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Subsidiary internal and external embeddedness: trade-up and trade-off

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  • Joanna Scott-Kennel
  • Snejina Michailova

Abstract

Much, if not most, of the international business literature argues that subsidiaries benefit from balancing their internal embeddedness in the multinational enterprise to which they belong, and their external embeddedness in the host environment in which they are located. In this paper we argue that there are tensions between embeddedness in internal and in external networks, and that a balance between these two types of embeddedness is more aspirational than achievable. We problematise the often advocated but seldom unpacked ideal of an optimal balance between subsidiaries' internal and external embeddedness. We consider two types of interaction between them: a trade-up (a complementary relationship where higher embeddedness in one network leads to higher embeddedness in the other whilst achieving a desired outcome) and a trade-off (a substitutive relationship where embeddedness in one network replaces embeddedness in the other network, causing the multinational to forego the opportunity to benefit from both). We analyse some of the tensions that imbalances may create for the subsidiary and for the multinational enterprise, and we outline the implications for both research and practice.

Suggested Citation

  • Joanna Scott-Kennel & Snejina Michailova, 2016. "Subsidiary internal and external embeddedness: trade-up and trade-off," International Journal of Multinational Corporation Strategy, Inderscience Enterprises Ltd, vol. 1(2), pages 133-154.
    • Handle: RePEc:ids:ijmcst:v:1:y:2016:i:2:p:133-154
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    Citations

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    Cited by:

    1. Scott-Kennel, Joanna & Saittakari, Iiris, 2020. "Sourcing or sharing in MNE networks? National headquarters and foreign subsidiaries as knowledge conduits in SMOPECs," International Business Review, Elsevier, vol. 29(1).
    2. Igor Gurkov & Alexandra Kokorina & Zokirzhon Saidov, 2018. "Effectiveness Of Opening Ceremonies Of Oversea Manufacturing Facilities – Lessons From Multinational Corporations Operating In Russia," HSE Working papers WP BRP 59/MAN/2018, National Research University Higher School of Economics.
    3. Riviere, Monica & Romero-Martínez, Ana M., 2021. "Network embeddedness, headquarters entrepreneurial orientation, and MNE international performance," International Business Review, Elsevier, vol. 30(3).
    4. Si Zhang & Shasha Zhao & Ioannis Bournakis & Robert Pearce & Marina Papanastassiou, 2018. "Subsidiary roles as determinants of subsidiary technology sourcing: empirical evidence from China," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 623-648, August.

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