Power, conflict, and organizational justice in the multinational corporation headquarters-subsidiary relationship

This research investigated the following relationships: (1) headquarters-subsidiary relative power and the expression of conflict, (2) organizational justice and the level of conflict in the multinational corporation (MNC) headquarters-subsidiary relationship, and (3) subsidiary power and organizational justice. A field study was conducted and data was obtained from U.S.-based multinational corporations' foreign subsidiaries and their headquarters counterparts. Multiple regression and analysis of variance techniques were used to test the hypotheses. The findings indicate that the greater the power asymmetry between a subsidiary and headquarters, the more likely the weaker party in that relationship expresses conflict indirectly. Some examples of indirect expressions of conflict are frustration, avoidance, and relationship neglect. Commitment to the headquarters was negatively related to the indirect expression of conflict for weaker and stronger parties. A significant relationship between direct expressions of conflict (i.e., problem-solving tactics, direct negotiation, and persuasion) and headquarters-subsidiary power asymmetry was not found. However, stronger parties from national cultures with high power distance rankings and those from national cultures with high individualism rankings favor the direct expression of conflict. Further investigation indicated that headquarters organizations tend to express conflict directly to a greater extent relative to subsidiaries and that subsidiaries tend to express conflict indirectly to a greater extent than headquarters. Distributive and procedural justice were both significantly and negatively related to the level of conflict in the headquarters-subsidiary relationship, as perceived by the subsidiary. The findings also indicate that procedural justice, in particular, appears to play a critical and dominant role in determining the level of MNC headquarters-subsidiary conflict. Subsidiary power and commitment to the MNC headquarters were found to be positively related to the levels of distributive and procedural justice. The results suggest that when subsidiaries are not treated justly, the level of conflict experienced between the subsidiary and headquarters is greater than in those relationships where the subsidiaries feel that they are treated fairly. However, it is important to bear in mind that the greater the subsidiary's power within and commitment to the MNC, the greater its sense of justice.