How do Chinese Multinational Companies Coordinate and exert Control over Foreign Subsidiaries ? The case of Chinese Subsidiaries in France
Keywords:China, Control, Expatriation, Foreign direct invesment, Foreign subsidiary, Multinational companies
France is nowadays an attractive country for Chinese investors. With their direct investments in France, Chinese companies pursue mainly market and asset seeking goals. However, Chinese might lack international experience, which makes performance of their subsidiaries in France difficult to achieve. Our research investigates how Chinese companies implement control and coordination mechanisms to manage their subsidiaries in France. We held interviews with 17 managers in charge of Chinese subsidiaries in France. We find that Chinese companies use four main mechanisms to exert control over their subsidiaries in France: (i) control through the share of capital in a subsidiary, with a clear preference for wholly owned subsidiaries or large majority shares in joint ventures; (ii) decentralised decision-making to compensate for the lack of international experience of Chinese managers; (iii) formalisation of the subsidiary’s organisation through a mix of reporting, ERP and written documents; and (iv) control and coordination by international human resources coming from the Chinese headquarters, including expatriates with rather observational roles as well as frequent short-term assignments.
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