The Locus of Decision-Delegation Among Japanese Multinational Enterprises: An Empirical Study

Abstract

This study investigates decision delegation from headquarters to overseas subsidiaries of Japanese MNEs. We examine differences across three decision domains as well as between subsidiary geographic locations. The decision domains are, first, general management decisions related to strategy and management/operations; second, IT development decisions; and third, transfer pricing. The empirical results indicate that, generally, the decision authority for management/operational decisions is more extensively delegated to overseas subsidiaries than decision authority for strategic decisions. The decision delegation for international transfer pricing is found to be low. There are differences between subsidiaries in different geographic locations. In general, the delegation of decision authority for all decision domains is broader to North American and European subsidiaries than to Asian subsidiaries. We show that decision delegation is not a monolithic activity, but a complex activity which is not yet fully comprehended by theory.

Keywords: locus of decision-making, overseas subsidiaries, Japanese MNEs, IT systems investment decisions, international transfer pricing decisions