Title: Remote control of foreign subsidiaries: a transaction cost analysis of virtual expatriation

Authors: Dirk Holtbrügge; Katrin Schillo

Addresses: Department of International Management, University of Erlangen-Nürnberg, Lange Gasse 20, 90403 Nürnberg, Germany ' University of Applied Sciences HTW Chur, Pulvermühlestrasse 57, 7004 Chur, Switzerland

Abstract: Virtual expatriations are characterised by the spatial and psychic separation of private and professional life. While virtual expatriates are physically located at the headquarters, from an organisational and operational point of view, they belong to the foreign subsidiary. In this study, the use of virtual expatriations as a control mechanism in MNCs is analysed. Based on transaction cost theory, three research hypotheses are developed and tested on 172 MNCs in the BRICS countries (Brazil, Russia, India, China, and South Africa). The study shows that the frequency of interactions between the headquarters and subsidiary, as well as the asset specificity of the latter, has a significant influence on the use of virtual expatriation. On the contrary, this instrument of remote control of foreign subsidiaries is not affected by the uncertainty of transactions.

Keywords: control mechanisms; international assignments; virtual expatriation; transaction cost theory; TCT; remote control; foreign subsidiaries; uncertainty; MNCs; MNC subsidiaries; multinational corporations; BRICS countries; Brazil; Russia; India; China; South Africa; interaction frequency; international management.

DOI: 10.1504/EJIM.2013.057114

European Journal of International Management, 2013 Vol.7 No.6, pp.623 - 645

Available online: 11 Oct 2013 *

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