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Business and Management.
The ability of an organisation to adapt and evolve in accordance with external change is frequently cited as a path to sustainability and longevity of operations. The manner in which change, transformation and adaption manifests itself within an organisation continues to prompt research across a wide and varying array of disciplines. Of particular interest in terms of organisational change is capability development as a vehicle for transformation. If real transformation is to occur the organisation must go beyond incremental change in extending and modifying the ways in which it operates (Helfat et al. 2007). Capability development as a driver for organisational transformation therefore recognises the importance of the modification and adaption of a resource base in accordance with external change.
The emerging dynamic capabilities perspective argues that in turbulent environments it is the adaption and modification of capabilities which fuels competitive advantage (Teece, 2007; Teece and Pisano, 1994; Teece, Pisano and Shuen, 1997). Indeed it is widely argued that what differentiates one organisation from another is largely determined by their resources and how they implement and utilize them (Wernerfelt, 1984; Barney, 1991, 1995; Peteraf, 1993). It is now emerging, however, that to meet the exacerbating challenges of fast moving, globally competitive markets, organisations need unique and difficult to replicate dynamic capabilities. This progression in theory aims to overcome the static nature of the resource based view (Mahoney and Pandian, 1992; Priem and Butler, 2001a; 2001b) and addresses the causal questions of how organizations can „continuously create, extend, upgrade, protect and keep relevant the enterprise‟s unique asset base‟ (Teece 2007, p. 1319).
This paper argues that whilst the dynamic capabilities perspective is useful and congruous to change it falls short when applied to subsidiary theory; limiting its applicability to theory and practice in this domain. The subsidiary context is a complex one; characterised by the need for alignment with headquarter driven objectives on one hand, and the need for responsiveness on the other (Scott, Gibbons and Coughlan, 2010) The scope for subsidiary adaption is largely contingent upon headquarter approval and controls in which case subsidiary management may affectively find their hands tied in pursuing adaptive strategies. The agency problem therefore raises some serious concerns over the applicability of the dynamic capability perspective in a subsidiary context. Juggling the competing goals of alignment and adaption reflects a real challenge for subsidiary management. The dynamic capabilities framework fulfills only the responsiveness dimension essentially ignoring crucial aspects of alignment.
This paper proposes looking at the other side of the coin in examining how mechanisms which allow for greater alignment can impact upon the subsidiaries capacity to be adaptive. It is argued that the subsidiaries capacity to gain access to resources and leverage their position will be largely contingent upon the space they occupy within the MNC network. This dual structure of alignment and adaption, and the combinative approach taken in this paper, has been referred to as ambidexterity (Duncan, 1976; Gibson and Birkinshaw, 2004).
Reilly, M., Scott, P. Subsidiary Ambidexterity: A New Lens Through Which Subsidiary Bargaining Power can be Examined?, EGOS colloquium, Gothenburg, Sweden, July 2011