How foreign subsidiaries gain attention form corporate headquarters

Summary of: Bouquet, Birkinshaw. (2008). Weight versus voice: how foreign subsidiaries gain attention form corporate headquarters. Academy of Management Journal, 51(3), 577-601

ATTENTION FROM HEADQUARTERS

Distinctive features of MNEs are high levels of geographical and cultural diversity coupled with complex portfolios of businesses, functions, and markets. This causes their attention to be divided among subsidiaries in ways that do not give an equal hearing to all parties.

1. Attention decisions are partially based on the structural positions that subsidiary units occupy within a corporate system (i.e. their ‘weight’).

2. A subsidiary also has a ‘voice’ of its own that it can use to attract attention.

3. The relationship between a subsidiary’s voice and headquarters attention is moderated by the subsidiary’s geographic distance and downstream competence.
    

Attention refers to the set of elements (in this case, foreign subsidiaries) that occupies the consciousness of managers.

Positive headquarters attention: The extent to which a parent company recognizes and gives credit to a subsidiary for its contribution to the MNE as a whole:

• Relative attention: The perceived level of recognition and credit given to a focal subsidiary relative to the level given to other subsidiaries in an MNE;

• Supportive attention: The provision by a corporate parent of discretionary resources as a way to facilitate a subsidiary’s development; and

• Visible attention: The explicit recognition from its corporate parent of a subsidiary’s existence and achievements, expressed in media that are transmitted to a broad body of stakeholders.
   

Two theoretical perspective of corporate attention allocations in MNEs:

1. Structural perspective (weight): Headquarters’ attention is fundamentally determined by the internationally differentiated positions that foreign subsidiaries occupy in the corporate system of an MNE. According to this perspective, an MNE is a value maximizing entity that functions according to criteria of proven strategic significance. The notion of weight suggest that parent company executives will continue to allocate attention to subsidiaries in the way they have always done.

• Local market strategic significance: The perception that the particular market in which a subsidiary operates is critical to the performance of its parent MNE.

• Subsidiary strength: The extent to which a subsidiary undertakes activities upon which sister subsidiaries depend.

2. Relational perspective (voice): Foreign subsidiary units have voices of their own that they can use in their relationships with headquarters to more effectively position their achievements within a corporate system, irrespective of current weight considerations:

• Initiative taking: The conscious and deliberate actions of subsidiary managers in their marketplace.

• Profile building: The broad set of efforts undertaken by subsidiary managers to improve their image, credibility, and reputation within their parent MNE.
   

Factors that strengthen the relationship between strength of the subsidiary’s voice and positive headquarters’ attention (i.e. contribute to the strategic isolation):

• Geographic distance: Being further from home usually means being less well connected to local networks, less able to understand local norms, and less able to be sure how much to trust what people say.

• Downstream competence: How the subsidiary’s knowledge or expertise in downstream activities (e.g. sales/marketing) can contribute to the rest of the MNE.

Hypotheses:

Hypothesis 1a: The strategic significance of its local market is positively related to the positive attention that a subsidiary receives from corporate HQs.

Hypothesis 1b: The strength of a subsidiary within an MNE network is positively related to the positive attention that the subsidiary receives from corporate HQs.

Hypothesis 2a: Initiative taking by a subsidiary’s managers is positively related to the positive attention that the subsidiary receives from corporate HQs.

Hypothesis 2b: Profile building by a subsidiary’s managers is positively related to the positive attention that the subsidiary receives from corporate HQs.

Hypothesis 3a: Geographic distance strengthens the relationship between initiative taking and positive HQs attention.

Hypothesis 3b: Geographic distance strengthens the relationship between profile building and positive HQs attention.

Hypothesis 4a: A downstream competence strengthens the relationship between initiative taking and positive HQs attention.

Hypothesis 4b: A downstream competence strengthens the relationship between profile building and positive HQs attention.

Downstream competence: a unit responsible for activities mostly confined to product sales, service, and/or marketing

Upstream competence: e.g. manufacturing, R&D, strategic support services

Hypotheses 1a, 1b, 2a, 2b, 3a, 3b and 4b are supported.
 

Only hypothesis 4a is not supported: Initiative taking only attracts positive headquarters attention when a subsidiary’s competence extends to the upstream part of the value chain.
 

The attention given to a foreign subsidiary is not simply influenced by structural considerations of weight; the voice of a subsidiary critically matters. There is a:

• Top-down structural process whereby attention is allocated according to a subsidiary’s weight in an MNE,

• Bottom-up relational process whereby attention is earned according to the subsidiary’s voice in the MNE.
   

To be successful in shaping the perception that a subsidiary is a reliable, credible, and trustworthy actor in an MNE organization, a subsidiary needs to:

• Maintain a basic track record of success; and

• Reaffirm its commitment to the parent’s objectives; and

• Take deliberate steps to manage impressions with power brokers at the head office.