At the recent Academy of Management Conference, a paper by Ivey PhD alumnus Bassam Farah, as well as Ivey’s Professor Paul W. Beamish and Professor Luis A. Dau of Northeastern University, won the HKUST Best Paper in Global Strategy. The paper was also a finalist for the Best Paper in International Corporate Governance.
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Titled “Do MNE Parent-Foreign Subsidiary Governance Mechanisms Really Impact Foreign Subsidiary Performance?” the article examines how multinational firms govern their overseas subsidiary companies.
The researchers demonstrate that how subsidiary companies are organized, including such factors as the creation of regional headquarters, impacts firm survival and short-term profitability, and they make clear recommendations for global corporate strategists. Among their many interesting findings is that the outcome of governance decisions, such as what percentage of a subsidiary to wholly own, or what percentage of subsidiary’s employees should be expatriates, doesn’t really affect short-term growth and profits for the multinational firm, but does have a long-term influence on the firm’s survival.
The authors argue this may be because these choices may ensure a company does not make decisions that are detrimental to its survival, but some decisions, once made, do not necessarily encourage a company to seek new opportunities.
