A subsidiary’s ability to identify opportunities in the host country and to subsequently exploit these opportunities could create competitive advantages for the Multinational Corporation. While research on subsidiary entrepreneurship has focused primarily on subsidiary-specific resources and capabilities, as well as environmental factors, the type of opportunities that the subsidiaries may find in the host environment has been underexplored. Drawing on the subsidiary entrepreneurship literature, institutional perspectives, and entrepreneurship research, this paper suggests that subsidiaries embedded in institutional contexts that are different from those of their home country have unique advantages that enable the identification of entrepreneurial opportunities. Accordingly, a theoretical framework is proposed, based on contingency perspectives on the different views of entrepreneurial opportunities in relation to business processes in the host country’s institutional environment, vis-a-vis uncertainty levels and legitimacy requirements. In addition, appropriate strategic approaches are suggested, through which subsidiaries can exploit these entrepreneurial opportunities.

Introduction

Research on multinational corporations (MNCs) suggests that subsidiaries of multinational corporations (subsidiaries hereafter) play an important role in contributing to the development of firm-specific advantages (Burger et al., 2018; Birkinshaw, 1997; Williams, 2009). Birkinshaw (1997) argued that subsidiaries can contribute not only to the development of firm-specific advantages, but they can in fact drive certain entrepreneurial processes through identification of opportunities and development of new products and services in the local market. Given that subsidiaries can assume roles of innovation and creativity within the MNC, research on subsidiary entrepreneurship has focused on the importance of the parent-subsidiary relationship (Birkinshaw, 1997; Birkinshaw and Hood, 1998; Williams and Lee, 2011), subsidiary specific resources and capabilities (Birkinshaw, 1996, 1997), and local environmental factors (Birkinshaw and Hood, 1998; Du and Williams, 2017; Zahra et al., 2000), to understand what factors promote or suppress subsidiary entrepreneurship. Subsidiary entrepreneurship commences with identifying ‘opportunities’ in the host environment and concludes with the exploitation of the opportunities (Birkinshaw, 1997; Schmid et al., 2014; Wang and Suh, 2009). This is parallel to the corporate  entrepreneurship literature, which emphasizes the centrality of opportunity (Shane and Venkataraman, 2000) in entrepreneurial activities. Despite this centrality in entrepreneurship research, there still exists considerable uncertainty with regard to extant research on opportunities (Dutta and Crossan, 2005) due to the elusive nature of opportunity. While subsidiary entrepreneurship research has mainly focused on the relationship between the MNC headquarters and subsidiaries in terms of selling, evaluation and approval of the entrepreneurial ideas and has overlooked opportunity identification and exploitation (Schmid et al., 2014). In addition, while research on subsidiary entrepreneurship has emphasized the importance of subsidiary-specific resources and capabilities, as well as environmental factors, the type of opportunities that subsidiaries may find in the host environment has been limited (Schmid et al., 2014), except for recent studies such as the one by Du and Williams (2017), who identified a range of opportunities in China in the form of innovative projects.