Empirical Analysis of Interactive Control’s Effectiveness: A Parent-Subsidiary Company’s Interdependence Perspective

Biao Luo, Jie-Jie Yu, Hong-Mei Ji

School of Business, Anhui University, Hefei, China.
School of Management, University of Science & Technology of China, Hefei, China.

DOI: 10.4236/ib.2012.43025                

Abstract

Due to the increasingly complex business environment and the principal-agent relationship, the enterprise group should establish a control system to prevent agency risk. Besides traditional system control, the parent company tends to adopt an interactive control including decentralized decision making, process communication and target incentive to guide and govern the subsidiaries. As an elastic control mechanism, the interactive control’s effectiveness could be influenced by the resources dependence relationship which is objective existence between the parent and subsidiary company. Based on the classical literature review, this study analyzes the effects of interaction control to the performance (“interactive control → performance”) and the interdependence’s regulating role by a total sample and a multiple-group structural equation analysis based on Chinese groups’ data, the results show that the interactive control could improve the subsidiaries’ performance, but different control process has its particular applicable interdependence situation. In the conclusions, we proposed some suggestions to promote the interactive control’s effectiveness in the enterprise group’s management practices.

Keywords

Enterprise Group; Interdependence; Interactive Control; Performance

Conflicts of Interest

The authors declare no conflicts of interest.

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