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

Puck, Jonas and Hödl, Markus K. and Filatotchev, Igor and Wolff, Hans-Georg and Bader, Benjamin (2016) Ownership mode, cultural distance, and the extent of parent firms strategic control over subsidiaries in the PRC. Asia Pacific Journal of Management, 33 (4). pp. 1075-1105. ISSN 0217-4561

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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. Moreover, we find that extent of control over WoS (IJVs) declines (increases) when cultural distance increases. Our results have significant theoretical implications for international business (IB) research as they challenge existing views with regard to the relationship between ownership mode and control as well as the moderating effect of cultural distance. (authors' abstract)

Item Type: Article
Additional Information: This article has been published with open access at Springerlink.com.
Keywords: Ownership mode / Cultural distance / Control Subsidiaries
Divisions: Departments > Welthandel > International Business > Puck
Version of the Document: Published
Depositing User: ePub Administrator
Date Deposited: 03 Jun 2016 09:35
Last Modified: 04 Nov 2016 05:39
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/76701/
URI: http://epub.wu.ac.at/id/eprint/5072

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