Subsidiary strategy: The embeddedness component

This article develops the concept of internal subsidiary embeddedness as the canvas within which subsidiary strategy takes place. Developing an inductive model, we identify three hierarchical levels of embeddedness. The first level is operational embeddedness, which relates to interlocking day-to-day relations. The second level is capability embeddedness, which concerns the development of competitive capabilities for the multinational as a whole. The third level is strategic embeddedness, which concerns a subsidiary's participation in a multinational corporation's strategy setting. We derived our concept of embeddedness from an in-depth case study. Embeddedness is not merely an outcome of the institutional setting in which a subsidiary is situated, but is a resource a subsidiary can manage by means of manipulating dependencies or exerting influence over the allocation of critical resources. A subsidiary can modify its embeddedness to change its strategic restraints. Therefore, the development of subsidiary embeddedness becomes an integral part of subsidiary strategy.