Control of French and Japanese subsidiaries in China: implementing control mechanisms before and after the global economic crisis

Abstract

The central research question investigated herein involves why and how multinational firms implement various instruments and mechanisms to maintain control over their subsidiaries in China. During 2005–2007, the authors interviewed expatriate managers in charge of 12 French and 10 Japanese subsidiaries in China. The interviews show that multinational companies base their subsidiary control policy on four main control dimensions: the share of capital, expatriation, the training of local employees and the formalization of the organizational structure. A thematic content analysis of the 22 interviews provides deeper insight into the way, and the reasons why, multinational companies implement these four control dimensions. Since the subject companies all sell globally, this study also considers the effects of the global economic crisis of 2008–2009 on their control policies. Specifically, in early 2010, a sample of expatriate managers commented on the impact of the global economic crisis on their activities in the Asia-Pacific region, as well as on the corporate implementation of the four control dimensions.

Keywords:

• Asia
• China
• control and coordination mechanisms
• French and Japanese multinationals
• global economic crisis
• multinational corporations
• subsidiaries

Acknowledgements

This research has benefited from funding from the French National Agency for Research (ANR), under the auspices of the MNC Control programme (2009–2011).