The Determinants of Strategy Formulation and Change in Foreign Subsidiaries and Their Functional Units

This chapter investigates the determinants of strategy formulation and change at the subsidiary and functional unit levels. By contrast to previous studies, which only discussed the determinants of strategy formulation and change in foreign subsidiaries of MNEs located in developed countries, the manuscript’s contribution to knowledge is in advancing a more elaborate list of elements and indicators to measure the relevant factors associated with strategy formulation and change in foreign subsidiaries of different strategy types operating in an emerging host economy and to extend its application to measure the relevant factors associated with strategy formulation and change in different types of functional units belonging to subsidiaries of different strategy types. This study clearly identifies the key elements behind each of the three factors (subsidiary, head office or host country) that determine strategy formulation and change, and it constructs appropriate indicators to measure each element. It compares and contrasts the elements and the factors that determine strategy formulation and change in (1) foreign subsidiaries of different strategy types and (2) functional units belonging to foreign subsidiaries of different strategy types.