The strategic role evolution of foreign automotive parts subsidiaries in China A case study from the perspective of capabilities evolution

Abstract

Purpose - The purpose of this paper is to investigate the strategic role evolution of client-following local subsidiaries of foreign automotive parts suppliers in China. Design/methodology/approach - The units of analysis are five local subsidiaries of foreign automotive parts suppliers dealing with Beijing Hyundai Motor Corporation in China; a case study methodology based on interviews with managers of the subsidiaries was employed. Findings - First, a modified version of Ferdows's model can be utilized to aptly analyze the strategic role changes of subsidiaries of foreign automotive parts suppliers which have followed their major client into the emerging market. Second, the development of a subsidiary's functional capabilities varies from subsidiary to subsidiary, depending on the headquarters' (HQ) global strategy and the nature of its interactions with external players. Third, the strategic role evolution of a subsidiary is critically influenced by the levels of its functional capabilities. Finally, the mechanism for a subsidiary's strategic role evolution can be explained by the interactions of three critical factors: the task assigned by HQ, the subsidiary's choice, and the local environment. Research limitations/implications - The external validity of this case study is yet to be verified and the possible gaps in perceptions between the subsidiary and the HQ have not yet been addressed. This is the first case study to address the strategic role evolution of client-following subsidiaries of automotive parts suppliers. Practical implications - This study presents the HQ with a framework for role assignments and a checklist for planning the development of a subsidiary's capabilities. Originality/value - This is the first paper to investigate the strategic role evolution of local subsidiaries of foreign automotive parts suppliers in the emerging market, and it finds critical factors affecting capability development, which in turn shape the subsidiary's process of role evolution.