Host country corruption and headquarters-subsidiary relationships in emerging economies

Muhammad Shujaat Mubarik, Miao Miao, Muhammad Faraz Mubarak, Syed Imran Zaman, Syed Hasnain Alam Kazmi and Navaz Naghavi

International Journal of Emerging Markets, 2021, vol. 18, issue 9, 2523-2543

Abstract: Purpose - The primary objective of this study is to investigate the impact of a host country's corruption on the autonomy of a foreign subsidiary from a country with lower tolerance for corruption. In doing so, the study examines the moderating role of subsidiary-headquarters communication and multinational corporation's (MNC's) prior international experience in countries with a higher tolerance for corruption. Design/methodology/approach - The data were collected from 182 foreign subsidiaries of 57 Malaysian MNCs operating in 16 host countries. The study employed ordinary least square (OLS) using Stata16.1 to analyze the modeled relationships. Findings - The findings of this study reveal a significant positive association between the extent of corruption in the host country and the subsidiary's autonomy. The findings illustrate that an MNC's prior experience in the country with an increased tolerance for corruption does not moderate the association between corruption and subsidiary autonomy. However, the findings also confirm that the extent of headquarters-subsidiary communication negatively moderates the association between corruption and subsidiary autonomy. Originality/value - The study uses unique data collected from Malaysian MNCs. Furthermore, the study contributes to the literature by bringing forth subsidiary autonomy as a counter strategy to potential risks that can arise due to weak institutions and widespread corruption in a host country.

Keywords: Foreign subsidiary; Corruption; Autonomy; Communication; Institutions; Developing country (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-10-2019-0882

DOI: 10.1108/IJOEM-10-2019-0882

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