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Business and Management.
Subsidiaries are increasingly urged to adopt narrower more composite parts of global value chains. The disaggregation of value chain activities into disjointed parts, as a growing trend may however have significantly negative implications for subsidiaries if a narrow focus curbs their capacity to develop independent initiatives -initiative being a highly contributory factor to subsidiary sustainability. In this paper we suggest that extending upon our understanding of the changes inherent in the modern MNC requires greater depth in the exploration of how narrower roles and the fine slicing of activities impact upon subsidiary strategy.
Using a multiple case study of ICT subsidiaries we uncover how these subsidiaries navigate and negotiate internal MNC environments in positioning for growth. Our findings illustrate an emerging Pilot or lead user subsidiary role; one that is largely mis-aligned from general strategy yet a continuously shifting source of value for the organization. Pilot subsidiaries avoided direct cost competition with sister subsidiaries, opting instead to continuously develop capabilities which could then be diffused to low cost counterparts within the collective organization. The disposal or surrendering of capabilities and activities served a dual purpose; firstly it allowed the subsidiary the physical space to adopt new value add activities, to keep abreast of technological change and to renew its position as Pilot. Secondly, by offloading activities to more commoditized players within the network the subsidiary was able to maintain their network position relative to internal competitors.
Reilly, M., Scott, P., Mangematin, V. Navigating in the modern MNC: The emergence of a Pilot Subsidiary Role. Academy of International Business (UKI), University of Liverpool, March, 2012