Chapter 15: How Multinational Corporations Can Upgrade Foreign Subsidiaries: A Case Study from Central and Eastern Europe

Stefan Schmid

Abstract

While many companies operate across borders, some of them still hold the view that headquarters are the principal source of competitive advantage. These companies do not fully use the potential that foreign subsidiaries offer. In this chapter one means of upgrading foreign subsidiaries is presented: the setting up of a centre of competence. The role of a centre of competence is illustrated by the results of a case study conducted in Central and Eastern Europe. It is shown how a Slovakian subsidiary of a German multinational corporation was developed into a centre of competence. The chapter has two major objectives: to show that MNCs that establish centres of competence abroad have to undergo strategic, structural and cultural changes; and to demonstrate that not only subsidiaries in Western countries but also subsidiaries in transition economies can become centres of competence.