The Relationship between the Control Level of Foreign Subsidiaries and Performance in the Chinese Market

Kim,, B. , & Kim,, G. (2015). The Relationship between the Control Level of Foreign Subsidiaries and Performance in the Chinese Market. The Journal of Distribution Science, 13(8), 15-25, https://doi.org/https://doi.org/10.15722/jds.13.8.201508.15

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Abstract

Purpose - There is a lack of research on how much corporate control is sufficient for effective subsidiary business-related decision making. To address this research gap, this study analyzes the impact of the level of control of a Korean corporation's headquarters on its overseas subsidiary performance. Research design, data, methodology - The study's sample comes from the Overseas Korean Business Directory of KOTRA. A multiple regression analysis empirically confirmed the relationship between the headquarters level of control over the subsidiaries and their performance. Results - The results show that the greater an organization's headquarters control over strategic issues, the greater the subsidiary's non-financial performance. However, quick decision-making through decentralization promotes the rapid selection of successful new products that can provide a competitive advantage. Conclusion - This study shows that the impact of control levels on subsidiary performance depends on the type of control involved. Specifically, while low levels of control over operational issues had a positive (+) influence on subsidiary non-financial performance, high control levels led to improved non-financial performance with regard to strategic issues among the subsidiaries.

keywords: Multinational Company, Headquarter, Foreign Subsidiary, Control Level, Subsidiary Performance, Chinese Market

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Article Contents

Vol.13 No.8

The Relationship between the Control Level of Foreign Subsidiaries and Performance in the Chinese Market

Abstract

Reference

The Journal of Distribution Science