Strategic Roles and Performance of Japanese Subsidiaries

Strategic Roles and Performance of Japanese Subsidiaries

By David Bruce Montgomery, Takehiko Isobe
1998Working Paper No. 1507

The purpose of this paper is to examine factors affecting the performance of Japanese overseas subsidiaries. The following five factors are incorported in the model: subsidiary location, characteristics of parent company, ownership levels and foms of globalization, strategic roles and objectives of subsidiary, and subsidiary characteristics. Data are collected from 1,148 Japanese subsidiaries and analyzed using a binary logit regression model. The results suggest that subsidiary profit is variously affected by its strategic roles, and that corporate managers should recognize the differences of their impacts. Especially, we conclude that subsidiary profit arises from marketing activities rather tan manufacturing activity, and from localization rather than centralization.