Mainland Chinese Transnational Corporations in Asia: Spatial Embeddedness and Knowledge Transfer Across Borders

This paper examines the organizational convergence and/or divergence of practices between the parent and foreign subsidiaries in transnational corporations. While existing literature recognizes the importance of embeddedness of firms in institutional environment, the precise mechanism and process remain unclear. This paper develops a comprehensive theoretical framework that synthesizes the embeddedness theory with the concept of spatial knowledge transfer from a relational network perspective. To establish a foreign subsidiary is a process of de-embedding some practices from the home country and re-embedding in the host country simultaneously. This process is accomplished through spatial knowledge transfer of transnational corporations with involved actors. This paper illustrates these conceptual arguments through empirical investigations on transnationalization of transnational corporations from mainland China. I have interviewed more than 80 executives both from headquarters in China and subsidiaries in Hong Kong, Singapore and Malaysia from about 60 biggest firms in China. The study compares strategy, finance, human resource management of headquarters and foreign subsidiaries and analyzes how and why differences come about from regulatory and institutional level, organizational level and individual level. In conclusion, I argue that regulation is direct and influential force that leads to parent-subsidiary divergence. The relationship between parent and subsidiaries and key decision makers in transnational corporations also play a role.