Decision-Making Effectiveness, Strategic Orientation And Competitive Advantage Of MNC Subsidiaries In China

In the context of globalization, the purpose of transnational corporations operating overseas have been focused on acquiring competitive advantages from subsidiaries rather than making use of competitive advantages of parent company. Multinational corporations are not only concerned about the subsidiary’s financial performance, but also getting unique competitive advantage from the scattered overseas subsidiaries. In this context, subsidiaries are no longer just passive implementers and recipients of the parent company’s strategic plan but transform into active participants or sponsors. In the accelerating process of globalization, only giving full play to resources advantages and operating capacity of subsidiaries as well as displaying proactive strategic postures to identify of environmental opportunities and threats and making a timely response can subsidiaries win competitive advantages and performance. Subsidiaries in China which are operating in the context of China’s transition economy, facing of market turbulence and uncertainty of future changes, should put forward higher strategy adaptability to deal with increased competition and business risk. Therefore, how to make a proactive response to the request of China’s economic transformation as well as how to adjust or change the strategic direction timely are the critical and urgent issues of the subsidiaries in China.The premise to obtain competitive advantages lies on effective strategic management. Strategy includes two issues:what the firm’s goals and how to achieve the goals. The former depends on the firm’s strategic decision-making as well as the latter depends on the implementation of firm’s strategy. Only high quality decision-making coupled with effective implementation can firms get better performance. Top management team as the decision-making body makes the overall development strategy and business performance of firms. Therefore, the decision-making effectiveness by top management team of Subsidiaries in China must have important influence on strategic and competitive advantage of subsidiaries. Because subsidiaries are semi-autonomous entity, it operates on the one hand by the request from the parent company’s global integration, on the other hand by the opportunities and threats from the host country business environment. The dual powers make subsidiary be influenced by the parent-subsidiary relationship and local environmental factors. So it should be established targeted research model to study top management team decision-making in subsidiaries.Based on above ideas, this paper is focus on the basic research question of competitive advantage of MNC subsidiaries in China. The study is based on the theory of competitive advantage, decision-making, subsidiary development and other extended theory. It drills down and gradually expands the discussion to answer the three research questions through theoretical analysis and statistical analysis of survey research methods:First, which are the variables being constituted to the effective decision-making of top management team in subsidiary in China? Second, whether the strategic orientation play the mediation role between the decision-making effectiveness and subsidiary’s competitive advantage? Third, what kind of impact do the different environmental conditions exert on the relationship between decision-making effectiveness and strategic orientation?This paper proposes that decision-making effectiveness of top management team in subsidiaries in China is constituted by three variables, namely one is the extent of environmental information being reflected in the decision-making process, using the construct of managerial ties to represent; the second is characteristics of subsidiary decision-making process, using the construct of decision-making comprehensiveness to represent; the third is the extent of power which is delivered by parent company to subsidiaries, using the construct of decision-making autonomy to represent. The empirical test results show that the top management team decision-making effectiveness influences the competitive advantage of subsidiaries in China through the role of strategic orientation, in particularly, strategic orientaion is fully mediated the relationship of decision-making comprehensiveness and competitive advantage; strategic orientation is partly mediated the relationship of managerial ties and competitive advantage; as well as strategic orientation is partly mediated the relationship of decision-making autonomy and competitive advantage. The empirical test also found that environmental turbulence effect on the relationship between decision-making effectiveness and strategic orientation in subsidiary in China, In particularly, environmental turbulence negatively moderate the relationship between decision-making comprehensiveness and strategic orientation, and positively moderate the relationship between decision-making autonomy and the strategic orientation. But it has no influence on the relationship between managerial ties and strategic orientation.This study has the theoretical significance as following:First, it builds a strategic decision-making effectiveness model of top management team of subsidiaries in China, so enriches the connotation of decision-making theory and expands its scope of application; Second, to introduce the strategic orientation construct into the study of overseas subsidiaries makes contribution to the subsidiary development theory; Third, it promotes the study of path mechanism with the relationship of decision-making effectiveness and competitive advantage; The fourth, it deepens the understanding of the relationship between decision-making effectiveness and strategic-orientation under different environmental conditions; The fifth, it riches theory meaning of competitive advantage of overseas subsidiaries in particular context of China.From a practical perspective, this research calls attention to that subsidiaries in China should change the passive role of past to be a proactive role in strategic orientation for gain the special competitive advantage. In this process, top management team need to take full advantage of the heterogeneous composition of the team member, as far as possible within the time permitting to improve decision-making effectiveness by a comprehensive decision-making process. In the meanwhile, top management team in subsidiary in China should develop managerial ties actively to obtain more decision-making information resources and institutional support to improve the strategic decision-making effectiveness. From the perspective of parent company, it should be converted ideas to focus on cross-border management of how to coordinate and promote subsidiary’s developement to support and consistent with the multinational overall strategic objectives rather than focus on controlling subsidiaries and preventing the aspirations of develop independently of subsidiaries. In order to get more diversified sources of competitive advantages, multinational corporations should take the incentive mechanisms or measures to promote a proactive strategic orientation of subsidiaries in China 。...