Control in multinational corporations (MNCS): the case of Korean manufacturing subsidiaries

Abstract

Using both agency theory and comparative national culture frameworks, this study investigated factors determining the degree and type of control used by American and Japanese MNCs on their Korean subsidiaries. Two characteristics of MNCs affected the control they exerted—the degree of MNCs’ ownership, which affected the amount of control, and the nationality of the MNC’s headquarters, which affected the type of control exerted. As predicted, the size of the subsidiary relative to the MNC, moderated the relationship between the degree of ownership and amount of output control the MNC exerted. Overall, the study supported the usefulness of agency theory in explaining the degree of management control exerted, while national culture accounted for the type of control exerted.