TITLE:
The Influence of Interactive Control on Subsidiary Performance: A Mediating Role of Subsidiary Managers’ Strategic Behavior
AUTHORS:
Biao Luo, Jiejie Yu, Zhongliang Lu, Liang Wan
KEYWORDS:
Enterprise Group; Interactive Control; Strategic Behavior; Performance
JOURNAL NAME:
American Journal of Operations Research,
Vol.2 No.4,
November
30,
2012
ABSTRACT: Under the principal-agent relationship, there are two major factors that directly affect subsidiary strategy’s implementation and performance—enterprise groups’ internal interactive control and subsidiary managers’ strategic behavior. Prior research showed that the parent companies hope their subsidiary managers to be obedient and active, i.e. to keep a high degree of strategic identity and subsidiary initiative. We build and analyze a model to test the mediating role of strategic identity and subsidiary initiative based on data collected from Chinese groups. The results show that interactive control, strategic identity and subsidiary initiative all could improve subsidiary performance, furthermore, subsidiary initiative is a mediator between decision-making decentralization and subsidiary performance, and also a mediator between horizontal communication and subsidiary performance, the mediating role of strategic identity is not tested, but vertical communication can improve strategic identity. In the conclusions, we provide guidance on how parent companies to choose excellent subsidiary managers, and then how to develop a suite interactive control system.