Informed Headquarters, Legitimized Subsidiary, and Reduced Level of Subsidiary Control in International R&D Management

We investigate the extent to which headquarters’ perceived knowledge about overseas R&D subsidiaries influences the level of control over them. We confirm that headquarters’ knowledge about its overseas R&D subsidiaries lowers the level of control over them. Surprisingly, however, granting legitimacy to R&D subsidiaries does not necessarily lead to a reduction in headquarters’ control. In addition, R&D subsidiaries’ legitimacy does not influence the effect of headquarters’ knowledge about them on the level of control. Although headquarters’ knowledge about R&D subsidiaries tends to grant them legitimacy, the effect of that legitimacy seems rather minimal. These findings imply that headquarters are reassured when it reduces its control over the subsidiaries based on updated knowledge about their current situations rather than on an already-established positive image of those subsidiaries.