Accounting for the Strengths of MNC Subsidiaries: The Case of Foreign-owned Firms in Denmark

This paper links up with recent work on the role of subsidiaries in multinational corporations as well as with recent work in the strategy and business network literature. We discuss the sources of organizational strengths of subsidiaries in the larger multinational corporation, and argue that organizational strength can to some extent be proxied by strength in the market place. Based on analysis of data on foreign-owned production firms in Denmark, we test three hypotheses: 1) that internal factors (capabilities, patents....) are positively related to the organizational strengths of MNC subsidiaries, 2) business network factors (network relations) are positively related to the organizational strengths of MNC subsidiaries, and 3) there is an interaction effect between internal factors and business network factors when explaining the organizational strengths of MNC subsidiaries. Hypothesis 1 but not Hypothesis 2 is supported. But the testing also supports Hypothesis 3, that is there seems to be an interaction effect between the two factors.