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.
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:5072 |
| Date | 25 May 2016 |
| Creators | Puck, Jonas, Hödl, Markus K., Filatotchev, Igor, Wolff, Hans-Georg, Bader, Benjamin |
| Publisher | Springer |
| Source Sets | Wirtschaftsuniversität Wien |
| Language | English |
| Detected Language | English |
| Type | Article, PeerReviewed |
| Format | application/pdf |
| Rights | Creative Commons: Attribution 4.0 International (CC BY 4.0) |
| Relation | http://dx.doi.org/10.1007/s10490-016-9471-2, http://link.springer.com/, http://epub.wu.ac.at/5072/ |
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