Local Procurement and Value Chain Upgrading of Offshore Subsidiaries in China
Author
Abstract
This study integrates the offshore subsidiary (OS) development (OSD) and smile curve paradigms to examine the impact of local procurement on OSs’ functional upgrading of value chains (VCs) in China. Based on an offshore subsidiary development framework with headquarters-driven, internal subsidiary–driven, and host economy-driven, we draw on Taiwan-based subsidiaries operating in China from 2008 to 2018 to examine the relationships among value-chain functions, including technological enhancements (TE), marketing operations (MO), procurement mandates, and principal OSD determinants. In sum, the empirical results indicate that Taiwan-based OSs are able to strengthen their competitive advantage in China by engaging in persistent value creation through upgrading both TE and MO. In this study, some insights shed light on subsidiary development processes for multinational enterprises to revisit their strategies for deglobalization of VC configurations.
Key Words
localization, local sourcing, offshore subsidiary development framework, smile-curve logic, global value chain
