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Co-parenting through subsidiaries: A model of value creation in the multinational firm

Research paper by José Pla‐Barber, Cristina Villar, Anoop Madhok

Indexed on: 03 Nov '17Published on: 30 Oct '17Published in: Global Strategy Journal



Abstract

We analyze a novel way to configure and manage multinational networks and propose a model of “co-parenting,” characterized by the sharing of parenting roles and distribution of responsibilities between two units. We develop our argument around the notion of the springboard subsidiary, an operating subsidiary that assumes headquarters’ functions since it shares greater institutional closeness with both the headquarters’ country as well as with the host region. Based upon qualitative data, our inductive model revolves around three stages: establishment, consolidation, and maturity, each of which reflects distinct roles and loci of decision making among the three actors involved: headquarters, springboard subsidiary, and local subsidiary. Overall, our study sheds distinct light on when and how headquarters add value by matching parenting to context.In expanding across regions, multinational firms often face a situation where neither the local unit nor the corporate headquarters possesses the competencies to be at the competitive forefront. This article analyzes a model of interregional expansion of multinational firms by using springboard subsidiaries—operating subsidiaries that can serve as a bridge between headquarters and local subsidiaries since they share institutional and business ties with both. We develop a model in which some parenting functions—coordination, control, and knowledge creation—are distributed between headquarters and the springboard subsidiary along an accumulative process of capabilities. By demonstrating how a springboard subsidiary can help align control to context, the model offers a tool for strategic analysis that helps avoid potential value destruction by headquarters.