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Ownership mode, cultural distance, and the extent of parent firms’ strategic control over subsidiaries in the PRC

Lookup NU author(s): Professor Benjamin BaderORCiD

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Abstract

Previous studies often associated a specific type of ownership mode with the extent of control a parent firm may have over (strategic) decision-making in a foreign subsidiary, suggesting that parent firms should have higher control over wholly-owned subsidiaries (WoS) than international joint ventures (IJVs). Building on principal agent theory, we argue that in the Chinese context higher ownership levels do not necessarily have a positive effect on the extent of control over the foreign subsidiary. We further argue that cultural distance between the parent firm and the subsidiary moderates this relationship. We test our hypotheses using data from a sample of 156 foreign subsidiaries in the People’s Republic of China (PRC) and find strong support for our arguments. Our findings show that in WoS parent firms reduce their extent of control, while in IJVs parent firms increase their extent of control.

Publication metadata

Author(s): Puck J, Hödl MK, Filatotchev I, Wolff HG, Bader B

Publication type: Article

Publication status: Published

Journal: Asia Pacific Journal of Management

Year: 2016

Volume: 33

Issue: 4

Pages: 1075-1105

Print publication date: 01/12/2016

Online publication date: 25/05/2016

Acceptance date: 01/01/2016

Date deposited: 19/12/2018

ISSN (print): 0217-4561

ISSN (electronic): 1572-9958

Publisher: Springer

URL: https://doi.org/10.1007/s10490-016-9471-2

DOI: 10.1007/s10490-016-9471-2

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