The Strategic Development of Subsidiaries in Regional Trade Blocs.

Abstract

Purpose This paper explores the relationships between the strategic development of subsidiaries and the likelihood of subsidiaries exporting on an intra-regional basis to European markets. Research Approach The paper defines the strategic development of subsidiaries as increases in, autonomy, embeddedness in host locations, the use of networks and host country sourcing. The location of subsidiaries in industrial clusters is also considered. Use is made of multinomial probit analysis of a survey of 391 UK based subsidiaries to identify the relationships between the strategic development of subsidiaries and supplying European markets. Findings The study finds some evidence that there are links between increasing networks and supplying European markets, but there is no evidence that developing host country sourcing is associated with European supply. Location in an industrial cluster is consistently associated with supplying European markets and autonomy also appears to be closely associated with supplying European markets. Research Limitations Extension of the research is required to other regional trade blocs such as Mercosur and NAFTA. The role of networks and the links to location in industrial clusters requires further exploration and future research needs to include the services and knowledge-intensive sectors. Value The paper extends our understanding of subsidiary development in the context of intra-regional trading and thereby expands the literature on the regional strategy of multinationals. It highlights the importance of different types of autonomy for encouraging intra-regional trade by foreign-owned subsidiaries, and the central role of location in industrial clusters.