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Entrepreneurial behaviour in the MNC: an extended agency theory analysis of the parent-subsidiary relationship and subsidiary initiative

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  • William H.A. Johnson, John W. Medcof

Abstract

Entrepreneurial activity in the form of strategic subsidiary initiatives is examined theoretically utilising an extended agency theory perspective and extant empirical findings. The analysis using traditional agency theory suggests that entrepreneurial subsidiary initiatives are unlikely given the risk necessary to put forth an initiative and lack of incentives on the part of traditional subsidiary management. In developing an extended principal-agent analysis, it is discovered that the risk attitudes of the parent company and the subsidiary as well as the internal contracting system of the multinational company are rudimentary to a theoretical understanding of subsidiary-driven initiatives. The implications of the analysis are delineated and several propositions developed.

Suggested Citation

  • William H.A. Johnson, John W. Medcof, 2002. "Entrepreneurial behaviour in the MNC: an extended agency theory analysis of the parent-subsidiary relationship and subsidiary initiative," International Journal of Entrepreneurship and Innovation Management, Inderscience Enterprises Ltd, vol. 2(2/3), pages 186-203.
    • Handle: RePEc:ids:ijeima:v:2:y:2002:i:2/3:p:186-203
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    Cited by:

    1. Schmid, Stefan & Dzedek, Lars R. & Lehrer, Mark, 2014. "From Rocking the Boat to Wagging the Dog: A Literature Review of Subsidiary Initiative Research and Integrative Framework," Journal of International Management, Elsevier, vol. 20(2), pages 201-218.
    2. Johnson, William H.A. & Medcof, John W., 2007. "Motivating proactive subsidiary innovation: Agent-based theory and socialization models in global R&D," Journal of International Management, Elsevier, vol. 13(4), pages 472-487, December.
    3. Chatzopoulou, Erifili-Christina & Dimitratos, Pavlos & Lioukas, Spyros, 2021. "Agency controls and subsidiary strategic initiatives: The mediating role of subsidiary autonomy," International Business Review, Elsevier, vol. 30(3).

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