Drivers of subsidiary performance: The impact of subsidiaries’ autonomy in determining HR-policies

Kristine Svendsen

Student thesis: Master thesis


Globalisation has created the challenge of applying management approaches from company headquarters and at the same time adjusting them locally in subsidiaries. Hence, MNCs must design HR-systems that balance the needs of both local responsiveness and global integration, which is a balance that has implications for performance. Therefore, many MNCs have decided to grant considerable autonomy to their subsidiaries in relation to creating their own HR-systems for strategic reasons. As such, the purpose of this project is to examine how subsidiary autonomy in determining pay & performance policy, training & development policy, employee involvement & communication policy, and policy towards trade unions, can affect subsidiary performance – more specifically, labour productivity and performance in relation to customers and employees. Thus, the research question is: RQ: How do subsidiaries’ autonomy in determining HR-policies impact subsidiaries’ shareholder and stakeholder performance? The research question is answered through statistical analyses, and the results are triangulated with qualitative data from interviews with subsidiary HR-managers to enhance the confidence in the quantitative findings. The study shows that subsidiary autonomy in determining pay & performance policy does not impact neither shareholder nor stakeholder performance significantly. In fact, the relationship with shareholder performance seems to be negative, which suggests that pay & performance-policies for managers determined by the parent company leads to better shareholder performance; however the result is not significant. This is also the case in relation to autonomy in determining employee involvement & communication, which does not impact shareholder and stakeholder performance significantly. Yet, autonomy in determining employee involvement policy seems to have an inverse relationship with shareholder performance. On the other hand, subsidiary autonomy over training & development policy has a significant and positive impact on both shareholder performance and stakeholder performance. Finally, subsidiary autonomy in determining policy towards trade unions has the strongest significant impact on shareholder performance; however, the impact on stakeholder performance is insignificant. In conclusion, autonomy in determining HR-polices is not unequivocal, and the impact seems to depend both on the specific HR-policy area and the kind of subsidiary performance.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
Publication date2011
Number of pages156