Foreign MNE Subsidiary Emergence, Strategy, Contribution, and Sustainability Practices in Pakistan

Abstract

This research examines the emergence and evolution of foreign Multinational Enterprises (MNEs) subsidiaries, their strategies, contribution, and sustainability practices in Pakistan. Research argues that international business research has failed to answer some big questions regarding the emergence, evolution and strategies of foreign MNEs, and how MNEs from western economies respond to the pressures for sustainability in their international operations in emerging economies which are also referred to as pollution havens due to their cheaper land, resources and labor. Emerging economies are much relevant as the world economic center of gravity and the international business activity are now shifting from west to east, and in this regard, certain ignored contexts such as Pakistan, which is potentially a large and an important marketplace, and can play an important role for the multinational activity, are much interesting. Based on in-depth interviews from CEOs of 22 foreign subsidiaries in Pakistan, the study shows that foreign subsidiaries in Pakistan are well established having their presence in the country for quite some time, however, since the subsidiary entrepreneurial initiatives are mainly focused on the local market, and their innovativeness and contribution to the MNE in terms of knowledge and expertise are limited, they may be seen as rather less evolved in terms of roles and strategies. Furthermore, the foreign MNEs in Pakistan do adopt environmentally, economically, and socially sustainable practices, perhaps just like they do in their home (western) countries, although the foreign subsidiaries also experience pressures to adopt sustainability practices, as well as barriers in the adoption of such practices. Finally, the foreign subsidiaries in Pakistan do not at large have a broader role, although there is much potential for a broader role for subsidiaries. The lack of innovativeness of foreign subsidiaries suggests rather limited contribution on part of the competitiveness of the local industry and, hence, there is much scope for improvement.

Keywords: Subsidiary Roles, Subsidiary Development, Sustainability, Subsidiary Initiatives, Pakistan

JEL Classification: M16