Institutional Antecedents of Subsidiary External Embeddedness: Coping with Regulatory Competitive Constraints

Grazia D. Santangelo, Henrik Dellestrand, Ulf Andersson

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We investigate institutional antecedents to subsidiary external embeddedness and relate regulation constraining competition in local service sectors to subsidiary embeddedness with local partners in complementary sectors. Combining research on business networks with arguments derived from transaction cost economics, we argue that subsidiary external embeddedness depends on the extent of transaction costs originating from small numbers bargaining, which regulatory competitive constraints in local service sectors are a source of. Based on this logic, we suggest that low and high levels of regulatory competitive constraints are associated with greater subsidiary external embeddedness. We also suggest that this U-shaped relationship is more pronounced for subsidiaries that are centers of excellence within the multinational enterprise because these subsidiaries heavily depend on the local context as a source of their competitive advantage over their sister subsidiaries.
Original languageEnglish
Article number101851
JournalLong Range Planning
Issue number4
Number of pages14
Publication statusPublished - Aug 2019

Bibliographical note

Published online: 4. October 2018


  • External business embeddedness
  • Institutions
  • Factors market
  • Foreign subsidiary
  • Center of excellence

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