Does Country Context Distance Determine Subsidiary Decision-Making Autonomy? Theory and Evidence from European Transition Economies

Gjalt de Jong, Dut Van Vo, Philipp Marek, Björn Jindra

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    Abstract

    We studied an underrepresented area in the international business (IB) literature: the effect of country context distance on the distribution of decision-making autonomy across headquarters and foreign affiliates. Foreign affiliates directly contribute to the competitive advantages of multinational enterprises, highlighting the importance of such intra-firm collaboration. The division of decision-making autonomy is a core issue in the management of headquarters-subsidiary relationships. The main contribution of our paper is that we confront two valid theoretical frameworks - business network theory and agency theory - that offer contradictory hypotheses with respect to the division of decision-making autonomy. Our study is among the first to examine this dilemma with a unique dataset from five Central and Eastern European transition countries. The empirical results provide convincing support for our approach to the study of subsidiary decision-making autonomy.
    Original languageEnglish
    JournalInternational Business Review
    Volume24
    Issue number5
    Pages (from-to)874–889
    Number of pages16
    ISSN0969-5931
    DOIs
    Publication statusPublished - 2015

    Keywords

    • Central and Eastern European transition economies
    • Country context distance
    • Decision-making autonomy
    • Headquarters-subsidiary relationship

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