JultikaUniversity of Oulu repository

Location advantage is an importance incentive for a multinational enterprise (MNE) to set up subsidiaries in a foreign country. However, whether such location advantages are fully utilized during the subsidiary operation? The purpose of this study is to analyse how the subsidiary can make use of the changing location advantage and continue to grow. It tries to find out whether the subsidiary succeeds to meet its original expectation during its development. And if not, what should be done to make sure the previous location advantage is actually converted to the MNE’s competence. The research method is qualitative by doing a case interview with the headquarter of an MNE based in Finland. The qualitative empirical study helps to provide deeper understanding of the eclectic paradigm and subsidiary development as well as the analysis made in this study. As the study emphasizes the continuous development of both location advantage and subsidiary competence, the qualitative research shows different events in the subsidiary’s history. The finding made in the study shows that there is a continuous cycle between subsidiary development and the configuration of location advantage, headquarter-subsidiary relationship and the subsidiary character itself. In particular, the normative integration is the key in achieving a suitable configuration. Location advantage is the important link in making sure the subsidiary development will continue, therefore, the location advantage should be perceived as changing and dynamic to seek the growing subsidiary role. The finding suggests the MNE to pay more attention on recruitment and training to achieve high normative integration, which will prevent lots of potential conflicts. In addition, the location advantages should be consistently monitored and evaluated to be prepared to respond timely.