Impact of dimensions of country context distance on devolution from HQs towards subsidiaries

Over the past decades, the number of subsidiaries of multinational enterprises has gone down following rationalization through M&As and vertical integration. Regional subsidiaries are replacing national ones. In the food and beverage industry in particular, due to more integrated food authenticity, integrity and safety regulations, standardization of practices is needed. On the other hand, internal “embeddedness” remains quite typical of food in many cultures, as is the persistence of stringent national food regulations. An increasing number of regional subsidiaries of food and beverage MNCs have to cope with counteracting forces to find the right balance between standardization and adaptation of their company’s food offerings. It is interesting to investigate whether this changed cultural distance has an impact on subsidiary overall autonomy and on the adaptation of the marketing mix. Based on a pilot food industry dataset, we find that food and beverage MNC decision makers in subsidiaries are still highly engaged in local adaptation, especially with regard to strategic promotion, pricing and distribution policies. Product choices, on the contrary, are more often standardized. Formal institutional distance between HQ’s and subsidiaries is a reason for more strategic marketing mix adaptation at the devolved level. Higher economic distance, on the contrary, results in a higher probability for marketing mix standardization. Furthermore, more strategically autonomous subsidiaries engage in more adaptation. Finally, organizational factors such as subsidiary competence rather than country context distance impact on subsidiary autonomy.status: publishe