Subsidiary Autonomy and Factory Performance in Japanese Manufacturing Subsidiaries in Thailand

This chapter aims to investigate the relationship between levels of subsidiary autonomy and the performance of a subsidiary’s subunit (factory) in Japanese manufacturing subsidiaries in Thailand. We conducted ordinary least squares regression analysis based on a questionnaire survey of 50 Japanese manufacturing subsidiaries in Thailand and multiple case studies to investigate the causal relationship between subsidiary autonomy and factory performance. We have three main findings. First, the autonomy level of Japanese manufacturing subsidiaries is linked to the subsidiaries’ factories’ performance compared to factories in Japan, but not in other foreign countries. Second, high levels of subsidiary autonomy are negatively associated with factory performance. Third, there are two causal relationships: high factory performance leading to low subsidiary autonomy and high/low subsidiary autonomy leading to low/high factory performance. From this, we discussed whether the degree of resource centralization in the home country influences the relationship between the level of subsidiary autonomy and a subunit’s performance in the foreign subsidiary. Moreover, we discussed the possibility that the causal relationships between them are not necessarily direct causal relationships. We identified a new factor determining subsidiary autonomy and investigated the relationship between the subsidiary autonomy and performance of a subunit in the foreign subsidiary compared to the home country. Because this has not been discussed in previous studies, this chapter contributes to the study of headquarters–subsidiary relationships and gives guidelines to practitioners on managing subsidiary autonomy.