Sustaining the growth effects of foreign investment: the case of multinational subsidiaries in Malaysia

Investment by multinational corporations can generate a broad range of benefits for host economies. This paper argues that the nature and extent of these benefits depends in part on the strategic role of the subsidiary in the overall activities of the multinational corporation. Companies that share corporate knowhow, devolve administrative authority and grant worldwide innovation, manufacturing, and marketing rights to subsidiaries offer host economies exposure to state of the art management and marketing expertise and demand for highly paid labour. Survey evidence of multinational subsidiaries in Malaysia indicates that local management has input into all decision-making. Higher levels of autonomy apply in 'decentralised' organisations in operational and local market matters. However, the more integrated the subsidiaries in the global activities of the parent, the less their autonomy, implying a lesser contribution to the growth of managerial talent in Malaysia.