CORPORATE CONTROL BY CHINESE MNCS OVER THEIR FOREIGN SUBSIDIARIES: COMBINING INSTITUTIONAL AND RESOURCE-BASED PERSPECTIVES

Abstract

Chinese outward foreign direct investment (OFDI) has increased substantially in the last decade. This has resulted in the rapid growth of Chinese multinational corporations (MNCs). The performance of Chinese MNC's foreign subsidiaries can have significant impact on their parent corporation in terms of revenues, reputation, and sustainability, and on the host country's economy and welfare of local communities. However, there is little research so far on how Chinese MNCs control their foreign subsidiaries. Using institutional and resource-based views, this paper examines and delineates the major control mechanisms used by Chinese MNCs over their subsidiaries in the Australian mining industry. It also discusses the implications of the research findings. Data was collected from the websites of ten Chinese subsidiaries and their parent companies, as well as through interviewing five senior executives from four Chinese subsidiaries. The research found that Chinese MNCs relied heavily on ownership and insider control, particularly at the strategic level. They also preferred using expatriates for operational control in their foreign subsidiaries. These dependencies and preferences, however, are moderated by the Chinese MNCs' lack of experience and expertise in international management. Moreover, corporate governance in the Chinese subsidiaries is still weak in terms of independence and competence.