Opportunity identification in MNC subsidiaries:context and performance implications

This thesis brings together notions from the distinctive fields of international business and entrepreneurship in order to examine the under-investigated theme of Opportunity Identification (OI) within an entirely new context, that of the multinational subsidiary. Despite its centrality in entrepreneurship research, the notion of OI still lies at an embryonic stage of investigation, particularly as an organisation-wide phenomenon. Especially with respect to the multinational subsidiary, the concept of OI has not been examined per se, regardless of studies proving that entrepreneurial subsidiaries of MNCs can also be actively involved in the identification and pursuit of innovative ideas. In addressing the above key gaps, the present thesis develops a resource-based framework that examines both antecedents and outcomes of OI at the individual subsidiary level. This framework essentially integrates theoretical perspectives on subsidiary entrepreneurship and OI under a Resource-Based View (RBV) of the multinational subsidiary. This constitutes an innovative approach both in the subsidiary-related and entrepreneurship literature. This study adopts a mixed methods approach in combining qualitative theory building and quantitative theory testing within a two-staged research methodology. The first stage involved conducting exploratory case studies in 6 Scottish “entrepreneurial” subsidiaries, given the scarcity of relevant empirical work. The second stage involved carrying out a large-scale mail survey on U.S., European, and Japanese subsidiaries operating in the UK. An overall response rate of 16% was achieved. Quantitative data analysis entailed hypotheses testing through both Multiple Regression and Structural Equation (SEM) models. This study conceptualises subsidiary entrepreneurship as a notion broader than subsidiary initiative, comprising not only radical change and innovation, but also less fundamental but still significant improvements that continuously take place at the subsidiary level. The findings prove that subsidiary entrepreneurship is essentially driven by opportunities identified at the subsidiary level. For the identification of these opportunities, particular subsidiary-specific “entrepreneurial capabilities”, such as the subsidiary’s innovation propensity, risk attitude and external networking with non-direct value-chain members, are critical. Also, factors determining the parent-subsidiary relationship, such as the subsidiary’s autonomy levels and the flows of “strategic” knowledge and skills between the subsidiary and the parent, provide access to unique and valuable resources that can expand the subsidiary’s opportunity set. However, the external environment, both local and international, was not found to pose a significant direct effect on subsidiary OI. This study concludes with establishing a positive link between subsidiary entrepreneurship and performance. Implications for theory, practice and policy making are discussed. Major contributions of this study to theory include the development of a more holistic conceptualisation and measurement of subsidiary entrepreneurship, along with the adoption of a Resource-Based View (RBV) of the multinational subsidiary, which establishes the existence of specific “entrepreneurial” capabilities at the subsidiary level.