8Why Do MNCs Divest or Retain Foreign Subsidiaries?Approaches from Dependency and Redundancy in Subsidiary Networks Naoki YasudaTo construct a country-level hub variable, I divided the subsidiary’s exports by the total exports of the country where it operates. To construct a variable denoting a regional hub function, I divided the subsidiary’s exports by the total exports of the region where it operates. To test Hypotheses 1b and 2b, I constructed authority functions for both country and regional networks. To construct the former, I calculated total imports in the country where a focal subsidiary exists. I divided a subsidiary’s imports by the total imports of the county in which it operates. I repeated the procedure using regional and subsidiary data to construct a regional authority function variable. I calculated the total imports in the region where a focal subsidiary exists and divided a subsidiary’s imports by the total imports of the region in which it operates. To test Hypothesis 3, I constructed a measure of regional redundancy in subsidiary functions. I identified subsidiaries’ functions as described in Figure 1. I created a local sales ratio (i.e., local sales divided by the subsidiary’s local sales plus exports) and a local procurement ratio (local procurement divided by the subsidiary’s total local procurement plus imports). I classified subsidiaries into four types: (1) export platform subsidiary (i.e., local sales and local procurement ratios are both 0), (2) resource extraction subsidiary (i.e., local sales ratio is 0 and local procurement ratio is greater than 0), (3) vertical subsidiary (i.e., local sales ratio is greater than 0 and local procurement ratio is 0), and (4) networked subsidiary (i.e., local sales ratio and local procurement ratio are both greater than 0). Finally, I counted the number of subsidiaries that duplicate the functions of the subsidiary in the same country and region. Regional variables cover Asia, North America, South America, Europe, Africa, and Other. Table 1 summarizes the operationalization of these independent variables. Table 1: Framework of HypothesesVariableOperationalizationPredictionOperationalizationPredictionHub function Exports of a focal subsidiary/Country total exportsH1a: NegativeExports of a focal subsidiary/Regional total exportsH2a: NegativeAuthority functionA focal subsidiary’s imports/Country total importsH1b: NegativeA focal subsidiary’s imports/Regional total importsH2b: NegativeRedundancy Number of subsidiaries of the same functions in the same countryH3a: Positive Number of subsidiaries of the same functions in the same regionH3b: Positive
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