Social Knowledge as a Control System: A Proposition and Evidence from the Japanese FDI behavior

Building upon the concept of clans, this paper introduces the value of social knowledge as a control mechanism available for an MNC to manage its foreign subsidiaries. Social knowledge is defined as one's ability to understand and predict others' general patterns of behavior. The hypotheses are empirically tested with Japanese FDI data into four host countries, the United States, Singapore, Taiwan, and Korea. The results offer broad support for the proposition that for MNCs with social knowledge, the need to resort to ownership for control purposes is reduced.© 1994 JIBS. Journal of International Business Studies (1994) 25, 295–324