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.

2

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).

3

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.

4

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.

7

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

8

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.

9

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)”.

11

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.

12

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.

13

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.

61

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.

References

Ambos, TC, Ambos, B, & Schlegelmilch, BB 2006, ‘Learning from foreign subsidiaries: An

empirical investigation of headquarters’ benefits from reverse knowledge transfers’,

International Business Review, 15 (3), pp. 294–312, <http://www.ebsco.com>, viewed 8

November 2010

Åmo, BW & Kolvereid, L 2005, ‘Organizational Strategy, Individual Personality and

Innovation Behavior’, Journal of Enterprising Culture, 13(1), pp. 7-19,

<http://www.proquest.com>, viewed 4 August 2010.

Andersson, U & Forsgren, M 1996, ‘Subsidiary embeddedness and control in the

multinational corporation’, International Business Review, 5(5), pp. 487-508,

<http://www.ebsco.com>, viewed 26 November 2010.

Antoncic, B 2007, ‘Intrapreneurship: a comparative structural equation modeling study’,

Industrial Management + Data System, 107(3), pp. 309-325, <http://www.proquest.com>,

viewed 4 August 2010.

Antoncic, B & Zorn, O 2004, ‘The Mediating Role of Corporate Entrepreneurship in the

Organizational Support–Performance Relationship: An Empirical Examination’, Managing

Global Transitions, 2(1), pp. 5-14, http://www2.fm-kp.si/eng/, viewed 4 August 2010.

Antoncic, B & Hisrich, RD 2003, ‘Privatization, Corporate Entrepreneurship, and

Performance: Testing a Normative Model’, Journal of Developmental Entrepreneurship, 8(3),

pp. 197-218, <http://www.proquest.com>, viewed 4 August 2010.

Antoncic, B 2001,’Organizational Processes in Intrapreneurship: A conceptual Integration’,

Journal of Enterprising Culture, 9(2), pp. 221-236, <http://www.ebsco.com>, viewed 4

August 2010.

Antoncic, B & Hisrich, RD 2001, ‘Intrapreneurship: Construct refinement and cross-cultural

validation’, Journal of Business Venturing, 16(5), pp. 495-527, <http://www.proquest.com>,

viewed 4 August 2010.

Antoncic, B & Hisrich, RD 2000, ‘Intrapreneurship modeling in transition economies: A

comparison of Slovenia and the United States’, Journal of Developmental Entrepreneurship,

5(1), pp. 21-40, <http://www.proquest.com>, viewed 4 August 2010.

Arbaugh, JB & Camp, SM 2004, ‘Employee Equity, Incentive Compensation, and Growth in

Entrepreneurial Firms’, New England Journal of Entrepreneurship, 7(1), pp. 15-27,

<http://www.sacredheart.edu/download/1131_neje_spring04.pdf>, viewed 5 September.

Barney, J 1991, 'Firm resources and sustained competitive advantage', Journal of

Management, 17(1), pp. 99-121, <http://www.ebsco.com>, viewed 12 November 2010.

Bartlett, CA & Ghoshal, S 1998, Managing across Borders: The Transnational Solution, 2nd

edn, Harvard Business School Press, Cambridge, MA.

Bettis, RA & Hitt, MA 1995, ‘The new competitive landscape’, Strategic Management

Journal, 16, 7–19, <http://www.ebsco.com>, viewed 18 October 2010.

Birkinshaw, J & Robbins P 2010,’Ideas at Work: Sparkling Innovation’, Business Strategy

Review, 21(2), pp. 7-12, <http://www.ebsco.com>, viewed 4 August 2010.

Birkinshaw, J, Hood, N & Young, S 2005, ‘Subsidiary entrepreneurship, internal and external

competitive forces, and subsidiary performance’, International Business Review, 14(2), pp.

227-248, <http://www.ebsco.com>, viewed 4 August 2010.

Birkinshaw, J 2001, ‘Strategy and Management in MNE Subsidiaries, in Rugman, Am &

Brewer, TL &(ed.), The Oxford Book of International Business, Oxford University Press,

Oxford, pp. 380-402.

Birkinshaw, J 1999, ‘The Determinants and Consequences of Subsidiary Initiative in

Multinational Corporations’, Entrepreneurship Theory and Practice, 24(1), pp. 9-36,

<http://www.proquest.com>, viewed 4 August 2010.

Birkinshaw, J, Hood, N & Jonsson, S 1998, ‘Building Firm-Specific Advantages in

Multinational Corporations: The Role of Subsidiary Initiative’, Strategic Management

Journal, 19(3), pp. 221-241, <http://www.proquest.com>, viewed 4 August 2010.

Birkinshaw, J 1998, ‘Corporate entrepreneurship in network organizations: How subsidiary

initiative drives internal market efficiency’, European Management Journal, 16(3), pp. 355-

364, <http://www.proquest.com>, viewed 4 August 2010.

Birkinshaw, J & Hood N 1998. ‘Multinational subsidiary evolution: Capability and charter

change in foreign owned subsidiary companies’, Strategic Management Journal, 23(4), pp.

773-795, <http://www.proquest.com>, viewed 17 September 2010.

Birkinshaw, J 1997, ‘Entrepreneurship in Multinational Corporations: The Characteristics of

Subsidiary Initiatives’, Strategic Management Journal, 18(3), pp. 207-229,

<http://www.proquest.com>, viewed 4 August 2010.

Birkinshaw, J & Ridderstråle, J 1996, ‘Fighting the corporate immune system: a process study

of peripheral initiatives in multinational corporations’, International Business Review, 8, pp.

149-180,

<http://faculty.london.edu/jbirkinshaw/assets/documents/18fighting_the_corporate_immune_s

ystem.sloan_management_review.1998.pdf>, viewed 15 September 2010.

Birkinshaw, J 1996, ‘How Multinational Subsidiary Mandates Are Gained and Lost’, Journal

of International Business Studies, 27(3), pp. 467-495, <http://www.proquest.com>, viewed 15

September 2010.

Birkinshaw, J 1995, ‘Encouraging Entrepreneurial Activity in Multinational Corporations’,

Business Horizons, 38(3), pp. 32-39, <http://www.proquest.com>, viewed 15 September

2010.

Birkinshaw, J & Morrison, AJ 1995, ‘Configuration of Strategy and Structure in Subsidiaries

of Multinational Corporations’, Journal of International Business Studies, 26(4), pp. 729-753,

<http://www.jstor.org>, viewed 15 September 2010.

Boojihawon, DK, Dimitratos, P & Young, S 2007, ‘Characteristics and influences of

multinational subsidiary entrepreneurial culture: The case of the advertising sector’,

International Business Review, 16(5), pp. 549-573, <http://www.ebsco.com>, viewed 4

August 2010.

Brunåker, S & Kurvinen, J 2006, ‘ Intrapreneurship, local initiatives in organizational change

processes’, Leadership & Organization Development Journal, vol. 27(1-2), pp. 118-132,

<http://www.proquest.com>, viewed 4 August 2010.

Callaway, SK 2008, ‘Global Corporate Ventures: A New Trend of

International Corporate Entrepreneurship’, Multinational Business Review, 16(3), pp. 1-22,

<http://www.proquest.com>, viewed 4 August 2010.

Callaway, SK 2004, ‘Elements of Infrastructure: Factors Driving International

Entrepreneurship’, New England Journal of Entrepreneurship, 7(1), pp. 15-27, viewed 7

September 2010, <http://www.sacredheart.edu/download/1131_neje_spring04.pdf>, viewed 4

August 2010.

Campbell, DJ 2000, ‘The proactive employee: Managing workplace initiative’, The Academy

of Management Executive, 14(3), pp. 52-66, <http://www.proquest.com>, viewed 4 August

2010.

Cantwell, J & Mudambi, R 2005, ‘MNE competence-creating subsidiary mandates’, Strategic

Management Journal, 26(12), pp. 1109-1128, <http://www.proquest.com>, viewed 4 August

2010.

Chen, CC, Greene, PG & Crick, A 1998, ‘Does entrepreneurial self-efficacy distinguish

entrepreneurs from managers?’, Journal of Business Venturing, 13(4), pp. 295-316,

<http://www.ebsco.com>, viewed 8 November 2010.

Chini, T, Ambos, B & Wehle, K 2005, ‚The Headquarters-subsidiaries Trench: Tracing

Perception Gaps Within The Multinational Corporation’, European Management Journal,

23(2), pp. 145-153, <http://www.proquest.com>, viewed 4 August 2010.

Christensen, KS 2005, ‘Enabling intrapreneurship: the case of a knowledge-intensive

industrial company’, European Journal of Innovation Management, 8(3), pp. 305-322,

<http://www.proquest.com>, viewed 4 August 2010.

Covin, JG, Green, K, Slevin DP 2006, ‘Strategic Process Effects on the Entrepreneurial

Orientation-Sales Growth Rate Relationship‘, Entrepreneurship Theory and Practice, 30(1),

pp. 57-81, <http://www.proquest.com>, viewed 4 August 2010.

Covin, JG & Slevin, DP 1991, ‘A Conceptual Model of Entrepreneurship as Firm Behavior’,

Entrepreneurship Theory and Practice, 16(1), pp. 7-26, <http://www.proquest.com>, viewed

4 August 2010.

Davis, LN, & Meyer, KE (2004, ‘Subsidiary research and development, and the local

environment’, International Business Review, 13(3), pp. 359–382, <http://www.ebsco.com>,

viewed 8 November 2010.

Delery, JE & Doty, DH 1996, ‘Modes of Theorizing in Strategic Human Resource

Management: Tests of Universalistic, Contigency and Configurational Performance

Preconditions’, Academy of Management Journal, 39(4), pp. 802-836,

<http://www.ebsco.com>, viewed 27 November 2010.

Dess, GG & Lumpkin, GT 2005, ‘The Role of Entrepreneurial Orientation in Stimulating

Effective Corporate Entrepreneurship’, Academy of Management Executive, 19(1), pp. 147-

157, <http://www.ebsco.com>, viewed 4 August 2010.

Dimitratos, P & Plakoyiannaki, E 2003, ‘Theoretical foundations of an entrepreneurial

culture’, Journal of International Entrepreneurship, 1(2), pp. 187-215,

<http://www.ebsco.com>, viewed 27 December 2010.

Duane Ireland, RD, Covin, JG & Kuratko, DF 2009, 'Conceptualizing Corporate

Entrepreneurship Strategy', Entrepreneurship Theory and Practice, 33(1), pp. 19-46,

<http://www.proquest.com>, viewed 9 September 2010.

Duane Ireland, RD, Kuratko, DF & Morris, MH 2006a, 'A health audit for corporate

entrepreneurship: innovation at all levels: part I', The Journal of Business Strategy, 27(1), pp.

10-17, <http://www.emeraldinsight.com/>, viewed 9 September 2010.

Duane Ireland, RD, Kuratko, DF & Morris, MH 2006b, 'A health audit for corporate

entrepreneurship: innovation at all levels: part II', The Journal of Business Strategy, 27(2), pp.

21-30, <http://www.proquest.com>, viewed 9 September 2010.

Duane Ireland, RD, Kuratko, DF & Covin,JG 2003, 'Antecedents, Elements, and

Consequences of Corporate Entrepreneuship Strategy', Academy, of Management Proceedings,

0(0), pp. L1-6, <http://www.ebsco.com>, viewed 9 September 2010.

Edralin, DM 2010, ‘Human Resource Management Practices: Drivers for Stimulating

Corporate Entrepreneurship in Large Companies in the Philippines.’, DLSU Business &

Economics Review, 19(2), pp. 25-42, <http://www.ebsco.com>, viewed 4 August 2010.

Gapp, R & Fisher, R 2007, ‘Developing an intrapreneur-led three-phase model of innovation’,

International Journal of Entrepreneurial Behaviour and Research, 13(6), pp. 330-348,

<http://www.proquest.com>, viewed 4 August 2010.

Garvin, DA & Levesque 2006, LC, ‘Meeting the Challenge of Corporate Entrepreneurship’,

Harvard Business Review, 84(10), pp. 102-112, <http://www.proquest.com>, viewed 8

October 2010.

Ghoshal, S & Bartlett CA 1990, 'The Multinational Corporation as an Interorganizational

Network', Academy of Management Review, 15(4), pp. 603-625, <http://www.ebsco.com>,

viewed 9 September 2010.

Goodale, JC, Kuratko, DF & Hornsby, JS 2008, 'Influence factors for operational control and

compensation in professional service firms', Journal of Operations Management, 26(5), pp.

669-689, <http://www.ebsco.com>, viewed 9 September 2010.

Green, KM, Covin, JG & Slevin, DP 2008, ‘Exploring the relationship between strategic

reactiveness and entrepreneurial orientation: The role of structure-style fit’, Journal of

Business Venturing, 23(3), pp. 356-383, <http://www.proquest.com>, viewed 4 August 2010.

Hart, C 1998, ‘Doing a Literature Review’, 10th edn, Sage Publications, London.

Haugland, SA 2010, ‘The integration-responsiveness framework and subsidiary management:

A commentary’, Journal of Business Research, 61(1), pp. 94-97, <http://www.proquest.com>,

viewed 4 August 2010.

Hayton, JC 2005, ‘Promoting corporate entrepreneurship through human resource

management practices: A review of empirical research’, Human Resource Management

Review, 15(1), <http://www.ebsco.com>, viewed 8 October 2010.

Hisrich, RD 1990, ‘Entrepreneurship/intrapreneurship’, American Psychologist, 45(2), pp.

209-22, <http://www.apa.org>, viewed 20 September 2010.

Hoffman, RC 1994, ‘Generic strategies for subsidiaries of multinational corporations’,

Journal of Managerial Issues, 4(1), pp. 69-87, <http://www.ebsco.com>, viewed 8 October

2010.

Hornsby, JS, Kurakto DF, Shepherd, DA & Bott, JP 2009, 'Managers' corporate

entrepreneurial actions: Examining perception and position', Journal of Business Venturing,

24(3), pp. 236-248, <http://www.proquest.com>, viewed 9 September 2010.

Hornsby JS, Kuratko, DF & Zahra SA 2002, ‘Middle managers’ perception of the internal

environment for corporate entrepreneurship: assessing a measurement scale’, Journal of

Business Venturing, 17(3), pp. 253-273, <http://www.proquest.com>, viewed 4 August 2010.

Hornsby, JS, Kuratko, DF & Montagno, RV 1999, 'Perception of internal factors for corporate

entrepreneurship: A comparison of Canadian and U.S. Mergers', Entrepreneuship Theory and

Practice', 24(2), pp. 9-24, <http://www.proquest.com>, viewed 4 September 2010.

Hornsby, JS, Naffziger, DW, Kuratko, DF & Montagno, RV 1993, ‘An interactive model of

the corporate entrepreneurship process’, Entrepreneurship Theory and Practice, 17(2), pp. 29-

38, <http://www.proquest.com>, viewed 4 August 2010.

Jarillo, JC & Martínez, JI 1990, ‘Different roles for subsidiaries: the case of multinational

corporations in Spain’, Strategic Management Journal, 11(7), pp. 501-513,

<http://www.ebsco.com>, viewed 3 November 2010.

Johnston, S & Menguc, B 2007, ‘Subsidiary size and the level of subsidiary

autonomy in multinational corporations: a quadratic model investigation of Australian

subsidiaries’, Journal of International Business Studies, 38(5), pp. 787-802,

<http://www.ebsco.com>, viewed 4 August 2010.

Kenney, M & Mujtaba, BG 2007, ‘Understanding Corporate Entrepreneurship and

Development: A Practitioner View of Organizational Intrapreneurship’, Journal of Applied

Management and Entrepreneurship, 12(3), pp. 73-88, <http://www.proquest.com>, viewed 4

August 2010.

Kerr, S 1975, ‘On the Folly of Rewarding A, While Hoping for B’, The Academy of

Management Journal, 18(4), pp. 768-783, <http://www.ebsco.com>, viewed 4 September

2010.

Kuratko DF 2009, 'The entrepreneurial imperative of the 21st century', Business Horizons,

52(5), pp. 421-428, <http://www.elsevier.de/>, viewed 9 September 2010.

Kuratko, DF, Covin, JG & Garrett, RP 2009, 'Corporate venturing: Insights from actual

performance', Business Horizons, 24(6), pp. 459-468, <http://www.ebsco.com>, viewed 9

September 2010.

Kuratko, DF & Audretsch, DB 2009, 'Strategic Entrepreneurship: Exploring Different

Perspectives of an Emerging Concept', Entrepreneuship Theory and Practice, 33(1), pp. 1-18,

<http://www.ebsco.com>, viewed 9 September 2010.

Kuratko, DF, Duane Ireland, RD, Covin, JG & Hornsby, RS 2005, 'A Model of Middle-Level

Managers' Entrepreneurial Behavior', Entrepreneurship Theory and Practice, 29(6), pp. 699-

716, <http://www.proquest.com>, viewed 4 September 2010.

Kuratko, DF & Goldsby, MG 2004, 'Corporate Entrepreneurs or Rogue Middle Managers? A

Framework for Ethical Corporate Entrepreneurship', Journal of Business Ethics, 55(1), pp. 13-

30, <http://www.proquest.com>, viewed 9 September 2010.

Kuratko, DF, Hornsby, JS, Naffziger, DW & Montagno, RV 1993, ‘Implement Entrepreneurial

Thinking in Established Organizations’, SAM Advanced Management Journal (07497075),

58(1), pp. 28-35, <http://www.ebsco.com>, viewed 4 August 2010.

Kuratko, DF, Montagno, RV & Hornsby, JS 1990, ‘Developing an intrapreneurial assessment

instrument for an effective corporate entrepreneurial environment’, Strategic Management

Journal’, 11(4), pp. 49-58, <http://www.ebsco.com>, viewed 11 November 2010.

Kuratko, DF, & Montagno, RV 1989, ‘Intrapreneurship: Developing innovation in the

corporate culture’, Strategic Management Journal, 11(4), pp. 49-59,

<http://www.ebsco.com>, viewed 4 September 2010.

Kuratko, DF & Montagno, RV 1989, 'The Intrapreneurial Spirit', Training and Development

Journal, 43(10), pp. 83-86, <http://www.proquest.com>, viewed 9 September 2010.

Lee JR & Chen JS 2003, ‘ Internationalization, local adaptation, and subsidiary's

entrepreneurship: An exploratory study on Taiwanese manufacturing firms in Indonesia and

Malaysia’, Asia Pacific Journal of Management, 20(1), pp. 51-72,

<http://www.proquest.com>, viewed 4 August 2010.

Lin, SL & Hsieh, AT 2010, ‘International strategy implementation: Roles of subsidiaries,

operational capabilities, and procedural justice’, Journal of Business Research, 63(1), pp. 52-

60, <http://www.proquest.com>, viewed 4 August 2010.

Lumpkin, GT & Dess, GG 2001, ‘Linking two dimensions of entrepreneurial orientation to

firm performance: The moderating role of environment and industry life cycle, Journal of

Business Venturing, 16(5), pp. 429-451, <http://www.proquest.com>, viewed 4 August 2010.

Manimala, MJ, Jose, PD & Thomas, KR 2006,‘Organizational Constraints on

Innovation and Intrapreneurship: Insights from Public Sector’, Vikalpa: The Journal for

Decision Makers, 31(1), pp. 49-61, <http://www.ebsco.com>, viewed 30 March 2010.

Manolopoulos, D 2006, ‘The Concept of Autonomy in the Subsidiary Management Research:

A Conceptual Investigation’, Journal of Transnational Management, 11(4), pp. 45-62,

<http://www.proquest.com>, viewed 4 August 2010.

March, JG 1991, 'Exploration and Exploitation in Organizational Learning', 2(1), pp. 71-87,

<http://www.ebsco.com>, viewed 9 September 2010.

McFadzean, E, O'Loughlin, A & Shaw, E 2005,’ Corporate entrepreneurship and innovation

part 1: the missing link’, European Journal of Innovation Management, 8(3), pp. 350-372,

<http://www.proquest.com>, viewed 4 August 2010.

Molina, C & Callahan, JL 2009, ‘Fostering organizational performance: The role of learning

and intrapreneurship’, Journal of European Industrial Training, 33(5), pp. 388-400,

<http://www.emeraldinsight.com>, viewed 4 August 2010.

Morris, MH, Davis, DL, & Allen, JW 1994, ‘Fostering corporate entrepreneurship: Cross-

cultural comparisons of the importance of individualism versus collectivism’, Journal of

International Business Studies, 25(1), pp. 65–89, <http://www.jstor.org>, viewed 28

December 2010.

Naman, JL & Slevin, DP 1993, 'Entrepreneurship and the Concept of Fit: A Model and

Empirical Tests', Strategic Management Journal, 14(2), pp. 137-153,

<http://www.ebsco.com>, viewed 9 September 2010.

O’Donnell, SW 2000, ‘Managing foreign subsidiaries: agents of headquarters, or an

interdependent network?’, Strategic Management Journal, 21(5), pp. 525–548,

<http://www.ebsco.com>, viewed 9 December 2010.

Paterson, SL & Brock, DM 2002, ‘The development of subsidiary-management research:

review and theoretical analysis’, International Business Review, 11(2), pp. 139-164,

<http://www.ebsco.com>, viewed 4 August 2010.

Picard, J, Boddewyn, JJ & Grosse, R 1998, ‘Centralization and Autonomy in International-

Marketing Decision Making’, Journal of Global Marketing, 12(2), pp. 5-25,

<http://www.ebsco.com>, viewed 4 August 2010.

Pinchot, G 1985, Intrapreneuring, Harper & Row, New York.

Porter, ME 1990, The Competitive Advantage of Nations, Free Press, New York.

Prahalad, CK & Oosterveld, J 1999, ‘Transforming Internal Governance: The Challenge for

Multinationals’, Sloan Management Review, 40(3), pp. 31-40, <http://www.proquest.com>,

viewed 20 September 2010.

Prahald, CK & Doz, YL 1981, ‘An Approach to Strategic Control in MNCs’, Sloan

Management Review, 22(4), pp. 5-14, <http://www.proquest.com>, viewed 3 November 2010.

Ripollés-Meliá, M, Menguzzato-Boulard, M & Sánchez-Peinado, L 2007, ‘Entrepreneurial

orientation and international commitment’, Journal of International Entrepreneurship, 5(3),

pp. 65-84, <http://www.ebsco.com>, viewed 4 August 2010.

Roth, K & Morrison, AJ 1992, 'Implementing global strategy: Characteristics of global

subsidiary mandates.', Journal of International Business Studies, 23(4), pp. 715-736,

<http://www.ebsco.com>, viewed 9 September 2010.

Roth, K & Morrison, AJ 1990, ‘An empirical analysis of the integration-responsiveness

framework in global industries’, Journal of International Business Studies, 21(4), pp. 541-

565, <http://www.ebsco.com>, viewed 3 November 2010.

Russel, RD 1999, ‘Developing a Process Model of Intrapreneurial Systems’,

Entrepreneurship: Theory and Practice, 23(3), pp. 65-84, <http://www.ebsco.com>, viewed 4

September 2010.

Sadler, RJ 2000, ‘Corporate Entrepreneurship in the Public Sector: The Dance of the

Chameleon’, Australian Journal of Public Administration, 59(2), pp. 25-41,

<http://www.proquest.com>, viewed 4 August 2010.

Sargent, J & Matthews, L 2006, ‘The drivers of evolution/upgrading in Mexico's

maquiladoras: How important is subsidiary initiative?’, Journal of World Business, 41(3), pp.

233-247, <http://www.proquest.com>, viewed 4 August 2010.

Schindehutte, M, Morris, MH & Kocak, A 2008, ‚Understanding Market-Driving Behavior:

The Role of Entrepreneurship’, Journal of Small Business Management, 46(1), pp. 4-26,

<http://www.proquest.com>, viewed 4 August 2010.

Schindehutte, M, Morris, MH & Kuratko, DF 2000, 'Triggering events, corporate

entrepreneurship and the marketing function', Journal of Marketing Theory and Practice, 8(2),

pp. 18-30, <http://www.proquest.com>, viewed 9 September 2010.

Schotter, A & Bontis, N 2009, ‘Intra-organizational knowledge Exchange’, Journal of

Intellectual Capital, 10(1), pp. 149-164, <http://www.proquest.com>, viewed 4 August 2010.

Schumpeter, J 1911, Theorie der wirtschaftlichen Entwicklung, 9th edition, Duncker &

Humblot, Berlin.

Slevin, DP & Covin JG 1990, ‘Juggling Entrepreneurial Style and Organizational Structure —

How to Get Your Act Together’, Sloan Management Review Winter, 31(2), pp. 43–53,

<http://www.proquest.com>, viewed 4 September 2010.

Spiggle, S 1994, ‘Analysis and interpretation of qualitative data in consumer research’,

Journal of Consumer Research, 21(3), pp. 491-503, <http://www.ebsco.com>, viewed 4

September 2010.

Stopford, JM & Baden-Fuller, CWF 1994, ‘Creating Corporate Entrepreneurship’, Strategic

Management Journal, 15(7), pp. 521-537, <http://www.proquest.com>, viewed 4 August

2010.

Storgaard, M 2010,’ Lokale syn på globale horisonter: et kritisk perspektiv på HQ’s rolle I den

globaliserende MNC’, PhD thesis, Aarhus School of Business,

Taggart, JH 1997, ‘An Evaluation of the Integration-Responsiveness Framework: MNC

Manufacturing Subsidiaries in the UK’, Management International Review, 37(4), pp. 295-

319, <http://www.ebsco.com>, viewed 2 November 2010.

Thornberry, NE 2003, ‘ Corporate entrepreneurship: teaching managers to be entrepreneurs’,

The Journal of Management Development, 22(4), pp. 329-344, <http://www.proquest.com>,

viewed 4 August 2010.

Vachani, S 1999, ‘Global diversification’s effect on multinational subsidiaries’ autonomy’,

International Business Review, 8(5-6), pp. 535-563, <http://www.ebsco.com>, viewed 4

August 2010.

Venaik, S, Midgley, DF, & Devinney, TM 2004, ‘A new perspective on the integration-

responsiveness pressures confronting multinational firms’, Management International Review,

44(1), pp. 15–48, <http://www.proquest.com>, viewed 17 December 2010.

Veenker, S, van der Sijde, P, During, W & Nijhof A 2008, ‚Organisational Conditions for

Corporate Entrepreneurship in Dutch Organisations’, The Journal of Entrepreneurship, 17(1),

pp. 49-58, <http://www.proquest.com>, viewed 4 August 2010.

Verbeke, A, Chrisman, JJ & Yuan, W 2007, ‘A Note on Strategic Renewal and Corporate

Venturing in the Subsidiaries of Multinational Enterprises’, Entrepreneurship Theory and

Practice , 31(4), pp. 585-600, <http://www.proquest.com>, viewed 4 August 2010.

Wakkee, I, Elfring, T & Monaghan, S 2010, ‘Creating entrepreneurial employees in traditional

service sectors’, International Entrepreneurship and Management Journal, 6(1), pp. 1-21,

<http://www.springer.com>, viewed 4 August 2010.

Yamin, M & Otto, J 2004, ‘Patterns of knowledge flows and MNE innovative performance’,

Journal of International Management, 10(2), pp. 239–258, <http://www.ebsco.com>, viewed

8 November 2010.

Yeung, HWS 2002, ‘Entrepreneurship in International Business: An institutional perspective’,

Asia Pacific Journal of Management, 19(1), pp. 29-61, <http://www.proquest.com>, viewed 5

October 2010.

Young, S & Tavares, AT 2004, ‘Centralization and autonomy: back to the future’,

International Business Review, 13(2), pp. 215-238, <http://www.ebsco.com>, viewed 4

August 2010.

Zahra, SA, George, G & Dharwadkar, R 2001, ‘Entrepreneurship in the multinational

corporation: the effects of corporate and local contexts’, Academy of Management

Proceedings, 0(0), pp. G1-6, <http://www.ciber.gatech.edu/workingpaper/1999/99_00-

27.pdf>, viewed 20 September 2010.

Zahra, SA & Garvis, DM 2000, ‘International corporate entrepreneurship and firm

performance: The moderating effect of international environmental hostility’, Journal of

Business Venturing, 15(5-6), pp. 469-492, <http://www.proquest.com>, viewed 4 August

2010.

Zahra, SA, Nielsen, AP & Bogner, WC 1999, ‘Corporate entrepreneurship, knowledge, and

competence development’, Entrepreneurship Theory & Practice, 23(3), pp. 169-189,

<http://www.proquest.com>, viewed 18 October 2010.

Zahra, SA, Kuratko, DF & Jennings, DF 1999, 'Guest editorial: Entrepreneurship and the

acquisition of dynamic organizational capabilities', Entrepreneurship Theory and Practice,

23(3), pp. 5-10, <http://www.proquest.com>, viewed 9 September 2010.

Zahra, SA, Jennings, DF & Kuratko, DF 1999, 'The antecedents and consequences of firm-

level entrepreneurship: The state of the field', Entrepreneurship Theory and Practice, 24(2),

pp. 45-65, <http://www.proquest.com>, viewed 9 September 2010.

Zahra, SA & Covin, JG 1995, ‘Contextual influences on the corporate entrepreneurship-

performance relationship: a longitudinal analysis’, Journal of Business Venturing, 10(1), pp.

43-59, <http://www.proquest.com>, viewed 6 April 2010.

Zahra, SA 1993, “Environment, corporate entrepreneurship, and financial performance: a

taxonomic approach”, Journal of Business Venturing, 8(4), pp. 319-40,

<http://www.proquest.com>, viewed 8 November 2010.

Zahra, SA 1991, ‘Predictors and Financial Outcomes of Corporate Entrepreneurship: An

Exploratory Study’, Journal of Business Venturing, 6(4), pp. 259-286,

<http://www.proquest.com>, viewed 4 August 2010.

Zampetakis, LA & Moustakis, V 2007, 'Fostering corporate entrepreneurship through internal

marketing', European Journal of Innovation and Management, 10(4), pp. 413-433,

<http://www.emeraldinsight.com>, viewed 4 September 2010.

Zhao, F 2005, ‘Exploring the synergy between entrepreneurship and innovation’,

International Journal of Entrepreneurial Behaviour and Research, 11(1), pp. 25-41,

<http://catchword.com>, viewed 4 August 2010.

APPENDIX

Figure 1

see Åmo & Kolvereid 2005, p. 11

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