Publication Type
Journal Article
Version
publishedVersion
Publication Date
1-2024
Abstract
Research Summary: When can a firm make fine-grained adjustments to misaligned subsidiary governance? We examine whether and under what conditions a firm will adapt the equity stake it owns in a subsidiary, enabling improved alignment of the stake with the uncertainty in the local environment. We predict that the rate of adaptation of misaligned equity stakes depends on the experiential and vicarious learning from which the firm can draw, and that these learning effects are contingent on possessing fungible slack resources, specifically cash. Using a sample of 726 Japanese-foreign subsidiaries established in 38 host countries over a 21-year period, we find support in line with our predictions. Overall, this study explicates heterogeneous adaptability in subsidiary governance and similar strategic tasks. Managerial Summary: Whether due to suboptimal choices or changing conditions, firms must sometimes change how they relate with and control their subsidiaries. Whereas much research has addressed adaptation in the form of discrete changes in ownership mode, we examine under what conditions a firm can make fine-grained adjustments to misaligned subsidiary governance. We argue that a firm can learn to make such adjustments, not only from its own experience but also vicariously by observing other firms in the same foreign environment. Furthermore, we consider whether cash is a valuable resource for this purpose. Overall, this study shows how firms can pursue strategic adaptation in subsidiary governance and related tasks.
Keywords
adaptability, equity stakes, governance alignment, learning, resources
Discipline
International Business | Strategic Management Policy
Research Areas
Strategy and Organisation
Publication
Strategic Management Journal
Volume
45
Issue
1
First Page
168
Last Page
201
ISSN
0143-2095
Identifier
10.1002/smj.3540
Publisher
Wiley
Citation
MARTIN, Xavier and CUYPERS, Ilya.
Heterogeneous adaptability: Learning, cash resources, and the fine-grained adjustment of misaligned governance. (2024). Strategic Management Journal. 45, (1), 168-201.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7261
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Additional URL
https://doi.org/10.1002/smj.3540