A Subsidiary Of The Parent And Subsidiary Companies In China Under The Framework Of Network Growth Mechanism

Along with increase in the diversification of environment, complication of internal structure, and diversity of each subsidiary, a parent-subsidiary corporation is more regarded as a sort of special inter-organizational network. Subsidiaries have become the most important source of competitive advantage within the parent-subsidiary corporation. However, many researches are based on practical experiences of firms of developed countries, and insufficient to explain and direct some new practical phenomena and problems arisen from networked growth of subsidiaries in parent-subsidiary corporation in China. In relation to function of main body of parent-subsidiary corporation in economy development and subsidiaries' strategic contribution to parent-subsidiary corporation, in allusion to practical phenomena of firm's networked growth in China, a study on the mechanism of networked growth of subsidiaries shows much realistic meanings for China. Under such circumstances, this dissertation will try to explore the mechanism of networked growth of subsidiaries in parent-subsidiary corporation in China theoretically and empirically with reference to theories of subsidiaries in multinational corporations, based on theories of socioeconomic network, firm growth.The subsidiary's growth and development is within a complex competitive arena, consisting of an internal environment of internal customers, suppliers and other subsidiaries, and an external environment consisting of customers, suppliers and competitors. It is not realistic for a subsidiary to conduct in one of the networks exclusively. Each of these network environments represents a set of threats and opportunities to the subsidiary. The key human resources in decision making process of a subsidiary's growth—the managers also possess some personal relationships, which may represent a set of opportunities or threats to firm growth. Therefore, the core objective of this thesis is to explore subsidiary's complex network structure consisting of both internal and external networks, network interactions and its influence to the subsidiary's growth. It could be further disintegrated into three key problems. The first is to determine whether the complex network structure has a significant impact on growth of the subsidiaries. The second is to determine if it does, what the mechanism of networked growth of the subsidiaries, that is, the impact is direct or indirect toward a mediating variable. The third is to see if managerial ties have a significant effect on growth of the subsidiaries under the complex competitive environments.By integrating the normative and empirical analysis process, this dissertation systematically analyzes the problems mentioned above. The main contributions of this dissertation are as the following:(1) Based on a taxonomy of networks in the subsidiaries, this dissertation constructs the conceptual modeling of the relationship among the internal and external network characteristics, interactions between the internal and external network and the growth of the subsidiaries, and inspected the impact of complex network characteristics on subsidiaries' growth in parent-subsidiary corporation in China by empirical analysises.Many scholars consider that the subsidiary is unique in facing both external and internal competitive networks simultaneously, but previous researches rarely mention multiple-level networks. These two types of networks have so far been examined only in isolation. Forsgren et al (1997) advanced "network infusion" phenomenon exists between internal and external networks. Ghoshal and Bartlett(1990), Biemans(1991) emphasized exertion of network efficacy depends on the mutual support of both internal and external network interfaces. But these researches are limited to theoretical analysises, and empirical analysises are still insufficient.One contribution of this dissertation lies in connecting the internal and external network within a single conceptual framework of the subsidiaries' growth, examing of the interconnectedness between the performance implications of the two networks. The results show that the complex network structure has significant impacts on growth of the subsidiaries. From the view of different internal and external network level, and the view of different network characteristics in the same network level (network centrality, tie strength), this dissertation has proposed four different forms of combinations in examining the joint impact of the internal and external network: network interactions between the internal and external network centrality, the internal and external tie strength, the internal network centrality and the internal tie strength, the external network centrality and the external tie strength. This dissertation has also verified the relationship of the four forms and the subsidiary's growth with empirical methods in different quantitative and qualitative indexes. The results suggest that both indexes achieved conformation from each other, which indicates that internal and external network and network interactions have significant impacts on the subsidiary's growth. This result is almost same with Biemans' (1991) that effective external cooperation requires well-functioned internal interface. Furthermore, the study provides empirical tests to achieving growth by leveraging the internal and external network of the subsidiaries in China.(2)This dissertation extends the concept of networks capability, constructs a theoretical framework which can be characterized by "network characteristics-networks capability- subsidiary's growth". The mediating impact of networks capability is supported by empirical results.Refer to existing researches from both domestic and overseas, the concept of networks capability is limited to capabilities of relationship combination. This dissertation has redefined the concept of networks capability and its components from strategy orientation, process execution, node qualifications, and innovation aggregation, with consideration of the subsidiary's unique growth pattern. This concept and its components are integration of applications of strategy theory, resource-based theory and network theory, it is the basic grasp of dynamic competitive environment. This dissertation constructs a theoretical modeling for analyzing the mechanism of subsidiary's networked growth, with networks capabilities as a mediating variable. The empirical results show that networks capabilities have mediating effect on relationships between network characteristics, network interactions and subsidiary's growth. This conclusion has further indicated that subsidiary has relied on the networks capabilities that were generated by its interactions with internal and external network environments, in order to create more competitive advantages, thus achieve growth. At the same time, this analysis has proved that although internal network and external network have different impacts on the subsidiary in the process of creating competitive advantages, however the mechanism of creating competitive advantages works in line with the mediating effect of networks capabilities.The conclusion about the mediating effect of networks capabilities not only explains the mechanism that complex network structure influences the subsidiary's growth, more importantly, it raises the network relations theory more applicable to some extent. If the firm network analysis lacks explanations about networks capabilities and its components, and contents relate to networks capabilities cultivation, this will lead to a less applicable network theory, which will affect the overall sight of the firm's orientation in networks and development of strategy network. Therefore, the management implication of this is that the subsidiary in parent-subsidiary corporation in China must build and strengthen its networks capabilities.(3)From the viewpoint of holism, we provided a theoretical framework for the mechanism of subsidiary's networked growth.Although theoretical development has already shown that individuation and holism are two different approaches of analyzing the same object of firm theories. However, from the unique firm network concept and its characteristics, we prefer the view of holism, considering the nature of firm management in our country and the intent of this study. From the viewpoint of network concept and its characteristics, network is a system that establishes various relationships, by many individuals (including firms, teams, individuals) during the process of exchange and transfer of resources. The boundary blurring of network relations has provided an opportunity with greater development for both enterprises and individuals; Considering the management features of our country's enterprises in a transition economy, under the circumstance that enterprises do not have sufficiently effective systems of exchange standard, the firm network and the manager's individual network have become the basic factors of management jointly (Xin and Pearce, 1996). The growth of a firm normally requires the macro firm and the micro firm's manager to act effectively in cooperation; Considering the motive of subsidiary's growth in the particular study, except for the adaptability of the local environment and the parent company's strategy requirements, the subsidiary has strategic choices itself. The strategic choices that managers make inherently reflect their backgrounds and experience (Child, 1972; Hambrick & Mason, 1984). As a result, managers' social ties are believed to affect firms' strategic choices and performance. This relationship thus leads to a link between managerial ties, a micro-level construct, and firm performance, a macro-level phenomenon (Peng and Luo, 2000) .Amongst the current micro-macro problems academic analysis, most of them have focused on the managerial ties to firm's innovation behaviors and contributions to the firm performance. However, the exclusive emphasis of these analyses is on the effect of the managerial ties on the firm performance, the interaction analysis of individual network and firm network is insufficient from the viewpoint of holism. At the same time, these studies have still tended to be qualitative and indirect analysis and seldom to employ large samples in a quantitative study (Luo & Chen, 1997) . This dissertation has combined the managerial ties into the mechanism of networked growth of subsidiaries, and it has constructed micro-macro interchangeable theoretical framework, to make some contributions to the literature mentioned above. Although this analysis is only an initial attempt, however this has combined the originally separated firm network and managerial network. It suggests that our framework is supported by empirical results and valid to analyze the growth of the subsidiaries.(4)This dissertation establishes an analytic framework for combining mediation of networks capabilities and moderation of managerial ties. It has analyzed the relationships between the managerial ties, subsidiary's complex network structure and the subsidiary's growth, and has concluded three important conclusions and management implications: firstly, the managerial ties in a transition economy has different positive effects on the subsidiary's growth in its internal and external network environment. Since the internal network is rarely local in a geographical sense and is acutely apperceived of its dynamics by subsidiary managers, the managerial ties have more significant positive effect on its internal network rather than the external network; Secondly, the managerial ties can positively influence subsidiary's networked growth through the mediating effect of networks capabilities, it has further pointed out the importance of networks capabilities in firm growth; Thirdly, we have admitted the positive effect of the managerial ties to the economic exchange and firm performance in a transition economy. At the same time, we should also recognize the empirical study demonstrates limits to which managerial ties are beneficial in a transition economy. As the transition economy is getting to an end, the lasting problem of this positive supporting effect is sill to be discussed, the firm and its managers need to treat the moderating effects of managerial ties dynamically.