Functional Upgrading and Value Capture of Multinational Subsidiaries

Anže Burger, Björn Jindra, Philipp Marek, Matija Rojec

Research output: Contribution to journalJournal articleResearchpeer-review


This paper investigates the relationship between the value capture of multinational subsidiaries and functional upgrading, which is defined as a diversification of employment from primary business functions to higher value adding activities such as ICT, R&D, marketing or logistics. By combining survey-based business function indicators with longitudinal accounting data for a representative sample of multinational subsidiaries located in six Central and Eastern European countries (CEECs), we assess the impact of functional upgrading on foreign subsidiaries' value capture. The results provide robust evidence that the breadth as well as the scope of functional upgrading induces an upward shift of subsidiaries' value added. The effect of functional upgrading is stronger in the earlier phases after entry of the foreign investor, while the long-term growth trend remains unaffected.
Original languageEnglish
JournalJournal of International Management
Issue number2
Pages (from-to)108-122
Number of pages15
Publication statusPublished - Jun 2018


  • MNEs
  • Subsidiary development
  • Functional upgrading
  • GVCs
  • Value added

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