Archived — Working Paper Number 9: World Mandate Strategies for Canadian Subsidiaries

by Julian Birkinshaw, Institute of International Business, Stockholm School of Economics, March 1996


Summary

This paper identifies the factors associated with world mandates in Canada's foreign-owned subsidiary companies. It examines the processes of mandate gain and the relationship of mandates to various aspects of subsidiary performance.

There are three key findings.

  • The subsidiary's internal attributes and, most critically, its upstream capabilities, i.e., research and development (R&D) and manufacturing, are the key predictors of world mandate success.
  • Mandates are gained through two types of subsidiary initiatives: internal and external. Internal initiatives are associated with tight integration and an entrepreneurial subsidiary culture. External initiatives are associated with high autonomy, R&D capabilities and strong leadership.
  • Mandate presence is related to subsidiary performance through "subsidiary value-added" which is a qualitative measure of the subsidiary's contribution to the corporation.

Findings have implications for public policy.

  • Mandate success is driven from within the subsidiary rather than by the nature of the parent-subsidiary relationship. This conclusion points to the importance of nurturing an entrepreneurially minded business culture in Canada's foreign-owned industrial sector.
  • Mandate subsidiaries seem to occur in industries with a relatively low level of Canadian competition, a result which was not expected. The suggestion from this finding is that Canadian subsidiaries are better at gaining "niche" mandates, in relatively uncompetitive industries, than gaining "leading-edge mandates" in those industries in which Canada has a stronger presence.
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