The (Un)Predictable Factor: The Role of Subsidiary Social Capital in International Takeovers

Purpose: – The purpose of this paper is to investigate how the implementation of headquarters-originated employment practices affect multinational corporation (MNC) ability to exploit the value of organizational social capital of the acquired subsidiary.
Design/methodology/approach: – The authors use qualitative insights collected over 16 years from a Danish company to illustrate how a foreign MNC’s interference with the balanced structure of relations, norms, and roles in a subsidiary jeopardized the value of existing social capital.
Findings: – The authors argue that changes in the collective perception of employment practices create the collective response, constructive or destructive, resulting respectively in the gain or loss of the performance benefits arising from organizational social capital.
Practical implications: – The authors suggest two guidelines and two general propositions for future research on the value of organizational social capital in international takeovers.
Originality/value: – The results indicate that local management and employees could use organizational social capital as a unique feature of the local business system when competing with other subsidiaries in the same MNC.