The Governance-Innovation Nexus in MNEs: How HQ ‎ControlShapes Subsidiary Innovation and Performance

  • Authors

    • Moon Hwan Cho Ingenium College of Convergence Studies, Hankuk University of Foreign Studies, South Korea
    • Byung Il Park College of Business, Hankuk University of Foreign Studies, South Korea
    https://doi.org/10.14419/5tz07h29

    Received date: December 4, 2025

    Accepted date: December 15, 2025

    Published date: December 22, 2025

  • Headquarters Control; Subsidiary Innovation; Financial Performance; Agency Theory; Resource-Based View

  • Abstract

    This study examines how various dimensions of headquarters control—extent of control, focus of control, and formal mechanisms—affect ‎the innovation and financial performance of foreign subsidiaries. Based on agency theory and resource-based view (RBV), this study ‎empirically tests the conceptual model using survey data from 200 subsidiaries operating in China. The results of hierarchical regression ‎analysis show that control mechanisms have a positive effect on both incremental and radical innovation, and the effect on incremental ‎innovation is stronger. In contrast, the extent and focus of control did not have a significant effect on either type of innovation. Both types of ‎innovation displayed a significant positive relationship with financial performance, and the influence was particularly greater for radical ‎innovation. These results suggest that the control structure of headquarters needs to be aligned with the characteristics of innovation ‎activities. This study contributes to the international business literature by clarifying the specific roles of headquarters control and providing ‎practical implications for the balance between control and autonomy for managing global innovation‎.

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    Cho , M. H. ., & Park, B. I. . (2025). The Governance-Innovation Nexus in MNEs: How HQ ‎ControlShapes Subsidiary Innovation and Performance. International Journal of Accounting and Economics Studies, 12(8), 749-760. https://doi.org/10.14419/5tz07h29