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The determinants of MNE subsidiaries' political strategies: evidence of institutional duality

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Abstract

In this study, we develop and test a model of the determinants of political strategies used by foreign subsidiaries of multinational enterprises (MNEs). Using recent theoretical advances in institutional theory that recognize that MNE subsidiaries are confronted with pressures for isomorphism within the corporation (internal legitimacy) and within the host country (external legitimacy), we integrate international business and political strategy literatures to create a multilevel model of subsidiary, host country and parent determinants of political strategy. Our hypotheses are tested using survey and archival data from Western European subsidiaries of US MNEs.

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Notes

  1. While we would also conjecture that a positive relationship may exist between the parent's use of the information and constituency-building strategies and the use of such strategies by subsidiaries, we expect other factors (e.g., heterogeneous subsidiary resources, relationships and transferability) to weaken the effect of internal legitimacy for these two strategies. However, we are constrained by data availability to test such relationships, and thus do not propose formal hypotheses of these effects.

  2. Our survey was based on a pre-publication version of Hillman and Hitt's (1999) published work presented in 1995. Thus, it is not reflective of the full published model. We cite the published version here for the sake of reader accessibility, and because our three strategy types are indicative of those in the 1999 published version.

  3. When comparing the simple cross-classified equation with those for a simple two-level model and a simple three-level model, the differences can easily be seen. A simple two-level model can be written as Y ij =γ 00+u 0 j +e ij , and a simple three-level model as Y ijk =γ 000+v 0 k +u 0 jk +e ijk . We use the basic intercept-only models in order to simplify the notations for illustration purpose, as well as to compare and highlight the essential differences among cross-classified models, two-level models and three-level models.

  4. As noted by Ambrose and Schminke (2003), multilevel modeling (or HLM) does not produce an R 2 statistic. Following these authors, we calculated R 2 statistics based on OLS as approximate references for assessing how much variance is explained by each multilevel model. The results obtained from OLS are almost identical to those reported in Table 3. For the full models, the R 2 is 0.31 for information political strategy, 0.13 for financial incentive political strategy, and 0.33 for constituency-building political strategy.

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Acknowledgements

We are grateful to Departmental Editor Lorraine Eden and the three anonymous reviewers for their valuable comments and suggestions during the review process.

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Authors and Affiliations

  1. Department of Management, Arizona State University, Tempe, AZ, USA

    Amy J Hillman

  2. Global Business Department, Thunderbird, The Garvin School of International Management, Glendale, AZ, USA

    William P Wan

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  1. Amy J Hillman
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Correspondence to Amy J Hillman.

Appendix A1

Appendix A1

Political strategy questions

How frequently has your subsidiary used the following tactics in this country within the past year?

(Five-point scale: Never, Once/year, Once/month, Once/week, and Once/day.)

  1. 1)

    Contacting, initiating discussions or providing information to public policymakers by members of the company.

  2. 2)

    Contacting, initiating discussions or providing information to public policymakers by external professionals.

  3. 3)

    Reporting of research results, publishing position papers or technical reports.

  4. 4)

    Company members testifying before hearings/committees of government bodies.

  5. 5)

    Commissioning research/think-tank research projects.

  6. 6)

    Hiring individuals with political or professional bureaucracy experience to work for the company.

  7. 7)

    Company members serving in a political position at the local, country or equivalent, national or EU level.

  8. 8)

    Paying elected officials or civil servants to speak at your organization.

  9. 9)

    Providing paid travel or other benefits to elected officials or civil servants.

  10. 10)

    Providing financial contributions to candidates or parties.

  11. 11)

    Using economic and/or political education programs.

  12. 12)

    Public relations advertising in the media.

  13. 13)

    Holding press conferences on public policy issues.

  14. 14)

    Approaching representatives of the US Government to support your programs.

  15. 15)

    Mobilizing grassroots political programs.

  16. 16)

    Advocacy advertising in the media (e.g., a particular issue position).

  17. 17)

    Forming coalitions with other organizations not in your horizontal or sectoral trade associations (i.e., environmental groups, social groups).

  18. 18)

    Joining business advisory groups to government and regulatory bodies such as standard setting committees.

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Hillman, A., Wan, W. The determinants of MNE subsidiaries' political strategies: evidence of institutional duality. J Int Bus Stud 36, 322–340 (2005). https://doi.org/10.1057/palgrave.jibs.8400137

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