Proximity at a distance: The relationship between foreign subsidiary co-location and MNC headquarters board interlock formation |
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| Institution: | 1. KU Leuven, Faculty of Economics and Business, Department of Management, Strategy & Innovation, H. Conscienceplein 8, 2000 Antwerpen, Belgium;2. Politecnico di Milano, School of Management, Via Lambruschini 4, Milano, Italy;3. University of Amsterdam, Amsterdam Institute for Social Science Research, CORPNET, Nieuwe Achtergracht 166, 1001 Amsterdam NB, The Netherlands;4. University of Ljubljana, Faculty of Social Sciences, Kardeljeva pl. 5, 1000 Ljubljana, Slovenia;5. University of Warsaw, Faculty of Management, Szturmowa 1/3, 02-678 Warszawa, Poland;6. Utrecht University, Department of Methodology & Statistics, 3584 Utrecht CS, The Netherlands;7. Leiden University, Department of Computer Science (LIACS), PO Box 9512, 2300 Leiden RA, The Netherlands;1. New York University Stern School of Business, Henry Kaufman Management Center Department of Economics, 44 West Fourth Street, 7-90, New York, NY 10012, USA,;2. University of Birmingham, Birmingham Business School, Department of Strategy & International Business, Edgbaston Park Road, Birmingham B15 2TY, UK;3. University of Sussex, Department of Strategy & Marketing, Sussex House, Falmer, Brighton BN1 9RH, UK;1. Southampton Business School, University of Southampton, SO17 1BJ, UK;2. Audencia Business School, Nantes, France;3. University of Aberdeen Business School, University of Aberdeen, AB24 5UD, UK;4. Leicester Castle Business School, De Montfort University, Leicester, LE19BH, UK;1. Adelaide Business School, The University of Adelaide, Adelaide, SA 5005, Australia;2. Ted Rogers School of Management, Ryerson University, Toronto, ON M5B 2K3, Canada;1. Department of Management Sciences, COMSATS University Islamabad, Park Road, Tarlai Kalan, Islamabad, 45550, Pakistan;2. Department of the Business Administration, University of Poonch Rawalakot, Azad Jummu and Kashmir, Pakistan;3. Rabat Business School, International University of Rabat, Parc Technopolis, Rabat-Shore, 11100, Morocco;1. China Academy of Cross-border E-commerce, School of Economics, Zhejiang University, 38 Zheda Road, Hangzhou 310027, China;2. Ningbo Research Institute, China Academy of Cross-border E-commerce, Zhejiang University, 1689 Jiangnan Road, Ningbo 315048, China;3. The York Management School, University of York, Heslington, York YO10 5DD, UK |
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| Abstract: | Corporations seek various relationships, such as board interlocks, with other firms to reduce resource dependencies. The consistent theoretical expectation and empirical finding that physical proximity is an important driver for board interlock formation is seemingly at odds with the emerging and growing literature on transnational board interlock ties. We argue that the effect of proximity on multinational corporation (MNC) board interlock formation can also be attributed to the firms’ internationalization strategy, namely, when they have co-located subsidiaries in foreign markets. We call this “proximity at a distance”. We test our assumptions on a dataset covering almost 43,000 board interlocks among MNC headquarters and their 12 million subsidiary co-location pairs. We confirm that proximity among headquarters increases the odds of interlocking but also find robust evidence that co-located subsidiaries also increase firms’ propensity to interlock, particularly for transnational board interlocks. Our results help provide an explanation for the “paradox of distance” by showing that the interlock between two distant MNCs may be driven by proximity to their foreign subsidiaries. As such, we illustrate how MNCs’ resource-dependent strategic responses can occur at the headquarters level to address uncertainties experienced at the subsidiary level. |
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| Keywords: | Board interlocks Transnational board interlocks Internationalization Resource dependence Subsidiary co-location Proximity HQ-subsidiary relations |
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