How Does the Level of Control, Support, and Social Integration of the Parent Firm Affect the Exploitative/Explorative Capabilities of the Foreign Subsidiary? Empirical Evidence from Korean Listed Firms

Abstract

Purpose - Based on organizational learning theory, this study empirically analyzes the effect of the control level, support level, and social integration level of the headquarters on the exploitative and explorative capabilities of foreign subsidiaries. Design/Methodology – To test the research hypotheses, a survey of foreign subsidiaries of Korean listed firms was conducted, and regression analysis was performed on the 400 returned data. Findings - The analysis reveals that the level of parent control does insignificantly affect the exploitative capabilities of foreign subsidiaries but had a negative effect on the explorative capabilities of foreign subsidiaries. The level of support from the parent firm is found to have a positive effect on the exploitative capabilities of foreign subsidiaries. However, a U-shaped relationship exists between parent support and the explorative capabilities of foreign subsidiaries. The level of social integration is found to have a positive effect on the exploitative capabilities of foreign subsidiaries, but an inverse U-shaped relationship exists between the explorative capabilities of foreign subsidiaries. Originality/value - Based on organizational learning theory, this study has useful implications. It shows that the control, support, and social integration level of parent firms have different effects on the exploitative and explorative capabilities of foreign subsidiaries.