The ‘hollowing out’ of the national subsidiary in multinational companies: is it happening, does it matter, what are the strategic consequences?

Abstract

This article explores the effects of corporate organizational structure and of subsidiary discretion within multinational companies (MNCs). It draws on a representative survey of the most senior HR practitioner in foreign- and domestic-controlled subsidiaries in Canada. Key findings point to the importance of subsidiary discretion, especially discretion over human resource management. Greater subsidiary discretion is associated with a range of positive outcomes: securing international product and service mandates; greater subsidiary influence within the MNC; the promotion and protection of subsidiary employment (increased headcounts, less offshoring, more onshoring); and enhanced engagement with domestic institutions. These results highlight the strategic importance for union, civil society and public policy actors, as well as MNC subsidiary managers themselves, to focus on the drivers of subsidiary discretion, as opposed to the ‘hollowing out’ of corporate structures, and to weave that discretion into larger policy narratives to promote local economies.