Quotation Puck, Jonas, Hödl, Markus, Filatotchev, Igor, Wolff, Hans-Georg, Bader, Benjamin. 2016. Ownership Mode, Cultural Distance, and the Extent of Foreign Firm's Control over Subsidiaries in the PRC. Asia Pacific Journal of Management 33 (4), 1075-1105.


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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.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Asia Pacific Journal of Management
Citation Index SSCI
WU-Journal-Rating new FIN-A, MAN-A, STRAT-C, WH-B
Language English
Title Ownership Mode, Cultural Distance, and the Extent of Foreign Firm's Control over Subsidiaries in the PRC
Volume 33
Number 4
Year 2016
Page from 1075
Page to 1105
Reviewed? Y
URL http://link.springer.com/article/10.1007/s10490-016-9471-2
DOI http://dx.doi.org/doi:10.1016/j.intman.2016.04.002

Associations

People
Puck, Jonas (Details)
Hödl, Markus (Former researcher)
Filatotchev, Igor (Details)
External
Bader, Benjamin (Leuphana University Lueneburg, Germany)
Wolff, Hans-Georg (University of Cologne, Germany)
Organization
International Business (Details)
Global Business and Trade DP (Details)
Competence Center for Emerging Markets and CEE WE (Details)
Institute for International Business IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5300 Economics (Details)
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