Paper info

Industrial Networks, Internationalization and Subsidiaries Development: The Case of Loccioni and its Foreign Subsidiaries

Enrico Baraldi , Francesco Ciabuschi, Gian Luca Gregori, Olof Lindahl and Andrea Perna

The paper was published at the 32nd IMP-conference in Poznan, Poland in 2016.

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Research background This paper adopts an industrial network perspective to explore the process of internationalization of the Italian company Loccioni Group (Loccioni) through the establishment of three subsidiaries in three different countries. We build on previous studies examining firm internationalization in a specific country, but particularly we focus on how the interdependences between the various subsidiaries’ industrial networks has evolved in time and between markets. As the subsidiaries’ networks are highly internationalized, they can exert further pressure on the various subsidiaries development. Based on this reasoning, the main questions addressed in this paper concern (1) how the establishment and evolution of the business relationships of a firm subsidiaries affect their internationalization in time and in space: and (2) how not only the local embeddedness of subsidiaries, but also the interconnectedness between their internationalized business networks affect the internal relationship between subsidiaries and headquarters. Purpose The purpose of this paper is to explore two specific areas pertaining to the industrial networks and the internationalization of firms. Firstly, we look at how business relationships influence the process of internationalization in time, from the establishment of the first subsidiary in a foreign market to the following ones, and in space, that is, across different markets, all connected to each other typically via a pivotal business relationship (e.g., different subsidiaries in different markets, but all supplying the same customer). This paper thereby unpacks how the dependence of subsidiaries on industrial networks influences when, where and how they grow in a market. Secondly, we investigate how an increasing external network dependence of subsidiaries in their internationalization process may cause a detachment of the subsidiary from the mother company as its knowledge becomes insufficient to guide the subsidiary’s internationalization. Methods This paper utilizes an exploratory, longitudinal, single-case study of Loccioni, a systemintegrator of measurement and testing machines for automotive and home appliances components, to illustrate the specific dynamics of the influences of industrial networks on the internationalization process of subsidiaries. Main contribution The paper contributes to the IMP tradition by providing a multi-layered and geographically more fine-grained view of the network embedding companies that operate on internationalized markets: it is in fact not only the headquarters which manages key business relationships, but also several local subsidiaries are involved in each of them, so that that the same business relationship plays out across several geographies, with risk for coordination problems if not tensions. This paper thereby sheds light on a less investigated area of research within the IMP tradition, the link between internationalization in different countries and the interconnectedness between the industrial networks spanning these countries. At the same time, this paper contributes to international business (IB) theories by showing how networkdependent the process of internationalization of both the mother company and its subsidiaries is. Specifically we contribute by providing insights into the case of a firm that internationalizes late within highly international markets, which is also a good example of how an SME plugs into a Global Factory and exploits further opportunities of internationalization.