How do emerging multinational enterprises release subsidiary initiatives located in advanced economies?

Abstract

We revisit the relationship between headquarters and subsidiaries under the context of emerging multinational enterprises (EMNEs) and develop a new model for releasing the subsidiary initiative, a significant form of corporate entrepreneurship activities hosted in advanced economies. Drawing upon institutional theory and corporate entrepreneurship theory, we argue that mutual trust between headquarters and subsidiaries serves as a mediating mechanism linking formal institutional distance and subsidiary initiatives. Meanwhile, we propose that communication effectiveness between headquarter and subsidiary plays as a moderator upon such relationships. Communication between the headquarters and the subsidiary positively moderates the relationship from formal institutional distance to trust. A sample including 232 EMNEs with headquarters in China and subsidiaries in advanced economies largely support our model on subsidiary initiative. Our model provides a solution to the global integration-local responsiveness paradox