Unravelling agency relations inside the MNC: The roles of socialization, goal conflicts and second principals in headquarters-subsidiary relationships

Björn Ambos, Sven Kunisch, Ulrich Leicht-Deobald and Adrian Schulte Steinberg

Journal of World Business, 2019, vol. 54, issue 2, 67-81

Abstract: Prior research has advanced classical agency theory to account for various characteristics of headquarters (HQ)-subsidiary relations in the multinational corporation (MNC). In an attempt to contribute to this line of research, in this paper, we propose and test an agency model for HQ-subsidiary relations inside the MNC. Drawing on classical agency assumptions, we develop a baseline hypothesis that links informal controls (i.e., socialization), HQ-subsidiary goal conflicts, and the HQ’s use of formal controls (i.e., behavioral controls). We subsequently introduce an important boundary condition, which reflects subsidiaries’ internal agency relations with subsidiary CEOs as second principals. More specifically, we argue that the baseline relationship only holds under low levels of second principal power. To test our model, we employed a unique study design with three parallel surveys addressing the agents and the two principals involved in 131 agency relations within one MNC.

Keywords: Headquarters-subsidiary relation; Agent relation; Agency theory; Socialization; Organizational control; Goal conflict; Multinational corporation; Principal-agent relation (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:worbus:v:54:y:2019:i:2:p:67-81

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DOI: 10.1016/j.jwb.2018.10.001

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