MANAGING THE HEADQUARTERS‐FOREIGN SUBSIDIARY RELATIONSHIP: THE ROLES OF STRATEGY, CONFLICT, AND INTEGRATION

This study examined the relationship between the headquarters and the foreign subsidiaries of multinational corporations (MNCs). Hypotheses concerning the strategies pursued by each MNC, intergroup conflict, conflict management styles, integrating mechanisms, and the effectiveness of the headquarters‐subsidiary relationship are developed and tested. There were no significant differences in the intergroup conflict experienced by subsidiaries pursuing different international strategies. However, effectiveness of the headquarters‐subsidiary relationship was negatively related to intergroup conflict. The use of the avoiding style of conflict management was negatively related to the effectiveness of the headquarters‐subsidiary relationship, as hypothesized. For MNCs pursuing global integration strategies, the use of personal integrating mechanisms and integrating conflict management styles were negatively related to intergroup conflict. For MNCs pursuing local responsiveness strategies, the use of bureaucratic integrating mechanisms and dominating conflict management styles were not negatively related to inter‐group conflict. This ran counter to expectations. MNCs pursuing multi‐focal strategies did not fit neatly into either strategy camp—global integration or local responsiveness.