Electronic Thesis and Dissertation Repository

Degree

Doctor of Philosophy

Program

Business

Supervisor

Professor Paul W. Beamish

Abstract

This dissertation investigates how a multinational enterprise’s (MNE) corporate headquarters governs its foreign subsidiaries. It draws on agency theory, prospect theory, and corporate governance literatures to develop a framework that describes select MNE parent-foreign subsidiary governance mechanisms expected to predict foreign subsidiary performance, measured as foreign subsidiary survival and profitability.

To test this framework, I first conducted a pilot Canadian study. It was followed by the main multi-country study. The Canadian study used mixed methods. It analyzed quantitative data, compiled from different sources, and qualitative data, collected through personal interviews with subsidiary managers. The main multi-country study used survival analysis and multinomial/binary logistic regression techniques to analyze longitudinal datasets/sub-datasets for 2000-2008.

The Canadian study showed Japanese MNE parents of Canadian foreign subsidiaries that had high survival were governed through nonlinearly higher parent ownership, greater expatriate numbers, and lower risk levels, by their MNE corporate headquarters.

The main multi-country study confirmed most of the findings of the Canadian study and provided new findings that demonstrated foreign subsidiaries that were more likely to survive also tended to be governed by regional headquarters (RHQ) in addition to corporate headquarters (CHQ). It also showed that parent ownership interacts with expatriates in a foreign subsidiary. They thus tend to complement and/or substitute for each other as MNE parent-foreign subsidiary governance mechanisms predicting foreign subsidiary survival. Further, it showed that although these select parent-subsidiary governance mechanisms (ownership, expatriates, risk, and RHQ) predict a foreign subsidiary’s survival, they do not predict a foreign subsidiary’s profitability.

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