Functional Upgrading and Value Capture of Multinational Subsidiaries

This paper investigates the relationship between the value capture of multinational subsidiaries and functional upgrading, which is defined as a diversification of employment from primary business functions to higher value adding activities such as ICT, R&D, marketing or logistics. By combining...

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Bibliographic Details
Published inJournal of international management Vol. 24; no. 2; pp. 108 - 122
Main Authors Burger, Anže, Jindra, Björn, Marek, Philipp, Rojec, Matija
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.06.2018
Subjects
Functional upgrading
GVCs
MNEs
Subsidiary development
Value added
Subsidiary development
MNEs
Functional upgrading
GVCs
Value added
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Summary:This paper investigates the relationship between the value capture of multinational subsidiaries and functional upgrading, which is defined as a diversification of employment from primary business functions to higher value adding activities such as ICT, R&D, marketing or logistics. By combining survey-based business function indicators with longitudinal accounting data for a representative sample of multinational subsidiaries located in six Central and Eastern European countries (CEECs), we assess the impact of functional upgrading on foreign subsidiaries' value capture. The results provide robust evidence that the breadth as well as the scope of functional upgrading induces an upward shift of subsidiaries' value added. The effect of functional upgrading is stronger in the earlier phases after entry of the foreign investor, while the long-term growth trend remains unaffected.
ISSN:1075-4253
1873-0620
DOI:10.1016/j.intman.2017.09.004