The growth of research on corporate entrepreneurship (CE) was fast in past decades. At the beginning, research mainly focused on the relationship between CE and firm performances (Covin and Slevin, 1989, 1991; Zahra, 1995; Lumpkin and Dess, 1996). Although research had come out with valuable theoretical concepts and rich empirical results, it still encountered bottleneck. Some scholars suggested that CE research be extended to international business activities or include social network perspective (Dess, Ireland, Zahra, Floyd, Janney and Lane, 2003).
In the academic model of CE research, researchers traditionally assumed that subsidiaries were the instrument of MNC and consequently, acted as a subordinate entity (Birkinshaw and flood, 1998). As subsidiaries grew in size and developed their own unique resources, they were conceptualized as a semi-autonomous entity from a subordination to one of equality (Bartlett and Ghoshal, 1989). In recent year Taiwan local companies were, attempting to become multinational enterprises through enlarging the scale of entrepreneurial activities of international manufacturing, marketing, purchasing, researching, etc. Especially the scale and scope of subsidiaries in Mainland China were often no less than that of their Parent Companies in Taiwan. Offering rich resources and unique capabilities, subsidiaries of Taiwan enterprises were important sources of competitive advantage to their Parent Companies. They are not subordinates to the Parent Companies any more. They played critical roles in involving in strategy formulation, exploring market opportunities, extending resource exploitations, developing new products, and creating useful innovations.
Subsidiaries also carried out new tasks, such as creation, adoption and diffusion of innovation (Ghoshal and Bartlett, 1988). Researchers assumed that subsidiary managers took on additional or part of, responsibilities on tapping into new ideas and opportunities in the local market and interacting with other local partners to build their unique capabilities (Bartlett and Ghoshal, 1989; Birkinshaw, Hood and Jonsson, 1998; Birkinshaw, 1997; Birkinshaw, Hood and Young, 2005).
Subsidiaries had potential to behave independently as an entrepreneur. They operated under a unique local environment as defined by the network partners of customers, suppliers, competitors and government bodies, to which they have to adapt to be effective. The nature of local environment would cause important influence on entrepreneurial activities undertaken by subsidiaries (Birkinshaw and Hood, 1998). Therefore, subsidiaries were directly or indirectly influenced by both parent companies and local network partners. Essentially, subsidiaries were embedded in the social network of parent companies and local network partners which affected their entrepreneurial behaviors. Thus, this research extended corporate entrepreneurship into international activities and conducted an empirical study on Taiwan enterprise's subsidiaries with relational embeddedness of social network perspective.
Even though. CE is one of the main streams of management research, most of current empirical researches adopted single source or single method. Multiple sources of data collection to triangulate will enhance the reliability and validity of empirical research (Lyon Lumpkin and Dess 2000). When we collected data of dependent and independent variables through single questionnaire form same group interviewers at the same time, the research may encounter the common method variance resulted in research bias. One of the solutions is to raise level of units of analysis to avoid the bias (Peng, Kao and Lin, 2006). Thus, this research collected data of 5 top managers for each subsidiary conducted by the hierarchical linear model to get a more correct empirical result compared to the traditional research design using the linear regression model statistics from single questionnaire data.
Two opposing arguments explain the association between embeddedness and entrepreneurial behaviors. The first is the high strength of embeddedness (strong tie) in which organizations link to each other closely to enjoy the benefits of coordination and adaptation. Thus the higher degree of embeddedness, the greater likelihood of network partners' influence on subsidiary's entrepreneurial behaviors (Andersson and Forsgren, 1996; Uzzi, 1997). We call it the positive effect of embeddeness intensity. The next is the low strength of embeddedness (weak tie) in which organizations keep, distant and infrequent relationships and exchange information with multiple organizations to prevent being sealed off from: the market (Uzzi; 1996). The low strength of embeddedness enhances greater level of entrepreneurial behaviors because organizations know more new ideas or innovative information from outside (Uzzi, 1996; Simsek, Lubatkin and Floyd, 2003). It is called counter effect of embeddedness intensity.
An over-embeddedness phenomenon exists (Uzzi 1996), in which positive effect rises up to a threshold: However after threshold is reached, embeddedness derails the firm's behaviors. Once embeddedness increases beyond a certain threshold of intensity, the firm may begin to trade with a confined set of network partners and ignore the benefits or demands of the partners outside the network. It may not prevent the isolation from the market as new information flows into the network decreases; eventually it is closed off in highly embedded network. When a firm becomes too embedded to adapt, embeddedness turns into liability Scholars argued that balanced network which has strong ties and weak ties simultaneously will facilitate its economic actions as the firm can enjoy the optimal benefits of coordination, adaptation, information exchange, trust, joint problem-solving arrangement, and inflow of innovative information (Uzzi, 1996; 1997). Taking on over-embeddedness and balanced network arguments, we induce that embeddedness has inverse U shape relationship with the subsidiary's entrepreneurial behavior.
Subsidiary Entrepreneurship, Radical Entrepreneurial Behavior, Relational Embeddedness, Hierarchical Linear Model