficient contact to MNC or
subsidiary leaders. However within research preparation getting this access turned out impossible.
Thus this thesis tackles the problems in a theoretical way.
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The literature is mainly identified via the Electronic Library Information Navigator (ELIN)
of the Aarhus School of Business (ASB)/ Aarhus University. With the help of ELIN access is
granted to the majority of scientific journals, e. g. Strategic Management Journal, Entrepreneurship
Theory and Practice, Journal of Business Venturing in the case of this thesis. By using key words
such as ‘corporate entrepreneurship’, ‘international entrepreneurship’, ‘strategic entrepreneurship’,
‘intrapreneurship’, ‘subsidiary’ and “subsidiary management” relevant texts in the areas of
entrepreneurship and subsidiary management are identified. The key word search is refined by
using different combination of these key words
In an initial and unstructured key word search about 20 potentially relevant sources are
goind to be identified and reviewed leading to a rather fragmentary image of the problem. Further
relevant authors and texts are going to be identified via each reference list leading to another 20
potentially relevant sources which were again reviewed. This process of identifying and reviewing
sources will be reiterated five times in total completing each time the image of how subsidiaries can
be managed in an entrepreneurial way. In this way the methodology of this thesis combines key
word search with the so-called snowballing methodology. Hence a triangulation effect is given
assuring that major sources are identified. In case interesting books are going to be identified with
the snowball-technique these will be majorly accessed in the form of E-Books. Access was again
granted via Merkur, the search engine of ASB’s library. In case the relevant source is not available
in an electronic form, books will be accessed in libraries. Furthermore some course literature from
both ASB’s and UV’s masters program is going to be used for the purpose of this thesis. Finally
additional literature provided by the thesis supervisor will be included in the thesis.
Concerning the analytical approach this thesis follows an inductive approach (Hart 1998).
The literature is going to be reviewed with the purpose of establishing a theory in the end. This
approach is suitable due to the exploratory character of the thesis. The phenomenon of CE in
subsidiary management is going to be explored by reviewing the literature systematically in order to
induce a thesis. In case this thesis had an explanatory or descriptive character a deductive approach
would have been also suitable. For each research question categories (Spiggle 1994) shall be
established. These categories will be identified while reviewing the literature and paying attention
for termini which are repeated throughout the literature. In case these categories are related to the
research questions they will be used as a heading or sub-heading.
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2 RQ1 = “How is subsidiary initiative influenced by subsidiary role?”
2.1 Theoretical Approach
Within the course of MNC research several lines of thought developed how headquarter and
subsidiary are related. Historically one of the first perspectives on the MNC was the hierarchical
one covering the strategy-structure stream and the headquarter-subsidiary relationship stream
(Birkinshaw 2001). This perspective assumes that top management knows the corporate strategic
imperatives best and how these can be met by subsidiaries. Subsidiary roles were e. g. assigned as
to the perceived actual or future relevance of the market and enforced through HQ control and
coordination (Birkinshaw et al. 1998). However research revealed that reality is by far more
complex as subsidiaries experience greater degrees of freedom then described in the hierarchical
perspective on the MNC (Birkinshaw 2001). Therefore this approach is inappropriate for this thesis
as CE in subsidiary management requires a certain degree of freedom in order to develop novel
ideas (e. g. Zahra et al. 2001). If this thesis concentrated on focused CE (Birkinshaw 1997) it would
have been surely possible to gain some ideas out of this line of thought.
Contrary to this hierarchic perspective a new heterarchic perspective emerged reflecting that
subsidiaries can have more important tasks than being the pipeline of the headquarter to the local
market. Research highlighted that subsidiaries can produce and market products all over the world
as it is e. g. the case with world product mandates (Roth & Morrison 1992). The research on
heterarchic MNCs can be subdivided in the MNC process stream and the subsidiary role stream
(Birkinshaw 2001). Both in common is a shift from a solely HQ-based view towards a network
perspective as heterarchic MNCs can be described to a certain degree by decentralized decision
making. This is especially the case as it is acknowledged that lateral relationships exist between
subsidiaries facilitating the direct flow of people, products and knowledge. Furthermore HQ control
is exhibited to a large degree by normative integration. (Birkinshaw & Morrison 1995).
Out of this research stream on the heterarchic MNC several other research streams
developed such as research on ‘specialized roles taken by subsidiaries within the MNE’, ‘evolution
of subsidiary over time’, ‘flows of information between the subsidiary and its network and
‘headquarters-subsidiary relationship’ (Birkinshaw 2001). The first part of this thesis can be situated
within the research area of ‘specialized roles taken by subsdiaries within the MNC’ as RQ1 is
directly addressed towards subsidiary roles.
14
Concerning possible theoretical perspectives on the MNC both a network and a resource-
based approach appears useful. The transaction cost theory is rejected due to the implicit focus on
the headquarter (Birkinshaw 2001). The institutional perspective is rejected due to its focus on
subsidiaries becoming isomorphic. Although the internal and external pressures on the subsidiaries
are acknowledged it cannot be the aim for subsidiaries to become isomorphic under the point of
view of CE. The underlying argument for this reasoning can be found within the definition of EO.
Risky and innovative actions are opposed to forces of becoming isomorphic as diversity can be
regarded as a source for entrepreneurial behavior. This does not mean that institutional forces can be
neglected for CE in subsidiary management. However raising the issue of subsidiary initiative and
subsidiary role on institutional theory does not appear useful for this purpose.
The network theory on the other hand offers various links for research on the influence of
subsidiary role on CE in subsidiaries. Corporate Strategy is still elaborated to a large extent at the
HQ. Therefore, once the MNC is willing to foster entrepreneurial actions in their subsidiaries this
decision has to be in accordance to the international strategy of the whole MNC. However
subsidiaries are the ones both to execute strategy and take initiative. Thus their individual situation,
as reflected by their environment and capabilities (Hofmann 1994), must be incorporated when
deciding to enhance subsidiary EO. This is congruent with Storgaard’s (2010) definition of the
network-based view positing that both headquarter and subsidiary have a certain degree of power
within the MNC leading to regular power struggles between both entities. The headquarter is
equipped with formal power, e. g. investment or recruiting policy, whereas the subsidiary’s power
has its origin in network knowledge such as e. g. key knowledge, strategic positions in the value or
critical technical, personal or management knowledge. Furthermore one can consider all MNC
entities as constantly interacting. For the purpose of this thesis the network perspective is especially
adequate as the concept of embeddedness entails both an internal and an external aspect (Anderson
& Forsgren 1996). As to be developed within this section both aspects play an important role for
subsidiary role and subsidiary initiative.
However it appears useful to integrate a resource-based view (Birkinshaw 2001) on the
MNC during the course of this thesis. This is especially the case as capabilities and resources play
an important both for subsidiary role (Hofmann 1994) and subsidiary initiative (e. g. Birkinshaw
1999).
15
Hence the Hoffman (1994) model is considered as a good starting point for discovering the
relationship between subsidiary role and subsidiary initiative. In terms of internal embeddedness in
entails a focus international strategy and subsidiary capabilities. By the means of the local
environment the external embeddedness aspect is as well covered. Furthermore capabilities,
resources and environment were identified as categories within literature review and must
consequently included into a framework covering subsidiary role and subsidiary initiative.
International strategy determines to a certain degree subsidiary role (e. g. Hoffman 1994, Jarillo &
Martinez 1990) and has thus to be as well covered for assessing the impact of subsidiary role on
subsidiary initiative. This is especially the case as CE responds to corporate strategy (Åmo &
Kolvereid 2005). Thus the Hofmann (1994) model is going to be extended to CE.
2.2 Subsidiary Roles and International Strategies
Nowadays MNCs are disposed to opposing forces such as meeting the needs for product and
market diversity on the one hand and the need for international efficiency on the other hand. These
forces are commonly displayed in the Integration-Responsiveness Framework showing both model
international strategies for MNCs and specific roles for subsidiaries (e. g. Bartlett & Ghoshal 1998,
Taggart 1997, Jarillo and Martinez 1990, Roth & Morrison 1990) The Integration aspect represents
the MNCs’ activities to reduce overall costs in order to gain competitive advantage. Location
factors are mainly used in order to lower operational costs. Responsiveness reflects the MNCs’
efforts to meet the requirements of local markets and regulatory forces (Taggart 1997).
Two pure strategies can be identified: the multinational strategy, represented by low
integration and high responsiveness, and the global strategy which is described by high integration
and low responsiveness. Multinational strategies are usually adequate in markets where local tastes
differ to a large degree in terms of social, economic or technological aspects (Hoffman 1994) as it is
e. g. the case in many nutrition or fashion markets. Global strategies suit when local tastes do not
play a significant role as it is e. g. the case with IT components. In this case MNCs can concentrate
on the exploitation of economies of scale or economies of scope or both (Hoffman 1994).
Table 1: Overview of the key literature on international strategies, subsidiary role and CE
(see Appendix)
16
The transnational strategy represents an approach where integration and local
responsiveness are equally important. This is a particularly important strategy as international
markets are converging from global or multinationals towards transnational ones (Bartlett &
Ghoshal 1998). The fourth strategy is the international strategy which is characterized by low
integration and low responsiveness.
Therefore one can state that MNCs shall view their markets under the aspects of integration
and local responsiveness in order to manage their international operations (and therefore their
subsidiaries) adequately. But how are these aspects related to CE and which international strategy
suits most for implementing CE?
In order answer this question the international strategy perspective is going to be contrasted
with Birkinshaw’s (1997) typology of subsidiary initiative. This typology is used due to its
uniqueness in differentiating subsidiary initiative. As to this study four different types of subsidiary
initiative exist: Local market initiatives, internal market initiatives, global market initiatives and
hybrid market initiatives. Local market initiatives represent local opportunities seized by the
subsidiary which are consequently commercialized all over the world leading to a new business for
the MNC. Internal market initiatives aim at seizing opportunities inherent in the internal market. By
the means of global market initiatives subsidiaries are trying to meet the needs of customers abroad
from the local market with existing products or businesses. Hybrid initiatives contain the
development of new products or services abroad from the subsidiary location.
According to Birkinshaw (1997) local market initiatives are encouraged by high autonomy
at first and low subsidiary-parent communication. The initiative process can be described by low to
moderate internal selling and an implicit approval process. Therefore one can state that subsidiaries’
integration in the MNC has to be low for facilitating local market initiatives. As opportunities are
seized first locally and thereafter leveraged on a global basis (Birkinshaw 1997) one can assume a
high local responsiveness. Therefore it can be argued:
P1: Local market initiatives develop best under multinational strategies.
17
Global market initiatives are facilitated by high autonomy and low subsidiary-parent
communication. Internal selling is characterized as low and the approval process as implicit. In
comparison to the local market initiatives internal selling is even lower and the approval process in
even more implicit. (Birkinshaw 1997) Again, one can consider low subsidiary integration as
encouraging for global initiatives. Integration is as well important for global initiatives as a new
product or market is developed around an existing business (Birkinshaw 1997) it can be argued that
local responsiveness is as well facilitating global market initiatives. In terms of international
strategies one can claim therefore:
P2: Global market initiatives develop best under multinational strategies.
Internal market initiatives are enhanced by low autonomy and high subsidiary-parent
communication. The initiative process is described by high internal selling and an explicit approval
process (Birkinshaw 1997). High subsidiary integration can therefore be considered as facilitating
internal market initiatives. Local responsiveness has to be low as the initiative aims at the MNC
itself and not on local opportunities of the subsidiary (Birkinshaw 1997). In this way internal
market initiatives focus on rationalizing activities and reducing overall costs confirming that
P3: Internal market initiatives develop best under global strategies.
Hybrid market initiatives are facilitated by low autonomy and high parent-subsidiary
communication. High internal selling and an explicit approval process are describing the initiative
process (Birkinshaw 1997). Thus, high subsidiary integration can encourage hybrid market
initiatives. Although initiatives are marketed on a global basis opportunities are identified locally
(Birkinshaw 1997). Therefore high local responsiveness is a prerequisite for such kind of initiatives.
P4: Hybrid market initiatives develop best under transnational strategies.
Another aspect of the Integration-Responsiveness Framework is pointed out by Jarillo &
Martinez (1990) defining three subsidiary roles as to these dimensions. These findings are extended
by Taggart (1997) identifying a fourth role. These roles are to a great extent consistent with findings
of e. g. Birkinshaw & Morrison (1995) and Roth & Morrison (1992).
18
Autonomous subsidiaries (Jarillo & Martinez 1990, Taggart 1997), also known as local
implementer (Birkinshaw & Morrison 1995) are described by low integration and high local
responsiveness. When products are still young it is usually hard to identify customer needs. In such
situation subsidiaries’ focus is mainly on meeting local requirements (Lin & Hsieh 2010) and
therefore global products are adapted to local tastes (Birkinshaw & Morrison 1995). Most value
chain activities are performed independently of Headquarter and other subsidiaries (Lin & Hsieh
2010). Analogous to the reasoning before we can state:
P5: Local market initiatives develop best in autonomous subsidiaries
P6: Global market initiatives develop best in autonomous subsidiaries.
Receptive subsidiaries (Jarillo & Martinez 1990) or the specialized contributor (Birkinshaw
& Morrison 1995) can be considered as the mirror image of autonomous subsidiaries. Integration is
high, especially in terms of technology centralization (Taggart 1997). Local Responsiveness is low.
Only few value chain activities are pursuit such as e. g. manufacturing or marketing and sales (Lin
& Hsieh 2010). Due to the extreme focus on the MNC itself this type of subsidiary is predestined
for internal initiatives. Therefore
P7: Internal market initiatives develop best in receptive subsidiaries.
Converse to the quiescent subsidiary (Taggart 1997) is the active subsidiary (Jarillo &
Martinez 1990) which is also described as the world mandate (Birkinshaw & Morrison 1995) or the
specialized global subsidiary mandate (Roth & Morrison 1992). The subsidiary is closely integrated
into the MNC’s network as many value chain activities are conducted in an integral way with other
subsidiaries around the world (Lin & Hsieh 2010). Local responsiveness is as well high especially
“driven especially by substantial difficulty in identifying competitors and their strategies, and by
the variety of unknowns in product and process specifications (p. 307)” (Taggart 1997).
Furthermore some value chain activities are focused on local requirements (Lin & Hsieh 2010). In
total these are the reasons why such subsidiaries can contribute actively to the development of firm-
specific advantages. In this way and similar to the preceding logic one can state
P8: Hybrid market initiatives develop best in active subsidiaries
19
Thus, at the subsidiary level the I–R framework is useful to differentiate and identify
subsidiary roles in an MNC implementing one of the different international model strategies (Lin &
Hsieh 2010). Although pursuing a certain international strategy this does not necessarily imply that
MNCs’ subsidiaries have to be located in the same sector as it is the international strategy.
Birkinshaw & Morrison (1995) and Jarillo & Martinez (1990) are claiming that for successfully
pursuing corporate strategy MNCs may have to assign different strategic roles for each subsidiary.
This is especially the case as each subsidiary is located in a different environment and has different
capabilities (Hofmann 1994). In this way some subsidiaries may have to be strongly responsive to
the local environment whereas others do not.
From a CE point of view we can recap that in terms of integration and local responsiveness
neither one strategy nor one subsidiary role can facilitate all four types of subsidiary initiative
(Birkinshaw 1997). Yet subsidiary role is not solely determined by MNC’s international strategy.
International strategy represents a framework for CE to occur, subsidiary role another one.
Therefore having a certain international strategy this does not necessarily mean that only the related
initiative type can be expected. The type of international strategy rather facilitates the related
initiative type. Therefore both headquarter and subsidiary managers willing to foster subsidiary
initiative must be aware of the international strategy. If e. g. the international strategy and subsidiary
role are straight aligned it is hard to foster e. g. internal market initiatives within a multinational
strategy with majorly autonomous. If the latter initiatives are highly relevant for the MNCs are
urged to alter or at least circumvent structural preconditions. Furthermore one has to be aware that
the subsidiary itself is differentiated. Parts of the subsidiary may be closely integrated whereas
others may be autonomous to a great extent (Birkinshaw 1997). Therefore it may be enough to
embed one subsidiary division differently in order to direct the CE efforts in the right way.
2.2.1 Mission Strategy
MNCs are commonly facing a trade-off between market share-growth and short-term profits.
The philosophy how to behave in this context is commonly known as mission strategy. Zahra
(1991) showed that growth-oriented strategies are positively related to CE. This is coherent with the
finding of Covin & Slevin (1991) and Naman & Slevin (1993) stating that build strategies have a
positive impact on entrepreneurial postures. The main reason can be found in the congruency
between CE and build strategies. Thinking of e. g. harvest situations there is little space left for
expenditures in entrepreneurial activities as costs shall be kept low in order to increase profits.
20
2.2.2 Strategy making
Strategic decision-making particapativeness is the issue of taking strategic decisions in an
autocratic way or by joint decision making including techniques such as e. g. group discussion, the
Delphi technique or devil’s advocacy. Covin et al. (2006) point out that decreased decision speed
and decision boldness may have a negative impact on the EO of the MNC as e. g. certain market
windows may close during the decision process inhibiting the MNC to be proactive. Furthermore
participative decision-making is merely associated with incremental and low-potential innovations.
In this way the risk-taking dimension of EO is affected diminishing the long-term profitability
negatively as compared with radical, high-potential innovations. Therefore Covin et al. (2006) state
“EO has a more positive effect on sales growth rate when major operating and strategic
decisions are made in autocratic versus participative manners (p. 69)”
Another issue to affect EO in strategy making is whether strategy shall be planned or emerge
over time. Compared to traditional companies entrepreneurial MNC are facing a higher degree of
uncertainty due to the unpredictable outcomes of innovations. By letting strategy emerge MNCs can
incorporate market feedback into strategic decisions. This is especially important as entrepreneurial
actions may require major investments as e. g. new ventures may need new production facilities for
meeting the needs of all customers. Therefore the use of prototypes is of utmost importance (Garvin
& Levesque 2006) as these are prone to gather customer responses.
In case market feedback is inferior than expected MNCs may suffer from large sunk costs if
strategic actions are executed in a pure planned way. If market feedback is superior to expectations
resource allocation may have been to low leading again to sunk costs and lost economies of scale.
Therefore strategic flexibility is an important issue for entrepreneurial MNCs which. This is assured
best by emergent strategy making. This is not to say, that strategy has not to be planned at all, but to
state that entrepreneurial MNCs need strategic flexibility. Similarly Garvin & Levesque (2006)
argue that strategy shall be developed by trial and error.
21
2.3 External Environment
In order to differentiate subsidiary roles better a look to the subsidiary’s environment is
beneficial (Hofmann 1994) as the local environment offers opportunities and threats for the
subsidiary itself and the MNC as a whole. In this way it represents exogenous factors pressuring the
MNC to be either locally responsive or globally integrated or both (Birkinshaw et al. 1998).
Hofmann (1994) differentiates between accommodating and constrained environments for the MNC
strategy. In accommodating environments opportunities exceed threats whereas in constrained
environments the situation is vice-versa.
In this section the external environment shall be analyzed under the point of view of CE.
The relevance of the external environment for CE is rooted in the daily interactions of employees
with their external environment. Birkinshaw (1999) emphasizes “employees will typically interact
far more with customers and other firms in their local market than with corporate managers (p.
18)”. In this way employees can recognize opportunities and challengers for both the subsidiary and
the MNC stimulating employees to pursue entrepreneurial solutions. Within the next paragraphs it is
going to be outlined which factors describe an external environment favorable for CE.
Table 2: Overview of the key literature regarding CE and external environment (see
Appendix)
2.3.1 Local Competition
Several researchers confirm the relevance of subsidiaries’ embeddedness in the host country
for developing their own capabilities and their entrepreneurial potential. Yamin and Otto (2004)
examine interactions between subsidiaries and their immediate environment showing its relevance
for knowledge creation and innovation. Consequently Ambos et al. (2006) note that headquarters
benefit most from reverse knowledge transfer if subsidiaries are located in heavily competitive
environments. Therefore congruent with the analysis of Birkinshaw et al. (2005) this thesis assumes
a given positive impact of local competition for entrepreneurial activities.
Following the logic of Porter (1990) one can state that the presence of industry clusters in a
single location can push the competitiveness of the whole cluster. In this way local competition is
supposed to have a severe impact on the pursuit of subsidiary initiatives (Birkinshaw et al. 1998).
22
However one has to bear in mind that embeddedness depends to a certain degree on the MNC’s
international strategy. Receptive subsidiaries will probably have fewer possibilities to integrate into
the host country’s landscape decreasing the potential benefits of local competition on
entrepreneurial activities. As to their role they would rather concentrate on the pursuit of internal
initiatives instead of incorporating ideas of their immediate environment into their operations.
Birkinshaw et al. (1998) claim that globalization of industry is positively associated with
internationally oriented subsidiary initiative, hence CE. However, they are showing as well that
multidomestic industries are predestined for more locally focused initiatives. Verbeke et al. (2007)
argue industry globalization has a stronger effect on renewal initiatives compared to new venturing.
Hence, globalization of the industry has to be considered as well as environmental factor
influencing subsidiary initiative. Creating an internal environment favorable for internal initiatives
in a multidomestic industry, pursuing a multidomestic international strategy without receptive
subsidiaries will probably cause problems, not only for CE implementation but for corporate
performance at all.
A last interesting aspect related to competition is complexity. Zahra (1991) states “diversity
of customer needs and expectations among the different segments served by the firm (p. 264)” is
positively associated with CE. Prahalad & Oosterveld (1999) confirm that complexity of global
business is positively related to CE where as Zahra et al. (2001) claim that local market complexity
is as well positively associated with CE.
2.3.2 Industry growth and industry life cycle
From an industry life cycle point of view one can state that emerging industries offer more
opportunities for new ventures (Covin & Slevin 1991) than mature ones. Lumpkin & Dess’ (2001)
research findings show as well the relevance of firms’ proactiveness in early life cycle stages
confirming the relevance of industry life cycle for CE activities. These authors (2001) explain this
phenomenon by highlighting the increased market opportunities which are inherent in growth
industries compared to mature ones. This is coherent with Zahra’s (1993) propositions stating that
industry growth is positively related to success of corporate venturing due to the increased demand.
Consequently Antoncic (2007) show that increased demand for new products is positively
associated with CE. In a similar vein it is shown that industry growth is positively related to CE
(Antoncic & Hisrich 2001, Antoncic 2007). However one has to think about whether renewal
23
activities are not more promising in more mature industry life cycle stages (Zahra 1993, Verbeke et
al. 2008). As competition becomes more focused on prices one could expect than renewal activities
exceed corporate venturing activities.
2.3.3 Technology
Technology plays as well an important role for the occurrence of CE. Covin & Slevin’s
(1991) elaborated the relevance of advanced technologies for the occurrence of CE. Antoncic
(2007) (as well as Antoncic & Hisrich 2001, 2000 and Zahra 1993) confirms that increased
technological opportunities are associated with CE. These opportunities are majorly present in
younger industries but differ from industry to industry.
2.3.4 Dynamism
Another beneficial factor for subsidiaries’ entrepreneurship is dynamism of external
environment (e. g. Antoncic 2007, Antoncic & Hisrich 2001, Antoncic & Hisrich 2000, Zahra et. al.
2001, Zahra 1993, Covin & Slevin 1991). Due to changes in the political, economic, social or
technological situation (Zahra 1991) the subsidiary can be found in an instable situation. However
changing environments create as well opportunities. In such an environment subsidiaries have to
take risks in order to cope with e. g. technology obsolescence (Zahra et al. 2001). Similarly
proactiveness can be associated with dynamism (Lumpkin & Dess 2001). Given the association
between proactiveness and exploration (March 1991) of opportunities and resources this thesis
agrees with Lumpkin & Dess (2001) in a way that changing and instable environments offer more
space for successful opportunity and resource seeking than stable environments. Consequently
Antoncic (2007) and Antoncic & Hisrich (2001) note that demand for new products is positively
associated with intrapreneurship. In a similar vein Verbeke et al. (2007) highlight the importance of
local environmental dynamism both for new venturing and renewal activities. However according
to these authors renewal is influenced to a greater extent than new venturing initiatives.
Interestingly Birkinshaw’s (1999) findings reveal that a high level of market dynamism does not
promote subsidiary initiative due to inferior possibilities for getting locally embedded. Increased
competition may incorporate as well dangers of getting crowded out of competition. And as
reasoned in section 2.1 external embeddedness is a must for MNCs in order to recognize new local
opportunities. As Birkinshaw (1999) considers dynamism as the only determinant of the local
24
environment context this finding may be explained accordingly. Several researchers distinguish
between hostile and dynamic environemts (e. g. Antoncic 2007, Antoncic & Hisrich 2001, Antoncic
& Hisrich 2000, Zahra et. al. 2001, Zahra 1993, Covin & Slevin 1991) and highly dynamic
environments are close to hostile environments. Therefore this thesis agrees with the
aforementioned researchers in a way that dynamism supports CE. However getting embedded into
local context as highlighted by Birkinshaw (1999) remains an issue for effective CE implementation
in subsidiary management.
2.3.5 Hostility
Environmental hostility can also be associated positively to subsidiary initiatives (e. g.
Antoncic 2007, Antoncic & Hisrich 2001, Antoncic & Hisrich 2000, Zahra et al. 2001, Zahra &
Garvis 2000, Zahra 1993, and Covin & Slevin 1991). Unfavorable change as compared to
company’s goals or mission is one aspect of environmental hostility (Zahra 1993). This change may
result out of e. g. increased competition and changing market conditions, adverse regulatory burden
and radical industry changes. Related to hostility is uncertainty as it may be sometimes unclear
whether future will become unfavorable or not.
By hostility the organization as a whole is threatened forcing the organization to pursue
entrepreneurial activities. First, products may be differentiated by intensive marketing in order to
maintain customer basis or even increase market share (Zahra 1991). However, if hostility still
increases MNC is urged to experiment with new ways of organizing the MNC itself and the
subsidiary in order to strengthen the EO (Zahra et al. 2001). Additionally Zahra (1991) argues that
MNCs are forced to consider new business ideas in such situations.
Interestingly Zahra & Garvis (2000) consider international markets generally as hostile due
to cultural distance between home and host country. Host markets differ from home markets which
play an important role for marketing products but as well for e. g. organizing operations.
Additionally the point of administrative burden plays a more important role in international markets
as in home markets as foreign companies are usually less protected by host institutions than
domestic companies. Following the logic of Zahra & Garvis (2000) to consider international
markets generally as hostile one can go even further claiming that hostility in international markets
predestines MNCs to foster subsidiary initiative.
25
Yet there are other voices that environmental hostility has a negative impact on CE (Davis &
Meyer 2004, Lumpkin & Dess 2001, Zahra & Garvis 2000). Davis & Meyer (2004) findings show
that demanding competition urges subsidiaries to spend less on R&D. Lumpkin & Dess (2001)
reveal that environmental hostility has a negative impact on subsidiary’s proactiveness. Increased
competition on price reduces subsidiaries’ slack resources which are a necessary condition for
entrepreneurial efforts. Zahra & Garvis (2000) argue that firms can over-pursue international CE
and will therefore generate fewer profits. Furthermore risk-taking may be inappropriate in tough
competition as strategic missteps may threaten the MNC severely.
Porter (1990) argues that in benign environment organizations can be profitable without
improving. Through the pressure of competition companies are forced to improve and become more
entrepreneurial therefore. As positive effects of dynamism and hostility on CE are proved and
negative effects of hostility are as well documented this thesis argues there is an invisible limit
where competition becomes too tough and the inherent risk of CE exceeds the risk-taking and pro-
active capacities of the organization.
However the relation between dynamism and hostility on the one hand and different
subsidiary initiatives are not fully known yet. Zahra (1993) shows dynamism supports new
venturing whereas hostility is related towards renewal. In extreme tough competition risk of failure
for new ventures is too big. Renewal activities improving the performance of the MNC would be by
far more promising. On the other hand Verbeke et al. (2007) reason that dynamism supports both
new venturing and renewal activities, but interestingly they consider renewal as stronger influenced
by dynamism compared to new venturing. Hence it is unclear whether renewal is facilitated by both
dynamism and hostility or whether both findings are simply contradictious.
In terms of subsidiary initiative as differentiated by Birkinshaw (1997) internal market
initiatives can be allocated to renewal as this type of initiative is directed to the MNC itself. Global
initiatives refurbish existing product lines or markets (Verbeke et al. 2007) and can therefore be
considered as renewal. Local market initiatives lead to new business and can be consequently seen
as new venturing, too (Verbeke et al. 2007). Hybrid market initiatives represent the optimum siting
of a new value-adding activity and is hence considered as new venturing. Hence it may be proposed
that dynamism is more important for internal and global market initiatives as for local and hybrid
initiatives.
26
From an embeddedness perspective one can argue that local, global and hybrid market
initiatives (Birkinshaw 1997) are more intensely influenced by local dynamism and hostility
compared to internal market initiatives. On the other hand the latter internal market initiatives, like
hybrid market initiatives as well, require more internal embeddedness. From an internal market
perspective these can as well be dynamic or hostile. Therefore this thesis agrees that subsidiary
initiative is generally positively influenced by a dynamic and hostile environment. Yet the
relationship between environmental dynamism and hostility on the one hand and subsidiary
initiatives on the other hand remains an interesting research field. Especially interesting appear the
gray areas between dynamism and hostility and between CE supportive hostility and CE damaging
hostility.
2.4 Capabilities and Resources
Subsidiary capabilities play an important role both in characterizing the subsidiary
(Hofmann 1994) as well as for CE implementation (Birkinshaw 1999, Birkinshaw & Hood 1998,
Covin & Slevin1991). Hoffman (1994) defines subsidiary capabilities as the critical resources and
skills of the subsidiary itself. From a knowledge-based view they can be considered as applied
knowledge and know-how as capabilities contribute directly to firm performance (Schotter &
Bontis 2009). This is especially relevant as the development of subsidiary capabilities strengthens
subsidiary initiative (Schotter & Bontis 2009). Furthermore Birkinshaw & Hood (1998) reveal that
subsidiaries can extend their charter either by subsidiary capability enhancement or by parent-
driven investments. In this way capabilities can be seen as a prerequisite for subsidiary initiative.
Following the model of Hofmann (1994) subsidiary “capabilities reflect the range of
resources and key skills (e.g., R&D, production, marketing') actually performed by the subsidiary to
meet the requirements of its role within the MNC (p. 76)”. The capability dimension is viewed as a
continuum ranging from “many to few“. Again the Hofmann (1994) approach is going to be
extended to CE due to the relevance of capabilities both for CE (Birkinshaw 1999, Birkinshaw &
Hood 1998, Covin & Slevin1991) and subsidiary roles (Hofmann 1994).
Table 3: Overview of the key literature regarding CE and capabilities and resources (see
Appendix)
27
Birkinshaw’s (1999) findings suggest that the presence of distinctive capabilities is an
important driver for subsidiary initiative. Distinctive capabilities are considered as capabilities in a
network entity which are superior in comparison to other entities of the MNC. These capabilities
can be seen in a resource context building one major precondition for subsidiary initiative as
technical, financial and market-based skills are necessary for convincing headquarter to pursue
initiatives (Birkinshaw 1999). Kuratko et al. (1990) show as well the relevance of resource
availability for CE implementation. Birkinshaw et al. (1998) elaborate three criterions in order to
identify subsidiary resources which can contribute to the development of MNC’s competitive
advantage. Although competitive advantage is an outcome of CE these insights can also be applied
for characterizing distinctive capabilities.
The first one is a strictly resource-based one as to Barney (1991). Barney considers valuable,
rare and imperfectly imitable resources as the ones contributing to MNC’s competitive advantage.
Birkinshaw et al. (1998) apply this reasoning less strong stating that subsidiary’s resources have to
be superior as compared to other entities of the MNC. In this way this thesis considers the
subsidiary’s capabilities as internally superior. From a CE perspective the issue is now whether
superior internal capabilities are satisfactory for subsidiary initiative. Therefore superior internal
capabilities are going to be contrasted to superior external capabilities. A subsidiary capability can
be considered as externally superior once they are superior compared to the local competition but
not necessarily as compared to the MNC itself
Taking again a look on the CE typology of Birkinshaw (1997) all but local market initiatives
require strong proven resources. As local initiatives are local opportunities leveraged worldwide we
can assume that subsidiary's capabilities have to be externally superior. However due to the required
low integration of the subsidiary its capabilities must not be necessarily internally superior. The
approval process is implying there may be a better location for the initiative which is not seized due
to the low integration. Therefore it can be argued
P9: Local market initiatives require superior external capabilities
The same reasoning can be applied for global market initiatives. Low integration is
sufficient, the approval process is implicit therefore internal superior capabilities are not necessarily
required. But for having an opportunity to leverage an existing product on worldwide base
capabilities must be externally superior
28
P10: Global market initiatives require superior external capabilities
Internal market initiatives require high integration. In order to get the initiative approved an
explicit process is required. Therefore one may think of several subsidiaries competing for the right
to pursue their initiative. The main argument would normally be that their capabilities are superior
as compared to other entities of the MNC. Internal market initiatives therefore require superior
internal capabilities. However one can still think of competitors with superior capabilities. For
internal market initiatives the initiative could be still valuable although with the competitor’s
resources it could be performed in a better way.
P11: Internal market initiatives require superior internal capabilities.
Hybrid initiatives are facilitated by high integration and an explicit approval process. The
initiative is pursuit in the best location of the MNC. Therefore an internal competition exists to have
the right to pursue the initiative. This competition is usually decided by superior internal
capabilities. External capabilities are important as well as a new value-adding activity shall be
established. The latter requires as well superior external capabilities. Without these the probability
of new venture failure increases dramatically
P12: Hybrid initiatives require superior internal and external capabilities
The second criterion established by Birkinshaw et al. (1998) treats recognition of subsidiary
capability by top management. These authors claim that other parts of the MNC must recognize as
well the superior capabilities of the subsidiary in order to contribute to MNC’s competitive
advantage. One way to contribute to competitive advantage is subsidiary initiative, i.e. CE,
requiring distinctive capabilities. The relevance for CE implementation in subsidiary management is
right now whether CE generally requires capability recognition. Again the framework of
Birkinshaw (1997) is going to be applied for this purpose.
As explained above local market initiatives are encouraged by low integration. The approval
process is fairly implicit giving the subsidiary a relative strong degree of freedom for pursuing
initiative. Thus it can be argued that initiative can be pursuit without capability recognition by top
management. The existence of superior capabilities is important. The recognition of these is fairly
irrelevant. As the same reasoning can also be applied for global initiatives this thesis argues
29
P13: Local and global initiatives do not require recognition of superior capabilities by top
management
In contrast internal and hybrid initiatives are facilitated by high integration and characterized
by an explicit approval process. The explicit approval process implies recognition of superior
capabilities. Thus
P14: Internal and hybrid initiatives require recognition of superior capabilities by top
management
The final criterion of Birkinshaw et al. (1998) is the need for translation of specialized
resources into other parts of the organization. Considering the stickiness (Birkinshaw & Hood 1998)
of some resources this may pose a problem for certain initiative types. This criterion is described by
Birkinshaw (1997) as “internal selling”. Local and global market initiatives require low internal
selling. Thus stickiness of resources does not pose a problem. On the other side internal and hybrid
market initiatives are described by a high degree of internal selling. Therefore stickiness of
resources may pose a problem.
P15: Local and global market initiatives do not require translation of specialized resources.
Internal and hybrid market initiatives require translation of specialized resources.
From this resource-based perspective it can be argued that different subsidiary capacities
facilitate different initiative type. Similarly Verbeke et al. (2007) argue that the influence of
specialized resources differs within entrepreneurial activities. According to these authors
specialized resources have a negative impact on subsidiary renewal initiatives and a positive impact
on subsidiary venturing initiatives. As reasoned in section 2.3.5 internal and global market
initiatives (Birkinshaw 1997) can be considered as renewal whereas local and hybrid market
initiatives can be described as new venturing. Hence local and hybrid market initiatives are
encouraged by the means of distinctive capabilities. Similarly one can argue internal and global
market initiatives are negatively influenced by the existence of specialized resources. This
contradicts the findings above stating that internal market initiatives require superior internal
resources which must be translated into the MNC and recognized by top management. Furthermore
this contradicts as well the reasoning above that global market initiatives require superior external
capabilities which must not necessarily be recognized by top management and translated into the
whole MNC. These differences may be explained due to methodological differences between
30
Birkinshaw (1997) and Verbeke et al. (2007). Verbeke et al. (2007) analyze the different impact of
the environment on renewal and new venturing. However the typology of Birkinshaw (1997) is
much more fine-grained in terms of subsidiary initiative, furthermore the three criterions elaborated
by Birkinshaw et al. (1998) are very adequate for differentiating capabilities and resources as shown
above. Hence, this thesis disagrees with Verbeeke et al. (2007) and argues:
Local market initiatives require superior external capabilities which must not necessarily be
recognized by top management and do not have to be transferred into the MNC. Similarly global
market initiatives require superior external capabilities which must not mandatorily be recognized
by top management and translated into the MNC. Internal market initiatives require superior
internal capabilities which must be recognized by the HQ and transferred into the MNC: Hybrid
market initiatives require superior internal and external capabilities which must be recognized by
HQ and transferred into the MNC. Apart from specialized capabilities there are other capabilities
which are relevant for CE implementation. Covin & Slevin’s (1991) proposes a short time to market
period, sufficient funding for R&D, opportunity recognition and the creation of new products from
generic technologies.
2.5 Findings
The first part of this thesis reveals at first the relevance of international strategy, external
environment and subsidiary capabilities both for determining subsidiary roles and its influence on
subsidiary initiative. By the means of the integration-responsiveness framework (Taggart 1997,
Jarillo and Martinez 1990) and Birkinshaw’s (1997) subsidiary initiative typology several
theoretical propositions could be developed. Transnational strategies support best hybrid market
initiatives, global strategies support best internal market initiatives; multinational strategies support
best local initiatives and global market initiatives. The same reasoning could be applied for
subsidiary roles (Taggart1997) and subsidiary initiatives (Birkinshaw 1997). Active subsidiaries
support hybrid market initiatives, Receptive subsidiaries support best internal market initiatives, and
autonomous subsidiaries support best local and global market initiatives.
31
However subsidiary roles are not only defined by the international strategy, but as well by
their external environment and their capabilities and resources (Hofmann 1994). Hofmann (1994)
defines the external environment in a continuum ranging from “accommodating to constrained”. In
the literature several environmental determinants are identified such industry growth and industry
life cycle (Antoncic 2007, Antoncic & Hisrich 2003, Lumpkin & Dess 2001, Zahra 1993, Covin &),
technology (Antoncic 2007; Antoncic & Hisrich 2003, Covin & Slevin 1991), local competition
(Birkinshaw et al. 2005, Zahra et al. 2001, Prahalad & Oosterveld 1999, Zahra 1991), dynamism
(Antoncic 2007, Antoncic & Hisrich 2003, Zahra et al. 2001, Covin & Slevin 1991) and hostility
(Antoncic 2007, Antoncic & Hisrich 2003, Zahra et al. 2001, Zahra & Garvis 2000, Zahra 1993,
Covin & Slevin 1991).
An interesting issue is the relationship between CE and either environmental dynamism or
hostility. Davis & Meyer (2004) and Lumpkin & Dess (2001) claim that environmental hostility has
a negative impact on subsidiary initiative. Therefore this thesis argues that after a certain limit the
environment becomes too hostile inhibiting in this way CE. Yet more research needs to be
conducted regarding the relationship between environmental dynamism and hostility and different
subsidiary initiative types. However, in terms of Hofmann’s (1994) axe this thesis considers a
certain degree of hostility as beneficial for CE. From a CE perspective it can be stated accordingly
the more of the mentioned factors are given for the subsidiary the more the environment can be
considered as accommodating
Capabilities are displayed by Hofmann (1994) in a dimension from “few to many”.
Distinctive capabilities appear to be those in the value chain which are superior in the subsidiary
compared to other entities in the network. This thesis reveals that hybrid market initiatives require
superior internal and external capabilities which must be translated into a different location of the
MNC and therefore recognized by headquarter. Internal market initiatives require superior internal
capabilities which must be translated into a different location of the MNC and therefore recognized
by headquarter. Local and global market initiatives require solely superior external capabilities.
They do not have to be transferred within in the organization and therefore top management must
not necessarily recognize them.
32
Additionally several CE specific capabilities are revealed according to Covin & Slevin
(1991): short time to market, sufficient R&D funding, opportunity recognition and the creation of
new products from generic technologies. In the logic of Hofmann (1994) and Birkinshaw & Hood
(1998) this thesis states the more capabilities and resources as characterized above the more we can
consider them as “many”.
Given the necessity of (“many”) distinctive capabilities and an accommodating environment
for subsidiary initiative the Hofmann (1994) model suggests global MNCs shall integrate subsidiary
activities in accommodating environments. In this way MNC’s international strategy and subsidiary
role are aligned. Thus from a structural point of view MNC can automatically benefit of internal
market innovations. On the other hand multidomestic MNCs are asked to grant capable subsidiaries
more autonomy in order to align strategy and structure. By this means are automatically local and
global market initiatives fostered.
In case one condition of “many” capabilities and an “accommodating” environment is not
met subsidiary initiative will turn out difficult. Yet it has to be mentioned that an environment may
be accommodating for business but not for CE. However from a strategic point of view on and in
accordance with Hofmann (1994) it can be stated that in accommodating environments global
MNCs shall grant less capable subsidiaries more autonomy. Conversely multidomestic MNCs shall
integrate less capable subsidiaries in accommodating environments. Similarly global MNCs shall
grant capable subsidiaries more autonomy in constrained environments and multidomestic MNCs
integrate capable subsidiaries in constrained environments. The main reason for these deviations
can be found in the fact that both global and multinational strategies assume to have capable
subsidiaries in accommodating environments; e. g. less capable subsidiaries cannot fully participate
in the MNC strategy and are dependent on other resources and skills (Hofmann 1994). Hence if the
subsidiary is not sufficiently capable and/ or located in a constrained environment an individual
approach towards the subsidiary (compared to the overall international strategy) is useful.
This is an important insight as in this way the MNC can benefit of further subsidiary
initiative types and not solely those facilitated by international strategy. A further insight is that
capability development is of utmost importance. As international strategy is not determined on a
local basis and the external environment can be hardly influenced the congruence of strategy/
capabilities and environments is majorly depended on subsidiary capabilities. Hence in accordance
with Birkinshaw (1999) and Birkinshaw & Hood (1998) the development of subsidiary capabilities
can be considered as a prerequisite for subsidiary initiative.
33
In a transnational logic both integration and local responsiveness are equally important.
Therefore the individual context of each subsidiary and each subsidiary department plays a more
important role when implementing CE. One division might require closer integration where as
another does not. In this way transnational strategies are the ones who soonest can facilitate all
types of subsidiary initiatives as mentioned by Birkinshaw (1997).
A further insight is that emergent strategy making is positively associated with CE (Covin,
Green & Slevin 2006, Garvin & Levesque 2006). Changes in distinctive subsidiary capabilities or
within the environment occur as a constant phenomenon and must consequently as well be reflected
within corporate strategy. Hence subsidiary initiative is as well constantly subject to changes. This
is an especial important insight for transnationals given their difficulties to balance integration and
local responsiveness. In order to take the necessary decision quickly and calculatedly risky strategic
making shall be made in an autocratic way (Covin, Green & Slevin 2006). Furthermore CE is
associated with growth strategies (Zahra 1991, Covin & Slevin 1991).
34
3 RQ2: “What determines an internal environment favorable for CE?”
3.1 Theoretical Approach
Several researchers (e. g. Antoncic 2007, Christensen 2005, Zahra 1991) worked on
organizational factors facilitating CE. For subsidiary management this turns out especially
important as neither corporate strategy nor subsidiary environment can be amended for the purpose
of fostering CE. For fostering CE MNCs must therefore pay attention that subsidiaries either have
or gain capabilities (see section 2.4 & 2.5, e. g. Birkinshaw 1999, Birkinshaw & Hood 1998). Hence
an important aspect of creating an internal environment favorable for CE is facilitating the creation
of capabilities.
Zahra (1991) describes the internal environment as consisting of tangible and intangible
organizational variable. Tangible variables cover organizational structure by the means of
“communication, scanning integration, differentiation and control” (Zahra 1991, p. 265).
Intangible variables are related to organizational values. Birkinshaw (1999) proposes a corporate
context consisting of decentralized structures, a high level of parent-subsidiary communication and
a high level of subsidiary credibility to support subsidiary initiative. Hornsby et al. (2002) mention
“management support, work discretion, rewards/ reinforcement, time availability and
organizational boundaries (p. 254)” as organizational factors facilitating CE. Christensen (2005)
mentions “rewards, (top) management support, resources, organizational and risk (p. 315)” as
organizational factors influencing CE. Antoncic (2007) considers communication, controls,
environmental scanning, organizational support and competition-related and person-related values
as positively related to intrapreneurship. Thus it can be stated that research on internal factors
facilitating CE is a popular theme.
Though these mentioned examples show that research lacks currently consistency. Partially
these enablers overlap, as it is e. g. the case with the use of communication as stated by Zahra
(1991) and Antoncic (2007). Partially they appear contradictious as e. g. Zahra (1991) mentions
integration and Birkinshaw (1999) decentralization as facilitating CE. Hence a systematic literature
review on this topic appears necessary in order to analyze and document the current state of
knowledge.
35
Interestingly these authors mix vocabulary out of different scientific areas. Especially
striking is the incorporation of structure (Hornsby et al. 2002, Birkinshaw 1999, Zahra 1991) into
vocabulary, such as communication (Antoncic 2007, Zahra 1991), values (Antoncic 2007, Zahra
1991) and rewards (Christensen 2005, Hornsby 2002) which are rather related to HRM and OB.
Hence an environment favorable for CE can be considered as a rather broad construct with different
researchers integrating aspects out of a variety of research streams. Given this broadness it is hard
to define the “internal environment”. Therefore it may be questioned whether there is something
like “the internal environment” facilitating CE. As argued above some of the above mentioned
factors are an integral part of literature on HRM. Thus for tackling RQ2 concepts out of the
literature on SHRM shall be borrowed.
Delery & Doty (1994) present 3 theoretical models for SHRM. In short the universalistic
perspective assumes there are specific practices for better organizational performance. The
contingency perspective proposes the link between specific practices and performance to be
contingent on strategy. The configurational perspective assumes the existence of multiple unique
organizational configurations leading each to maximal performance. Each configuration can be
allocated to a certain ideal strategy. Hence it is going to be analyzed which approach suits best for
describing an environment favorable for CE. Furthermore this section tries to provide a holistic
overview which factors have to be considered when designing a CE supportive environment.
Concerning the theoretical premises mentioned in section 2.1 the network approach is going
to be maintained. Furthermore a resource-based view is included as resources (see section 3.9) play
an important role for CE. This approach brings useful insights regarding the relationship between
subsidiary role and subsidiary initiative. Hence it is expected that for analyzing the internal
environment this approach is as well useful. This is especially due to the fact that analyzing the
internal environment entails a great focus on internal embeddedness (Anderson & Forsgren 1996).
Yet the external environment is not going to be neglected as it represents a major influence on CE to
occur in subsidiaries (see section 2.3). Concerning different research streams as mentioned by
Birkinshaw (2001) this research question can be situated within the area of headquarter-subsidiary
relationship as the internal environment represents a denominator of this relationship.
36
3.2 Structure
In the first part of this thesis the impact of integration and autonomy on both subsidiary role
and subsidiary initiative is shown from a strategic perspective. From a network perspective one has
to consider that structure is not solely determined in response to strategy. The individual situation of
each subsidiary has as well a direct influence on structure due to its network power (Storgaard
2010). In section 2 the issue of both structure and CE is considered as determined majorly by
international strategy, subsidiary capabilities and environment. Yet and to be developed in the
current section there is as well literature covering the immediate influence of structure on CE. In
this way structure is considered as a proper factor to influence CE and must be contained in a
systematic literature review on the internal environment and CE.
Table 4: Overview of the key literature regarding CE and corporate structure (see
Appendix)
Zahra (1991) argues integration can be considered as influencing corporate
entrepreneurship. By integrating different business units both ideas and information can be spread
in order to work jointly for the purpose of realizing intrapreneurial visions. In an integrated MNC
internal idea generation is facilitated due to the enhanced communication between different units.
This is especially relevant as support of colleagues is a very relevant factor for enabling CE.
Christensen (2005) states that employees do “not only use each other to discuss and test new ideas,
but groups of employees cooperate to develop new products and ideas (p. 311)”.
Hornsby et al. (1993) tackle the structural aspect of the CE process by using the term of
organizational boundaries. These authors recognize the relevance of employees looking “at the
organization from a broad perspective (p. 32)” which is hindered by the real and imagined
organizational boundaries. This is especially the case with subsidiary initiatives requiring
recognition of specialized resources (Birkinshaw et al. 1998). One way to overcome these
boundaries is to alter MNC structure and integrate different corporate units.
Resource allocation is a further beneficial effect of integration for subsidiary initiative
(Callaway 2008). As shown in section 3.9 resource allocation is essential for realization of
entrepreneurial efforts. However Callaway (2008) argues that there is a tradeoff between resource
allocation and the necessary independence for pursuing CE. As integration increases the freedom to
act entrepreneurially decreases.
37
Consequently, other researchers emphasize the relevance of decentralized structures for CE.
Covin & Slevin (1991) propose that entrepreneurial postures are negatively related to structural
centralization. Birkinshaw et al. (1998) gain empirical evidence for the relevance of subsidiary
autonomy for subsidiary initiative. Birkinshaw (1999) argues “a high level of centralization of
subsidiary decision making will suppress subsidiary initiative (p.16)”. Based on this work Zahra et
al. (2001) gain empirical evidence for the positive association between subsidiary autonomy and
subsidiary entrepreneurship. Their main argument why autonomy has a positive influence on
entrepreneurship is the increased intrinsic motivation of subsidiary managers. Furthermore the latter
know best local markets. Together these two preconditions offer opportunities for entrepreneurial
actions in subsidiaries. Interestingly Young & Tavares (2004) specify that autonomy does not lead
automatically to increased motivation and in this way to more subsidiary initiative. Instead these
authors argue autonomy has to be linked to positive motivation in order to foster CE arguing that
managers. Especially in the case of short-term employments employees will not be motivated by
increased autonomy as they will not experience the outcomes of their actions.
Veenker et. al (2008) validate the relevance of decentralized structures cross-culturally by
conducting empirical research in the Netherlands. The advantage of decentralized organization lies
in the employees having a larger degree of freedom to develop their ideas. In addition internal
competition is not that strong enabling employees to implement their visions. Furthermore Duane
Ireland et al. (2006a) stress the positive effect of decentralized decision-making on communication,
a precondition for entrepreneurial subsidiary behavior.
Young & Tavares (2004) make a notable distinction between decentralization and autonomy.
According to these authors autonomy can either be gained by the subsidiary or delegated by
headquarter. This delegation process is what is usually understood by decentralization. Following
this logic decentralization is not a necessary precondition for fostering subsidiary initiative as
subsidiaries can create their own space for initiative. This reasoning is congruent with Birkinshaw
& Hood (1998) highlighting that subsidiary can gain competence-creating mandates on their own.
Hence they become more autonomous in their decision-making.
38
From an autonomy point of view research highlights other factors than pressures for national
responsiveness and global integration (Young & Tavares 2004) determine as well the degree of each
subsidiary’s autonomy. Diversification has an important impact on subsidiary autonomy (Vachani
1999) as especially related product diversification offers opportunities for economies of scale and
scope. Vachani’s (1999) findings show the more product diversification is related the less the
subsidiary can be considered as autonomous. These results show as well that unrelated product
diversification does not have an influence on subsidiary autonomy. From a geographic
diversification perspective Vachani (1999) reveals that unrelated international geographic
diversification has a negative impact on subsidiary autonomy due to the cultural distance and the
related problems of knowledge transfer. Furthermore Vachani (1999) gains empirical evidence that
world-wide product division structure is beneficial for subsidiary autonomy compared to functional
division structures. In world-wide product division structures subsidiaries have the responsibility
for a whole product without a need for interacting with other units of the MNC. Last, but not least
Vachani (1999) shows as well that subsidiary autonomy for personnel, marketing and production is
higher than for finance and R&D. Finance and R&D touch the MNC as a whole and are therefore
more subject to headquarter decisions.
An interesting proposition is stated by Verbeke et al. (2007) arguing that decentralization
has a stronger impact on renewal activities compared to corporate venturing. Subsidiary managers
perceive venturing activities as falling within their psychological boundary. Renewal activities on
the other hand touch the MNC as a whole. Consequently subsidiary managers might hesitate to
pursue renewal activities as headquarter is usually perceived as having a greater degree of expertise
within the subsidiary’s core business. Therefore subsidiary managers tend to act in favor of
headquarter reducing the freedom for subsidiary initiative. Therefore according to Verbeke et al.
(2007) decentralization plays a more important role for renewal activities compared to venturing
activities. This is especially interesting if one compares this insight to the one of Birkinshaw (1997)
stating that internal market initiatives require less autonomy. Internal market initiatives are aiming
at modifying the internal market and contribute in this way to the corporate renewal. Hence it can
be argued that research regarding decentralization and corporate renewal and new venturing in
subsidiaries must incorporate a more fine-grained unit of analysis, such as e. g. proposed by
Birkinshaw (1997), in order to provide consistent results. However the synthesis of Verbeke et al.
(2007) is still useful for the purpose of this thesis as decentralization is considered as generally
supportive for both types of CE.
39
Organic structures appear to have a strong influence for subsidiary initiative, too. Slevin &
Covin (1990) distinguish between mechanistic structures on the one hand and organic structures on
the other hand. Mechanistic structures represent those described by specialized tasks, formalized
rules and centralized decision-making. Organic structures are more loosely controlled, enhance
internal communication and decisions are made in a more consensus-seeking way. Due to these
features Slevin & Covin (1990) conclude that organic structures are predestined for entrepreneurial
behavior. Similarly Covin & Slevin (1991) propose that entrepreneurial posture is positively
associated to structural organicity and negatively related to structural formalization and structural
complexity. Hornsby et al. (1993) confirm, that “organizations should avoid having standard
operating procedures for all major parts of jobs, and should reduce dependence on narrow job
descriptions and rigid standards of performance (p. 32)”, thus organic structures. More recently
Duane Ireland et al. (2006a) argue that highly structured job roles inhibit entrepreneurial efforts.
Furthermore they add that small number of layers contribute to MNC’s CE efforts. As the span of
control broadens more space left is for individual entrepreneurial efforts. Furthermore lateral and
horizontal interactions are encouraged as decision-making is decentralized
Basically one can state that literature reveals beneficial effects of both integration and
autonomy on subsidiary initiative. Integration is beneficial for resource allocation whereas
autonomy gives subsidiaries the necessary freedom to pursue entrepreneurial actions. Interestingly
internal communication is considered to be a positive outcome of both integration (Zahra 1991) and
autonomy (Duane Ireland et al. 2006a). As literature regarding the beneficial effects of autonomy is
by far younger one could assume a development in the literature regarding CE and structure.
However at the same time several researchers revealed decentralization may as well cause
problems. Dess & Lumpkin (2005) reason fragmentation may be e. g. one outcome inhibiting
corporate entrepreneurship efforts. Similarly Young & Tavares (2004) note the danger of
‘reinventing the wheel’ in extremely decentralized structures. Furthermore Garvin & Levesque
(2006) mention decreased organizational learning as a related problem. Successful subsidiary
initiative leads to strategic and operational innovations which have to be transferred in some cases
to other business units in order to create sustainable competitive advantage for the MNC as a whole
(see section 2.4). In extremely decentralized organizations there are fewer horizontal links hindering
the knowledge transfer within the MNC. This is coherent with the above mentioned findings of
Zahra (1991) highlighting the relevance of integration for interaction purposes and Hornsby et al.
(1993) showing the relevance of low organizational boundaries
40
From a structural point of view the question is how to balance integration and autonomy in
order to foster subsidiary initiative and meet as well the strategic requirements. One way to bridge
integration and the necessary centralized structure is focused CE (Birkinshaw 1999), or skunkworks
(Lumpkin & Dess 2005), by the means of cross-functional pooling of competencies in project teams
or networks. In this way an additional structure can be easily established as an extension to the
organization’s traditional hierarchy (Christensen 2005). On the long-term rum small project teams
have the capacity to influence larger parts of the whole organization to alter their behavior in a
rather entrepreneurial way (Stopford & Baden-Fuller 1994). Furthermore working in
entrepreneurial teams offers the possibility of pooling different individual social, situational and
environmental backgrounds as a source of creativity (Gapp & Fisher 2007).
Garvin & Levesque (2006) document this approach was very popular in the past decades.
Many MNCs established corporate venture divisions (mainly 70s and 80s) and corporate venture
capital groups (mainly 90s) in order to nurture new businesses right from the beginning. However,
according to Garvin & Levesque (2006) integration of successful new ventures is necessary as
maintenance of a double structure is not efficient as e. g. knowledge transfer and realization of
economies of scale and scope will be difficult. As the old bureaucratic structure is maintained and
CE is fostered within a single division with its own structure integration into the MNC will become
more difficult during the course of time. People a part from the focused CE group will be suspicious
towards the new venture and “power struggles between new-business managers and division
leaders” (Garvin & Levesque 2006) may occur. Solving these problems will turn out costly and time
consuming urging MNCs often to either spin offs or shut-downs new ventures.
Therefore this thesis agrees with Garvin & Levesque (2006) reasoning that integration of
subsidiary initiatives takes place best right from the beginning in order to minimize corporate
resistance. However a certain degree of autonomy is necessary in order to give the subsidiary the
necessary freedom to act entrepreneurially. Finding the right balance between autonomy and
integration is therefore the issue for MNCs, both for international strategies and CE. Garvin &
Levesque (2006) suggest that protection sponsorships may help to bridge this tradeoff. Protection
sponsorship means to have a respected leader responsible for oversight, resource allocation and
strategic guidance. Furthermore the task of the protection sponsor is to grant the subsidiary the
necessary freedom for developing the subsidiary initiative. Another tool according to Garvin &
Levesque (2006) is the employment of hybrid organizational forms. They suggest combining
creatively dotted-line and solid-line relationships for mixing authority and oversight, especially by
the means of councils and oversight committees.
41
Hence it can be argued that neither decentralization nor integration can be considered as the
magic bullet for CE. As reasoned above both have their beneficial effects on CE. However they
support different types of initiatives (see section 2.2). Thus structure does not determine per se CE.
From a CE perspective structure has to be amended according to expected type of subsidiary
initiative (Birkinshaw 1997). From a practical point of view this is not realistic. Think of a MNC
which decides that more internal market initiatives are required and starts centralizing activities. In
case the business environment requires the MNC to be highly locally responsive this approach will
turn out problematic for the MNC. Consequently for the MNC it is better to determine structure
according to the corporate, subsidiary and environmental context. However one can state that
structures combining both integration and local responsiveness structures are closest to the majority
of subsidiary initiatives (Birkinshaw 1997). For each type of subsidiary initiative at least one
component within the integration/ autonomy continuum is given. Hence for fostering other
initiatives than hybrid markets initiatives it is not an issue of achieving either local responsiveness
or integration. It is rather an issue of concentrating on one of these dimensions.
3.3 Comunication
According to Zahra (1991) communication is important as in this way new ideas can be
introduced into the organization and employees can be familiarized with recent trends in the
relevant sector. Furthermore communication is crucial for interdisciplinary cooperation as idea
realization requires usually the involvement of different organizational departments, such as e. g.
financing, HRM and operations. Additionally Christensen (2005) points out that by seeking for
consensus and holding regularly meeting employees are given the feeling of having influence. This
is especially important as congruence must be established between the company’s goals and
employees’ intrinsic motivation in order to foster corporate entrepreneurship (Kenney & Mujtaba
2007). Without influence there will be very little intrinsic motivation, therefore communication is of
extreme relevance for CE. In order to create an internal environment supportive CE the quality and
the amount of communication are of utmost importance. (Zahra 1991). These findings are
confirmed by Antoncic (2007, 2001) and Antoncic & Hisrich (2001, 2000). Although Antoncic’s
studies cover intrapreneurship his definition of intrapreneurship can be used to a large extent
interchangeable with a CE definition.
Table 5: Overview of the key literature regarding CE and communication (see Appendix)
42
However one has to distinguish between formal and informal communication (Zahra 1991).
Formal communication entails e. g. regular meetings whereas informal communication happens
merely on the social side of the employees. Therefore giving employees the possibility to
communicate face-to-face is important, too. For this purpose creating a work environment with
increased physical proximity is important where employees can exchange ideas without regard on
their level or their function. Examples can be e. g. coffee pots or mail rooms, but as well special
team building measures or social events (Christensen 2005).
The relevance of communication for fostering subsidiary initiative is well promoted by
Birkinshaw (1999). However in the aforementioned categorization of subsidiary initiative
Birkinshaw (1997) mentions local and global subsidiary initiatives do not require necessarily a high
degree of parent-subsidiary communication. Similarly Verbeke et al. (2007) argue that extended
headquarter-subsidiary communication has a negative impact on new venturing as those may be
completely out of the corporate strategic context. Interestingly hybrid market initiatives are
facilitated by a high amount of parent-subsidiary communication. As reasoned in section 2.3.5
hybrid market initiatives can be considered as new venturing as a new-value adding activity is
established. Hence the findings of Birkinshaw (1997) contradict Verbeke et al. (2007) regarding
hybrid market initiatives. Similarly local market initiatives require a low degree of headquater-
subsidiary communication (Birkinshaw 1997) but Verbeke et al. (2007) state that new venturing can
be considering requires the latter. As reasoned in section 2.3.5 local market initiatives can be
considered as new venturing.
So it can be summarized that communication has a positive effect on CE in the vast majority
of cases. The findings of Birkinshaw (1997) and Verbeke et al. (2007) show there may be situations
where communication is not that necessary or even counter-productive. Thus there is evidence that
a contingency approach towards communication and CE may be appropriate. One rationale for
these findings can be found in the direction of communication. Local and global market initiatives
require as well communication. In these cases more communication is needed within the subsidiary
and its environment. On the other hand internal market initiatives require more communication
within the MNC. Same reasoning is as well adequate for the propositions of Verbeke et al. (2007).
New venturing requires communication with the immediate environment and within the subsidiary
whereas renewal needs to involve as well headquarter. Consequently hybrid market initiatives can
be considered as requiring both. These findings might explain as well why communication is
considered as a positive outcome of both integration and autonomy (see section 3.2)
43
From a practical point of view this is especially important as communication may help to
bridge structural deficits with subsidiary initiative. Think of a MNC in a multinational corporate
context with capable subsidiaries in accommodating environments. Hence majorly local and global
market initiatives are fostered by the corporate structure. However internal market initiatives may
be as well required. Thus establishing internally directed communication channels may help
bridging the lack of integration. In this way communication may help to bridge structural
deficiencies for the purpose of supporting CE. This is especially relevant as establishing new
communication channels requires less change than altering corporate structure.
3.4 Environmental Scanning
As shown in the preceding section entering new ideas into the organization is of utmost
importance for fostering subsidiary initiative. One way to get new ideas in is the use of intensive
environmental scanning (Russell 1999, Zahra 1991, Covin & Slevin 1991). By the means of
regularly collecting, analyzing and interpreting data about the organization’s environment and the
competition industry trends and changes can be highlighted leading eventually to new ideas. E. g.
new ventures of competitors can show in which direction business is developing. Threats and
Opportunities shall also be revealed by scanning efforts. This is especially important given the
positive relationship between environmental hostility and CE (Zahra & Garvis 2000). Hostile
environments will expose the MNC to a variety of threats. Therefore quick identification of threats
and opportunities is of utmost importance for maneuvering in such an environment. The relevance
of environmental scanning is confirmed by Antoncic (2001 & 2007) and Antoncic & Hisrich
(2001).
Table 6: Overview of the key literature regarding CE and environmental scanning (see
Appendix)
3.5 Organizational Support
Another relevant factor for corporate entrepreneurship is organizational support (e. g.
Antoncic 2007, Zhao 2005, Kuratko et al. 2005), which can be regarded as the willingness of the
organization to support and facilitate entrepreneurial actions within the organizations (e. g. Hornsby
et al. 2002, 1993). The especial relevance for CE in subsidiary management is highlighted by
44
Birkinshaw & Hood (1998) revealing that subsidiaries can gain competence-creating mandates
either by parent investments or by subsidiary capability enhancement. In both terms organizational
support plays an important role either by the means of resource allocation or supportive actions for
subsidiary capability development. From a network perspective it is important to develop subsidiary
capabilities as they have unique opportunities due to their local embeddedness. From a resource-
based view the inherent stickiness of capabilities (Birkinshaw & Hood 1998) has as well to be
mentioned. Therefore it shall be analyzed how organization can support development of subsidiary
capabilities within subsidiaries and in this way subsidiary initiative.
Table 7: Overview of the key literature regarding CE and organizational support (see
Appendix)
For fostering CE MNCs are asked to embrace an open and supportive management style in
order encourage pursuit of entrepreneurial efforts (Zhao 2005). Major tools for organizational
support can be found within the core functions of HRM as staffing, training and rewarding play an
important role within organizational support (e. g. Antoncic 2007; Zhao 2005). Furthermore
commitment of top management plays as well an important role (e. g. Antoncic 2007; Zhao 2005)
as they play a major role for determining strategy and structure within the MNC. The more top
management is committed to change and CE the more they will consider as well CE aspects when
reviewing strategy and structure. Furthermore employees need to have the feeling their initiatives
are appreciated by the top management (Hornsby et al. 1993, Kuratko et al. 1990). Similar to the
case of excessive controls (see section 3.7) a lack of organizational support can lead to frustration
within the workforce hindering the implementation of corporate entrepreneurship.
Hornsby et al. (2002, 1993) highlight that employees have to be convinced that innovation is
the future of the organization and that every employee can contribute something for this purpose.
Major parts for facilitating CE can be found in the areas of HRM and resource allocation (Hornsby
et al 2002, 1993). Especially the organization’s HRM system plays an important role for
encouraging and reinforcing entrepreneurial behavior (Duane Ireland et al. 2006a). Analyzing the
HRM aspects of CE is especially promising in this context as subsidiaries may experience a large
degree of autonomy in this area (Vachani 1999). In this way subsidiaries may set an impetus for CE
themselves.
45
3.6 Rewards
By the means of rewards behavior can be reinforced (Kerr 1975). In order to be efficient the
reward system must be exactly related towards the expected behavior of the organization
(Christensen 2005). Therefore research (e. g. Hornsby et al. 2002, 1993) points out that such kind of
reward system must include clear goals, feedback, emphasis on individual responsibility and
rewards contingent on performance. Generally speaking this implies that entrepreneurial behavior
must as well be rewarded. However bearing the results of RQ1 in mind different kinds of goals and
hence different kind of rewards may be associated to different kinds of subsidiary initiative. In order
to foster subsidiary initiative employees in e. g. receptive subsidiaries need to have different goals
compared to autonomous subsidiaries as the expected entrepreneurial behavior differs in both types
of subsidiaries. Internal market initiatives which are mainly encouraged in receptive subsidiaries
aim at increased efficiency where as local market initiatives aim at launching new business
(Birkinshaw 1997). Consequently the goals, feedback and rewards must be adapted according to the
intended outcomes of subsidiary initiative in order to reinforce entrepreneurial behavior.
Table 8: Overview of the key literature regarding CE and rewards (see Appendix)
One way to adapt reward schedule to strategic preconditions is the use of an incentive pay
system as described by Hayton (2005). In order to support entrepreneurial action this author
suggests a pay structure consisting of lower base pay and incentives oriented towards ends rather
than means. One reason for the relevance of supporting rather ends than means can be found in the
positive association between less rigidly designed jobs and CE (Edralin 2010, Duane Ireland et al.
2006a, Hayton 2005). Congruently Hornsby et al. (2002, 1993) highlight the importance of work
discretion. Similarily Kenney & Mujtaba (2007) and Hayton (2005) posit the importance of
rewarding as well informal actions. This is especially important in terms of capability development
as rigid job description hinder employees to show their hidden talents.
However, these ends do not have to be necessarily financial ones (e. g. Garvin & Levesque
2006). One way to support entrepreneurial ends is to reward e. g. new ventures or internal
innovations in order to support entrepreneurial actions. Using an incentive reward system enables
the MNC to direct the entrepreneurial efforts in a manner desired by the MNC. However it is
necessary to know in advance which kind of subsidiary initiative is embraced by the MNC and
which kind of initiative is facilitated by current international strategy and subsidiary role. An
46
important aspect to bear in mind for a CE supportive reward system is the integration of incentives
for collaboration & team-work (Duane Ireland et al. 2006a, Hayton 2005). The underlying reason is
that innovation is usually not the product of individual actions but relies on the combination of
individual knowledge (Duane Ireland et al. 2006a).
More over employees’ willingness to take risks differs in relation to environmental factors
(2005). Hayton (2005) reasons technology, dynamism and growth stage will have an impact on
individual risk perception. As risk-taking is an important component of the MNC’s EO finding the
right level of related incentives is of utmost importance. Too much risk-taking may lead the MNC
into financially dangerous situation whereas too little risk-taking may reduce the long-term
competitiveness of the MNC. Therefore understanding the influence of the environment on the
individual risk perception is indispensable. Consequently Hayton (2005) states that “in complex,
high technology environments, or in firms that are still in the highly uncertain start-up stage, the
need for incentives will be greater than for mature firms in stable and relatively well understood
technological environments (p. 25)”.
Another important aspect in designing a CE supportive reward structure is individual
differences. Hayton (2005) emphasizes that employees have different individual risk profiles. Thus
these must be borne in mind if the MNC wants to support CE all over the organization. Additionally
people differ in the way they are motivated and rewards are not limited to salaries. Christensen
(2005) argues that intrapreneurs also appreciate rewards such as recognition, free time to work on
own projects, expanded job responsibilities, promotions, funding for research or conferences,
expense accounts on. Furthermore bonus, profit share, equity or shares in the company also
motivate entrepreneurial employees. In this way understanding the individual motivation profile is
as well important in order to support best entrepreneurial efforts.
Yet considering individual risk and motivation schemes in a corporate reward system may as
well cause problems. Thornberry (2003) mentions jealousy as one potential problem occurring by
individual reward structures. Congruently Hayton (2005) analyzes the importance of internal equity
vs. external equity in reward structures for CE. This author (20025) highlights entrepreneurial
organizations rely majorly on external equity in order to attract and retain capable employees.
Employee retention is an important topic for facilitating CE as highlighted by Edralin (2010).
However as Hayton (2005) mentions as well relevant arguments for achieving internal equity, such
as e. g. cooperation and knowledge exchange, balancing internal and external equity remains a
major issue for entrepreneurial MNCs.
47
Hence this thesis argues that a reward system which supports CE in subsidiary management
must incorporate goals, feedback, rewards (e. g. Hornsby et al. 2002) related to subsidiary role (as
shown in section 2). Furthermore environmental and individual characteristics have as well to be
considered (Hayton 2005).
3.7 Control
Referring to controls one can state that employees need freedom to realize their ideas.
Excessive use of rules, procedures and regulations can work as an inhibitor for corporate
entrepreneurship (Zahra 1991). Danger lies in employees getting frustrated by too high barriers for
implementing their ideas. In a similar vein Hornsby et al. (1993) reason that employees need to
have the necessary freedom to design their work in a way they consider it most efficient.
Additionally they argue that penalizations of unsuccessful CE efforts will discourage employees for
further CE efforts. As mistakes occur in CE excessive criticism will turn out unproductive.
Table 9: Overview of the key literature regarding CE and control (see Appendix)
However a certain degree of control remains necessary especially in the context of project
selection (Kuratko et al. 1993, Kanter 1989). Congruently to this reasoning the results of Antoncic
& Hisrich (2001, 2000) and Antoncic (2007, 2001) show not too excessive use of formal controls
for monitoring entrepreneurial activities is positively associated to intrapreneurship.
Therefore taking a closer look on control mechanism appears useful in order to explore the
relationship between control and subsidiary entrepreneurship. Zahra et al. (2001) are tackling the
question by differentiating between strategic and financial controls. Strategic controls asses the
subsidiary performance in regard to long-term objectives and the competitive environment.
Contrarily financial controls usually refer to the achievement of short-term financial goals. Zahra et
al. (2001) demonstrate that strategic controls are positively related to subsidiary’s entrepreneurship
due to the inherent long-term focus which can support initiative. Long-term objectives do not
necessarily have to be financial (Garvin & Levesque 2000). One could as well think of behavioral
goals which are controlled strategically. How many promising projects are revealed? How many
new ventures are launched?
On the other hand financial controls are assumed to constrain initiative as compensation is
48
tied to short-term financial goals. However research of Zahra et al.(2001) only reveals the positive
link between strategic controls and subsidiary’s entrepreneurship. The negative relationship
between financial controls and subsidiary entrepreneurship was not statistically significant.
Consequently Duane Ireland et al. (2006a) consider strategic controls as more relevant for
encouraging risk acceptance and in this way entrepreneurial behavior.
However it appears there is no ideal control system for encouraging entrepreneurial efforts
in subsidiaries. Which is the right balance between strategic controls and financial controls? When
are formal controls too excessive and start to inhibit CE? Zhao (2005) argues control and
management systems must be flexible in order to foster innovation, thus entrepreneurship.
Situational factor must be regarded in order to design an efficient control system. Furthermore it is
reasoned that product/ project life cycle has an important influence as e. g. product development
requires more empowerment and delegation as compared to launching a product. But generally
innovation flourishes under less controlled structures. This reasoning is congruent with the one of
Kuratko et al. (1993) highlighting the relevance of control in project selection. The common
denominator is cost control. CE entails as well financial dangers, e. g. lack of focus or empire
building (Birkinshaw 1998, see section 1.2.3): Therefore management has to keep an eye whether
projects have a perspective of becoming profitable.
Another important influence on control systems is the tradeoff between exploitation and
exploration (Duane Ireland et al. 2006a). According to these authors control systems must secure
both stability for exploiting current competitive advantages and flexibility for entrepreneurial
actions. One way for balancing this tradeoff is the integration of “budgetary flexibility and slack
resources […] into the firm’s control system, providing room for experimentation with unsanctioned
initiatives (p. 15)” (Duane Ireland et al. 2006a).
From an agency theory perspective O’Donnell (2000) explores control and subsidiary
management. His findings show that supervision and monitoring as a means of HQ control decrease
with increasing subsidiary autonomy. These findings are explained by increasing costs and
difficulties for HQ to control the subsidiary. As shown under section 2.2 autonomy is an outcome of
corporate, subsidiary and environmental context and especially high in autonomous subsidiaries.
As control is costly (O’Donnell 2000) but necessary due to the costs related to CE (Zhao 2005,
Kuratko et al. 1993) here is a tradeoff between CE and especially multidomestic strategies/
autonomous subsidiaries. With transnational strategies and active subsidiaries controlling
possibilities are better due to the greater integration of subsidiaries.
49
In this way the findings of O’Donnell (2000) reveal that control is directly related to
structure. Hence and congruently with Zahra et al (2001) and Garvin & Levesque (2000) it can be
argued that by the means of goal setting control must be related to subsidiary role in order to
enhance subsidiary entrepreneurship. Furthermore environmental and situational influences such as
e. g. product life cycle (Zhao 2005) and the trade-off between exploitation and exploration must be
considered (Duane Ireland et al. 2006a).
3.8 Staffing
In order to enhance subsidiaries’ entrepreneurial efforts employees build one major asset
(Zhao 2005). Attraction and Retention of employees having not only the necessary technical skills
but as well behavior and values which suit to the belief and culture (Edralin 2010) is of utmost
importance. Hence MNC staffing differs according to company and environmental culture as further
explained in section 3.11. Generally speaking CE requires flexible and risk-taking employees
(Duane Ireland et al. 2006a) which are committed to change (Zhao 2005) and constant innovation
(Duane Ireland et al. 2006a). Yet one has to be aware that risk-taking underlies individual and
environmental influences (see section 3.6). Furthermore entrepreneurial project managers are
required in order to promote and coordinate subsidiary initiative (Zhao 2005).
Table 10: Overview of the key literature regarding CE and staffing (see Appendix)
However how these employees are identified remains unclear. Edralin (2010) suggests
multiple hurdle screening and customized selection test in order to identify entrepreneurial
employees. Contrarily Thornberry (2003) is not able to identify entrepreneurial characters.
Consequently Kenney & Mujtaba (2007) suggest that selection tests are not adequate as
“entrepreneurial aptitude is generally self-identified” (Kenney & Mujtaba 2007, p. 81). Therefore
these authors highlight a team approach for staffing. In a similar vein Zhao (2005) states “The right
mix of people is essential to the successful commercialisation of innovations (p. 37)”. Similarly
Edralin (2010) emphasizes the relevance of diverse skills in entrepreneurial teams. One way to
enhance the exchange of diverse skills within the MNC in teams is establishing an internal labor
market which matches projects and individual skills and knowledge (Duane Ireland et al. 2006a).
50
3.9 Allocation of resources
Regarding resource allocation the literature is relatively homogenous. Christensen (2005),
Zhao (2005) and Hornsby et al. (2002, 1993) document the relevance of financial resources and
time availability. However these authors argue that allocation of resources does not facilitate per se
entrepreneurial actions. Rather they should be considered as a prerequisite condition for
implementing ideas. Consequently Christensen (2005) argues that knowledge is probably the most
important resource. Idea generation risks to be repetitive without state-to-the-art knowledge. Hence
resource may be wasted. Yet and explained under section 2.4 this does not necessarily imply
transferability of knowledge is required for fostering CE.
3.10 Training
The relevance of training for CE is regularly documented in the literature, e. g. Hayton
(2005) states “entrepreneurial firms invest more time and effort on orientation and there is more
group oriented training (p. 31)”. The positive effect of coaching on employees’ entrepreneurial
behavior is as well empirically validated by Wakkee et al. (2008). Their analysis is grounded in
several theoretical arguments. First coaching is relevant due to the coaches’ access to resources,
expertise and network. In this way both individual idea generation and organizational cooperation is
facilitated. Furthermore coaching plays an important role for increasing awareness of the necessity
of entrepreneurial actions. Finally coaching is necessary for solving individual role conflicts in
terms of CE. These conflicts usually reside in uncertainties how to balance traditional tasks with
exploring new opportunities. This is especially relevant for employees working for a long time
within the MNC with the MNC developing their business model towards a more entrepreneurial
oriented one.
Table 11: Overview of the key literature regarding CE and training (see Appendix)
51
Regarding the concrete implementation of an efficient CE training program it is important to
set goals related to entrepreneurial behavior (Wakkee et al. 2008, Duane Ireland et al. 2006a).
According to Duane Ireland et al. (2006a) goals of a CE supportive HRM system are the following:
“
• embrace creative and innovative behavior;
• take reasonable levels of risk;
• use a long-term orientation to evaluate innovation-based possibilities;
• focus on results;
• work cooperatively with others;
• tolerate ambiguity; and
• assume responsibility for change (p. 15)”
Take a look on the goals from a training perspective one can state several goals can be
considered as generally valid. Creativity and the embracement of innovative behavior can be
regarded as necessary for all types of subsidiary initiative. The need for a long-term evaluation of
CE activities is as well generally accepted in section 3.6. Tolerance for ambiguity and responsibility
for change can as well be considered as generally supportive for CE. Yet e. g. the focus on results
implies an alignment of training and the corporate, the subsidiary and the environmental context. As
shown in section 2 these contexts determine to a large degree the occurrence of certain subsidiary
initiatives (Birkinshaw 1997). Hence the expected results and thus training as well differs as to
these contexts. The expected results of e. g. internal market initiatives (Birkinshaw 1997) differ
from those of local and global market initiatives. The expected cooperation within those initiatives
differs as well as internal market initiatives require a great extent of cooperation within the MNC.
On the other hand local and global market initiatives require interaction with the immediate
environment of the subsidiary. Hybrid market initiatives require both. Furthermore the definition of
what level of risk can be considered as “reasonable” differs according to environmental and
individual influences (see section 3.6).
Regarding the content of entrepreneurial training Thornberry (2003) mentions first that
technical skills such as cash flow analysis or market analysis can be taught to a vast majority of
employees (Thornberry 2003). However it takes more for establishing a successful CE training
program. A further aspect of CE training is opportunity recognition and idea development
(Thornberry 2003). “Most managers, when asked to think about new business opportunities, tend to
start dose to horne with iterative, relatively small changes to products or services. It takes a push
52
from a coach who aggressively challenges this "dose to horne" mentality typically found in the
ideation phase (p. 342)” (Thornberry 2003).
Related to the latter issue one has to mention the role of entrepreneurial self-efficacy as
described and empirically validated by Wakkee et al. (2008) and Chen et al. (1998). The concept of
entrepreneurial self-efficacy describes individual perceptions of skills, motivation and resources
related to a specific area or context. It is especially relevant for CE as “individuals with a high level
of self-efficacy will initiate and perform new tasks at a much higher level than individual with lower
levels of self-efficacy (p. 5)” (Wakkee et al. 2008). Furthermore Wakkee et al. (2008) argue that
entrepreneurial self-efficacy can be learned and taught. This is especially relevant as the above
mentioned role-conflicts regarding CE can be reduced in this way.
Generally speaking training should be continuous and less structured (Kenney & Bahaudin
2007, Duane Ireland et al. 2006a). Furthermore Duane Ireland et al. (2006a) note the necessity of
adapting the training program to individual knowledge requirements. A further insight on the
content of training is highlighted by Thornberry (2003) stating that catalytic coaching can be
considered as a means of enhancing the generation of novel ideas compared to step-by-step
enhancements of existing business opportunities. For practitioners Hornsby et al. (2002) developed
a CE assessment instrument in order to enable organization to recognize their related deficiencies.
Based on the gained insights MNCs can develop a training program in order to become more
entrepreneurial. Literature reveals as well explicit training programs. Duane Ireland et al. (2006b)
developed a CE employee development program whereas Kuratko & Goldsby (2004) elaborated a
CE training program. However these assessment tools and training programs are not going to be
analyzed in this thesis as they are rather relevant for practitioners.
Basically concerning the research on the relationship between training and CE one can state
that training entails several elements which are generally valid for CE. Duane Ireland et al. (2006a)
mention that “creative and innovative behavior”, “tolerance for ambiguity” and “responsibility for
change” shall be goals of a CE supportive HRM system. These categories are sufficiently broad to
be valid for all types of subsidiary initiative. Similarly continuous and less structured training can
be considered as facilitating CE. However, in terms of results, risk-taking and cooperation (Duane
Ireland et al. 2006a) there are fundamental differences within subsidiary initiative (Birkinshaw
1997). In these areas the immediate influence subsidiary role (as described in section 2) must be
considered for aligning strategy, capabilities, environment, subsidiary initiative, rewards, control
and CE training. A similar approach can be found within the research area on entrepreneurial self-
53
efficacy (ESE). ESE exists within a certain area or context (Wakkee et al. 2008). Hence - training
must be exactly related to the expected area of subsidiary initiative. Think of e. g. training on local
opportunity recognition in receptive subsidiaries. Receptive subsidiaries are not highly locally
responsive but highly integrated. In this way internal market initiatives are facilitated and the
mentioned ESE training program would take place in a different area than the expected area of
initiative. Thus training may turn out inefficient if it is not aligned with the corporate, the subsidiary
and the environmental context.
3.11 Culture Concerning the intangible environmental variables (Zahra 1991) one can differentiate
between culture and values. Culture has been recognized for a long time as a determining factor for
CE (Covin & Slevin 1991). Entrepreneurial culture can be considered as very relevant both for
fostering subsidiary initiative and developing subsidiary capabilities (Birkinshaw et al. 1998). Zhao
(2005) defines culture as “the norms and deeply rooted values and beliefs that are shared by people
in an organization (p. 29)”. Åmo & Kolvereid (2005) consider the environment as the determining
factor if employees get engaged in entrepreneurial activities. According to these authors an
environment providing freedom to act will encourage employees to act entrepreneurially.
Consequently one can consider an entrepreneurial culture as supportive towards experimentation
and tolerant towards failure. The underlying reason is the more experiments are carried out the
greater the experience which visions can be realistically implemented. Therefore entrepreneurial
cultures entails a great focus on the opportunities inherent in change and the related uncertainty
(Duane Ireland et al. 2006a). Consequently these authors (2006) emphasize that entrepreneurial
cultures have their focus “on the future rather than the past (p. 16)”.
Table 12: Overview of the key literature regarding CE and culture (see Appendix)
But how does the entrepreneurial culture look like? Dimitratos & Plakoyiannakis’ (2003)
findigs show six cultural dimensions (market orientation, innovation propensity, risk attitude,
networking orientation and motivation) to support CE. Similarly Covin & Slevin (1991) propose
that entrepreneurial posture is positively related with cultures supporting the expression of novel
and radical ideas, empowerment of middle- and low-level employees, positive attitudes towards
change and innovation and the spirit and practice of teamwork.
54
Yet it can be argued that subsidiary role, and hence international strategy, subsidiary
capabilities and local environment, cannot be neglected. In this way this thesis agrees with Hisrich
(1990) highlighting the relevance of visions, goals and actions plans, thus the corporate, subsidiary
and environmental context (see section 3.6 and 3.7), within a CE supportive culture. One may think
of e. g. subsidiaries with different market orientations due to international strategy, different
innovation propensities depending on industry life cycles, different risk attitudes as to the hostility
of the market or different network orientations depending on the subsidiary role.
A similar idea can be found within the research area of CE and national culture. For CE to
occur in (national) subsidiaries national culture plays as well an important role according to Zhao
(2005). Along with Hofstede (1980) she reasons that high individualism, low power distance and
low uncertainty avoidance would be beneficial for CE implementation. Low power distance is often
related to “more decentralized and less hierarchical structures (p. 29)” (Zhao 2005) and is in this
way conducive to CE. Yet as shown in section 3.2 excessive decentralization may reduce internal
communication and resource allocation and hinder in this way subsidiary initiative. So for balancing
decentralization and integration adequately MNCs with subsidiaries in rather low power distance
environments need a different a degree of power distance in their corporate culture than MNCs with
subsidiaries in rather high power distance environments.
Uncertainty avoidance can be linked to risk acceptance and resistance to change, hence CE
(Zhao 2005). Though the findings in section 2.3.5 reveal hostility may have a negative impact on
subsidiary initiative as strategic missteps may threaten the organizational severely. Hence it can be
argued the relevance of uncertainty avoidance in organizational culture differs along with the
hostility of each subsidiary’s environment and other factors affecting the appropriateness of risk-
taking. Furthermore individual differences regarding risk-taking must not be neglected (Hayton
2005).
Regarding individualism the situation is quite similar if one takes the findings of Morris et
al. (1994) into account. Individualism facilitates the creation of unconventional ideas which is
necessary for CE. Yet extreme individualism may hinder the necessary communication and
cooperation for idea implementation. In this way collectivism is as well beneficial for CE.
Therefore Morris et al. (1994) conclude a moderate level of individualism to support CE. Bearing in
mind that both national cultures and organizational cultures share these dimensions the question is
whether organizational culture has to support or balance the local subsidiary context. One may think
e. g. of a MNC with subsidiaries mainly operating in collectivistic cultures. Therefore
55
organizational culture might support individualistic behavior in order to foster non confirmative
idea generation. In this way culture must be developed contingent to locational factors of
subsidiaries.
Hence, subsidiary role must be regarded as well from a subsidiary role perspective as
visions, goals and action plans play as well an important role for a CE supportive culture (Hornsby
et al. 1993). Furthermore cultural differences between company culture and national culture must
not be neglected as especially individualism (Morris et al. 1994), power distance and uncertainty
avoidance (Zhao 2005) have an important influence on CE due to their relation to risk-taking,
collaboration, decentralized structures and individual idea creation. Yet as reasoned these
dimensions may as well be overemphasized which may suppress subsidiary initiative or even
endanger the MNC as a whole. Thus balancing corporate and the environmental/ national culture is
a must. Furthermore by the means of uncertainty avoidance both environmental and individual
differences have as well to be considered (Hayton 2005)
3.12 Values
Regarding CE supportive values Zahra (1991) makes a clear distinction between individual-
centered values and competition-focused values. Individual-centered values are those how
employees are seen and treated by the organization. Concerning corporate entrepreneurship it is
important to create values supporting individual creativity and encourage risk-taking. Furthermore
these values can be used for integrating individual and company goals and create hence intrinsic
motivation (Zahra 1991). Competition-focused values are concerned with the organizations
behavior in the market. Agile and aggressive movements in the market encourage entrepreneurial
activities as constantly new solutions for a changing external environment are requested (Zahra
1991). Concerning the organizations internal environment Zahra (1991) shows the greater
importance of individual-centered values. Antoncic (2007, 2001) and Antoncic & Hisirch (2001)
confirm empirically the relevance of these values.
Yet it may be questioned whether individual-centered values mean the same within different
MNCs. As these values are meant to encourage risk-taking (Zahra 1991) the influence of
environmental and individual factors (see section 3.6 and 3.11) has to be considered. Finding the
right level of risk-taking is necessary as “too much risk-taking may lead the MNC into financially
dangerous situation whereas too little risk-taking may reduce the long-term competitiveness of the
56
MNC” (Heinrichs 2011, p. 44). Furthermore the relationship between individual-centered and
competition-focused values on the one hand and different kinds of subsidiary initiative (e. g.
Birkinshaw 1997) appears worthy for further research. Especially in the area of new venturing
external CE (Zahra 1991) appears more relevant. As reasoned in section 2.3.5 hybrid and local
market initiatives can be considered as new venturing. Hence it may be argued these subsidiary
initiatives are more positively influenced by competition-focused values than internal and global
market initiatives.
3.13 Findings
The results on RQ2 reveal several factors determining an internal environment favorable for
CE in subsidiary management. CE can be enhanced by the means of structure (section 3.2),
communication (section 3.3), environmental scanning (section 3.4), organizational support (section
3.5), rewards (section 3.6), control (section 3.7), staffing (section 3.8), allocation of resources
(section 3.9), training (section 3.10), culture (section 3.11) and values (section 3.12).
Concerning structure it is shown that both integration and autonomy have beneficial effects
for CE. From a universalistic perspective it can be argued that organic structures support best CE (e.
g. Slevin & Covin 1990). Furthermore a transnational configuration is closest to all types of
subsidiary initiatives (Birkinshaw 1997) and hence ideal for fostering CE. Concerning a possible
configurational approach the intense influence of subsidiary role on subsidiary initiative (e. g.
Birikinshaw 1997, Taggart 1997, Jarillo and Martinez 1990, Roth & Morrison 1990, see section 2.2)
has to be mentioned. As integration and autonomy play an important role both for CE and
subsidiary role these dimensions offer possibilities to develop a configurational approach.
Consequently it has to be considered that both structure and subsidiary initiative are subject to
subsidiary capabilities and the external environment (Hofmann 1994, see as well section 2.3 and
2.4). Furthermore autonomy is e. g. influenced by product and geographic diversification (Vachani
1999). Autonomy differs as well within MNCs as autonomy is higher for HRM, marketing and
production compared to R&D and Finance (Vachani 1999). Hence there are a variety of
contingency variable concerning CE and structure.
Related to the association between communication and CE the general relevance of quality
and amount of communication (Zahra 1991) has to be mentioned. From a configurational point of
view one can state for fostering CE communication must be related to subsidiary role (see section 2)
57
as each kind of subsidiary initiative requires a different focus within communication. Practically
amending communication only according to the strategic preconditions may be inefficient as only
certain initiative types are fostered. Hence the full potential of CE is not exploited. As it is easier to
amend communication compared to organizational structure communication offers possibilities to
enhance other initiatives than those related to subsidiary role. Thus by the means of communication
it is possible to direct CE.
Concerning environmental scanning research reveals homogenous results. E. g. Russell
(1999) and Zahra (1991) show scanning is positively related to CE. One may think about whether
environmental scanning plays a greater role for subsidiary initiatives requiring external
embeddedness. However environmental scanning is a broadly defined topic covering as well e. g.
monitoring of market and industry trends. The latter plays as well an important role for initiatives
relying on internal embeddedness. Hence no arguments are found for either configurational or
contingency approaches.
Organizational support revealed as well relatively consistent results (e. g. Antoncic 2007,
Zhao 2005, Kuratko et al. 2005). However while reviewing the literature the concept of
organizational support turned out to be a bit thin as major parts of organizational support are
determined at HRM level (Duane Ireland et al. 2006a, Hornsby et al 2002, 1993). Hence
organizational support is going to be further analyzed at HRM level. This is an especially
promosing approach as subsidiaries experience a greater degree of freedom in HRM compared to
other business areas (Vachani 1999). Yet from a universalistic perspective it can be retained that an
open and supportive management style (Zhao 2005, Hornsby et al. 2002, 1993) towards subsidiary
initiative can be considered as organizationally supportive for CE.
First within HRM the relevance of rewards for CE has to be mentioned. From a
universalistic perspective it can be argued that these must be related to the expected behavior
(Christensen 2005) and hence contain clear goals, feedback, emphasis on individual responsibility
and rewards related to performance (e. g. Hornsby et al. 2002, 1993). Furthermore the use of an
incentive pay system (Hayton 2005) is considered to support CE. Yet in section 2.2 it is shown that
subsidiary role determines to a great extent subsidiary initiative. Consequently the expected
outcomes of CE differ and hence the related goals differ as well. Thus from a configurational
perspective it can be argued that the reward system must represent the corporate, subsidiary and
environmental context. However one has to be aware that both rewards (Hayton 2005) and CE (see
section 2.3) are subject to environmental influences. Whether both are similarly affected by the
58
environment is not revealed by literature. Additionally a CE supportive reward system must
incorporate individual differences in risk-perception (Hayton 2005). Consequently a CE supportive
rewards system must consider the corporate, subsidiary and environmental context and at the same
time take individual differences into account. Thus a contingency approach is useful.
Concerning controls authors like e. g Antoncic & Hisrich (2001, 2000), Antoncic (2007,
2001 and Kuratko et al. (1993) show that not too excessive use of controls is beneficial for CE and
especially necessary for project selection. Furthermore Zahra et al. (2001) and Duane Ireland et al.
(2006a) propose that strategic controls are more relevant for encouraging risk acceptance. From a
configurational perspective it can be argued that control must refer to clearly articulated goals and
hence subsidiary role. Similarly O’Donnell (2000) notes autonomy is negatively associated to
headquarter control. Consequently one might think of a configurational approach towards control
and subsidiary entpreneurship. Zhao (2005) on the other hand posits product/ project life cycle to
have an influence on control. Yet research could not reveal whether product life cycle affects
control in the same way as it influences subsidiary role. Furthermore it is argued that MNCs’ control
system have to be flexible and contain as well situational factors (Zhao 2005). Hence a contingency
approach towards CE and control appears more promising.
From a universalistic perspective and related to staffing it can be argued that an internal
environment favorable for CE requires capable (Edralin 2010), flexible and risk-taking (Duane
Ireland et al. 2006a) employees who are committed to change (Zhao 2005) and constant innovation
(Duane Ireland et al. 2006a). Consequently Edralin (2010) suggests multiple hurdle screening and
customized selection for recruiting. Concerning a possible configurational approach towards CE
and staffing it can be argued that subsidiary role has as well an influence on the goals of a CE
supportive staffing policy. Hence different skills and capabilities of potential employees may be
required. However research reveals further variables influencing the relationship between staffing
and a CE supportive environment. Edralin (2010) argues that congruence between individual and
corporate beliefs and culture must exist for enhancing intrinsic motivation and thus CE. Though
staffing differs according to organizational culture and the local culture of the subsidiary (Zhao
2005, Morris et al. 1994). Furthermore as culture is expected to have influence on the risk-taking
attitude of the organization (Zhao 2005) individual and environmental influences (Hayton 2005)
must as well regarded by a CE supportive staffing policy. Thus a contingency approach towards
staffing and CE is appropriate.
59
The literature review on allocation of resources and CE provided a rather homogenous
image. Financial resources and time availability can be regarded as a prerequisite of CE
(Christensen 2005, Zhao 2005, Hornsby et al. 2002, 1993). Knowledge plays as well an important
role in terms of resources (Christensen 2005). Thus a universalistic approach towards CE and
resource allocation appears useful.
Concerning the relevance of training within a CE supportive environment it can be stated
technical skills such as cash flow analysis or marketing can be taught (Thornberry 2003) and
training should be continuous and less structured (Kenney & Bahaudin 2007, Duane Ireland et al.
2006a). Furthermore training on opportunity recognition is necessary (Thornberry 2003). Duane
Ireland et al. (2006a) present goals of a CE supportive HRM system. Out of these “creative and
innovative behavior”, “tolerance for ambiguity” and “responsibility for change” can be considered
as universalistically valid. The “focus on results” (Duane Ireland et al. 2006a) opens the door for a
configurational approach as focusing on results differs within each subsidiary initiative (Birkinshaw
1997). Hence the corporate, subsidiary and environmental context may provide insights on patterns
of entrepreneurial training. However “take reasonable levels of risk” is clearly a variable depending
on individual and environmental characteristics (Hayton 2005). Furthermore and as reasoned for
communication “work cooperatively with” others must not necessarily be solely aligned with
subsidiary role and subsidiary initiative. By establishing additional means of cooperation subsidiary
initiative can be fostered a part from the strategical and structural preconditions. Similarly the
concept of ESE (Wakkee et al. 2008, Chen et al. 1998) appears to be generally supportive for CE.
Though ESE is related to a certain area or context of action training must be accurately related to
the expected area of action. Hence concerning CE supportive training a contingency approach
appears at least partially appropriate.
Related to entrepreneurial culture this thesis mentions first the explicit focus on
opportunities resulting out of change and uncertainity (Duane Ireland et al. 2006a). Consequently
Dimitratos & Plakoyiannakis (2003) argue that this culture consists of market orientation,
innovation propensity, risk attitude, network orientation and motivation. Yet Hisrich (1990)
proposes the relevance of visions, goals and action plans for a CE supportive culture. Hence neither
the corporate nor the subsidiary nor the environmental context must be neglected when talking
about CE and culture. In this way both it can be argued for a contingency and configurational
approach. However subsidiary culture will always be subject to corporate and environmental culture
(Zhao 2005, Morris et al. 1994) and hence a configurational approach appears inappropriate.
60
Concerning CE supportive values Zahra (1991) distinguishes between individual-centered
and competition-focused values. Individual-centered values are more related towards internal CE
whereas competition-focus values are related towards external CE. Yet the relationship between
values and different types of subsidiary initiative (Birkinshaw 1997) is not known yet. From a
contingency perspective it can be argued that in MNCs pursuing both types of CE the relationship
between both values will be affected by the relationship of internal versus external CE. Yet there is
a no empirical support for this hypothesis. Hence an universalistic view on CE supportive values is
maintained.
So from a universalistic perspective environmental scanning, organizational support,
allocation of resources and the existence of individual-centered and competition-focus values can be
considered as determinants of an internal environment favorable for CE. Yet there are others
variables such as structure, communication, rewards, control, staffing and culture which need to be
developed contingent to strategical, structural, environmental, situational and individual
preconditions and subsidiary capabilities. Regardig training and CE the situation appears a bit
ambiguous. As at least partially support for a contingency approach is gained more research is
required within this area.
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4 Discussion
This thesis tackles the issue of CE in subsidiary management in two ways. First the
relationship between subsidiary role and subsidiary initiative is explored. Secondly it is analyzed
what determines an internal environment favorable for CE.
Regarding the relationship between subsidiary role and subsidiary initiative it is shown that
subsidiary role has an immediate influence on subsidiary initiative (Birkinshaw 1997). In this way
the interesting insight is gained that integration has as well beneficial effects for CE. Furthermore
different kinds of subsidiary initiative are allocated to different kinds of international strategy and
thus subsidiary role. Yet it may be questioned to which degree it is appropriate to apply the
integration-responsiveness framework on Birkinshaw’s (1997) typology of subsidiary initiatives.
The integration aspect is more or less explicitly given in the text. However it may be questioned if
subsidiary initiatives can be clearly allocated to local responsiveness. Birkinshaw (1997) gives
indirectly hints as he describes the intended outcome of these initiatives. Especially in the case of
global market initiatives allocating initiative to local responsiveness is not evident. If one thinks of
“Enhancement and international leverage of an existing product line or business (qualitative)”
(Birkinshaw 1997, p. 224) this does not automatically suggest high local responsiveness. Yet global
market “initiative sought to build a new product or market around an existing business line using
the distinctive capabilities resident in that subsidiary” (Birkinshaw 1997, p. 223). Thus the focus on
subsidiary capabilities and the fact that the product/ market is developed around subsidiary’s
existing business line implies local responsiveness must be given.
Due to the network perspective inherent in this thesis covering only international strategy as
determining subsidiary role is considered as insufficient. Hence by the means of Hofman’s (1994)
model it is possible to integrate subsidiary capabilities and the local environment into a framework
for determining the relationship between subsidiary role and subsidiary initiative. In this way an
approach is provided for maintaining focus within CE activities which is proved to be important
(Birkinshaw 1998, see section 1.2.3).
62
Concerning the local environment it is shown that industry, technological and competition
factors have an influence on CE. Furthermore dynamism and hostility of the environment can be
considered as supportive for CE. However the relationship between dynamism and hostility on the
one hand and CE on the other hand is not fully explored yet. This is especially important as
dynamism and hostility appear to have different effects on new venturing compared to renewal (e.
g. Zahra 1993).
Related to subsidiary capabilities it can be stated that distinctive capabilities are required for
subsidiary initiative. Yet it is shown as well that different kinds of subsidiary initiative require
different kinds of capabilities. In this way new insights concerning CE are gained. Additionally it is
confirmed that capability development is of utmost importance for fostering CE in subsidiary
management.
Concerning CE favorable internal environments there is much evidence that a universalistic
approach is not sufficient. Although environmental scanning, organizational support, allocation of
resources and individual-centered and competition-focused values are identified as generally
supportive for CE there are other factors which are heavily influenced by strategical, structural,
environmental, situational and individual preconditions and subsidiary capabilities.
Regarding structure it is demonstrated that organic structures are beneficial for CE (e. g.
Slevin & Covin 1990). Yet it is shown as well that both integration and local responsiveness are
beneficial for CE (e. g. Garvin & Levesque 2006). This is especially the case as section 2 revealed
that both can be allocated to different kinds of subsidiary initiative. Furthermore it may be
questioned whether it is useful to include structure into factors facilitating CE. Amending the
structural context only for the purpose of facilitating CE without regard to e. g. industry,
environment and subsidiary capabilities may heavily endanger MNC’s core business.
Communication must be related to the corporate, subsidiary and environmental context in
order to foster CE. As demonstrated in section 2 and 3.2 this is especially due to the fact that both
high integration and high local responsiveness facilitate subsidiary initiative. As communication can
be directed by the means of creating or eliminating communication channels it is hence possible to
circumvent the structural context and foster thus further types of subsidiary initiative.
63
Similarly rewarding, control, staffing, training and culture must be designed in congruence
to these structural preconditions. The underlying reason can be found in the necessity for goals in
order to foster CE (e. g. Hornsby et al. 2002, 1993, Hisrich 1990). In order to reinforce
entrepreneurial behavior these must be related exactly to the expected outcome. As subsidiary
initiative differs along with corporate, subsidiary and environmental contexts goals differ as well
and hence CE supportive rewarding, control, staffing and culture. Furthermore it is revealed these
factors are subject to individual, situational and cultural differences. Thus it is revealed there is
nothing like a universalistically supportive CE environment. The variety of influences on these
internal environmental facilitators suggests rather a contingency approach.
This is an interesting result as section 2 rather suggests there are different configurations for
CE and subsidiary initiative. Furthermore literature suggests in most cases there is one certain
environment which supports best CE. Yet section 3 revealed there are many further influences to be
considered in order to create a CE supportive environment. However it must be acknowledged that
this finding may be biased by the methodological approach. By hindsight developing a consistent
configurational approach with that many internal environmental factors appears hardly feasible. For
future research it may be interesting to reduce these factors. This is especially the case as future
research is still necessary as to be further explained in section 6.
A first step may be to exclude the structural aspect out of the research area on internal
environmental facilitators for CE. As it is shown in section 2 and 3.2 the subsidiary role concept
determines to a large degree which kind of subsidiary initiative can be expected. Furthermore both
integration and autonomy have beneficial effects for CE. Additionally it is argued that changing the
structural context for fostering CE may have counterproductive effects on MNC’s current business.
Thus one approach could be to consider structure generally as a constant factor influencing CE.
A second approach could be to exclude all factors which are proved to be universalistically
valid. These could be further considered as general facilitators within CE. The benefit of excluding
structure as well as the univsalistically valid factors is that in this way only communication,
rewarding, control, staffing, training and culture must be further examined. Future research on these
six enablers may be able to develop a configurational model for internal environmental factors
facilitating CE. For this purpose an interesting starting point would be to determine the differences
between environmental influence on subsidiary initiative and environmental influence on internal
facilitators such as e. g. rewarding.
64
5 Limitations
From a methodological point one has to state the chosen theoretical approach is appropriate.
In this way many theoretical insights are gained which could probably not have been gained
empirically. As reasoned in section 1.4 getting sufficiently access to MNCs for pursuing a
quantitative approach is hardly possible within the course of a master thesis. Thus a qualitative
approach may have been possible. Yet it is hard to believe that qualitative research reveals such
profound results without having as well access to various MNCs. Especially in terms of the
equivalent relevance of integration and local responsiveness it is hard to get such fundamental
insights within one single MNC. Similarly developing research on environmental facilitators
towards a contingency approach is hardly empirically possible within a master thesis. As theoretical
research enables to include a variety of findings and data it is possible to tackle the problem in a
rather broad way and gain consequently these profound results.
Concerning reliability of findings it can be stated that every one may get access to data
banks administering business journals. As everybody may use the same key-words a similar
literature trunk will probably turn out. Similarly the results provided by the snow balling
methodology can be replicated as these are selected due to their direct relevance for the research
question. However reliability is influenced by the inductive character of this thesis. Individual
decisions must be considered for key word search and the snow-balling technique. Which texts are
considered as relevant and due to which reasons? This drawback is compensated as this thesis
reiterates five times the process of accessing literature by the means of the mentioned techniques. If
this process was reiterated several times more the variance within the expected literature would
have been reduced. Yet a deeper insight into literature is rejected as results became repetitive and
time is constraint for the purpose of this thesis. Additionally individual differences in terms of
course material and literature provided by supervisor have to be mentioned.
65
Validity of this thesis depends majorly on the validity of references. As no experiments are
carried out this thesis depends fully on data gained by other researchers. Yet there are no indices to
doubt the validity of their projects. A further limitation in terms of validity resides as well in the
reiteration process of accessing literature. Although it appears useful to stop the reiteration process
after five times this may imply that key literature is not identified. One might expect deviations in
results once unidentified key literature contains major insights regarding either the relationship
between subsidiary initiative and subsidiary role or a CE favorable internal environment.
Furthermore results may be repetitive in case similar research projects are not identified while
reviewing the literature. However as the results of the literature identification process become
repetitive it is assumed the results of this thesis are valid.
The choice of a network approach turns out as well beneficial for the purpose of analyzing
CE in subsidiary management. By the means of this theoretical perspective it is possible to include
both internal and external embeddedness factors (Anderson & Forsgren 1996) for the subsidiary
into the thesis. Furthermore this perspective enables a view on the subsidiary as a separate actor
which is a must for analyzing CE in subsidiary management. The inclusion of the resource-based
view is as well beneficial as resources play an important role for both research questions. Yet one
may argue that other perspectives have as well their advantages for analyzing the topic. Therefore
partially arguments from other perspectives are included in order to complete the image.
6 Future Research
Research on CE in subsidiary management remains an interesting topic. As reasoned in
section 1.2.1 MNCs all over the world are required to foster the innovative potential of their
subsidiaries in order enhance financial performance and secure the survival of the organization. CE
is one approach enabling to develop subsidiaries’ potential and contribute in this way to the
competitive advantage of the MNC. Yet some new issues are revealed in this thesis. Investigating
these issues is thus especially important due to the described contemporary relevance of the topic.
The first major issue is the relationship between local responsiveness and subsidiary
initiative. This thesis tackles the issue by analyzing the work of Birkinshaw (1997). Yet the
literature regarding this issue is quite thin and Birkinshaw (1997) presents relating arguments in a
rather implicit way.
66
A second concern represents the special relationships between active subsidiaries/
transnational strategies and subsidiary initiative. In the second part of this thesis it is argued that
transnational structures are closest to all kinds of subsidiary initiatives as it is possible to focus on
one aspect of the integration/ responsiveness framework. This is especially the case as e. g.
communication can be used in order to direct CE. In this way one can foster other kinds of initiative
than facilitated by the corporate, subsidiary and environmental context. Yet it is not known to which
degree high local responsiveness is nocuous for internal market initiatives or conversely high
integration for local and global market initiatives. This is especially important for transnationals as
in the case the nocuous effects outweigh the capacities of e. g. communication for directing CE
transnationals may be urged to concentrate on hybrid market initiatives. In the other case they may
be capable to direct initiative as to their visions.
A further issue represents the relationship between dynamism and hostility and different
kinds of subsidiary initiative. This thesis reveals that literature in this area is quite ambiguous which
is majorly due to different definitions of the corporate context and subsidiary initiative. It is shown
that both have generally a beneficial influence on CE. Yet it is still unclear how these dimensions
are related to different kinds of subsidiary initiative. As the external environment represents a major
determinant for both subsidiary role and subsidiary initiative further investigations on dynamism
and hostility are of utmost importance.
Another promising research area is probably the relationship between the product/ project
life cycle and CE. In section 2.3.2 it is shown that the industry life cycle affects CE whereas section
3.7 revealed the importance of product life for controls. Hence it is questioned in which way control
is related to both industry and product life cycle in order to foster CE?
Similarly it is questioned whether rewards and subsidiary initiative are similarly affected by
environmental influences. Dynamism, technology and growth stage play an important role for
fostering CE (see section 2.3). Yet these factors affect as well individual risk-perceptions (see
section 3.6) and hence as well rewarding. Hence an interesting issue would be to know whether
rewards are similarly affected as subsidiary initiative. Similarly it may be questioned if the external
environment influences only rewards in this way or whether other factors are as well exposed to
environmental influences.
67
This is especially a must if one wants to complete the image of a CE supportive
environment. This thesis reveals certain parts of a CE supportive environment to be
universalistically valid. Other factors depend on a variety of factors. Furthermore this thesis gives
some evidence for a contingency approach towards an internal environment supportive for CE. Yet
this thesis presents as well an approach how one may elaborate a configurational approach towards
CE in subsidiary management. Consequently more research on conmmunication, rewards, control,
staffing, training and culture is required.
Another interesting research question concerns the relationship between individual-centered
and competition-focus values and different kinds of subsidiary initiative. Section 3.12 suggests that
values differ according to the importance of external vs. internal CE. Hence it appears worth to
analyze whether corporate values differ according to the expected type of subsidiary initiative. It
may be interesting as well to analyze as well whether other factors determine as well how actually
values support CE.
Additionally entrepreneurial project selection under multinational strategies is as well an
interesting research area. This thesis shows there is a trade-off between control and autonomy.
Control is necessary especially under multinational strategies. Yet control is as well costly. Hence it
would be interesting to investigate how MNCs handle this issue.
Furthermore research on CE supportive training merits more commitment. This thesis
provides only partial support for a contingency approach in terms of training and CE. Hence more
research is required in this area.
A last issue is the future of the factor ‘organizational support’ which appears consistently
throughout the literature. Yet as major parts of organizational support reside in the area of HRM
this concept is currently slightly thin. Hence it may be questioned whether there is a really a factor
‘organizational support’ which can be used for encouraging entrepreneurial activity.
68
7 Conclusion
This thesis tackles the topic of CE in subsidiary management by answering the questions of
how subsidiary initiative is influenced by subsidiary role and what determines an internal
environment favorable for CE. CE is a very relevant concept for subsidiary management as it
enables MNCs to benefit from capabilities inherent in each subsidiary. This is especially important
as CE affects MNCs financial performance positively (e. g. Zahra 1991).
Subsidiary role is a relevant determinant of CE as this concept entails a corporate, subsidiary
and environmental context. These contexts are proven to have as well an influence on subsidiary
initiative. Consequently the scientific understanding of the CE phenomenon is sharpened as it is
shown that subsidiary initiative cannot be fully self-determined at subsidiary level. Rather different
kinds of subsidiary initiative are facilitated by different configurations of international strategy,
subsidiary capabilities and its local environment. For researchers this thesis provides new insights
as the relevance of the subsidiary role concept as a determining factor of subsidiary initiative is
revealed. Furthermore different determinants of subsidiary role are viewed from a CE perspective
providing a detailed image how corporate, subsidiary and environmental context influence
subsidiary initiative.
From a practical point of view considering subsidiary role for CE is important as company
leaders are shown that determining international strategy has an immediate influence on possible
outcomes of subsidiary initiative. For internationalization purposes insights can be gained what
determines a favorable environment for subsidiaries. Yet environment conditions facilitating CE
may contradict at the same time MNC’s current business. Hence practitioners must view subsidiary
environment under the view of exploitation vs. exploration (e g. Duane Ireland et al. 2006a, March
1991). Furthermore the relevance of subsidiary capability development is confirmed. As both
international strategy and external environment can hardly be used for influencing subsidiary CE
efforts MNCs must pay special attention on the creation and maintenance of distinctive subsidiary
capabilities.
69
A further important insight is MNCs strategy making must be emergent and autocratic in
order to enhance CE (Covin et al. 2006, Garvin & Levesque 2006). In this way contextual changes
and market feedback are taken into account and the inherent risk of entrepreneurial actions is
reduced (see section 1.2.3). These insights enable MNC managers to design viable CE strategies.
Furthermore the relationship between subsidiary role and subsidiary initiative enables managers to
keep an overview over corporate entrepreneurial activities. Initiatives corresponding to strategy are
related to core business and hence automatically within focus.
Secondly literature reveals that the internal environment must be supportive for CE. Yet it is
shown as well that major internal facilitators are heavily influenced by subsidiary role and other
individual, environmental and situational factors. By providing a contingency approach towards an
internal environment favorable for CE this thesis provides new insights within this major area of
CE. This is especially relevant as this area is not fully explored yet and researchers like Christensen
(2005) ask for further investigation. However this thesis cannot provide an ultimate framework
what exactly determines a CE supportive environment. This contingency approach may rather be
regarded rather as a starting point for further investigation as it is shown that MNC must consider a
variety of factors for creating an internal environment that really is supportive for CE. Yet a
possible configurational approach is not fully rejected as this reveals a variety of internal
environmental determinants of CE. As their inter-relation in respect to CE is not fully known yet
research on a configurational approach may be promising in future. Additionally some factors may
be excluded in future out of the literature on internal environmental facilitators. Section 2 and 3.2
reveal that structure has an influence on subsidiary initiative. Yet it is argued as well that structure
cannot be amended for the purpose of fostering CE as structure underlies corporate, subsidiary and
environmental context. Hence adapting structure for CE may endanger the MNCs current business.
As the concept of organizational support can be analyzed to a great extent at an HRM level this
concept must at least be revised within this research area. Otherwise this factor may be excluded
one day out of this area. Finally this thesis provides research with a current review on literature and
several new research directions possibly stimulating research within this area.
70
For Practitioners it is important to retain that currently environmental scanning, organization
support, allocation of resources and the existence of individual-centered and competition-focus
values can be considered as generally supportive for CE. Communication, rewards, control,
staffing, training and culture are further organizational facilitators which need to be developed in
congruence with subsidiary role and other environmental, individual and situational factors. MNCs
need to understand which subsidiary initiatives are facilitated by current subsidiary role
configuration. Organizational communication channels, culture and the HRM system must be
developed in congruence with these structural preconditions and other individual, environmental
and situational influences. In this way MNCs are capable to create an environment providing
managers with sufficiently freedom for developing and implementing ideas without fragmentizing
the MNC. Finally it is important to retain that these environmental facilitators may be used in order
to foster other forms of subsidiary initiative than facilitated by the subsidiary role context. Special
tools for creating a CE supportive internal environment can be e. g. the use if protection
sponsorships, hybrid structures, incentive pay scheme, internal labor market, informal
communication channels and catalytic coaching.
Thus in terms of CE in subsidiary management this thesis describes first how to incorporate
a strategic focus in CE by considering the corporate, subsidiary and environmental context.
Secondly it describes how these contextual influences must be represented in the organization’s
internal environment. Finally this thesis provides as well evidences which other factors must as well
be considered in the internal environment. In this way other initiatives than facilitated by subsidiary
role may as well be enhanced by the MNC.
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Table 1: Overview of the key literature on international strategies, subsidiary role and CE
Author Year Focus Relevance for International Strategy and CE
Jarillo & Martínez 1990 Subsidiary roles Provides framework for analysis of strategy at subsidiary level.
Introduction of Receptive, Active and Autonomous subsidiaries
Hoffman 1994 Strategic subsidiary management Integration of MNC strategy, external Environment and subsidiary
capabilities into a model of subsidiary strategies. Especially relevant as
external environment and subsidiary capabilities are proven to have an
influence on CE
Birkinshaw & Morrison 1995 Strategy and Structure in
subsidiaries
Provides overview on the literature of subsidiary strategy
Taggart 1997 Subsidiary roles Extends integration-responsiveness framework. Introduces quiescent
subsidiary
Birkinshaw 1997 Subsidiary initiative Provides framework for analyzing CE at subsidiary level. Introduction
of Local Market, Internal Market, Global Market and Hybrid Initiatives
Bartlett & Ghoshal 1998 MNC strategy Provides Integration-Responsiveness Framework
Lin & Hsieh 2010 Subsidiary roles, Operational
capabilities and procedural justice
Extends knowledge on subsidiary roles
Table 2: Overview of the key literature regarding CE and external environment
Author Year Focus Relevance for External Environment and CE
Covin & Slevin 1991 Entrepreneurship as firm behavior Proposes the relevance of technological sophistication, dynamism,
hostility, industry life cycle stage for entrepreneurship
Zahra 1991 Predictors and outcomes of CE Validates empirically the relevance of dynamism, hostility and
heterogeneity
Zahra 1993 CE, external environment and
financial outcomes
Proved relevance of dynamism, hostility and technological
opportunities for CE
Hofmann 1994 Strategic subsidiary management Provides framework for integrating the external environment into
subsidiary strategies and hence subsidiary initiative
Birkinshaw et al. 1998 Subsidiary initiative and firm-
specific advantages
Industry globalization, local competition
Antoncic & Hisrich 2000 Intrapreneurship, organizational,
environmental and characteristics,
performance
Dynamism, technological opportunities, industry growth, demand for
new products, hostility (unfavorability of change, competitive rivalry)
Zahra & Garvis 2000 ICE and environmental hostility Extended insights on environmental hostility
Antoncic & Hisrich 2001 Intrapreneurship, organizational
and environmental characteristics,
performance
Dynamism, technological opportunities, industry growth, demand for
new products, hostility (unfavorability of change, competitive rivalry)
Lumpkin & Dess
2001 EO, environment and industry life
cycle
Insights on proactiveness and industry life-cycle, dynamism and
hostility
Zahra et al. 2001 Entrepreneurship and corporate and
local environment context
Dynamism, hostility, complexity
Davis & Meyer 2004 Subsidiary and local environment Relationship between hostility and R&D
Birkinshaw et al. 2005 Subsidiary entrepreneurship,
external and internal competitive
forces and performance
Local competition
Antoncic 2007 Intrapreneurship Dynamism, technological opportunities, industry growth, demand for
new products, hostility (unfavorability of change, competitive rivalry)
Verbeeke et al. 2007 Strategic renewal and corporate
venturing in subsidiaries
Dynamism, industry life cycle
Table 3: Overview of the key literature regarding CE and capabilities and resources
Author Year Focus Relevance for capabilities and resources and CE
Kuratko et al. 1990 CE environment Resource availability
Covin & Slevin 1991 Entrepreneurship as firm behavior proposes relevance of resources and competencies for CE; highlights
the relevance of short time to market period, sufficient funding for
R&D, opportunity recognition and the creation of new products from
generic technologies
Hofmann 1994 Strategic subsidiary management Provides framework for integrating capabilities and resources into
subsidiary strategies and hence subsidiary initiative
Birkinshaw 1997 Subsidiary initiative Provides framework for analyzing CE at subsidiary level. Introduction
of local market, internal market, global market and hybrid market
initiatives
Birkinshaw et al. 1998 Subsidiary initiative and firm-
specific advantages
Development of three criterions in order to asses resources which can
contribute to the development of firm-specific advantages
Birkinshaw & Hood 1998 Subsidiary evolution, capability and
charter changes
Relevance of capabilities for enhancement of subsidiary charter
Birkinshaw 1999 Subsidiary initiative Distinctive capabilities
Verbeke et al. 2007 Strategic renewal and corporate
venturing in subsidiaries
Relevance of specialized resources for strategic renewal and corporate
venturing
Schotter & Bontis 2009 Intra-organizational knowledge
exchange
Proves the positive association between local capability development
and subsidiary initiative
Table 4: Overview of the key literature regarding CE and corporate structure
Author Year Focus Relevance for structure and CE
Slevin & Covin 1990 CE and organizational structure Organic structures
Covin & Slevin 1991 Entrepreneurship as firm behavior Negative association between CE and centralization, structural
formalization and complexity, positive association of and CE and
structural organicity
Zahra 1991 Predictors and outcomes of CE Empirical support for relevance of integration
Hornsby et al. 1993 CE, external environment and
financial outcomes
organizational boundaries
Birkinshaw et al. 1998 Subsidiary initiative and firm-
specific advantages
Empirical support for the relevance of autonomy; recognition of
specialized resources
Birkinshaw 1999 Subsidiary initiative Weak support for “a high level of decision-making centralization will
suppresses subsidiary initiative”
Vachani 1999 Global diversification and
subsidiary autonomy
Related product diversification negatively and unrelated geographic
diversification negatively associated with subsidiary autonomy, world-
wide product division structure positively, more autonomy for
personnel, marketing and production
Zahra et al. 2001 Entrepreneurship and corporate and
local environment context
Empirical evidence for the positive association of autonomy and
subsidiary initiative
Young & Tavares 2004 Centralization and Autonomy Subsidiary autonomy vs. decentralization, relevance of national
responsiveness and industry sector
Christensen 2005 Intrapreneurship Cross-functional teams
Dess & Lumpkin 2005 EO Skunkworks, fragmentization
Duane Ireland et al. 2006 CE Negative influence of formalization on CE. Flat structures.
Decentralization and communication
Garvin & Levesque 2006 CE Balancing Integration and Autonomy
Verbeeke et al. 2007
Strategic renewal and corporate
venturing in subsidiaries
Relevance of decentralization for strategic renewal and corporate
venturing
Callaway 2008 Global corporate ventures Resource allocation and centralization/ autonomy
Veenker et al 2008 CE Positive correlation between decentralization and CE
.
Table 5: Overview of the key literature regarding CE and communication
Author Year Focus Relevance for communication and CE
Zahra 1991 Predictors and outcomes of CE Introduction of new ideas, cross-functional cooperation. empirical
support for the relevance of communication
Birkinshaw 1997 Subsidiary initiative Provides framework for analyzing CE at subsidiary level. introduction
of local market, internal market, global market and hybrid market
initiatives
Birkinshaw 1999 Subsidiary initiative Weak support for corporate-subsidiary communication
Antoncic & Hisrich 2000 Intrapreneurship Empirical support for communication amount and quality
Antoncic & Hisrich 2001 Intrapreneurship, organizational
and environmental characteristics,
performance
Empirical support for communication amount and quality
Antoncic 2001 Organizational Processes in
intrapreneurship
Intra- and inter-firm communication
Christensen 2005 Intrapreneurship Qualitative insights on communication at Danfoss
Antoncic 2007 Intrapreneurship Empirical support for communication amount and quality
Kenney & Mujtaba 2007 CE Intrinsic motivation and CE
Verbeke et al. 2007 Strategic renewal and corporate
venturing in subsidiaries
Negative association for communication and new venturing, positive
association for communication and renewal
Table 6: Overview of the key literature regarding CE and environmental scanning
Author Year Focus Relevance for communication and CE
Covin & Slevin 1991 Entrepreneurship as firm behavior Introduction of new ideas
Zahra 1991 Predictors and outcomes of CE Empirical support for the relevance of scanning for CE
Russell 1999 Process model of intrapreneurial
system
Initiation of new ideas and scanning
Antoncic & Hisrich 2001 Intrapreneurship, organizational
and environmental characteristics,
performance
Empirical support for the relevance of scanning for CE
Antoncic 2001 Organizational Processes in
intrapreneurship
Proposes relevance of scanning for CE
Antoncic 2007 Intrapreneurship Empirical support for the relevance of scanning for CE
Table 7: Overview of the key literature regarding CE and organizational support
Author Year Focus Relevance for organizational support and CE
Kuratko et al. 1990 CE environment Empirical evidence for relevance of management support
Hornsby et al 1993 CE, external environment and
financial outcomes
Empirical evidence for relevance of management support
Birkinshaw & Hood 1998 Subsidiary evolution, capability and
charter changes
Capability development and resource allocation
Antoncic & Hisrich 2000 Intrapreneurship Empirical evidence for relevance of organizational support
Antoncic & Hisrich 2001 Intrapreneurship, organizational
and environmental characteristics,
performance
Empirical evidence for relevance of organizational support
Antoncic 2001 Organizational Processes in
intrapreneurship
Internal and external organizational support
Hornsby et al. 2002 Middle managers, CE and the
internal environment
Top management support
Kuratko et al. 2005 Middle managers entrepreneurial
behavior
Management support
Zhao 2005 Entrepreneurship and innovation Empirical evidence for relevance of organizational support
Duane Ireland et al. 2006 CE Links internal environment and CE with HRM
Antoncic 2007 Intrapreneurship Empirical evidence for relevance of organizational support
Table 8: Overview of the key literature regarding CE and rewards
Author Year Focus Relevance for rewards and CE
Kerr 1975 Rewarding Rewards and behavior reinforcement
Hornsby et al 1993 CE, external environment and
financial outcomes
Goals, feedback, individual responsibility and rewards based on result,
work discretion
Hornsby et al. 2002 Middle managers, CE and the
internal environment
Goals, feedback, individual responsibility and rewards based on result,
work discretion
Thornberry 2003 CE Danger of jealousy
Christensen 2005 Intrapreneurship Recognition, own projects, expanded job responsibilities, promotions,
research fundings…
Hayton 2005 CE and HRM Informal actions, environmental factors, individual factors, internal vs.
external equity, less rigidly designed jobs
Duane Ireland et al. 2006 CE Team-work
Table 9: Overview of the key literature regarding CE and control
Author Year Focus Relevance for control and CE
Zahra 1991 Predictors and outcomes of CE Empirical evidence for negative association between excessive use of
excessive use of controls and CE
Kuratko et al. 1993 CE Necessity of controls
O’Donnell 2000 Subsidiary management Empirical evidence for negative association between autonomy and
control
Antoncic & Hisrich 2000 Intrapreneurship Empirical evidence for the relevance of formal controls
Antoncic & Hisrich 2001 Intrapreneurship, organizational
and environmental characteristics,
performance
Empirical evidence for the relevance of formal controls
Antoncic 2001 Organizational Processes in
intrapreneurship
Intra-firm formal controls
Zahra et al. 2001 Entrepreneurship and corporate and
local environment context
Empirical evidence for positive association between strategic controls
and CE
Zhao 2005 Entrepreneurship and innovation Flexible control system
Duane Ireland et al. 2006 CE Strategic controls, balancing exploitation and exploration, budgetary
flexibility, slack
Antoncic 2007 Intrapreneurship Empirical evidence for the relevance of formal controls
Table 10: Overview of the key literature regarding CE and staffing
Author Year Focus Relevance for staffing and CE
Zhao 2005 Entrepreneurship and innovation Commitment to change required, entrepreneurial project manager,
diverse skills
Duane Ireland et al. 2006 CE Flexibility, risk-taking, commitment to constant innovation required
Kenney & Mujtaba 2007 CE Selection tests not applicable, entrepreneurial aptitude self identified
Table 11: Overview of the key literature regarding CE and training
Author Year Focus Relevance for training and CE
Thornberry 2003 CE Technical skills
Hayton 2005 CE and HRM Documents relevance of training
Duane Ireland et al. 2006 CE Goals of HRM for CE, continuous and less structured training
Wakkee et al. 2008 CE, coaching, entrepreneurial self-
efficacy
Empirical evidence for relevance of coaching and ESE for CE,
goalsetting
Table 12: Overview of the key literature regarding CE and culture
Author Year Focus Relevance for culture and CE
Hisrich 1990 Entrepreneurship/ Intrapreneurship Visions, goals and action plans
Covin & Slevin 1991 Entrepreneurship as firm behavior Expression of novel and radical ideas, empowerment of middle- and
low-level employees, positive attitudes towards change and innovation
and the spirit and practice of teamwork
Morris, Davis & Allen 1994 CE and individualism vs.
collectivism
Empirical evidence for positive association between CE and a modest
level of individualism
Birkinshaw et al. 1998 Subsidiary initiative and firm-
specific advantages
Empirical evidence for relevance of entrepreneurial culture on
subsidiary initiative and capability development
Dimitratos &
Plakoyiannakis
2003 Entrepreneurial culture market orientation, innovation propensity, risk attitude, networking
orientation and motivation
Zhao 2005 Entrepreneurship and innovation Individualism, power distance, uncertainty avoidance
Duane Ireland et al. 2006 CE Focus on the future, change, uncertainty