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Understanding Agency Problems in Headquarters-Subsidiary Relationships in Multinational Corporations: A contextualized Model.

Kostova, Tatiana and Nell, Phillip C. and Hoenen, Anne Kristin (2017) Understanding Agency Problems in Headquarters-Subsidiary Relationships in Multinational Corporations: A contextualized Model. Journal of Management, 3 (1). pp. 57-81. ISSN 1557-1211

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Abstract

This paper proposes an agency model for headquarters subsidiary relationships in multinational organizations with headquarters as the principal and the subsidiary as the agent. As a departure from classical agency theory, our model is developed for the unit level of analysis and considers two root causes of the agency problem - self-interest and bounded rationality. We argue that in the organizational setting, one cannot assume absolute self-interest and perfect rationality of agents (subsidiaries) but should allow them to vary. We explain subsidiary level variation through a set of internal organizational and external social conditions in which the headquarters-subsidiary agency dyad is embedded. We then discuss several agency scenarios reflecting various levels of selfinterest and rationality that lead to different manifestations of the agency problem. The proposed framework can inform more relevant applications of the agency perspective in organizational studies and motivate future research.

Item Type: Article
Keywords: agency theory / headquarters subsidiary relationships / bounded rationality / self interest / opportunism / culture / institutions / multidomestic / global / transnational MNCs
Divisions: Departments > Welthandel > International Business
Version of the Document: Accepted for Publication
Variance from Published Version: Minor
Depositing User: Kerstin Kvapil
Date Deposited: 12 Apr 2016 14:09
Last Modified: 19 Sep 2017 17:24
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/76642/
URI: http://epub.wu.ac.at/id/eprint/4980

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