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The drivers of subsidiary development continue to advance following changes in the global environment, availability of resources, and stiffening of competition between international businesses. As an evolutionary mechanism, alignment assists MNEs in capturing value while ensuring that subsidiaries can deliver their commitments. Here, we focus on whether the subsidiary role change specified in charters is linked to performance. We also determine the importance of alignment mechanisms with the applied business agenda for performance by specifically using the perspectives of scorecard and retention. Our results are garnered from statistical analyses of 152 responses to surveys given to Taiwan MNE subsidiaries. Our findings reconfirm the relationship between subsidiary role change and performance while further demonstrating that a mediating effect of alignment between these two factors exists. We also found that a moderating effect will only trigger when formalization and profile building are insufficient to properly address business needs. We discuss our findings in the context of the literature of HQ-subsidiary relationships and consider the managerial implications with the hope of initiating a new chapter in future subsidiary management by alignment. Though bureaucratic control remains crucial across the MNE network, alignment re-emphasizes the importance of subsidiary managers’ development under the established corporate culture.

american journal of business

A New Chapter of Subsidiary Charters in MNEs: Will Alignment Become More Effective through the Dynamics of Subsidiary Role Change and their Performance