Establishment modes and network relationships of foreign subsidiaries

Abstract This research examines the effects of the establishment mode of foreign subsidiaries (greenfield vs acquisition) on the type of network relationships (social vs business) they develop in local markets. The authors use the network approach to better understand the role played by local subsidiaries for the development of networks in multinational enterprises. The empirical study is based on a dataset covering 120 foreign-owned subsidiaries in Italy. The findings show that acquired subsidiaries are more directly involved in business relationships, whereas greenfield subsidiaries pay more attention to social relationships before building business networks. The establishment mode thus affects the type of network relationships developed by local subsidiaries, which can help them to overcome the liabilities of foreignness and outsidership.