Implementing strategic initiatives in MNE subsidiaries: Contrasting the path-dependency and effectuation approaches

Radical shifts in the macro-level environment, such as the fast digitalization of the economy and the imposed reconfiguration of global value chains (for instance because of global decoupling), have created new challenges for multinational enterprise (MNE) subsidiary managers. Radical shifts in the environment can have major implications for a subsidiary’s activities in the MNE’s value chain, and for its distinct underlying competences and role in the MNE network. What are the optimal subsidiary strategic responses, in the form of new investment initiatives, to radical shifts in the environment? We examine the implications of adopting a path-dependency versus an effectuation approach to guide subsidiary managers in responding to radical, exogenous shifts. We describe the path-dependency view on Patterns of subsidiary evolution. We then suggest that an effectuation approach can be useful to subsidiary managers facing radical environmental change, especially when enacting and implementing pattern-breaking investment initiatives, whereby they should attempt to broaden the range of reasonably possible options available to them and engage in experimentation.