An Empirical Study of Development Processes in Foreign-Owned Subsidiaries in Canada and Scotland (1997)

This paper reports on a detailed clinical study of development processes in a sample of foreign-owned manufacturing subsidiaries in Canada and Scotland. Development is used here to refer to the growth and enhancement of subsidiary resources that add increasing levels of value to the multinational corporation (MNC) as a whole. In this context, the development process is viewed as an extension of the internationalisation process, in that it represents increasing levels of resource commitments in foreign markets (Johanson and Vahlne, 1977). The point at which the traditional ‘internationalisation’ process ends, i.e. with the first incidence of FDI, is thus the point at which subsidiary development begins. Despite the widespread evidence for resource-rich and influential subsidiaries (e.g. Forsgren, Holm and Johanson, 1992), the process by which they develop has apparently escaped systematic research attention so far. A few studies have referred to the growth of subsidiary resources but not as their primary objective (e.g. Prahalad and Doz, 1983; Forsgren et al., 1992; Kim and Mauborgne, 1993), and studies of subsidiary types – in which development is implied but never discussed – are legion (e.g. White and Poynter, 1984; Bartlett and Ghoshal, 1986).