Why do MNE foreign subsidiaries differ in supply chain management capability, and how does it matter?

Abstract

Purpose Despite the growing and widespread importance of exploring the primary factors facilitating global value chain (GVC) and supply chain management, this topic has received surprisingly little attention to date. Drawing upon the technology–organization–environment framework and the resource-based view, this study aims to fill these important gaps in the literature by theorizing and developing a comprehensive model to explain how a foreign subsidiary of multinational enterprises can improve the upgrading of the GVC and supply chain performance in a host market. Design/methodology/approach Using survey data collected from 266 foreign subsidiaries of multinational enterprises operating in the Chinese manufacturing sector, this study empirically examines the theoretical framework using a structural equation modeling approach. Findings The results demonstrated that the relative advantages of digital technology, supplier diversification and environmental uncertainty all contribute positively to the development of foreign subsidiaries’ supply chain management capabilities. Meanwhile, supply chain management capability plays a positive role in foreign subsidiaries facilitating GVC upgrading and enhancing supply chain performance. Research limitations/implications The findings of this study provide many important implications and useful insights to foreign subsidiaries operating in an emerging host market by concentrating on how to develop and maintain their competitive advantages in the process of GVC reshaping and supply chain restructuring. Originality/value This study provides a useful guide to help firms better understand how they may develop and enhance their competitive advantages in upgrading their GVCs and implementing supply chain restructuring. In addition, this research generates important policy implications considering the recent trend toward creating more effective and sustainable global supply value chains.