We analyze power relationships in subsidiaries of multinational corporations. We explain how despite many advances in the literature, there is still an unresolved debate with respect to the critical question of whether subsidiary power is loaned or owned. We develop an overarching framework that encompasses both agency theory and resource dependence theory as the two pillars to understand decision-making by managers in subsidiaries. We propose that agency theory applies more when the subsidiary's decision rights are “loaned” by headquarters, while resource dependence theory applies more when the subsidiary “owns” its decision rights. We also explain how subsidiary evolution integrates the arguments of these two theories. Agency appears to apply earlier while resource dependence is more relevant at later stages
Subsidiary power: loaned or owned? The lenses of agency theory and resource dependence theory
Torben Pedersen
2019
Abstract
We analyze power relationships in subsidiaries of multinational corporations. We explain how despite many advances in the literature, there is still an unresolved debate with respect to the critical question of whether subsidiary power is loaned or owned. We develop an overarching framework that encompasses both agency theory and resource dependence theory as the two pillars to understand decision-making by managers in subsidiaries. We propose that agency theory applies more when the subsidiary's decision rights are “loaned” by headquarters, while resource dependence theory applies more when the subsidiary “owns” its decision rights. We also explain how subsidiary evolution integrates the arguments of these two theories. Agency appears to apply earlier while resource dependence is more relevant at later stagesFile | Dimensione | Formato | |
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