Management and ownership control in foreign investments: An analysis of the influence of isomorphism and quality of institutions (original) (raw)
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Journal of Management, 2007
This article integrates institutional theory and organizational learning perspective and proposes a contingency framework on the relationship between ownership strategies and subsidiary performance. Using a sample of Japanese subsidiaries worldwide, the article finds important main effects of ownership, institutional distance, and host country experience on subsidiary survival. Furthermore, the effect of ownership is contingent on institutional distance and host country experience. In institutionally distant countries, subsidiaries have better survival chances if foreign parents have more ownership. Host country experience has a negative impact on subsidiary survival, but the effect is weaker if foreign parents have larger ownership positions in the subsidiaries.
Different Forms of Agency and Institutional Influences within Multinational Enterprises
1 Abstract Purpose: Given their exposure to diverse institutional settings, decision making in multinational enterprises (MNE) is marked by inconsistencies and conflict. Within the comparative institutional analysis (CIA) literature, such inconsistencies are seen as a source of experimentation or innovation. By contrast, in the international business (IB) literature, institutions are primarily understood as constraints on MNE activity. The latter focuses on 'institutional effects' taking institutions as stable and determining of social agency. As a way of addressing this limitation, we aim to understand the conditions that enable actors to engage in strategic action despite institutional pressures towards statis. Methods: The research draws on systematic comparative case studies of two large MNEs in the chemical industry, headquartered in Germany and the UK, and operating in Italy, Germany, and Poland. It focuses on one example of agency, subsidiary efforts to change product formulations that are successfully developed by the headquarters.
BAR - Brazilian Administration Review, 2015
This work investigates whether host countries institutional factors and firm characteristics can help the understanding of Brazilian multinationals' choices of ownership mode for their foreign direct investments (FDI). Brazil is a privileged locus for research on emerging market multinationals (EMNEs), given its growing stock of outward FDI. The paper contributes to a better understanding of the international strategic choices of EMNEs. First, the phenomenon under study is examined using the theoretical lenses of institutionalism. Second, the study looks at the relationship between state support and choice of ownership mode, a new issue in the area of international business. Third, differences between the decisions taken by manufacturing and service EMNEs are also examined. Fourth, the study focuses on an emerging country, Brazil. The quality of the regulatory environment of the host country, and differences in beliefs, cultural identity and management practices between the host country and the country of origin are factors of the institutional environment significantly related to the choice of ownership mode by Brazilian EMNEs. As to firm characteristics, our results show that state support favors the choice of joint ventures, and that service EMNEs also significantly prefer joint ventures, when compared to manufacturing firms. The findings also support the view that EMNEs are less sensitive to institutional weaknesses in host countries.
Firm ownership and internationalisation: is it context that really matters?
European J. of International Management, 2016
This paper considers the potential role played by different kinds of shareholders in the firms' international level, distinguishing the firms quoted in the UK from those listed in the countries of Continental Europe (France, Germany, Italy, Poland and Spain). Our results confirm that different kinds of ownerships affect the overall level of a firm's internationalization. Family ownership has a negative impact on foreign sales in the UK but not in Continental Europe, while Bank ownership has a negative impact on the scope of FDI in Continental Europe but no impact whatsoever in the UK. Institutional investors positively impact the scope of both foreign sales and FDI in the UK, while in Continental Europe they have a negative impact on foreign sales. These different results contribute to explaining why previous studies that have focused on just one country or a single measurement of internationalization have come up with such contrasting results.
Ownership control of foreign affiliates: A property rights theory perspective
A B S T R A C T This paper applies property rights theory to explain changes in foreign affiliates' ownership. Post-entry ownership change is driven by both firm-level characteristics and by the differences in the institutional environments in host countries. We distinguish between financial market development and the level of corruption as two different institutional dimensions, such that changes along these dimensions impact upon ownership change in different ways. Furthermore, we argue that changes in ownership are affected by the foreign affiliate's relatedness with its parent's sector, as well as by the affiliate's maturity. We use firm level data across 125 host countries to test our hypotheses. ã 2016 Published by Elsevier Inc.
Contrasting Control Modes in the Multinational Corporation: Theory, Practice, and Implications
International Studies of Management and Organization, 1982
Control of subsidiaries of multinational firms by their headquarters is a topic of interest for researchers and managers alike. Control strategies vary widely among organizations, and no one particular approach has been universally adopted. What will be examined here are the behavioral aspects of organizational control in the multinational firm, namely, the modes and quantity of interactions between headquarters and subsidiary. Although a normative theory will not, and cannot, be presented, the implications of control systems for the groups affected by them-individuals, organizations, labor unions, and governments-will be discussed. This paper presents the results of a study that examined the manifestations of two different organizational control styles on the relationship between headquarters and subsidiary of multinational firms. The two control styles studied were (1) formal, bureaucratic control, and (2) informal, cultural control. Formal, bureaucratic control relies on the use of explicit rules and regulations for control of organizational members, whereas informal, cultural control is based on the existence of an implicit culture within the organization. These two control systems can be conceptualized as "ideal types" and as such can
Subsidiary embeddedness and control in the multinational corporation
International Business Review, 1996
A subsidiary of a multinational corporation (MNC) is embedded in a network of specific business relationships. It is argued that the degree of subsidiary embeddedness is a function of the adaptation between the subsidiary and direct and indirect counterparts of these relationships. The paper hypothesizes that the higher the degree of embeddedness, the greater the likelihood of counterparts influencing the subsidiary's behaviour. This influence competes with headquarter's desire to exercise control to integrate the subsidiary into the overall corporate strategy. The empirical data presented, collected from 78 subsidiaries of major Swedish MNCs, indicate that embeddedness has an impact on how headquarter's control is perceived by the subsidiary, if embeddedness is separated into external and corporate embeddedness. The test provides support for the opinion that the higher the degree of embeddedness vis-g~-vis external customers, suppliers and other counterparts, the lower the degree of headquarters' control, as perceived by the subsidiary. But it also lends support for the view that embeddedness vis-d-vis corporate counterparts works in the opposite direction; it rather tends to increase the control perceived at the subsidiary level. These results indicate that competition for influence over the subsidiaries' behaviour, as seen from the headquarter's point of view, arises primarily from external actors who have business specific relationships with the subsidiary.
The influence of multinational enterprises on subsidiaries: context matters
Accounting, Auditing & Accountability Journal, 2018
Purpose The purpose of this paper is to examine how differences in the institutional environments of a multinational enterprise (MNE) shape the role of management control systems (MCSs) and social capital in the headquarter (HQ)-subsidiary relationship of an emerging economy MNE. Design/methodology/approach A case study design was adopted in this research in order to understand how the differences in the institutional environments of an MNE shape the design and use of MCSs. Data were gathered by means of semi-structured interviews, document analysis and observations. Interviews were conducted at the Nigerian HQ and UK subsidiary of the Nigerian Service Multinational Enterprise (NSMNE). Findings The study found that the subsidiary operated autonomously, given its residence in a stronger institutional environment than the HQ. Instead of the HQ depending on MCSs means of coordination and control, it relied on social capital that existed between the HQ and subsidiary to coordinate and i...
Control in multinational firms : an economic perspective / 1684
1990
This paper uses principal-agent and transaction cost theories to analyze the concept of control in multinational enterprises. One of the main points is the distinction between methods of organization (the price system and hierarchy) and economic institutions (markets and firms), which use both methods of organization. I argue that the price system and hierarchy are substitutes, with the price system utilized in firms to overcome the basic flaws of hierarchy. This theoretical framework is then used to analyze some of the relationships studied in the organization theory literature of the MNE.