Parent-subsidiary Strategic Congruence In Enterprise Group:Influence, Antecedent And Control

For the enterprise group’s value-creation and loss-prevention, the subsidiary managers’ business concepts and behaviors must be in line with the demands of the headquarters, i.e. strategic congruence. However, under the principal-agent relation, subsidiary managers tend to be individualistic or opportunistic, and these behaviors are harmful attempts to the group’s strategic objectives. From the view of enterprise group’s development, along with increased market competition, the number of enter-prise group is increasing year by year, and the organizational form also from a top-down hierarchical structure evolve into a network structure with multiple relations. In a hierarchical structure, the subsidiaries are strategic implementers, parent com-pany can efficiently control on the subsidiary by direct interventions, but in a network structure, existing different abilities between different subsidiaries, the role of sub-sidiary also become diversified, so the "direct interventions" may be difficult to work. Thus, what kind of effective management can parent company take for different sub-sidiaries in a network structure, i.e. to achieve effective strategic congruence?Early scholars tend to define strategic congruence as a certain behavior of sub-sidiary manager, the content differences lead to some divergences on its influence and antecedent. Thus, this paper will focus on "parent-subsidiary strategic congruence", strategic congruence for short below, based on the redefine of parent-subsidiary stra-tegic congruence, we will analyze its influence, antecedent and control mechanism, trying to answer these questions:What influences will it have on subsidiary perform-ance? How does it form? How does it be controlled by its parent company? The main contents and conclusions are as follows:(1) We redefine the strategic congruence. Based on the Principal-agent theory, combined with the current situation of parent-subsidiary relationship and related pre-studies, we deconstruction the parent-subsidiary strategic congruence from the perspective of subsidiary manager’s behavior, i.e. strategic identity, strategic com-mitment and subsidiary initiative;(2) We analyze the structural influence of strategic congruence. A basic premise of the study is that the three behaviors of strategic congruence may not necessarily benefit subsidiary performance, through a structural equation modeling analysis with total sample, we test the relations among strategic identity, strategic commitment and subsidiary initiative, and their influences on subsidiary performance. The study indi-cate that strategic identity can improve strategic commitment and subsidiary initiative, and strategic identity and initiative both have a positive effect on subsidiary perform-ance, while a pure strategic commitment may have a negative effect, which means parent company should try to balance the three behaviors, subsidiary managers’stra-tegic identity should be systematically improved, and strategic commitment and sub-sidiary initiative should be view objectively, and to avoid the risks brought by over-dependence or over-initiative by strategic identity.(3) We analyze the forming mechanism of strategic congruence. We find the parent-subsidiary interdependence is the antecedent variables for strategic congruence by theoretical review, then, we test the relations among parent-subsidiary interde-pendence, strategic congruence and subsidiary performance, and further test the mod-erating effects of enterprise ownership on strategic congruence. The study confirms that parent-subsidiary interdependence intensity and parent-subsidiary interdepend-ence asymmetry play different roles on strategic congruence and subsidiary perform-ance, and there are also some significant differences of subsidiary managers’ behavior between China’s State-owned enterprises and private-owned enterprises. These results indicate that enterprise group should have an objective assessment on the business and ability of both parent company and its subsidiaries, to build positive parent-subsidiary interdependence, thus, can have effective strategic congruence spontaneously.(4) We analyze the control mechanism of strategic congruence. We find group management control is the control variables for strategic congruence by theoretical review, due to it can affect the subsidiary manager’s behavior motivation, perceived pressure and personal ability. Then, we analyze the specific control mechanism for "strong subsidiary" and "weak subsidiary". Research has shown that dynamic interac-tions, decentralization, monitoring process, performance evaluation and incentive are effective control tools to balance "strong subsidiary" with "weak subsidiary", yet, the control mechanism should change with the position of subsidiary in practice.