Host country corruption and headquarters-subsidiary relationships in emerging economies

Abstract

Purpose

The primary objective of this study is to investigate the impact of a host country's corruption on the autonomy of a foreign subsidiary from a country with lower tolerance for corruption. In doing so, the study examines the moderating role of subsidiary-headquarters communication and multinational corporation's (MNC's) prior international experience in countries with a higher tolerance for corruption.

Design/methodology/approach

The data were collected from 182 foreign subsidiaries of 57 Malaysian MNCs operating in 16 host countries. The study employed ordinary least square (OLS) using Stata16.1 to analyze the modeled relationships.

Findings

The findings of this study reveal a significant positive association between the extent of corruption in the host country and the subsidiary's autonomy. The findings illustrate that an MNC's prior experience in the country with an increased tolerance for corruption does not moderate the association between corruption and subsidiary autonomy. However, the findings also confirm that the extent of headquarters-subsidiary communication negatively moderates the association between corruption and subsidiary autonomy.

Originality/value

The study uses unique data collected from Malaysian MNCs. Furthermore, the study contributes to the literature by bringing forth subsidiary autonomy as a counter strategy to potential risks that can arise due to weak institutions and widespread corruption in a host country.

Citation

Mubarik, M.S., Miao, M., Mubarak, M.F., Zaman, S.I., Alam Kazmi, S.H. and Naghavi, N. (2023), "Host country corruption and headquarters-subsidiary relationships in emerging economies", International Journal of Emerging Markets, Vol. 18 No. 9, pp. 2523-2543. https://doi.org/10.1108/IJOEM-10-2019-0882