Managing Competency Creating R&D Subsidiaries: Evidence from Japanese Multinationals

Globalization of business activities is imperative for Japanese manufacturers, as an international market, particularly in emerging economies, grows much faster than domestic market. In this regards, the relative importance of their overseas subsidiaries to home base headquarter become greater. One of strategic roles of overseas subsidiary is that of competence creation, not only for its host country, but for a whole company wide activity in the world. In this paper, the shift of overseas ’subsidiary role to competence creation is analyzed by the dataset from the METI ’s Survey on Overseas Business Activities (SOBA) from 1999 to 2008. It is found that a balance between control of headquarter and autonomy of subsidiary is required to make this shift. In addition, it is important for a headquarter to accumulate experiences at host country operation to manage competence creating overseas subsidiary, particularly in emerging economies such as China, where a local business context is much different from Japan.