Integrating distance research with the behavioral strategy literature on MNC headquarters-subsidiary relations, this paper explores how the distance between headquarters and subsidiaries relates to value added by the headquarters. We show for 124 manufacturing subsidiaries in Europe that, on average, distance is unrelated to value added by headquarters but that this effect is contingent upon the extent to which the subsidiary is locally embedded. Only after a certain threshold level of subsidiary embeddedness, distance is negatively related to headquarters value added. This effect is more pronounced for cultural, economic, and administrative distances than for pure geographic distance, highlighting the critical role of contextual variation for MNCs.
Austrian Classification of Fields of Science and Technology (ÖFOS)
- 509018 Knowledge management
- 505027 Administrative studies
- 502052 Business administration
- 506009 Organisation theory
- 502044 Business management
- 507026 Economic geography