The Relationship between the Control Level of Foreign Subsidiaries and Performance in the Chinese Market

Purpose - There is a lack of research on how much corpo-rate control is sufficient for effective subsidiary business-related decision making. To address this research gap, this study ana-lyzes the impact of the level of control of a Korean corpo-ration's headquarters on its overseas subsidiary performance. Research design, data, methodology - The study's sample comes from the Overseas Korean Business Directory of KOTRA. A multiple regression analysis empirically confirmed the relation-ship between the headquarters level of control over the sub-sidiaries and their performance. Results - The results show that the greater an organization's headquarters control over strategic issues, the greater the sub-sidiary's non-financial performance. However, quick decision-mak-ing through decentralization promotes the rapid selection of suc-cessful new products that can provide a competitive advantage. Conclusion - This study shows that the impact of control lev-els on subsidiary performance depends on the type of control involved. Specifically, while low levels of control over operational issues had a positive (+) influence on subsidiary non-financial performance, high control levels led to improved non-financial performance with regard to strategic issues among the subsidiaries.