Lookup NU author(s): Dr Benjamin Bader
This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).
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.
Author(s): Puck J, Hödl MK, Filatotchev I, Wolff HG, Bader B
Publication type: Article
Publication status: Published
Journal: Asia Pacific Journal of Management
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
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