Introduction

Headquarters and subsidiaries are the two generic organizational units that form multinational corporations (MNCs). Their specific relationship is of central importance, as conflicts in these relationships threaten the effectiveness, or even the operations, of MNCs. Reasons for conflicts in headquarters–subsidiary relationships are manifold. They range from differing perceptions of business opportunities (see e.g. Schmid and Daniel in this volume) to the introduction of corporate-wide standards (see e.g. Fenton-O'Creevy et al. in this volume). In particular, conflict potential can be linked to headquarters-driven charter losses, i.e. an active move by headquarters to withdraw a charter from a particular subsidiary.

Headquarters-driven charter losses in subsidiaries are typically an outcome of headquarters redefining the strategic mission of the MNC. One example is the implementation of a rationalization strategy, in which some production plants are to be closed and production capacities are reallocated to other subsidiaries. Another occurs when a subsidiary loses its charter because the parent company downgrades the importance of the host country market. These charter reallocations are likely to increase competition among subsidiaries and, for the “losers,” a conflicting relationship with the parent company is likely to arise (e.g. Blazejewski 2009; Dörrenbächer and Becker-Ritterspach 2009). However, little is known about what causes conflicting interests in charter losses between headquarters and subsidiaries to turn into an open conflict, nor is much known about the role of headquarters' and subsidiaries' agency.

This chapter addresses this research gap using the case of a German MNC in the telecommunications equipment industry (Siemens).