Subsidiary initiative in Indian software subsidiaries of MNCs

Abstract

In this paper, the author investigates intrapreneurship in software subsidiaries of multinational corporations in India using an analogous concept—subsidiary initiative— that has been used in the international business literature. Subsidiary initiative is a discrete, proactive undertaking by an operational unit situated outside the home country that advances a new way for the corporation to use or expand its resources.

Based on an analysis of published case studies written on the Indian software subsidiaries of Motorola, Philips, and Siemens, the author finds that subsidiary initiative played a visible role in obtaining business at the early stages of the subsidiary's evolution when organizational credibility was lacking and the liability of the country of origin had to be overcome. Subsidiary initiative is also critical if the subsidiary wishes to reposition itself in its market, i.e., in the network of the multinational parent. Barriers to subsidiary initiative include the following:

administrative heritage of the subsidiary

difficulties in the evaluation of business potential

lack of funds to develop new capabilities

the attrition of qualified people.

Moving to a higher position on the value curve is impeded by the nature of past relationships with internal customers and the strong bargaining position of these customers. These barriers are accentuated by asymmetries in the flexibility allowed to product divisions and subsidiaries.

High levels of subsidiary initiative are associated with low levels of integration and high levels of autonomy. This is contrary to earlier research done on multinational subsidiaries in the developed country context. The author proposes that the explanation for this contrast lies in the different contexts in which these subsidiaries operate. Specifically, subsidiary initiative in the Indian context is an outcome of subsidiary managers seeking to cope with the environment in which they operate.The distinctive features of this environment include:

the pressure of retaining and motivating engineers with multiple career options

pressures from the media and wider social expectations

a desire to control one's destiny when there is a realization that India's time has come.

The author also finds a new trend in the organizational arrangements of software subsidiaries within multinationals in that some multinational parents are allowing subsidiaries to chart their own destiny in return for dilution of a part (or whole) of their stake in the subsidiary. Based on this trend, he proposes a new model titled ‘Competitiveness for Growth Opportunities’ for the subsidiary-parent relationship to replace the existing ‘Loyalty for Security in the MNC Network’ model. In conclusion, the author argues that more multinational corporations will have to shift to this new model to achieve the level of agility required to compete in an era of rapid changes in technology and enhanced competition.