Chapter 2: Value Generation in the Multinational Corporation

As markets become increasingly competitive, it is important for multinational corporations to generate value. Both headquarters and subsidiaries are responsible for contributing to value generation, albeit they may do so in different ways. This builds on the notion from the literature that it is possible to discern two separate concepts that relate to the generation of value, namely, value creation and value added. These concepts are often used interchangeably, without a clear distinction what they de facto reflect or what the underlying mechanisms of value creation and value added are.

Based on a set of assumptions regarding headquarters–subsidiary relations conceptual arguments related to value generation are developed.

Teasing out the differences between the concepts becomes important as it leads to a fuller understanding of what a headquarters do in different situations and of what a headquarters–subsidiary relationship entails for value generation.

In this chapter, it is argued that value-adding activities tend to be conducted by a headquarters, but are dependent on varying knowledge situations of headquarters, while the value creation process tends to take place at the subsidiary level.