The impact of foreign ownership and control on the organizational identification of host country managers working at MNC subsidiaries

Abstract

This study builds on social identity and self-categorization theories to examine how foreign ownership and control affect the organizational identification (OI) of host country national managers working at local subsidiaries of multinational corporations (MNCs). We suggest that the degree of foreign ownership and the extent of the foreign parent’s control over the subsidiary have negative effects on the strength with which the host country managers identify with the foreign-owned firm. The results from analyses of a sample of 428 Korean managers working at 43 MNC subsidiaries in Korea demonstrate the negative relationships between foreign ownership share and control, as exerted through mechanisms such as the centralization of decision-making authority by foreign headquarters and the assignment of expatriates to subsidiaries, and the OI of the host country managers. In addition, we found that the extent to which the foreign firm is perceived as being socially responsible within the host country mitigates the negative impact of foreign ownership and control on the OI of the host country managers.

Keywords:

• Corporate social responsibility
• foreign ownership
• foreign control
• host country managers
• organizational identification
• MNC subsidiaries

Acknowlegements

We acknowledge the constructive comments from the guest editors, Elaine Farndale, Stan Gully, Helen Liu, Jean Phillips, Sumita Raghuram, and Maja Vidović, and three anonymous reviewers.