How Does a Foreign Subsidiary Operating in an Emerging Market such as South Africa Balance Headquarter Control and Subsidiary Initiative-taking?

Abstract

The purpose of the research was to increase understanding of how foreign subsidiaries operating in an emerging market balance headquarter control and subsidiary initiatives in institutionally complex environments. Specifically, this thesis explored how the relationship between Swedish MNE headquarters and their South African subsidiaries affects the subsidiaries’ ability to take initiatives, particularly focusing on local adaptation, operational disruptions and control dynamics. This was done through a qualitative case study using semistructured interviews with headquarter representatives in Sweden and subsidiary representatives in South Africa. The findings suggest that local knowledge and the ability to adapt to the institutional environment are critical factors for achieving long-term success in the South African market. A successful balance between headquarter control and subsidiary initiative in emerging markets is achieved not through fixed levels of autonomy, but rather the ability to respond effectively to local contexts while remaining strategically aligned with headquarter interests. By focusing on the HQ

subsidiary relationship in an institutionally complex environment, the thesis contributes to international business literature by providing insight on the tradeoff between autonomy and control, challenging the traditionally static view on emerging market subsidiaries as passive, suggesting that the tradeoff invites a rather active role.