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Building on a proprietary dataset made accessible for this research, I tested the theoretical model for this thesis using previously collected data from each of the studied subsidiaries and the corporate headquarters of their corporate parents.The dataset comprises of objective measures of subsidiary and corporate financial performance, objective characteristics of corporate headquarters characteristics and structure, as well as more subjective and behavioural data based on surveys which focus on control mechanisms to which subsidiaries are subject and the strategic orientation they pursue.
I find support in my analysis for the mediating role of Controls in the relationship between Corporate Strategy and subsidiary level strategy.
The results from the analysis demonstrate that the strategic orientations of subsidiaries are endogenous to the corporate strategy through the mechanism of Controls each subsidiary is subject to.
To explore the effect of corporate strategy on business-unit-level strategy and performance, I conducted a quantitative analysis of data corresponding to over 2,500 business units from 193 corporations.
Building on a proprietary dataset made accessible for this research, I tested the theoretical model for this thesis using previously collected data from each of the studied business units and the corporate headquarters of their corporate parents.
As a result, conflicting findings have led to researchers disagreeing on the significance of corporate effects and corporate strategy.
Corporate Strategy Thesis
Through this thesis, I have taken steps to clarify the misunderstood significance of corporate strategy to business-unit-level strategy and performance.
This dissertation has drawn on the literature from agency theory, information processing theory, and upper echelons theory, as well as the economic logic that underlies value creation in corporations.
Through this dissertation, I deconstruct the notion of corporate effects to theoretically redefine the role of controls as the mediator between corporate strategy and business unit strategy to respond to the research question, “How does corporate strategy influence business unit performance?
I also find support for the moderating effect of certain aspects and characteristics at corporate level such as size of corporate headquarters, number of subsidiaries managed by the corporation, and corporate CEO’s background in the relationship between Corporate Strategy and Controls.
The findings of this thesis re-establish the role of Corporate Strategy in our understanding of subsidiary level strategy and performance.