The building of country managers’ competence and its use in orchestrating subsidiaries’ resource: Empirical studies of indonesian subsidiaries in Nigeria

Abstract

This study employs a resource orchestration model to investigate the influence of country managers’ competence on subsidiaries’ performance in a host country. A structural equation model with a multistep approach using Lisrel is used to analyze 41 pieces of data from Indonesian business units operating in Nigeria. This study found that country managers use a subsidiaries’ absorptive capacity, which is formed by the combination of resources from the headquarters and the local partner as the dominant source of learning, to develop their competence over time. This competence does not directly influence subsidiary performance, but it is notably used to accumulate the critical assets for their subordinate business units. These assets then become valuable inputs for business units to develop or modify their operational capabilities which directly influence the performance. One contribution of this study is to provide a more detailed explanation of how a headquarters’ resources invested abroad are transformed into subsidiary performance.