Subsidiary autonomy and performance of Chinese MNEs in an emerging market

Abstract

The phenomenon of emerging market multinational enterprises (EMNEs) is becoming a new normal. How EMNEs should integrate and manage subsidiaries to perform well towards the business strategy is rarely studied. Autonomy delegation to subsidiaries was argued to be an enabling mechanism. This research explored the relationship of subsidiary autonomy and performance of Chinese MNEs in an emerging market and factors moderating the relationship. Using questionnaires to collect data from 52 Chinese MNEs in South Africa, this research ran a set of multiple regressions to test the relationship of subsidiary autonomy and performance and its moderating factors. The findings show: 1) greater subsidiary autonomy is associated with a higher level of performance; 2) the effect of subsidiary autonomy on performance is weakened for state-owned (SOE) subsidiaries but strengthened for privately owned (POE) subsidiaries; 3) the effect of subsidiary autonomy on performance is weakened by expatriate involvement for SOE subsidiaries but strengthened by expatriate involvement for POE subsidiaries; 4) the effect of subsidiary autonomy on performance is strengthened by organisational capability for both SOE and POE subsidiaries. Stateowned MNEs should focus on improving organisational capability and building up appropriate management incentives, instead of despatching expatriates to effectively improve performance of subsidiaries in emerging markets.