Parent‐subsidiary links under procedural justice in the emerging market

The purpose of this paper is to emphasize that procedural justice has a contribution to parent‐subsidiary links within multinational enterprises (MNEs).

A mailed survey is adopted in this study. A total of 152 valid and complete questionnaires were returned from the respondents. Structural equation modeling and Chow test are used in this research paper.

Based on structural equation modeling, three significant dimensions of the parent‐subsidiary links are found to contribute to the financial performance of the subsidiaries (resource commitment, information flow, and control flexibility). Based on Chow test, these dimensions can lead to better financial performance under greater procedural justice in the decision‐making processes of MNEs.

This study only collected information from Taiwanese multinational firms in East Asia and the Pacific countries, including China, Indonesia, Malaysia, Philippines, Thailand and Vietnam. Generally, these regions are the emerging market, with structurally volatile but fast‐growing economies. In addition, further studies can extend the research to other countries. Environmental interferences, such as culture and legal rules, were not considered in this study.

In reality, although the due process is sometimes neglected because of time limitations or lack of patience, superior managers still should pay more attention to the processes of strategic decision making to keep the procedure fair and transparent.

This paper underlines the importance and value of the procedural justice in MNE management. The exercise of the procedural justice motivated subsidiary managers to aim for better financial performance with voluntary effort and their best ability.