The impact of competition vs cooperation between subsidiaries within a multinational corporation

Abstract

This research seeks to determine the impact of headquarter control, rent- seeking behaviour, inter-subsidiary cooperation and competition on multination corporation (MNC) business performance. The research presents a framework for MNCs to structure its headquarter-subsidiary and subsidiary-subsidiary relationships to best support its global profit and shareholder value maximisation goal. The study used a quantitative research design to survey all MNCs operating within South Africa with headquarters in Europe, Japan or the United States of America. A survey (on-line questionnaire) measured the perceived level of subsidiary autonomy (headquarter control), rent-seeking behaviour, inter- subsidiary cooperation, inter-subsidiary competition and MNC performance (increase in domestic market share) within each subsidiary. An objective measure of MNC performance (global return on shareholder funds) was also included to confirm the validity of the research findings. The study used a multiple linear regression model to analyse the data. The research study found that a business strategy that promotes high levels of both inter-subsidiary cooperation and competition will maximise business performance. The study also confirmed that headquarter control constrains rent-seeking behaviour, whilst rent-seeking behaviour will harm MNC performance. The study, however, found that high levels of headquarter control has a net negative impact on global MNC performance.