Subsidiary Initiatives in the Institutional Environment

Abstract

We study subsidiaries of a MNC and research why they implement initiatives that deviate from organizational values of headquarters. Initially we relied only on the concept of institutional duality and expected that pressures in the institutional environment and values of headquarters explain the agency of the subsidiaries. But the results of our extensive participatory observation showed that the organizational values of subsidiaries (rather than those of headquarters) helped explain the subsidiaries’ actions. In conclusion, we find that there are limits to the predictive power of the concept of institutional duality. Our study shows that a distinction between values of headquarters and values of subsidiaries is necessary in order to understand the agency of subsidiaries. We suggest a concept of ‘institutional trinity’ that distinguishes between these two values as well as pressures in the institutional environment. Our research demonstrates that an MNC can benefit from a subsidiary that develops its own organizational values. If headquarters is subsequently ready to adopt some of these subsidiary values, it may be able to adapt more easily to a changing institutional environment.