The Creation and Reproduction of Headquarters-Subsidiary Interdependence

The aim of this article is to analyze headquarters (HQ)-subsidiary relationships in the domain of knowledge transfer based on the perspectives of power and control and the social embeddedness of firms in different institutional contexts. Data were collected from an Israeli multinational company. The analysis included various qualitative analyses of 64 interviews with employees of HQ and the South Pacific subsidiaries and of documents and observations. HQ-subsidiary relations in the domain of knowledge transfer are based on interdependence with limited cooperation, where power is not placed within one actor or location but rather is situated on both sides. This type of relationship is maintained and reproduced via tactics of knowledge transfer and control which are applied by both sides. A main cause of such relationships is the subsidiaries’ dual identification. On the one hand, Asian subsidiaries are loyal to some extent to the HQ, but on the other hand, they are loyal to their customers. The originality and value of this study is that first it presents an initial step in the development of a classification of interdependent HQ-subsidiary relationships. Second, this study shows which factors generate these relationships and how these relationships are reproduced, demonstrating that in the analysis of HQ-subsidiary relations, issues of power cannot be disconnected from the multinational context. Third, this study views organizational knowledge transfer as a form of business communication situated in broader cultural contexts. It contributes to the limited research that analyzes the coexisting of diverse organizing practices, and forms of business communication, which became prevalent in our global society.