Marketing Channels in Foreign Markets: Control Mechanisms and the Moderating Role of Multinational Corporation Headquarters–Subsidiary Relationship

To manage marketing channels, subsidiaries of multinational corporations (MNCs) must balance mandates from headquarters (HQ) with the local realities of the foreign markets. The performance implications of subsidiary–distributor relationship efforts thus are contingent on the HQ–subsidiary relationship. Drawing on marketing channels, economics, and organization theory literature streams, the authors (1) describe the complex performance properties of output and process control mechanisms that MNC subsidiaries deploy to manage foreign distributors and (2) conceptualize the HQ–subsidiary nexus along three attributes that should moderate the performance effects of control mechanisms: task coordination, or HQ's central coordination of processes across subsidiaries; subsidiary decision involvement, or two-way communications and consensual decision making between HQ and the subsidiary; and relational disharmony, or the extent of the HQ–subsidiary conflict. The authors test the hypotheses using field data from German and Japanese MNCs in the United States and Bayesian models that account for measurement error, endogeneity in the control mechanisms, heterogeneity in country of origin, and nonlinear and interactive terms for the latent constructs. The results demonstrate the importance of the HQ–subsidiary relationship for managing the subsidiary–distributor relationship.