Managing multinational corporations through compensation: The risk-sharing contract method
AbstractThis paper presents a mechanism that supports the flows of resources between subsidiaries of multinational companies. The mechanism is based on a risk-sharing contract between the HQ and the subsidiary manager. The model is built on the assumption that there are two alternative supervisory methods for promoting the flow of resources: incentives and direct monitoring. Analysis of the model leads to several interesting results, including some situations in which the manager of a subsidiary will be overcompensated. Another result indicates that as the distance between the home country and the host country increases, the incentive to the subsidiary manager increases.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 64 (2012)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jeconbus
MNC; Incentives; Principal-agent; Distance;
Find related papers by JEL classification:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation
- M16 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - International Business Administration
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nicolai J. Foss & Torben Pedersen, .
"Transferring Knowledge in MNCs: The Role of Sources of Subsidiary Knowledge and Organizational Context,"
IVS/CBS Working Papers
00-12, Department of Industrial Economics and Strategy, Copenhagen Business School.
- Foss, Nicolai J. & Pedersen, Torben, 2002. "Transferring knowledge in MNCs: The role of sources of subsidiary knowledge and organizational context," Journal of International Management, Elsevier, vol. 8(1), pages 49-67.
- Foss, Nicolai J. & Pedersen, Torben, 2000. "Transferring Knowledge in MNCs: The Role of Sources of Subsidiary Knowledge and Organizational Context," Working Papers 6-2000, Copenhagen Business School, Department of International Economics and Management.
- Dittmann, Ingolf & Maug, Ernst & Zhang, Dan, 2011. "Restricting CEO pay," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1200-1220, September.
- Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-39, May.
- Michael C. Jensen & Kevin J. Murphy, 1990.
"Ceo Incentives - It'S Not How Much You Pay, But How,"
Journal of Applied Corporate Finance,
Morgan Stanley, vol. 3(3), pages 36-49.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Oded Shenkar, 2001. "Cultural Distance Revisited: Towards a More Rigorous Conceptualization and Measurement of Cultural Differences," Journal of International Business Studies, Palgrave Macmillan, vol. 32(3), pages 519-535, September.
- Subramaniam, Mohan & Watson, Sharon, 2006. "How interdependence affects subsidiary performance," Journal of Business Research, Elsevier, vol. 59(8), pages 916-924, August.
- Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988.
" Compensation and Incentives: Practice vs. Theory,"
Journal of Finance,
American Finance Association, vol. 43(3), pages 593-616, July.
- Kogut, Bruce & Chang, Sea Jin, 1991. "Technological Capabilities and Japanese Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 401-13, August.
- Nakiye Boyacigiller, 1990. "The Role of Expatriates in the Management of Interdependence Complexity and Risk in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 21(3), pages 357-381, September.
- Weijian Shan & Jaeyong Song, 1997. "Foreign Direct Investment and the Sourcing of Technological Advantage: Evidence from the Biotechnology Industry," Journal of International Business Studies, Palgrave Macmillan, vol. 28(2), pages 267-284, June.
- Sushil Vachani, 1991. "Distinguishing Between Related and Unrelated International Geographic Diversification: A Comprehensive Measure of Global Diversification," Journal of International Business Studies, Palgrave Macmillan, vol. 22(2), pages 307-322, June.
- David M Brock & Oded Shenkar & Amir Shoham & Ilene C Siscovick, 2008. "National culture and expatriate deployment," Journal of International Business Studies, Palgrave Macmillan, vol. 39(8), pages 1293-1309, December.
- David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
- Jensen, Michael C & Murphy, Kevin J, 1990.
"Performance Pay and Top-Management Incentives,"
Journal of Political Economy,
University of Chicago Press, vol. 98(2), pages 225-64, April.
- Sumantra Ghoshal & Harry Korine & Gabriel Szulanski, 1994. "Interunit Communication in Multinational Corporations," Management Science, INFORMS, vol. 40(1), pages 96-110, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.