Comanaging in Multisubsidiary Firms: The Role of Complementary and Substitutive Interdependencies

We examine the formal authority structure in multisubsidiary firms, focusing on comanaged subsidiaries owned by two or more subsidiaries that belong to the same firm. We argue that a subsidiary is more likely to be comanaged when its need for intrafirm coordination and thus, the need for information processing are high. Accordingly, the likelihood that a subsidiary will be comanaged by other subsidiaries is positively associated with the extent of its relatedness and multimarket contact. Furthermore, the turbulence of the subsidiary’s environment moderates these relationships; it amplifies the relatedness and comanagement link but attenuates the multimarket contact and comanagement link, reflecting the complementary and substitutive nature of these interdependencies, respectively. Results of analyses based on the population of subsidiaries of manufacturing firms operating in France between 1999 and 2004 support the predictions. Our theory and findings have implications for the study of multiauthority structures more broadly, including project-based and matrix organizations, where similar demands shape the design of formal authority relationships across multiple superiors.