Parent‐Affilate Agency Conflicts and Foreign Entry Mode Choice

Abstract

We theoretically identify two levels of agency conflicts related to foreign direct investment (FDI): within a parent firm and between parent(s) and an affiliated firm. For a sample of 182 firms that announced U.S.‐related FDIs in 1995, we examine the effects of agency conflicts on the choice between a wholly owned subsidiary (WOS) and a joint venture (JV), and the relative share ownership of a parent. Firms with higher management ownership, especially the firms that made related FDIs, and firms with higher foreign affiliate monitoring efficiency are more likely to choose a WOS. Differences between U.S. and non‐U.S. parents are also examined.

Citation

Young Baek, H. (2003), "Parent‐Affilate Agency Conflicts and Foreign Entry Mode Choice", Multinational Business Review, Vol. 11 No. 2, pp. 75-98. https://doi.org/10.1108/1525383X200300012