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Heterogeneous Adaptability: Learning, Cash Resources, And The Fine-Grained Adjustment Of Misaligned Governance, Xavier Martin, Ilya Cuypers

Research Collection Lee Kong Chian School Of Business

Research Summary: When can a firm make fine-grained adjustments to misaligned subsidiary governance? We examine whether and under what conditions a firm will adapt the equity stake it owns in a subsidiary, enabling improved alignment of the stake with the uncertainty in the local environment. We predict that the rate of adaptation of misaligned equity stakes depends on the experiential and vicarious learning from which the firm can draw, and that these learning effects are contingent on possessing fungible slack resources, specifically cash. Using a sample of 726 Japanese-foreign subsidiaries established in 38 host countries over a 21-year period, we …