The strategic development of foreign owned subsidiaries and direct employment in the UK

Abstract

The authors use international business strategy and regional development literature to inform a set of propositions about the links between direct employment by foreign-owned subsidiaries in the manufacturing sector and the development of embeddedness and autonomy in these subsidiaries. A large-scale survey of French, German, and US manufacturing subsidiaries in the United Kingdom is used to test the importance of embeddedness (host-country sourcing and use of networks) and autonomy (decisionmaking and operational autonomy) for the growth of employment by foreign-owned subsidiaries and the growth of skilled jobs in such subsidiaries. The results indicate that growth of embeddedness and autonomy factors are important, especially for the growth of skilled jobs, but those subsidiaries that have this attribute are a minority of foreign-owned subsidiaries. In the light of these results, the authors argue that policies need to be geared towards developing embeddedness and encouraging the growth of autonomy in subsidiaries that are likely to be regarded as central to the overall objectives of multinational corporations (MNCs). This requires policymakers to be aware of the internationalisation strategies used by MNCs, particularly in the light of the emergence of new, low-cost, countries which can easily provide high-quality but low-cost manufacturing operations. An important conclusion is that simple promotion of networking among firms and supporting agencies, and attempts to improve the local asset pool are unlikely to be effective in most cases.