The Subsidiary Development of Automotive Part Suppliers in China: From the Capabilities Evolutionary Perspective

Abstract

This study examines the internationalization process of foreign manufacturing subsidiaries in China from the perspective of capabilities evolution. While most previous studies have analyzed the internationalization process at an overall firm or subsidiary level, this study conducted analysis of capability at the functional level (manufacturing, purchasing, marketing, and R&D). By synthesizing the existing stage theory and dynamic capability view, and with a focus on the scope of change in functional activities, we suggest a three-stage model of capabilities evolution in the internationalization of automotive part manufacturers: the capabilities-transfer stage, the capabilities-development stage, and the capabilities-exploitation stage. Using this three-stage model, we find that subsidiaries evolve in the course of interactions with internal and external network actors, the roles and contributions of which change with the stage of development. In our between-case study, we confirm that the level of capability attained by each subsidiary varies with the difference in types and degrees of network interactions. We conclude with some propositions concerning how to develop subsidiaries’ capabilities for systematic internationalization, stage by stage.