The complexity of the business network context and its effect on subsidiary relational (over-) embeddedness

Many studies have focused on the effects of MNC subsidiaries’ external relational embeddedness. Little attention has been given to its antecedents and especially to the potential effect that the business network context might have. We try to fill this gap and attempt to explain variation among subsidiaries’ degree of relational embeddedness. Our results show a strong and robust effect of the business network context – i.e. the network context in which the direct business relationships between the subsidiary and its partners are embedded – on the degree of relational embeddedness. However, contrary to previous literature, we find an inverted u-shaped relationship. We discuss our findings with regard to the issue of over-embeddedness and the literature on the strength of weak vs. strong ties.

► We attempt to explain variation among subsidiaries’ degree of relational embeddedness.
► Our results show a robust inverted u-shaped relationship between the complexity of the business network context and the subsidiary's degree of relational embeddedness.
► We conclude that subsidiaries invest into relational embeddedness only until the complexity of the business network context exceeds a threshold value at about 1 standard deviation above the mean value.