Research On Subsidiary Initiative Based On Institutional Distance And Parent’s Control

The current situation in our country presents a trend of regional dispersion. Itsoutstanding representations are the artificial market segmentation, administrative regionblockade, institutional local protection, etc. Therefore, the market mechanism has alreadyplayed an important role in the transition economy or emerging market economies, but thedevelopment of the corporations still depends on non-market system (such as governmentcontrol and social network, etc) to obtain resources in a large part. The situation directly affectthe corporations’ business strategies and the whole directions, and the emergence ofdiversified motives. Hence, the corporations tend to reinvest in different industries andmarkets in order to maximize the effectiveness of resources utilization, and that presents ahighly diversified phenomenon. The characteristics of diversity improve the continuouslyadjustments and evolution of the organization structure: as the expansion of their own scale,corporations have the sufficient ability to diversify, and also they have to face a selection oforganization structure. Then, in process of maturity on the selected system, the subsidiariesrole and strategic evolution also are constantly changing: the parents power devolution,subsidiaries’ desires of strategic position improvement and self development, both theseelements lead to fact that the subsidiaries gradually start to achieve their goals throughindependent behaviors. Corresponding, in the theoretical field, the research perspective ofscholars has also undergone some subtle changes.To combine with this background, this paper studies the parent-subsidiary corporations’trans-regional behaviors through the integration of the institutional theory, entrepreneurialtheory, resource-based view and corporate governance theory based on the current marketsegmentation of regional environment. Considering the highlight of subsidiaries’ strategicposition in recent years, this paper identifies the trans-regional subsidiaries and their behaviorpaths as the study object. Integrating with discussions of the antecedents of subsidiaryinitiatives (the differences of institutional environment, parent control methods) andconsequences (subsidiaries performance), the research question can summarize as follow:based on the identification of the differences between parents’ and subsidiaries’ environmentsand the parent control methods, how the trans-regional subsidiaries take the appropriateentrepreneurial, initiative behaviors, and how these behaviors influence their owndevelopment? The specific point cuts are from the following aspects:(1) whether theparent-subsidiary environments differences can impact the identification of subsidiaryinitiatives (including the types and degree);(2) how the parent control methods influence the emergences of subsidiary initiatives, especially for the condition that the top managers are notfamiliar with regional institutional diversity. The impact paths are direct or indirect?(3) arethe adoption of these initiatives contributing to the improvement of their own performances?(4) in the processes (environments and parent method identifications, initiatives extents andtypes explications, the performance transformations), does there have any other impact factors(controlled variables)? This paper made a detailed regression analysis by the means ofstatistical methods to verify the theory model and research hypotheses. The conclusions are asfollows:Firstly, the institutional distances influence the selection of subsidiary initiativesdifferently:(1) the parent-subsidiary environments differences can constrain the subsidiaries’internal initiatives. That means the environments differences have negative impact on thesubsidiary internal initiatives;(2) the parent-subsidiary environments differences can developand improve the subsidiaries’ external initiatives. That means: the environments differenceshave positive impact on the subsidiary external initiatives. Secondly, the parents’behavior andoutput control methods have different impact on the subsidiaries’ initiatives:(1) behaviorcontrol have a directly positive influence on the internal subsidiary initiative;(2) Outputcontrol have a positive influence on the external initiative. Thirdly, the parent control andinstitutional distance can have a interaction effect on the subsidiary initiative:(1) the behaviorcontrol can have a negative mediated impact on the positive relationship between theinstitutional distance and external subsidiary initiative;(2) the output control can have anegative mediated impact on the relationship between the institutional distance and internalsubsidiary initiative. Fourthly, the results of different types of subsidiary initiative on theirown performance are not the same:(1) the internal one can improve the performance.Through the activity in the corporate system, they can gain the parents’ attentions, improvethe effectiveness of internal operation, and get more extra resources;(2) but the impacts ofexternal ones on performances are not significant. It needs to concern with the contexts ofembedding environments. But we can also find that the emergence of subsidiaries’ externalinitiatives should be limited on a certain level: excessive external initiatives cannot improveperformances; otherwise, the extra costs of the behaviors lead to the subsidiaries regularoperations.These theoretical innovative contributions include in the following aspects:(1) with thefeatures of current market segmentation in our country, this paper examines the feasibility ofinternational theory through the study of the trans-regional subsidiaries in China, and it alsoenriches and expands the related theoretical achievements. This can be obviously reflected in the conclusion: because of the specific external situation, enterprises’ development historyand management tradition, the subsidiaries would depend more on parents and take behaviorresponds to the parents’ control. This is not very common in the international research.(2) forthe reason that the subsidiary initiatives is a relatively new research issues, it is of greatsignificance for the research area of trans-regional subsidiaries. Combining with theenvironment and corporate level, it constructs a theoretical analysis framework of selection ofsubsidiary initiatives which served as a foundation of school of subsidiary development.Moreover, the practical innovative contributions mainly include the following aspects:(1) theconclusions of this paper provide the theoretical bases and empirical supports for theunderstandings and explanation on the local trans-regional subsidiaries’ initiatives in ourcountry;(2) In practice, it contributes to the advice supporting of relevant policies making bythe governments; and it also throws lights on the judgments and choices of the subsidiariesbehaviors. Finally, this paper also points out the research limitation and the future researchdirection.