Heterogeneous adaptability: Learning, cash resources, and the fine-grained adjustment of misaligned governance

Research Summary: When can a firm make fine-grained adjustments to misaligned subsidiary governance? We examine whether and under what conditions a firm will adapt the equity stake it owns in a subsidiary, enabling improved alignment of the stake with the uncertainty in the local environment. We pre...

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Main Authors: MARTIN, Xavier, CUYPERS, Ilya
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2024
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/7261
https://ink.library.smu.edu.sg/context/lkcsb_research/article/8260/viewcontent/SMJ_2023_Martin_Cuypers_pvoa_cc_by.pdf
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spelling sg-smu-ink.lkcsb_research-82602024-05-27T02:08:40Z Heterogeneous adaptability: Learning, cash resources, and the fine-grained adjustment of misaligned governance MARTIN, Xavier CUYPERS, Ilya Research Summary: When can a firm make fine-grained adjustments to misaligned subsidiary governance? We examine whether and under what conditions a firm will adapt the equity stake it owns in a subsidiary, enabling improved alignment of the stake with the uncertainty in the local environment. We predict that the rate of adaptation of misaligned equity stakes depends on the experiential and vicarious learning from which the firm can draw, and that these learning effects are contingent on possessing fungible slack resources, specifically cash. Using a sample of 726 Japanese-foreign subsidiaries established in 38 host countries over a 21-year period, we find support in line with our predictions. Overall, this study explicates heterogeneous adaptability in subsidiary governance and similar strategic tasks. Managerial Summary: Whether due to suboptimal choices or changing conditions, firms must sometimes change how they relate with and control their subsidiaries. Whereas much research has addressed adaptation in the form of discrete changes in ownership mode, we examine under what conditions a firm can make fine-grained adjustments to misaligned subsidiary governance. We argue that a firm can learn to make such adjustments, not only from its own experience but also vicariously by observing other firms in the same foreign environment. Furthermore, we consider whether cash is a valuable resource for this purpose. Overall, this study shows how firms can pursue strategic adaptation in subsidiary governance and related tasks. 2024-01-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/7261 info:doi/10.1002/smj.3540 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8260/viewcontent/SMJ_2023_Martin_Cuypers_pvoa_cc_by.pdf http://creativecommons.org/licenses/by/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University adaptability equity stakes governance alignment learning resources International Business Strategic Management Policy
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic adaptability
equity stakes
governance alignment
learning
resources
International Business
Strategic Management Policy
spellingShingle adaptability
equity stakes
governance alignment
learning
resources
International Business
Strategic Management Policy
MARTIN, Xavier
CUYPERS, Ilya
Heterogeneous adaptability: Learning, cash resources, and the fine-grained adjustment of misaligned governance
description Research Summary: When can a firm make fine-grained adjustments to misaligned subsidiary governance? We examine whether and under what conditions a firm will adapt the equity stake it owns in a subsidiary, enabling improved alignment of the stake with the uncertainty in the local environment. We predict that the rate of adaptation of misaligned equity stakes depends on the experiential and vicarious learning from which the firm can draw, and that these learning effects are contingent on possessing fungible slack resources, specifically cash. Using a sample of 726 Japanese-foreign subsidiaries established in 38 host countries over a 21-year period, we find support in line with our predictions. Overall, this study explicates heterogeneous adaptability in subsidiary governance and similar strategic tasks. Managerial Summary: Whether due to suboptimal choices or changing conditions, firms must sometimes change how they relate with and control their subsidiaries. Whereas much research has addressed adaptation in the form of discrete changes in ownership mode, we examine under what conditions a firm can make fine-grained adjustments to misaligned subsidiary governance. We argue that a firm can learn to make such adjustments, not only from its own experience but also vicariously by observing other firms in the same foreign environment. Furthermore, we consider whether cash is a valuable resource for this purpose. Overall, this study shows how firms can pursue strategic adaptation in subsidiary governance and related tasks.
format text
author MARTIN, Xavier
CUYPERS, Ilya
author_facet MARTIN, Xavier
CUYPERS, Ilya
author_sort MARTIN, Xavier
title Heterogeneous adaptability: Learning, cash resources, and the fine-grained adjustment of misaligned governance
title_short Heterogeneous adaptability: Learning, cash resources, and the fine-grained adjustment of misaligned governance
title_full Heterogeneous adaptability: Learning, cash resources, and the fine-grained adjustment of misaligned governance
title_fullStr Heterogeneous adaptability: Learning, cash resources, and the fine-grained adjustment of misaligned governance
title_full_unstemmed Heterogeneous adaptability: Learning, cash resources, and the fine-grained adjustment of misaligned governance
title_sort heterogeneous adaptability: learning, cash resources, and the fine-grained adjustment of misaligned governance
publisher Institutional Knowledge at Singapore Management University
publishDate 2024
url https://ink.library.smu.edu.sg/lkcsb_research/7261
https://ink.library.smu.edu.sg/context/lkcsb_research/article/8260/viewcontent/SMJ_2023_Martin_Cuypers_pvoa_cc_by.pdf
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