The type of foreign direct investments and its influence on the
design of subsidiary boards
Jeroen Karper 11272732
BSc Economie & Bedrijfskunde University of Amsterdam Dr. Elko Klijn
Statement of Originality
This document is written by Jeroen Karper, who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Table of contents
Abstract ... 4
1. Introduction to the study ... 5
1.1 Introduction ... 5 1.2 Problem statement ... 6 1.3 Intended contributions ... 6 2. Theoretical framework ... 8 2.1 Background theory ... 8 2.2 Subsidiary boards ... 9
2.3 Entry mode choices ... 11
2.3.1 Greenfields ... 12 2.3.2 Acquisitions ... 13 2.4 Hypotheses development ... 14 2.5 Geographical focus ... 15 2.6 Conceptual model ... 15 3. Methodology ... 17 3.1 Research approach ... 17 3.2 Data collection ... 17 3.3 Measurement ... 18 4. Results ... 21
4.1 Correlation matrix and multicollinearity ... 21
4.2 Regression analyses ... 23
4.3 Conclusion ... 29
5. Discussion ... 30
5.1 Key findings and interpretations ... 30
5.2 Theoretical implications ... 30
5.3 Managerial implications ... 31
5.4 Limitations and future research directions ... 31
Abstract
This paper is concerned with the influences foreign direct investments have on subsidiary board design and in particular if there is a difference of influence between Greenfields and acquisitions. The world has never been more connected and multinational enterprises are a large factor for this interconnectedness. As such, research within the domain of international business has received more interests as well. The literature on pre-entry mode decisions has increased significantly but the literature on post-entry mode decisions is still scarce. This paper analyzed the influence entry modes (e.g. Greenfields and acquisitions) on the design of subsidiary boards of 181 subsidiaries based in North-Brabant in the Netherlands. Through a survey respondents gave insights in their subsidiary and parent firm. Through regression analyses it became clear that there’s no direct relation between Greenfield and acquisitions and their influence on subsidiary design however for Greenfields geographical focus has a moderating effect on this relationship. For Greenfields, ventures with low geographical focus tend to adopt fewer expatriates on boards.
1. Introduction to the study
1.1 IntroductionThrough the last two decades, globalization has become a very important topic in the literature of international business. The world has never been more connected and some businesses and markets thrive on the dependence of one another (Buckley & Ghauri, 2004; Dunning & Lundan, 2008; Yeung, 2009). A significant factor of this growth is the rise of multinationals and the bigger foreign direct investment over the past decades. In 2018, the FDI inflows all over the world accounted for $1.297 trillion (UNCTAD, World Investment Report, 2019). Foreign direct investment is an enormous factor in the international business and in our day-to-day life. As such there has never been this much interest in international business literature, multinational enterprises are a big part of today’s economy. Organizations try to invest overseas as much as possible since it is an effective way to do business.
Parallel with the expanding interests of organizations to invest overseas, research within the domain of international business has received increased scholarly interests as well. A significant stream of research in international business focuses on the equity entry mode choices organizations make in order to expand abroad (Anand & Delios, 2002; Filatotchev, Strange, Piesse & Lien, 2007; Gielens & Dekimpe, 2001; Kim & Hwang, 1992; Meyer, 2001; Nielsen & Nielsen, 2011). While most of this research has focused on why and how multinational enterprises internationalize, far less research attention has been placed how these entry mode choices influence post-entry decisions and their performance consequences (Brouthers, 2002; Brouthers & Bamossy, 2006; Canabal & White, 2008; Pan, Li & David, 1999; Woodcock, Beamish & Makino, 1994).
For example, within the literature of international business, research to date has focused on two types of wholly-owned subsidiaries namely international acquisition as well as greenfield acquisitions (Anand & Delios, 2002; Harzing, 2002; Newburry & Zeira, 1997). Both organizational forms are managed by a foreign management team (e.g., subsidiary board overseas (Leksell & Lindgren, 1982). Interestingly, research on subsidiary boards is scarce and little research exists on international corporate governance within subsidiary boards (Aguilera, Marano & Haxhi, 2019). As a result, the important gaps remain related to the structure of greenfield and acquisitive subsidiaries. Given that organizations pursue acquisitions and Greenfields for different reasons, it would be interesting to study the different effect of these two types of entry mode choices may have on the governance of subsidiaries (Du, Deloof &
Jorissen, 2015).To the extent that foreign Greenfields and acquisitions are established overseas and are governed by a subsidiary board, it is important to investigate the effect of such organizational forms on the structure and oversight of such mechanisms. There is a lack of understanding the post entry effects Greenfields and acquisitions have on governance in the subsidiary boards.
There’s a large need for research on corporate governance in subsidiary boards, corporate governance in corporate has been widely researched and a lot of insights into the efficiency of the right structure within a corporate board is thoroughly analyzed (Adams, Hermalin & Weisbach, 2010; Ayuso & Argandoña, 2009; Clarke, 2004; Jensen, 1993). So, in order to do research on corporate governance in subsidiary boards this study partially relies on corporate governance research in corporate boards. Given that there are significant similarities between foreign subsidiary boards and corporate boards, a corporate board is ultimately responsible. According to Strikwerda (2003) this can potentially lead to significant domain translation issues hence a second contribution of this dissertation is to investigate the applicability of corporate governance research to the setting of foreign subsidiaries
1.2 Problem statement
The problem within international business is, as mentioned before, the emphasis is too much on the pre-entry factors of foreign direct investment. There is so much less know about the post-entry effects on subsidiaries and in particular on governance within the subsidiary. This study focuses on the effects the entry modes: Greenfields and acquisitions have on governance within the subsidiary. This leads to the following research question:
‘’How does the type of foreign direct investment influences the design of subsidiary boards and does the geographical focus of the subsidiary moderate this relationship?’’
1.3 Intended contributions
A first contribution lies in the field of corporate governance and its boundary conditions. Since corporate governance mostly is applied to corporate board research and not so much to subsidiary research, certain findings in the literature of corporate governance might not be applicable (Strikwerda, 2003). Domain-translation issues could arise when applying corporate governance research in subsidiary boards but it also might have a non-significant effect, which
could lead to a breakthrough in governance research in subsidiary boards (Leksell & Lindgren, 1982; Strikwerda, 2003).
A second contribution lies in the field of international business. While a significant amount of research has studied the decisions of organizations to elect for Greenfields or acquisitions (Harzing, 2002; Newburry & Zeira,1997), this research is one of the first to investigate the composition and oversight responsibilities for subsidiary boards. It is important to get an overview of the effects entry modes can have on the composition and oversight responsibilities for subsidiary boards but also if there are different kind of effects between the entry modes. MNE’s could make more efficient choices if they are aware of the consequences of an entry mode.
2. Theoretical framework
2.1 Background theoryThe term internationalization has been around for a significant amount of time and has caused numerous debates about its definition (Knight, 2004; Melin, 1992; Morgan and Katsikeas, 1997; Toyne, 1989). The definition has changed overtime and therefore still has no true definition, this causes a lot of ambiguity and confusion between academics (Knight, 2004). There are three definitions that stand out as the majority of the academics agree with one of these three definitions. The first definition entails the following: ‘’It means a series of international activities such as academic mobility for students and teachers; international linkages, partnerships and projects; new international academic programs and research initiatives.’’ (Knight, 2007). The second definition is: ‘’The delivery of education to other countries through new types of arrangements such as branch campuses or franchises, and using a variety of face-to-face and distance learning techniques.’’ (Knight, 2007). The third definition, which according to Knight (2007) is believed to be the most fitting to the vast majority, is: ‘’The integration of an international, intercultural and/or global dimension into the curriculum and teaching learning process.’’. There are many definitions of internationalization but none of them are perfectly correct, this causes numerous discussions but also causes a lot of creativity and innovation as internationalization can be used for a lot difficult topics.
Besides the definition of internationalization, the process of internationalization has been widely investigated (Andersen, 1993; Cavusgil,1980; Clark, Pugh & Mallory, 1997; Johanson & Vahlne, 1977). Firms who’ve made the decision to expand their operations outside of their domestic market have three options of foreign expansion: exporting, foreign licensing and foreign direct investment (FDI) (Buckley, 1991; Buckley and Casson, 1976; Root, 1987; Terpstra, 1987). Following the definition of internationalization, the process of internationalization also doesn’t have one specific framework. According to Barkema et all (1996) this is due to range of factors (e.g. diversity of disciplines among researchers and the theoretical frameworks they adopt) which lead to multiple fitting frameworks. The most important factor for these different frameworks is in what way the researcher sees internationalization (Clark, Pugh & Mallory, 1997). One group of researchers have a static approach to internationalization, it is seen as a series of static choices dictated by different factors (Dunning, 1981; Dunning, 1988; Hennart, 1982; Hill, Hwang & Kim, 1990; Hymer, 1960; Hymer, 1976; Teece, 1983). Another group of researchers view internationalization as a process of increasing involvement within and across national markets (Johanson &
Wiedersheim-Paul, 1975; Johanson and Vahlne, 1977; Johanson and Vahln, 1990). Another reason internationalization is an elusive subject is because of different motives MNE’s have for foreign expansion.
According to the eclectic paradigm proposed by Dunning (1986) foreign investment is driven by three sets of motives/ advantages: ownership, location, and internalization advantages. For every MNE the mix of these three sets could be different and therefore may lead to foreign investment or discourage foreign investment (Dunning, 1986). The combination of these three sets, which creates a motive to invest, could be the main reason for the ambiguity among research as to what the perfect definition and process is for internationalization.
2.2 Subsidiary boards
In order to better understand how the boards on subsidiary level are designed, it is interesting to draw from existing literature in corporate governance research. There has been a lot of research done to corporate governance in corporate boards (Adams, Hermalin & Weisbach, 2010; Ayuso & Argandoña, 2009; Clarke, 2004; Lipton & Lorsch, 1992). Much is written about corporate governance in corporate boards but within the international business literature the corporate board is not the only board with significant impact on the organization’s performance. To the extent that subsidiary boards and corporate boards have significant differences but also similarities (e.g., directors are in place to oversee the activities of the organization), opportunities exist to identify specific domain translation issues and conclude on the extent that existing findings in corporate governance research is applicable to the foreign subsidiary setting.
Because of the extensive literature on corporate governance within corporate boards it could be possible to translate some factors of corporate boards over to corporate governance within subsidiary boards without the rise of domain-translation issues. So, in order to do research on corporate governance in subsidiary boards this study partially relies on corporate governance research in corporate boards, given that there are significant similarities between foreign subsidiary boards and corporate boards. Both boards have executive directors and non-executive directors who both have to make decisions for the organization. More important similarities between the boards are the functions they have within the organization: both have a monitoring function where the board oversees the operations, structure and overall performance of the organization. Both boards are also in charge of setting goals for the year and advice, when necessary, to accomplish these goals. So, there are some similarities between
corporate and subsidiary boards which can be helpful for research on corporate governance in subsidiary boards.
Besides the fact that subsidiary boards and boards of parent corporations have similarities, significant differences between both boards are present as well. To the extent corporate boards have ultimate accountability, there is the possibility for domain translation issues to arise if existing findings in this literature is directly applied to the context of foreign subsidiaries (e.g. Strikwerda, 2003). As the subsidiary is still a part of the parent firm and the corporate board of the parent firm has the ultimate responsibilities, decision-making processes of corporate boards can’t be used for the literature on subsidiary boards without taking into account the possible domain-translation issues. Strikwerda (2003) details which powers corporate boards have, which can’t be translated to a subsidiary board because the subsidiary board doesn’t have the same powers. In general, the corporate board is responsible for setting the business focus, product divisions and ethical standards of the subsidiary boards (Lorsch & Young, 1990). This has to be similar to the other parts of the parent firm and the subsidiary board has to comply with these factors. Official reporting, fiscal reports, government relations, relations with shareholders, capital markets and corporate resources: patents and trademarks are also responsibilities of the corporate board who can’t be translated to the subsidiary board (Lipton & Lorsch, 1992; Pearce & Zahra, 1991). Probably the most important difference between corporate and subsidiary boards is that the corporate board has the ultimate responsibility, which means this board has the last word in decisions on how the run the organization (Strikwerda, 2003).
Subsidiary boards are heterogeneous implying that they are different across organizations, but their main role is to oversee the performance of the subsidiary on behalf of headquarters, review a subsidiary's strategic plans and internal policies, and ensure the sound governance at the subsidiary level (Kriger, 1988; Leksell & Lindgren, 1982). The structure and responsibilities of these boards are determined by the characteristics of the parent firm as well as the subsidiary itself (Du, Deloof & Jorissen, 2015). In order to understand the design of a multinational enterprise (MNE) the corporate governance in both corporate boards and subsidiary boards has to be explained. The domestic part of the enterprise is governed by the corporate board, which has ultimate responsibilities as the corporate board controls the direction of the MNE. The international part of the organization is controlled by a subsidiary part which doesn’t have ultimate responsibilities but oversees the performance done by the subsidiary in the international market (Kriger, 1988; Leksell & Lindgren, 1982).
According to Kriger (1988) subsidiary boards can be seen in different ways, from a corporate perspective subsidiaries are seen only as formal entities or management groups. But for multinational corporates subsidiaries are mostly used for advisory purposes. In general subsidiaries add value through information it gathers about the local market and environment and in which way the company can be most successful in this environment (Huse & Rindova, 2001). From a stakeholder’s perspective, the subsidiary could also provide strategic and financial control over a company’s subsidiary. According to Demb and Neubauer (1992) and Kriger (1991) subsidiary control over the subsidiary is more common when the parent company has a centralized policy that effects the stakeholder. Besides the differences a perspective can have on the view of subsidiaries, geographical location also has an effect on subsidiaries. In a European setting subsidiaries are often also a mechanism for employees which has led to a debate on corporate governance (Huse & Rindova, 2001).
To further understand the way subsidiaries operated Björkman (1994) studied the boards of Swedish and Finnish subsidiaries in Norway and France. Björkman (1994) found the boards contributed to the local competency of the parent company and to the legitimacy of the subsidiaries. Subsidiaries not only were seen as formal entities but also played an active role in ratification of budgets and short term plans, in monitoring actions and in formulating strategies for the subsidiaries. But a limitation for this research was that the roles of the boards differed between countries and therefore aren’t generalizable for other subsidiaries (Björkman, 1994).
As stated before subsidiary boards are heterogeneous and therefore have different effects on their role within the multinational organization. It is important to make distinctions between central stakeholders and local stakeholders and the geographical location the subsidiary is located in (Huse & Rindova, 2001).
2.3 Entry mode choices
Foreign direct investment can be done through multiple entry modes and in order to understand the chosen entry modes: Greenfields and acquisitions it has to be clear what an entry mode choice is and what kind of different entry mode choices there are and why MNE’s choose these kind of entry modes. Entry modes decisions of MNE’s relate to the international activity of the organization (Canabal & White, 2008; Werner, 2002). Sharma and Erramilli (2004) define an entry mode as ‘‘a structural agreement that allows a firm to implement its product market strategy in a host country either by carrying out only the marketing operations (i.e., via export modes), or both production and marketing operations there by itself or in partnership with others (contractual modes, joint ventures, wholly owned operations)’’. According to Pan
and Tse (2000) the entry modes are divided into two categories: equity and non-equity. Joint ventures and wholly owned ventures such as Greenfields, brownfields, and acquisitions are part of the equity category, these entry modes require higher levels of control from the organization as a more significant investment has been done and the organization want to make sure this investment has a positive outcome. The second category, non-equity, entails contractual modes such as licensing, R&D contracts, and alliances which require lower levels of control since the investment done by the organization are far less intensive (Pan & Tse, 2000). For this research two entry modes out of the equity category, Greenfields and acquisitions, are further investigated to see what their influence is on subsidiary boards.
2.3.1 Greenfields
A Greenfield investment refers to a MNE setting up new production operations in a foreign country (Görg, 2000; Meyer & Estrin, 1998; Müller, 2007; O’Huallachain & Reid, 1997; Roberto, 2004). A Greenfield investment is an intensive investment entry mode choice and therefore requires a significant amount of control from the corporate board (Pan & Tse, 2000). The recourse commitment of a Greenfield is high since the organization has to start its operations from scratch in the foreign country and can’t use a large amount of recourses from local partners (Hill, Hwang & Kim, 1990). Greenfields are mainly chosen as an entry mode since organizations can keep control over their operations without large intermediary costs and keep dissemination risk as low as possible. Dissemination risk refers to the risk that firm- specific advantages in know-how will be expropriated by a licensing or joint venture partner (Hill, & Kim, 1988). For a wholly-owned subsidiary (e.g. a Greenfield) the dissemination risk is very low since most of the know-how, recourses and capabilities of the firm are kept internal and no partner is involved (Hill, Hwang & Kim, 1990).
Harzing (2002) for the first time within the literature of entry mode choice and subsidiaries analyses what happens after the choice of entry mode has been made. This research tries to answer the question if there’s a difference in management of the subsidiary between Greenfields and acquisitions. The research concluded that international strategy has an influence on the parent firm choice of entry mode, organizations following a global strategy have more Greenfields. Furthermore, Harzing (2002) found that for Greenfields the control of the corporate board of the parent firm will be higher than for acquisitions. The research details that Greenfield are more strongly monitored by the parent firm and that the number of expatriates within the workforce is higher than for acquisitions. The reason for this is that for a Greenfield, the parent has to build a new plant which leads to high investments and parent firms
want to make sure that these subsidiaries are in line with the parent firm itself (Harzing, 2002). The research concludes that acquistions have deeper external linkages with the local environment than internal links with the headquarters. Moreover, Greenfields have more firm- specific advantages than country specific advantages. The reason for this is that companies with very good internal core advantages and knowledge are faster inclined to transfer these advantages and knowledge to a new subsidiary because the company knows it will work for them. Finally, according to Prahalad & Doz (1987) organizations with global strategies focus more on internal isomorphism which means that organizations with such strategies are more inclined to conform to the parent organization. For entry mode choices, this means that for Greenfields internal isomorphism is more present (Harzing, 2002).
2.3.2 Acquisitions
While a Greenfield investment is setting up an entirely new production, an acquisition is the purchase of already existing assets (Meyer & Estrin, 1998; Müller, 2007; O’Huallachain & Reid, 1997; Roberto, 2004). For a MNE the purchase of existing assets is a somewhat less intensive way to start their operations in a foreign country since they already got the assets to conduct business. With an acquisition an organization purchases the know-how, recourses and capabilities instead of having these themselves and exporting them to the subsidiary in the foreign county (Lee & Lieberman, 2010; Roberto, 2004). This is the main difference with a Greenfield as both are equity based without large partners. So, the dissemination risk of an acquisition is also low because of the little intermediary involvement (Hill, Hwang & Kim, 1990). According to Lee and Lieberman (2010) acquisition is most commonly used as entry mode when the new foreign product market is less related to the firm’s existing products.
Just as for Greenfields, the research of Harzing (2002) uncovered some key factors for organizations who used acquisitions as entry mode choices. Corporate boards of parent firms with acquisition subsidiaries permit higher levels of local responsiveness than corporate boards of parent firms with Greenfields which is logical as with an acquisition of a company also a local management already is running the business. Also, the level of expatriates within the acquisition subsidiary board are lower than for Greenfields. There’s two reasons for this, a higher percentage of acquisitions has no expatriates at all in the workforce which leads to a lower average of expatriates. Secondly, even when there are expatriates within the workforce the percentage is often still less than expatriates within a Greenfield. Furthermore, the research concludes that acquistions have deeper external linkages with the local environment than internal links with the headquarters (Harzing, 2002). Organizations with more acquisition
subsidiaries will search for more country specific advantages as they invest in existing businesses in other countries. For example, if these countries have a good distribution network and welcome international companies the investment will pay off faster. Lastly, according to Prahalad & Doz (1987) organizations with multi domestic strategies focus more on external isomorphism which means that organizations with such strategies are more inclined to conform to the host country environment. For entry mode choices, this means that for acquistions external isomorphism is more present (Harzing, 2002).
2.4 Hypotheses development
The reason this research has opted for the entry modes, Greenfields and acquisitions, is that these entry modes are ownership based which leads to more control over the firm and therefore could have a more significant influence on the governance of the subsidiary board (Kriger, 1988; Leksell & Lindgren, 1982). With non-equity entry modes, the partners in the foreign country already have an established governance for the subsidiary which may lead to less influence on governance in a subsidiary through an entry mode (Du, Deloof & Jorissen, 2015). Also, Greenfields and acquisitions have more influence on the composition of subsidiary boards and also lead to more control by the parent firm. Especially Greenfields have a significant impact on the composition of subsidiary boards as the parent firm is more invested in the subsidiary (Harzing, 2002). Parent firms invest heavily in the new subsidiary as it is built from the ground up, this leads to the parent firm wanting more control over the subsidiary. This could be done by having more expatriates in the subsidiary board, these expatriates already work for the organization and know what is needed for the subsidiary to be in line with the parent firm. For Greenfields, there’s a higher level of internal isomorphism because Greenfield are more inclined to conform to the parent organization as the subsidiary is built through the likings of the parent firm and therefore the subsidiary has a higher resemblance to the parent firm. In order to conform to the parent firm more expatriates are being put on subsidiary boards. This leads to the following hypothesis:
Hypothesis 1: Greenfields lead to a) larger boards and b) more expatriates.
The importance of a subsidiary with a broad focus is different compared to a subsidiary with a narrow geographical focus. As a consequence, the parent firm wants to exercise more control and oversight in order to make sure that the decisions that are made in the subsidiary are better aligned with the interest of the parent firm organization and the other subsidiaries in
the network. Consequently, the relationship between Greenfields and a) monitoring, b) more expatriates and c) larger boards is going to be stronger in the presence of a broad geographical focus. This leads to the following hypothesis:
Hypothesis 2: A broad geographical focus positively moderates the relationship between
Greenfields and a) larger boards and b) more expatriates.
2.5 Geographical focus
One interesting aspect of foreign subsidiaries that make them stand apart from corporations is the geographical focus. Subsidiaries can have international exposure that other foreign subsidiaries within in the parent firm network do not have (Frost, 2001; Luo, 2001). As a result, the subsidiary boards’ composition and responsibilities of acquisitions and Greenfields might be affected differently depending on the geographical exposure of the venture. The importance of a subsidiary with a broad focus is different compared to a subsidiary with a narrow geographical focus and therefore could lead to different board compositions and different responsibilities of the subsidiary board. Since it is not sure if geographical focus has an influence on the relation between foreign direct investment and the design of the subsidiary board an analysis between these variables is necessary.
2.6 Conceptual model
The conceptual model that mirrors the research question: How does the type of foreign direct investment influences the design of subsidiary boards and does the geographical focus of the subsidiary moderate this relationship?
Figure 1 details the study’s constructs and the relationships which will be investigated in this research. According to the model Greenfields have a positive relationship with size of the subsidiary and number of expatriates within the subsidiary board. Acquisitions have a negative relationship with size of the subsidiary and number of expatriates within the subsidiary board. Geographical focus is presumed to positively moderate the relationship between Greenfields and a) larger boards and b) more expatriates.
Figure 1: Conceptual model and hypotheses
Dependent variables: Independent variables Size of the subsidiary
board
Number of expatriates within subsidiary board
Greenfields + +
3. Methodology
3.1 Research approachThis study is designed in line with a deductive approach, in which you develop a theory and hypotheses and design a research strategy to test the hypothesis (Saunders et al., 2003). Deductive research will progress through five sequential stages (Robson, 2002): 1) Deducing a hypothesis from the theory; 2) expressing the hypothesis in operational terms, which propose a relationship between the specific variables; 3) testing these operational hypotheses; 4) examining the specific outcome and 5) if necessary, modifying the theory in the light of the findings. This study uses quantitative data to test the causality of the variables given in the hypotheses. This research followed the five faces of deductive research. First, studies on
3.2 Data collection
The deductive nature of this research requires the use of primary data (Edmondson & McManus, 2007). To accurately examine whether this research actually represents an answer to the research question the validity of this research has to be measured (Heale & Twycross, 2015). Internal validity is the extent to which a study establishes a trustworthy cause-and-effect relationship between a treatment and an outcome (Onwuegbuzie, 2000). Internal validity is assessed by a) factor analysis and b) controlling for the validity of the scale by means of a Cronbach Alpha (Khorsan & Crawford, 2014; Nunnaly, 1978). External validity refers to if the outcome is generalizable to groups, environments, and contexts outside of the experimental settings (Khorsan & Crawford, 2014; Onwuegbuzie, 2000). The external validity of this research is improved by the way the survey had been set up, external validity improves as a big sample group without one subgroup as used (Khorsan & Crawford, 2014).
The data obtained for this research was done through a self-administered survey, the data gathered is qualified as quantitative. This section outlines the design of the survey and elaborates on the data collection procedures. Data is collected through a self-administered survey (Verschuren & Doorewaard, 2010).In order to test the hypotheses brought forward in the thesis, a survey distributed by the Brabant Development Agency will be used. The survey is administered to the general managers of 1051 foreign subsidiaries in Brabant, 181 of these surveys were returned completely which contributes to a response rate of 17.22 percent.
In order to test the hypotheses brought forward in the thesis, the 2011 survey of the N.V. North-Brabant Development Agency (BOM) is used. The BOM is a company established in 1983 and is funded by the Province of North-Brabant and the Ministry of Economic Affairs and
Climate. It is financed by the Province of North-Brabant and the Dutch State. According to their website the BOM is a ‘growth accelerator’ which means they think along with innovative entrepreneurs and solvers of social issues and help them with doing business (www.bom.nl). The BOM organization keeps track of all foreign companies in North-Brabant and their services focus on strengthening the development capabilities of four types of customers: Brabant ventures, International Trade, Foreign Investments and Renewable Energy. Their main goal is the impact they deliver for North-Brabant together with the entrepreneurs (www.bom.nl).
3.3 Measurement
Dependent variable: Subsidiary design
The objective of this research is to investigate the influence the type of foreign direct investments has on subsidiary design, logically subsidiary design is the dependent variable for this study. Subsidiary design is split into two dependent variables for a more elaborated view on the influence of FDI on subsidiary design. The first dependent variable is size of the subsidiary board which is measured by the number of members in the management board plus the number of members in board of directors. This measure describes the extent to how much members are included in the board of the subsidiary. The second dependent variable is the of expatriates within the subsidiary. This is measured by the total of non-Dutch members within the management board and the total of non-Dutch members within the board of directors. This measure describes the extent to how much foreign members are included in the board of the subsidiary. Both variables were checked for reasonable assumptions of normality, the value for skewness for the variable size of the subsidiary is 2.097 which indicates that the distribution of the measure significantly deviates from a normal distribution. Therefore, a logarithmic function was integrated which led to a skewness of -0.162 which produced an improved skewness in line with a normal distribution. The value for skewness for the variable number of expatriates within the subsidiary board is 3.386 which indicates that the distribution of the measure significantly deviates from a normal distribution. Therefore, a logarithmic function was integrated which led to a skewness of 0.464 which produced an improved skewness in line with a normal distribution. Also, multicollinearity was checked for these measures. By assessing the tolerance values and variance inflation factor it is concluded that there is no sign of multicollinearity. The maximum VIF within the models was 1,701 which is below the rule-of-thumb cut-off of 10 (Hair et al., 1998). The tolerance values are greater than 0.10, which specifies that no significant multicollinearity is detected.
Independent variable: Type of foreign direct investment à A) Greenfields and b) Acquisitions The independent variable of this study is the type of foreign direct investment. The focus of this study is to investigate if different types of foreign direct investment have a different influence on the design of a subsidiary board. As a consequence, the independent variable is split into two independent variables. The first independent variable is Greenfields and the second independent variable is Acquisitions. Due to the fact, that there are two independent variables this study can more clearly investigate which type of FDI has an effect on the design of a subsidiary board.
The moderating variable for this study is geographical focus. Literature on geographical focus of subsidiary boards and the role it has on subsidiary design is scarce but geographical focus could be an enormous factor in changing the design of a subsidiary (Frost, 2001; Luo, 2001). The importance of a subsidiary with a broad focus is different compared to a subsidiary with a narrow geographical focus. As a consequence, the parent firm wants to exercise more control and oversight in order to make sure that the decisions that are made in the subsidiary are better aligned with the interest of the parent firm organization and the other subsidiaries in the network.
Additional control variables
This study includes a number of control variables which emphasize on Hofstede’s cultural dimensions and organizational factors of both the parent firm and the subsidiary.
Hofstede’s cultural dimensions
Literature on Hofstede’s cultural dimensions shows that these dimensions have an impact of the organizational culture within a firm (Kirkman, Lowe & Gibson, 2006). Differences in organizational can lead to differences in board composition and therefore the dimensions have been added as a control variable to this study. Not all dimensions are used, long-term orientation was excluded from this study as it correlated to much with the other dimensions.
International experience parent firm
International experience of the parent firm was calculated as the difference between the year the parent firm started to operate abroad and the year the survey was distributed (2011).
Size parent firm
Literature indicates that the size of parent firms has a moderating effect on the relationship between subsidiary size and subsidiary design. A larger parent firm leads to a flatter U-shaped relationship between subsidiary size and subsidiary design. A larger parent firm indirectly leads to a smaller control role of the subsidiary firm and less expatriates within the subsidiary board (Peng & Beamish 2014). Parent firm size is measured by the parent firm’s total number of fulltime employees at the end of 2011. This number as obtained from the BOM 2011 database.
Structure parent firm
Structure of the parent firm was measured through four different options: Product-divisional structure, regional-Product-divisional structure, matrix structure and don’t know.
Size subsidiary
Studies on subsidiary boards indicate that the size of a subsidiary might have an influence on the design of a subsidiary board. Larger subsidiaries show a greater need for monitoring and building external linkages because of the more complex activities they perform. (Du, Deloof & Jorissen, 2015; Boone et al., 2007; Linck et al.). According to Peng & Beamish (2014) there’s a U-shaped relationship between subsidiary size and expatriate staffing level within subsidiary boards. When subsidiary size surpasses a certain level, there will be more monitoring by the parent firm and therefore more expatriate staffing. Subsidiary size is measured by the subsidiary's total number of fulltime employees at the end of 2011. This number as obtained from the BOM 2011 database.
Subsidiary age
Previous studies indicated that subsidiary age is an important proxy for subsidiary learning and has significant impact on subsidiary expatriate staffing level and therefore has a significant impact on subsidiary design (Delios & Beamish, 2001; Wilkinson et al., 2008). Subsidiary age was calculated as the difference between the year the subsidiary was established and the year the survey was distributed (2011).
4. Results
4.1 Correlation matrix and multicollinearity
Following the literature review, little research has been conducted on the impact Greenfields and acquisitions have on the design of subsidiary boards. To address this gap, this chapter analyses the data of the survey.
The sample size is constituted of 182 respondents. Table 1 details descriptive statistics and correlations for the variables within this study. The mean and standard deviation of the variables are added for descriptive purposes, while the correlation coefficient indicates the strength of the association between any two metric variables (Hair et al., 1998). The Descriptive Statistics and Correlation matrix table 1 represents is used to examine multicollinearity. Multicollinearity is the occurrence of high inter-correlations among independent variables in a multiple regression model, this can lead to skewed or misleading results (Farrar & Glauber, 1967). Table 1 shows that the variables size of the subsidiary board and number of expatriates within a subsidiary board display a correlation coefficient (0,666) greater than 0.550, which is the cut-off point for multicollinearity. The variables are still included for further analyses because these are dependent variables and won’t be analyzed in the same model. To further examine the influence of multicollinearity, variance inflation factors (VIF) and tolerance values have been calculated. The maximum VIF within the models was 1,701 which is below the rule-of-thumb cut-off of 10 (Hair et al., 1998). The tolerance values are greater than 0.10, which specifies that no significant multicollinearity is detected.
TABLE 2
Descriptive Statistics and Correlation Matrixa
a N=182. † = p < .10; * = p < 0.05; ** = p < 0.001.
Variable Mean SD 1 2 3 4 5 6 7 8 9 10 11 12 13
1. Size of a subsidiary board 4.610 4.141 1.000
2. Number of expatriates within a subsidiary board 2.297 3.265 .666** 1.000
3. Power distance 45.420 16.476 0.133 .172* 1.000
4. Individualism 68.310 21.632 0.036 0.026 -.511** 1.000
5. Masculinity 59.800 17.873 0.020 -0.097 -0.090 0.037 1.000
6. Uncertainty avoidance 59.550 21.495 -0.028 -0.023 .424** -.313** .273** 1.000
7. International exp. par 3.486 1.156 -0.033 -0.045 -0.098 -0.015 .173* 0.110 1.000
8. Size parent firm 7.118 2.806 0.088 0.000 -0.073 -0.041 0.010 0.076 .223** 1.000
9. Organizational structure parent firm 2.290 0.996 -.174* -.156* -0.056 0.038 -0.127 -0.004 0.036 -0.109 1.000
10. Size subsidiary 3.042 1.687 .287** 0.012 -0.100 0.096 -0.023 -0.072 .222** .472** -.174* 1.000
11. Subsidiary age 2.872 0.987 0.085 0.073 -0.124 .159* 0.030 -0.014 .393** .247** 0.004 .238** 1.000
12. GreenfieldAcquistion 0.665 0.473 -.199** -0.095 -0.053 -0.056 0.045 0.078 -0.045 -.272** 0.066 -.324** -0.133 1.000 13. Geographical focus 2.970 1.754 -0.052 0.029 -0.001 -0.081 0.094 -.152* -0.089 0.050 -0.045 0.018 -0.067 -0.070 1.000
4.2 Regression analyses
Multiple regression analyses are used to analyze the relationship between size of the subsidiary board and the number of expatriates within the board and the independent variables. Table 2 presents the hierarchical regression results on the dependent variables size of the subsidiary board and number of expatriates within a subsidiary board, model I, II and II have size of the subsidiary board as the dependent variable and IV, V, and VI have number of expatriates within a subsidiary board as the dependent variable.
Model I
Model I is the baseline model for size of the subsidiary board. The effects of multiple control variables on the size of the subsidiary board outlined in model I in table 2. Nine control variables are used for all of the six models namely: four out of five of Hofstede’s cultural dimensions (Power distance, Individualism, Masculinity and Uncertainty avoidance), a few parent firm characteristics (the international experience of the parent firm, the size of the parent firm and the structure of the parent firm) and two subsidiary characteristics (the size of the subsidiary and the number of years the subsidiary has existed). For model 1 power distance shows a strong significant positive influence on the size of the subsidiary board (β = 0.012, p < 0.01). This means that the size of a subsidiary board is slightly greater when there is a stronger hierarchy structure within the subsidiary. Furthermore, individualism has a significant positive influence on the size of the subsidiary board (β = 0.004, p < 0.05), which indicates the greater importance on attaining personal goals is the greater the board of the subsidiary. International experience of the parent firm indicates a significant negative influence on size of the subsidiary board (β = -0.111, p < 0.05). This means the more internationally experienced the parent is the smaller the size of the subsidiary board is. Moreover, the organizational structure of the parent firm also has a strong significant negative influence on the size of a subsidiary board (β = -0.121, p < 0.01). This means more structured parent firms decreases the size of the subsidiary board. Lastly, size of the subsidiary shows a strong significant positive influence on the size of the subsidiary board (β = 0.146, p < 0.01). This states that with a larger subsidiary a larger subsidiary board is connected.
The overall fit of model I is small (R2 = 0,149) which means that only 15% of the variance of the dependent variable is explained by the independent variables.
Model II
Model II details model I plus the variables GreenfieldAcquisition and geographical focus. Within the regression analyzes a difference between Greenfields or Acquisitions has been made through allocating different values for the type of foreign investment (Greenfield = 1 and Acquisition = 0). For model II the control variables power distance (β = 0.011, p < 0.01), organizational structure of the parent firm (β = -0.127, p < 0.01) and size of the subsidiary (β = 0.133 p < 0.01) show the same influences they have on size of the subsidiary board as they do in Model I, only the strength of the influence is different. Furthermore, masculinity indicates a significant positive influence on the size of a subsidiary board (β = 0.005, p < 0.05), which indicates that a subsidiary with a more masculine structure has a slightly greater subsidiary board. International experience of the parent firm indicates a strong significant negative influence on size of the subsidiary board (β = -0.120, p < 0.01). This means the more internationally experienced the parent is the smaller the size of the subsidiary board is. Additionally, model II shows that GreenfieldAcquisition has a significant negative influence on the size of the subsidiary board (β = -0.093, p < 0.05). The negative relationship means when a parent firm invests in a Greenfield subsidiary the size of the subsidiary board smaller is which is in confliction with hypothesis 1a.
The overall fit of model II is slightly an improvement towards model I but still poor (R2 = 0,166). Only 16.6% of the variance of the dependent variable is explained by the independent variables.
Model III
Model III entails model II plus the possible interaction effect between GreenfieldAcquisition and geographical focus on the size subsidiary board. Model III shows that there’s no significant evidence for an interaction effect between GreenfieldAcquisition and geographical focus on the size of the subsidiary board. For model II the control variables power distance (β = 0.010, p < 0.01), structure of the parent firm (β = -0.127, p < 0.01) and size of the subsidiary (β = 0.133 p < 0.01) show the same influences they have on size of the subsidiary board as they do in Model I, only the strength of the influence is different. Masculinity indicates a positive influence on the size of a subsidiary board (β = 0.005, p < 0.05), which indicates that a subsidiary with a more masculine structure has a slightly greater subsidiary board. Moreover, international experience of the parent firm indicates a strong significant negative influence on size of the subsidiary board (β = -0.123, p < 0.05). This means the more internationally experienced the parent is the smaller the size of the subsidiary board is. Lastly, model III shows
that GreenfieldAcquisition has a significant negative influence on the size of the subsidiary board (β = -0.095, p < 0.05). The negative relationship means that when a parent firm invests in a Greenfield subsidiary the size of the subsidiary board smaller is which is, again, in confliction with hypothesis 1a.
The overall fit of model III is only 0.04% better than the overall fit of model II (R2 = 0,170) which means there’s barely an improvement with the added variable interaction effect between GreenfieldAcquisition and geographical focus. This is a logical outcome as there was no evidence for an interaction effect between GreenfieldAcquisition and geographical focus on the dependent variable.
Model IV
Model IV is the baseline model for the number of expatriates within a subsidiary board. The effects of multiple control variables on the number of expatriates within the subsidiary board outlined in model I in table 2. The same nine control variables are used in this model. The variables Power distance (β = 0.022, p < 0.01) and individualism (β = 0.009, p < 0.01) both indicate a strong significant positive influence on the number of expatriates within a subsidiary board. This means that a stronger hierarchy structure and a more individualistic structure within the subsidiary lead to more expatriates within the subsidiary board. Furthermore, masculinity indicates a significant negative influence on the number of expatriates within the subsidiary board (β = -0.007, p < 0.05), which indicates that a subsidiary with a more masculine structure will have less expatriates in their subsidiary board. Table 2 shows there’s a strong significant negative influence on the number of expatriates within the subsidiary board (β = -0.148, p < 0.01). If a parent firm is more experience internationally the number of expatriates within the subsidiary board will be less. The size of the parent firm has a strong significant positive influence on the number of expatriates within the subsidiary board (β = 0.064, p < 0.01). The bigger the parent firm is the more expatriates there will be on the subsidiary board. The organizational structure of the parent firm has strong negative influence on the number of expatriates within the subsidiary board (β = -0.235, p < 0.01). This means more structured parent firms decreases the size of the subsidiary board. The size of the subsidiary board has a significant negative influence on the number of expatriates within the subsidiary board (β = -0.087, p < 0.05). This means that a larger subsidiary has fewer expatriates in their subsidiary board. Lastly, the subsidiary age has a strong significant positive influence on the number of expatriates within the subsidiary board (β = 0.146, p < 0.01). This means that an ‘older’ subsidiary has more expatriates within their subsidiary board.
The overall fit of model IV is poor (R2 = 0,089). Only 8.9% of the variance of the dependent variable is explained by the independent variables. The model for the dependent variable, size of the subsidiary board, fits almost twice as good as the model for number of expatriates within the subsidiary board (15% to 8.9%).
Model V
Model V details model IV plus the variables GreenfieldAcquisition and geographical focus. For model V the control variables power distance (β = 0.021, p < 0.01), individualism (β = 0.009, p < 0.01), masculinity (β = -0.008, p < 0.05), international experience of the parent firm (β = -0.137, p < 0.05), organizational structure of the parent firm (β = -0.237, p < 0.01), size of the subsidiary (β = -0.101 p < 0.05) and subsidiary age (β = 0.142, p < 0.01) show the same influences they have on the number of expatriates within the subsidiary board as in model IV, only the strength of the influence is different. The size of the parent firm has a significant positive influence on the number of expatriates within the subsidiary board (β = 0.050, p < 0.05). The bigger the parent firm is the more expatriates there will be on the subsidiary board. What stands out in this model is that there’s no significant evidence that GreenfieldAcquisition has an influence on the number of expatriates within the subsidiary board.
The overall fit of model V is slightly an improvement towards model IV but still poor (R2 = 0,109). Only 10.9% of the variance of the dependent variable is explained by the independent variables.
Model VI
Model VI details model V plus the possible interaction effect between effect between GreenfieldAcquisition and geographical focus on the number of expatriates within the subsidiary board. For model VI the control variables power distance (β = 0.021, p < 0.01), individualism (β = 0.009, p < 0.01), international experience of the parent firm (β = -0.137, p < 0.05) and organizational structure of the parent firm (β = -0.237, p < 0.01), size of the subsidiary (β = -0.101 p < 0.05) show the same influences they have on the number of expatriates within the subsidiary board as in baseline model IV, only the strength of the influence is different. Furthermore, masculinity indicates a strong significant negative influence on the number of expatriates within the subsidiary board (β = -0.009, p < 0.05), which indicates that a subsidiary with a more masculine structure will have less expatriates in their subsidiary board. Model VI shows that there’s no significant evidence that the size of the parent firm has an influence on the number of expatriates within a subsidiary board unlike model IV and V where there is
significant evidence. The subsidiary age has a significant positive influence on the number of expatriates within the subsidiary board (β = 0.137, p < 0.01). This means that an ‘older subsidiary has more expatriates within their subsidiary board. In Model VI it is detailed that GreenfieldAcquisition has a significant negative influence on the number of expatriates within a subsidiary board. The negative relationship means when a parent firm invests in a Greenfield subsidiary the number of expatriates within the subsidiary smaller is which is in confliction with hypothesis 1b. Model VI shows that there’s significant evidence for a positive interaction effect between GreenfieldAcquisition and geographical focus on the number of expatriates within the subsidiary board (β = -0.124, p < 0.05). Which means that the relationship between Greenfields and more expatriates is stronger in the presence of a broad geographical focus which is consistent with hypothesis 2b.
The overall fit of model VI the same as the overall fit of model V (R2 = 0,109). With the added interaction effect, still only 10.9% of the variance of the dependent variable is explained by the independent variables.
TABLE 2
Determinants of Board Structurea
In order to interpret how the effect of geographic distance moderates the relationship between the type of entry (i.e., acquisition or Greenfield) and the number of expatriates that serve on the foreign subsidiary board, an interaction plot was drawn (see Figure 2). As shown in Figure 2, there is a marginal and insignificant difference for acquisitions that have a narrow or broad geographical focus in terms of the number of expatriates on their subsidiary boards. This finding suggests that geographic focus does not have a significant influence regarding the appointment of expatriates on board. Interestingly, greenfield ventures do have a significant difference in terms of the expatriate board appointment. The findings show that those ventures
Number of Directors Number of expats
I II III IV V VI (Intercept) 0.483† 0.665† 0.717† 0.166† 0.299† 0.434† (-0.336) (-0.344) (-0.347) (-0.450) (-0.461) (-0.461) Power Distance 0.012** 0.011** 0.010** 0.022** 0.021** 0.019** (-0.003) (-0.003) (-0.003) (-0.004) (-0.004) (-0.004) Individualism 0.004* 0.003† 0.003† 0.009** 0.009** 0.009** (-0.002) (-0.002) (-0.002) (-0.003) (-0.003) (-0.003) Masculinity 0.004† 0.005* 0.005* -0.007* -0.008* -0.009** (-0.002) (-0.002) (-0.002) (-0.003) (-0.003) (-0.003) Uncertainty avoidance -0.002† -0.002† -0.002† -0.004† -0.002† -0.001† (-0.002) (-0.002) (-0.002) (-0.003) (-0.003) (-0.003)
International exp. parent -0.111* -0.120** -0.123** -0.148* -0.137* -0.139*
(-0.044) (-0.045) (-0.045) (-0.064) (-0.065) (-0.063)
Size parent firm 0.002† -0.001† -0.003† 0.064** 0.050* 0.042†
(-0.017) (-0.017) (-0.017) (-0.024) (-0.025) (-0.025)
Organizational structure parent firm -0.121** -0.127** -0.122** -0.235** -0.237** -0.219**
(-0.040) (-0.040) (-0.040) (-0.055) (-0.055) (-0.055) Size subsidiary 0.146** 0.133** 0.134** -0.087* -0.101* -0.097* (-0.025) (-0.025) (-0.025) (-0.038) (-0.039) (-0.039) Subsidiary age 0.077† 0.080† 0.079† 0.146** 0.142** 0.137* (-0.041) (-0.042) (-0.042) (-0.053) (-0.053) (-0.054) GreenfieldAcquisition --- -0.093* -0.095* --- -0.100† -0.116* --- (-0.037) (-0.038) --- (-0.054) (-0.055) Geographical focus --- -0.053† -0.044† --- 0.071† 0.097† --- (-0.038) (-0.039) --- (-0.054) (-0.055)
Greenfield * Geographical focus --- --- 0.038† --- --- 0.124*
--- --- (-0.037) --- --- (-0.052)
with low geographical focus tend to adopt fewer expatriates on boards, compared to those with a broad focus. One possible reason is that greenfield subsidiaries with a broad function play essentials roles in the MNE’s network and therefore need to be controlled to a larger extent. Greenfields are therefore more required to adhere to internal isomporhistic pressures as well as the exploitation of firm specific advantages. This finding therefore seems to be in line with Harzing (2002).
Figure 2.
4.3 Conclusion
Both hypotheses were tested in this chapter, the results showed hypothesis 1a and 1b aren’t supported and hypothesis 2a isn’t supported and hypothesis 2b is supported. Through the analysis, it showed that there’s a negative relationship between Greenfields and a) larger boards and b) more expatriates which means that a Greenfield as type of foreign direct investments leads to smaller subsidiary board and less expatriates. Consisted with hypothesis 2 the analysis showed a positive moderation effect of geographical focus between Greenfields and geographical focus on the number of expatriates within the subsidiary board. Which means that the relationship between Greenfields and more expatriates is stronger in the presence of a broad geographical focus 2,7 2,8 2,9 3 3,1 3,2 3,3 Acquisition Greenfield Nu m be r of e xp at ri at es Low geographical focus High geographical focus
5. Discussion
5.1 Key findings and interpretations
There were multiple key findings of this study, according to the results there’s a negative relationship between Greenfields and size of the subsidiary board and number of expatriates within a subsidiary board. This means that a Greenfield as entry mode choice leads to a smaller subsidiary board and less expatriates on that subsidiary board. A second finding is that there’s a positive interaction effect between GreenfieldAcquisition and geographical focus on the number of expatriates within the subsidiary board. Which means that a broad geographical focus positively moderates the relationship between Greenfields and a) more expatriates and b) larger boards.
5.2 Theoretical implications
This study contributes to the literature by improving our understanding of influence Greenfields and acquistions have on post-entry mode decisions within subsidiary boards. A significant stream of research in international business focuses on the equity entry mode choices organizations make in order to expand abroad (Anand & Delios, 2002; Filatotchev, Strange, Piesse & Lien, 2007; Gielens & Dekimpe, 2001; Kim & Hwang, 1992; Meyer, 2001; Nielsen & Nielsen, 2011) but leaves out the part on the post-entry mode decisions. This study adds to this literature by investigating what kind of influence entry mode decisions (e.g. Greenfields and acquisitions) have on the design of subsidiary boards, if there’s a difference in influence by different types of foreign direct investments.
Moreover, this study investigates the possibility of geographical focus as a moderator for the relationship between types FDI and their influence on subsidiary board design. As such, geographical focus is added to the current literature as a major influence on FDI and subsidiary design. But geographical focus has different influences on Greenfield and acquisitions and therefore needs to be further investigated.
Lastly, this study shows that some domain-translation issues arise when analyzing subsidiary boards on the base of corporate board literature. This study clarifies that literature from corporate boards can’t be used for subsidiary board without analyzing the differences between these boards.
5.3 Managerial implications
The results are of particular interest to foreign investing firms who aim to have successful subsidiaries who carry out the image of the parent firm. This study helps these firms for a better understanding of post-entry influences on subsidiary boards and could therefore lead to better foreign direct investments. Secondly, this study is of interest for subsidiaries self too as they can comprehend the logic as to why the parent firm makes certain decisions on subsidiary board design.
5.4 Limitations and future research directions
The results are, logically, subject to a number of limitations even though research on how entry mode choices influence post-entry decisions is scarce. These limitations lead to discussion, suggesting several issues for future research.
First, the correlation between type of foreign direct investment (e.g. Greenfields and acquisitions) and size of a subsidiary board is not significant, there’s no direct effect. Further studies may investigate the possibility of influence other types foreign direct investment (exporting, licensing & franchising and partnering & strategic alliance) possibly could have on the size of a subsidiary board. Second, given the difficulty in collecting “harder numbers”, the study relied on a survey to collect a sample size large enough for structural equation modeling to test the hypotheses. The sample size of 182 respondents is still low which makes it another limitation of this study. Because of the low sample size, it is less possible to generalize the findings of this study to the whole international business segment. Fourth, this study is measured at a single point in time. Longitudinal data, following parent firms for a longer period of time, could provide different findings for the literature. Interesting would be to investigate if the parent firm changes its foreign direct investment behaviour over a period of time because of for example more experience in the international business.
6. References
Adams, R. B., Hermalin, B. E., & Weisbach, M. S. (2010). The role of boards of directors in corporate governance: A conceptual framework and survey. Journal of economic literature, 48(1), 58-107.
Aguilera, R. V., Marano, V., & Haxhi, I. (2019). International corporate governance: A
review and opportunities for future research. Journal of International Business Studies, 1-42.
Anand, J., & Delios, A. (2002). Absolute and relative resources as determinants of international acquisitions. Strategic management journal, 23(2), 119-134.
Andersen, O. (1993) On the internationalization process of firms: a critical analysis. Journal of International Business Studies, 24, 209-231.
Ayuso, S., & Argandoña, A. (2009). Responsible corporate governance: towards a stakeholder board of directors?.
Barkema, H. G., Bell, J. H., & Pennings, J. M. (1996). Foreign entry, cultural barriers, and learning. Strategic management journal, 17(2), 151-166.
Björkman, I. (1994). Managing Swedish and Finnish multinational corporations: The role of the board of directors in French and Norwegian subsidiaries. International Business Review, 3(1), 47-69.
Bom.nl. (n.d.). Enabling growth. Retrieved from: https://www.bom.nl/over-bom
Boone, A. L., Field, L. C., Karpoff, J. M., & Raheja, C. G. (2007). The determinants of corporate board size and composition: An empirical analysis. Journal of financial Economics, 85(1), 66-101.
Brouthers, K. D. (2002). Institutional, cultural and transaction cost influences on entry mode choice and performance. Journal of international business studies, 33(2), 203-221. Brouthers, K. D., & Bamossy, G. J. (2006). Post-formation processes in Eastern and Western
European joint ventures. Journal of Management Studies, 43(2), 203-229.
Buckley, P. J. (1992). Alliances, technology and markets: a cautionary tale. In Studies in International Business (pp. 90-99). Palgrave Macmillan, London.
Buckley, P. J. and Casson, M. (1976) The Future of the Multinational Enterprise. Macmillan, London.
Buckley, P. J., & Ghauri, P. N. (2004). Globalisation, economic geography and the strategy of multinational enterprises. Journal of International Business Studies, 35(2), 81-98.
Canabal, A., & White III, G. O. (2008). Entry mode research: Past and future. International Business Review, 17(3), 267-284.
Clarke, T. (2004). Theories of corporate governance. The Philosophical Foundations of Corporate Governance, Oxon.
Clark, T., Pugh, D. S., & Mallory, G. (1997). The process of internationalization in the operating firm. International Business Review, 6(6), 605-623.
Cavusgil, S. T. (1980) On the internationalization process of firms. European Research, 6, 273-281.
Delios, A., & Beamish, P. W. (2001). Survival and profitability: The roles of experience and intangible assets in foreign subsidiary performance. Academy of Management journal, 44(5), 1028-1038.
Demb, A., & Neubauer, F. F. (1992). The corporate board: Confronting the paradoxes. Long range planning, 25(3), 9-20.
Doz, Y. L., & Prahalad, C. K. (1987). A process model of strategic redirection in large complex firms: The case of multinational corporations. The management of strategic change, 63, 83. Du, Y., Deloof, M., & Jorissen, A. (2015). The roles of subsidiary boards in multinational
enterprises. Journal of International Management, 21(3), 169-181.
Dunning, J. H. (1980). Toward an eclectic theory of international production: Some empirical tests. Journal of international business studies, 11(1), 9-31.
Dunning, J. H. (1981) International Production and the Multinational Enterprise. Allen and Unwin, London. Modern Economy, 6(4).
Dunning, J. H. (1988) Explaining International Production. Unwin Hyman, London.
Dunning, J. H., & Lundan, S. M. (2008). Multinational enterprises and the global economy. Edward Elgar Publishing.
Edmondson, A. C., & McManus, S. E. (2007). Methodological fit in management field research. Academy of management review, 32(4), 1246-1264.
Farrar, D. E., & Glauber, R. R. (1967). Multicollinearity in regression analysis: the problem revisited. The Review of Economic and Statistics, 92-107.
Filatotchev, I., Strange, R., Piesse, J., & Lien, Y. C. (2007). FDI by firms from newly
industrialised economies in emerging markets: corporate governance, entry mode and location. Journal of International Business Studies, 38(4), 556-572.
Frost, T. S. (2001). The geographic sources of foreign subsidiaries' innovations. Strategic Management Journal, 22(2), 101-123.
