Learning and competitiveness in Mexico's automotive industry: The relationship between traditional and world-class plants in multinational firm subsidiaries.

Abstract

This study deals with the competitiveness of the multinational corporation (MNC) under conditions of regional economic integration in a host country, whose trade and investment policies are undergoing liberalization. It builds upon the work of Doz & Prahalad (1986), Ghoshal & Nohria (1989), and Ghoshal & Bartlett (1990), in that it views the MNC as an internally differentiated organization, whose different national subsidiaries are embedded in very different environmental conditions and may have developed under very different historical circumstances (Ghoshal & Nohria, 1989: 323). This is indeed the case of the three auto MNC subsidiaries in Mexico (Ford de Mexico, Nissan Mexicana, and Volkswagen de Mexico), that have two types of auto assembly plants (traditional and world-class). While previous research focuses mostly on inter-subsidiary differentiation, the current study goes further by investigating intra-subsidiary differentiation. The following research questions are addressed: What are the principal differences between traditional and world-class plants? What is the role of each plant within the subsidiary organization and what is the relationship between them? Given that the problem of subsidiary adaptation to regional economic integration necessitates a knowledge transfer process, where and how does each of the two plants acquire world-class production knowledge to increase its competitiveness? The methodology used to answer these questions was qualitative, inductive, theory-building, and case-based in nature. Among the sources of information were interviews, direct observation, and archival data. Within-case and cross-case analyses yielded three main findings: (1) the co-existence of traditional and world-class assembly plants amounts to intra-subsidiary differentiation which is challenging to subsidiary managers; (2) contrary to expectations, there is no close relationship and practically no knowledge transfer between the sibling plants; and (3) each MNC employs a different knowledge transfer strategy for each type of plant. Besides enhancing our understanding of MNC behavior, this study specifies the link between plant level competitiveness and subsidiary effectiveness. It also contributes to MNC literature and practice by focusing on the dynamics of plant-to-plant relations within a host country subsidiary. Finally, it includes recommendations for reducing barriers to intra-subsidiary world-class production knowledge transfer.