Yan Du

Marc Deloof

Ann Jorissen

DIRECTORS IN FOREIGN SUBSIDIARIES

Keywords: Corporate Governance, subsidiary governance, board of directors, multinational enterprise, agency theory, resource dependence theory

des établissements d'enseignement et de recherche français ou étrangers, des laboratoires publics ou privés.

 [START_REF] Ghoshal | International differentiation within multinational corporations[END_REF][START_REF] Gong | Subsidiary Staffing in Multinational Enterprises: Agency, Resources, and. Performance[END_REF]Jaussaud and Schaaper, 2006;[START_REF] O'donnell | Managing foreign subsidiaries: Agents of headquarters or an interdependency network?[END_REF][START_REF] Roth | Foreign subsidiary compensation strategy: An agency theory perspective[END_REF]. However, less is known with respect to the role of the subsidiary board as an alternative control mechanism for managing foreign subsidiaries.

Using survey and archival data from 83 foreign subsidiaries operating in Belgium with headquarters in 14 different countries, we find that a foreign subsidiary is more likely to maintain an active board if it is a world mandate subsidiary. A world mandate subsidiary is a subsidiary that has worldwide responsibility for a product line and performs a broad scope of value-added activities. Moreover, a foreign subsidiary is more likely to maintain an active board if it is larger relative to the MNE, if it has a higher level of local responsiveness, and if its past performance is poorer. Furthermore, the presence of an active board in a foreign subsidiary is related to other control mechanisms deployed in the subsidiary. In particular, a foreign subsidiary is less likely to maintain an active board if the subsidiary CEO holds a management position at the headquarters.

To the best of our knowledge, this study is the first to empirically investigate the presence of active boards in foreign subsidiaries. Our results suggest that the agency problem between headquarters and subsidiary management, and the subsidiary's dependence on the external environment are important to understanding the presence of active boards in foreign subsidiaries.

Accordingly, both agency theory and resource dependence theory are relevant to the analysis of subsidiary boards and a combination of the two theories provides comprehensive explanations on the presence of active boards.

The remainder of this study is organized as follows. In the next section, we review the literature on boards in standalone firms, control mechanisms in MNEs, and subsidiary boards. In the Hypothesis Development section, we then develop hypotheses on the presence of active R e v i e w C o p y 4 boards in foreign subsidiaries. In the subsequent two sections, we set forth our research method and results. Finally, we conclude with discussions, study limitations, and directions for future research.

LITERATURE REVIEW

Boards in Standalone Firms

The literature on boards in standalone firms has been dominated by two theoretical perspectives: agency theory and resource dependence theory. According to agency theory, boards should reduce agency problems between shareholders and top managers [START_REF] Fama | Agency problems and the theory of the firm[END_REF][START_REF] Fama | Separation of ownership and control[END_REF]. Boards have the obligation of electing, evaluating, compensating and firing top managers in the best interests of shareholders [START_REF] Fama | Separation of ownership and control[END_REF][START_REF] Zahra | Boards of directors and corporate financial performance: A review and integrative model[END_REF]. Based on agency theory, many empirical studies have examined the relation between board composition (typically measured by the proportion of outside directors on the board) and firm performance (e.g., [START_REF] Bathala | The determinants of board composition: An agency theory perspective[END_REF][START_REF] Brickley | Leadership structure: separating the CEO and Chairman of the board[END_REF][START_REF] Wan | Board structure, process and performance: Evidence from publiclisted companies in Singapore[END_REF]. These studies have reached mixed results, probably because board composition is endogenously determined [START_REF] Adams | The role of boards of directors in corporate governance: a conceptual framework and survey[END_REF][START_REF] Hermalin | Boards of directors as an endogenously determined institution: a survey of the economic literature[END_REF]. Additionally, there is a growing body of literature examining the determinants of board composition [START_REF] Boone | The determinants of corporate board size and composition: an empirical analysis[END_REF][START_REF] Hermalin | The determinants of board composition[END_REF][START_REF] Lehn | Determinants of the size and structure of corporate boards: 1935-2000[END_REF][START_REF] Linck | The determinants of board structure[END_REF][START_REF] Mak | Determinants of corporate ownership and board structure: Evidence from Singapore[END_REF]. These studies suggest that board composition reflects a tradeoff between firm-specific benefits and costs of board monitoring, as well as the influence of top managers on boards. In contrast to agency theory, resource dependence theory views boards as important boundary spanners that make timely information available to top managers [START_REF] Barney | The resource-based view of the firm: Ten years after 1991[END_REF][START_REF] Hillman | Resource dependence theory: a review[END_REF][START_REF] Lockett | The resource-based view and economics[END_REF][START_REF] Pfeffer | The external control of organizations: A resource dependence perspective[END_REF]. The main board tasks include advice and counsel, channels of information and preferential access to key resources [START_REF] Hillman | Resource dependence theory: a review[END_REF][START_REF] Pearce | Board composition from a strategic contingency perspective[END_REF][START_REF] Pfeffer | Size and composition of corporate boards of directors: The organization and its environment[END_REF]. Empirical studies show that board capital such as directors' expertise, experience, knowledge, reputation, and interlocking directorates, is positively associated with firm performance (e.g., [START_REF] Boyd | Corporate linkages and organizational environment: A test of the resource dependence model[END_REF][START_REF] Carpenter | The strategic context of external network ties[END_REF][START_REF] Dalton | Number of Directors and Financial Performance: A Meta-Analysis[END_REF][START_REF] Hillman | Boards of directors and firm performance: Integrating agency and resource dependence perspectives[END_REF]. Moreover, firms respond to significant changes in the external environment by altering board structure [START_REF] Hillman | The resource dependence role of corporate directors: Strategic adaptation of board composition in response to environmental change[END_REF][START_REF] Pfeffer | The external control of organizations: A resource dependence perspective[END_REF].

Control Mechanisms in MNEs

An MNE consists of a group of geographically dispersed and culturally distant units that include its headquarters and different foreign subsidiaries [START_REF] Ghoshal | The multinational corporation as an interorganizational network[END_REF].

Headquarters often exerts various control mechanisms over foreign subsidiaries to ensure that subsidiary management acts in accordance with the overall strategy of the MNE (Jaussaud and Schaaper, 2006). The literature has distinguished three broad types of control mechanisms: outcome control, behavioral control and cultural control [START_REF] Baliga | Multinational Corporations: Control System and delegation issues[END_REF][START_REF] Eisenhardt | Agency theory: an assessment and review[END_REF][START_REF] Jaeger | The transfer of organizational culture overseas: An approach to control in the multinational corporation[END_REF][START_REF] Ouchi | A conceptual framework for the design of organizational control mechanisms[END_REF]. Outcome control monitors and evaluates the performance outcomes of subsidiary management. In contrast, behavioral control monitors the behavior of subsidiary management. While outcome control and behavioral control are explicit formal control mechanisms, cultural control, which is built on shared value and norms to control subsidiary management, is implicit and informal [START_REF] Baliga | Multinational Corporations: Control System and delegation issues[END_REF][START_REF] Ouchi | A conceptual framework for the design of organizational control mechanisms[END_REF]. For R e v i e w C o p y 6 example, the use of expatriate managers and corporate socialization could build organizational identification and develop shared values at the subsidiary level [START_REF] Chung | The management of information and managers in subsidiaries of multinational corporations[END_REF][START_REF] Gaur | Institutional environments, staffing strategies and subsidiary performance[END_REF][START_REF] Gong | Subsidiary Staffing in Multinational Enterprises: Agency, Resources, and. Performance[END_REF][START_REF] O'donnell | Managing foreign subsidiaries: Agents of headquarters or an interdependency network?[END_REF]. Cultural control is desirable only when outcome control and behavioral control are difficult to implement, because introducing cultural control entails high costs resulting from initial socialization and continued normative allegiance (Jager, 1983;[START_REF] Nohria | Differentiated fit and shared values: Alternatives for managing headquarters-subsidiary relations[END_REF][START_REF] Stopford | Managing the Multinational Enterprise[END_REF].

Drawing on agency theory, foreign subsidiaries may have their own goals and risk preferences that differ from those of headquarters. Empirical studies based on agency theory find that headquarters use various control mechanisms to align the interests of subsidiary management with those of headquarters (e.g., [START_REF] Chang | Control in multinational corporations: The case of Korean manufacturing subsidiaries[END_REF][START_REF] Nohria | Differentiated fit and shared values: Alternatives for managing headquarters-subsidiary relations[END_REF][START_REF] Roth | Foreign subsidiary compensation strategy: An agency theory perspective[END_REF]. Drawing on resource dependence theory, foreign subsidiaries are interdependent with other units within the MNE in terms of resource exchanges [START_REF] Birkinshaw | Configurations of strategy and structure in subsidiaries of multinational corporations[END_REF][START_REF] Gupta | Knowledge flows and the structure of control within MNCs[END_REF][START_REF] O'donnell | Managing foreign subsidiaries: Agents of headquarters or an interdependency network?[END_REF]. Moreover, foreign subsidiaries are instruments used by headquarters to seek resources from the external environment. Empirical studies in support of resource dependence theory find that headquarters use various control mechanisms according to foreign subsidiaries' environmental and resource contingencies (e.g., [START_REF] Andersson | Subsidiary embeddedness and control in the multinational corporation[END_REF][START_REF] Chung | The influence of subsidiary strategic context and head office strategic management style on control of MNCs: The Experience in Australia[END_REF]Gencturk and Aulakh, 1995;[START_REF] Ghoshal | International differentiation within multinational corporations[END_REF]Jaussaud and Schaaper, 2006;[START_REF] Nohria | Differentiated fit and shared values: Alternatives for managing headquarters-subsidiary relations[END_REF][START_REF] O'donnell | Managing foreign subsidiaries: Agents of headquarters or an interdependency network?[END_REF][START_REF] Yu | Local linkages and their effects on headquarters' use of process controls[END_REF]. While prior research offers valuable insights into control mechanisms used by headquarters for the management of foreign subsidiaries, the subsidiary board, as another control mechanism, has yet to be addressed in the literature.

R

Subsidiary Boards

Research on subsidiary boards is very limited. Among the few studies that examine subsidiary boards, [START_REF] Leksell | The board of directors in foreign subsidiaries[END_REF] identify external roles (advisory, external relations) as well as internal roles (control and monitoring, coordination and integration) that subsidiary boards play in MNEs. [START_REF] Kriger | The increasing role of board of foreign subsidiaries in MNCs: An empirical study[END_REF] finds evidence of an increasing use of subsidiary boards over time. Moreover, Japanese MNEs use subsidiary boards more actively than either European or North American MNEs. [START_REF] Huse | Stakeholder expectations of corporate boards[END_REF] find that stakeholders have different expectations with respect to the roles that subsidiary boards play in MNEs. Contrary to the aforementioned studies in which subsidiary boards are active, [START_REF] Gillies | The governance of transnational firms: Some preliminary hypotheses[END_REF] find that subsidiary boards are merely rubber stamps set up to fulfill local legal requirements. [START_REF] Björkman | Managing Swedish and Finnish multinational corporations: The role of the board of directors in French and Norwegian subsidiaries[END_REF] finds that most subsidiary boards perform limited tasks. However, in those boards that are active, strategy and budget approval is considered important. Recently, [START_REF] Kim | Differentiated governance of foreign subsidiaries in transnational corporations: An agency theory perspective[END_REF] and [START_REF] Kiel | Corporate governance options for the local subsidiaries of multinational enterprises[END_REF] theoretically demonstrate that the structure of subsidiary boards should satisfy the differentiated roles of foreign subsidiaries in MNEs. Although these studies provide important insights, the conditions under which foreign subsidiaries maintain active boards have yet to be examined in the literature.

HYPOTHESIS DEVELOPMENT

In this section, we use agency theory and resource dependence theory to develop hypotheses on the conditions under which foreign subsidiaries maintain active boards. These two theories provide complementary explanations on board roles. Moreover, they lead to different

Agency Theory and Subsidiary Boards

According to agency theory, the headquarters-foreign subsidiary relation has a principalagent structure where headquarters is the principal and subsidiary management is the agent.

Subsidiary management may have its own goals and risk preferences that differ from those of headquarters. When information asymmetries between headquarters and subsidiary management are high, it is difficult for headquarters to monitor the behavior of subsidiary management and employ behavioral control [START_REF] Christie | Decentralization of the firm: Theory and evidence[END_REF][START_REF] Eisenhardt | Agency theory: an assessment and review[END_REF][START_REF] Fama | Agency problems and the theory of the firm[END_REF][START_REF] O'donnell | Managing foreign subsidiaries: Agents of headquarters or an interdependency network?[END_REF][START_REF] Roth | Foreign subsidiary compensation strategy: An agency theory perspective[END_REF]. To ensure that subsidiary-level decisions are in accordance with the overall strategy of the MNE, agency theory prescribes the use of outcome control such as incentive compensation. However, outcome control is not desirable if the performance outcomes of subsidiary management are uncertain or difficult to measure [START_REF] Eisenhardt | Agency theory: an assessment and review[END_REF]Milgrom and Roberts, 1992). Additionally, cultural control may be desirable but it often entails high costs (Jager, 1983;[START_REF] Nohria | Differentiated fit and shared values: Alternatives for managing headquarters-subsidiary relations[END_REF][START_REF] Stopford | Managing the Multinational Enterprise[END_REF]. As an alternative control mechanism, an active board could be used for monitoring subsidiary management on behalf of headquarters. Moreover, an active board could reduce the information asymmetries by providing headquarters with information on the environmental and strategic complexities faced by the subsidiary [START_REF] Eisenhardt | Agency theory: an assessment and review[END_REF].

The above discussion suggests that an MNE is more likely to maintain an active board when there are high information asymmetries between headquarters and subsidiary management, and the performance outcomes of subsidiary management are difficult to measure. In the R e v i e w C o p y 9 international business literature, two factors are considered critical to induce the information asymmetries and increase difficulties of measuring the performance outcomes of subsidiary management. The first factor is the world mandate subsidiary. The world mandate subsidiary has worldwide responsibility for a product line and performs a broad scope of value-added activities (e.g., R&D, production, and marketing). It typically works with headquarters to develop and implement corporate strategy [START_REF] Birkinshaw | Configurations of strategy and structure in subsidiaries of multinational corporations[END_REF]. As the world mandate subsidiary has a high level of specialized knowledge and expertise which could be used by other subsidiaries and the headquarters, the level of information asymmetry is high. Thus, from an agency theory perspective, the world mandate subsidiary presents difficulties for monitoring or verifying the behavior of subsidiary management [START_REF] Bartlett | Managing across borders: The transnational solution[END_REF][START_REF] Doz | Managing MNCs: a search for a new paradigm[END_REF][START_REF] O'donnell | Managing foreign subsidiaries: Agents of headquarters or an interdependency network?[END_REF][START_REF] Roth | An empirical analysis of the integration-responsiveness framework in global industries[END_REF][START_REF] Roth | Foreign subsidiary compensation strategy: An agency theory perspective[END_REF]. Furthermore, the world mandate subsidiary operates in a strategically important market and performs complex tasks, making it difficult for the headquarters to measure the performance outcomes of subsidiary management. Accordingly, headquarters are likely to monitor the world mandate subsidiary through an active board. Thus, we posit the following hypothesis: Hypothesis 1a. A foreign subsidiary is more likely to maintain an active board when it is a world mandate subsidiary.

The second factor is the relative size of a foreign subsidiary with respect to the MNE.

International business studies show that the relative size of a foreign subsidiary represents the strategic importance of the subsidiary in the MNE [START_REF] Boyacigiller | The role of expatriates in the management of independence, complexity and risk in multinational corporations[END_REF][START_REF] Chang | Control in multinational corporations: The case of Korean manufacturing subsidiaries[END_REF][START_REF] Martinez | Multinational parent companies' influence over human resource decisions of affiliates: US firms in Mexico[END_REF][START_REF] Mudambi | Is knowledge power? Knowledge flows, subsidiary power and rent-seeking within MNCs[END_REF]. When a foreign subsidiary is larger [START_REF] Birkinshaw | Configurations of strategy and structure in subsidiaries of multinational corporations[END_REF][START_REF] Gupta | Knowledge flows and the structure of control within MNCs[END_REF][START_REF] Roth | An empirical analysis of the integration-responsiveness framework in global industries[END_REF]. Therefore, there is a high level of information asymmetry between headquarters and the relatively large subsidiary, and it is difficult for the headquarters to monitor the behavior of subsidiary management. Furthermore, as the relatively large subsidiary often faces strategic complexities and uncertainties (Gencturk and Aulakh, 1995), it is difficult for the headquarters to specify the performance outcomes of the subsidiary in advance. In particular, outcome control shifting risk to subsidiary management is not appropriate for relatively large subsidiaries because subsidiary management's decisions influence the overall performance of the MNE. Therefore, if a foreign subsidiary is large relative to the MNE, headquarters may monitor subsidiary management through an active board. Thus, we posit the following hypothesis: Hypothesis 1b. A foreign subsidiary is more likely to maintain an active board when it is larger relative to the MNE.

Resource Dependence Theory and Subsidiary Boards

According to resource dependence theory, firms depend on their external environment for survival, and they should alter their behavioral patterns to best acquire and maintain needed resources [START_REF] Barney | The resource-based view of the firm: Ten years after 1991[END_REF][START_REF] Hillman | Resource dependence theory: a review[END_REF][START_REF] Lockett | The resource-based view and economics[END_REF][START_REF] Pfeffer | The external control of organizations: A resource dependence perspective[END_REF]. In the context of MNEs, the external environment of a foreign subsidiary consists of other actors inside and outside the MNE such as headquarters, customers, suppliers and other counterparts. As a foreign subsidiary becomes more dependent on its external [START_REF] Andersson | Subsidiary embeddedness and control in the multinational corporation[END_REF][START_REF] Ghoshal | International differentiation within multinational corporations[END_REF][START_REF] Nohria | Differentiated fit and shared values: Alternatives for managing headquarters-subsidiary relations[END_REF][START_REF] Yu | Local linkages and their effects on headquarters' use of process controls[END_REF]. For example, [START_REF] Yu | Local linkages and their effects on headquarters' use of process controls[END_REF] find that headquarters uses less behavioral control when a foreign subsidiary has more local linkages. [START_REF] Andersson | Subsidiary embeddedness and control in the multinational corporation[END_REF] find that subsidiary managers perceive a lower level of control from headquarters when a foreign subsidiary is tightly embedded in the external network. [START_REF] Ghoshal | International differentiation within multinational corporations[END_REF] and [START_REF] Nohria | Differentiated fit and shared values: Alternatives for managing headquarters-subsidiary relations[END_REF] find that headquarters uses more cultural control such as corporate socialization when local resources are important to foreign subsidiaries. Besides altering control mechanisms, an active board could help the subsidiary access key resources by providing advice and counsel, building legitimacy and maintaining relations with important stakeholders [START_REF] Hillman | Resource dependence theory: a review[END_REF][START_REF] Lockett | The resource-based view and economics[END_REF][START_REF] Pfeffer | The external control of organizations: A resource dependence perspective[END_REF].

The above discussion suggests that an MNE is more likely to maintain an active board when a foreign subsidiary becomes more dependent on the external environment for key resources.

Thus, factors that increase a foreign subsidiary's dependence on other actors inside and outside of the MNE are important to understanding the presence of an active board. The first such factor is a foreign subsidiary's local responsiveness. Local responsiveness describes the extent to which a foreign subsidiary adjusts its activities to the needs of local stakeholders [START_REF] Bartlett | Managing across borders: The transnational solution[END_REF][START_REF] Doz | Managing MNCs: a search for a new paradigm[END_REF]Luo, 2001;[START_REF] Morrison | A taxonomy of business-level strategies in global industries[END_REF]. Local responsiveness stems from the complexity and dynamism of local market conditions as well as of the sociopolitical and macroeconomic environment of the host country [START_REF] Morrison | A taxonomy of business-level strategies in global industries[END_REF].

Subsidiaries with higher levels of local responsiveness are more dependent on local stakeholders [START_REF] Leksell | The board of directors in foreign subsidiaries[END_REF][START_REF] Kriger | The increasing role of board of foreign subsidiaries in MNCs: An empirical study[END_REF]. Thus, we posit the following hypothesis: Hypothesis 2a. A foreign subsidiary is more likely to maintain an active board when it has a higher level of local responsiveness.

The second factor is a foreign subsidiary's past performance. The level of past performance influences the firm's availability of financial slack and the survival of the firm [START_REF] Pearce | Board composition from a strategic contingency perspective[END_REF][START_REF] Ramanujam | Research on corporate diversification: a synthesis[END_REF]. When a firm performs poorly, it is important to maintain good relations with main stakeholders and have the access to more resources.

Outside directors could provide a fresh perspective, enhance the existing pool of expertise and assure the financial community that the firm's operations are under control [START_REF] Pearce | Board composition from a strategic contingency perspective[END_REF]. Accordingly, empirical studies on boards in standalone firms show that firms often add outside directors under poor past performance [START_REF] Hermalin | The determinants of board composition[END_REF][START_REF] Daily | The relationship between board composition and leadership structure and bankruptcy reorganization outcomes[END_REF][START_REF] Pearce | Board composition from a strategic contingency perspective[END_REF]. Similarly, in the context of MNEs, when a foreign subsidiary's past performance is poor, it is dependent on headquarters and other actors in the external environment for key resources. An active board could help the subsidiary acquire and maintain needed resources by providing advice and counsel, building legitimacy and managing relations with important stakeholders [START_REF] Hillman | Resource dependence theory: a review[END_REF][START_REF] Lockett | The resource-based view and economics[END_REF][START_REF] Pfeffer | The external control of organizations: A resource dependence perspective[END_REF]. Thus, we posit the following hypothesis:

The Relation between Agency Theory and Resource Dependence Theory

Agency theory and resource dependence theory address different aspects of the roles of active boards in foreign subsidiaries. From an agency theory perspective, an active board could be used as an alternative control mechanism to monitor subsidiary management on behalf of headquarters. According to resource dependence theory, an active board could be used to deal with the external environment and gain critical resources. In the above paragraphs, we first use agency theory to develop two hypotheses that link world mandate subsidiary and relative size to active boards. We then use resource dependence theory to develop two hypotheses that link local responsiveness and past performance to active boards. It should be noted that in addition to resource dependence theory, agency theory could also explain the impact of local responsiveness and past performance on the presence of active boards. According to agency theory, a foreign subsidiary with a high level of local responsiveness often has more local information that is not available for the headquarters [START_REF] Kim | Differentiated governance of foreign subsidiaries in transnational corporations: An agency theory perspective[END_REF], and consequently, it is difficult for the headquarters to monitor the behavior of subsidiary management. Similarly, a foreign subsidiary's poor past performance is an indication of poor management [START_REF] Hermalin | The determinants of board composition[END_REF][START_REF] Linck | The determinants of board structure[END_REF]). An active board could be used to ensure that subsidiary managers make decisions in the best interests of headquarters and improve the subsidiary's performance. On the other hand, in addition to agency theory, resource dependence theory also has implications for the impact of world mandate subsidiary and relative size on the presence of active boards.

According to resource dependence theory, the world mandate subsidiary performs a broad scope We begin by identifying our initial sample through the Bel-first database, using four criteria.

First, each subsidiary is located in Belgium and has a global ultimate owner domiciled outside Belgium. The global ultimate owner defined by the Bel-first database is an independent firm located in another country and that owns at least 51 percent of the subsidiary's shares. This criterion ensures that we select foreign subsidiaries operating in Belgium. Second, if an MNE has multiple subsidiaries registered in Belgium, we select only the largest subsidiary. We invoke this criterion because one MNE may use the subsidiary board in a similar way in its multiple subsidiaries. Third, we exclude subsidiaries with less than 50 employees because agency-based explanations may not be valid for smaller firms [START_REF] Eisenberg | Larger board size and decreasing firm value in small firms[END_REF] 2 . Finally, similar to previous studies [START_REF] Bathala | The determinants of board composition: An agency theory perspective[END_REF][START_REF] Linck | The determinants of board structure[END_REF], we exclude subsidiaries operating in financial industries. Application of these criteria results in a sample of 420 foreign subsidiaries.

Next, we collect data using a survey distributed to the CEOs of target foreign subsidiaries.

The names of the CEOs and their addresses were obtained from the Trends Top 2008 database, which provides financial and economic data on Belgian companies. If the name of a CEO was not available, we sent the questionnaire to another member of the top management team (CFO, chair of the subsidiary board, member of the subsidiary board). Additionally, we collect archival financial and governance data on these subsidiaries and their MNE headquarters. We designed the questionnaire following [START_REF] Dillman | Mail and internet surveys: the tailored design method[END_REF] to improve its content validity. First, we constructed the initial questionnaire based on the existing instruments. Next, we pre-tested the questionnaire through five interviews with CEOs of foreign subsidiaries. Additionally, we asked five academic hypotheses. The response rate is similar to those reported in previous studies [START_REF] Birkinshaw | Configurations of strategy and structure in subsidiaries of multinational corporations[END_REF][START_REF] Chang | Control in multinational corporations: The case of Korean manufacturing subsidiaries[END_REF][START_REF] Roth | Foreign subsidiary compensation strategy: An agency theory perspective[END_REF].

Before using the final sample to test our hypotheses, we verify the suitability of the sample for our analysis. First, we check non-response bias by comparing the absolute size and industry representation of our respondent subsidiaries with those of the target subsidiaries. The t-test shows that the absolute size of our respondent subsidiaries is not significantly different from the target subsidiaries (t=0.98, p=0.33). The chi-square test indicates that the industry representation of our sample is not significantly different from the target subsidiaries (chi-square=37.05, p=0.69). Next, we compare whether the answers from earlier respondents differ from those of later respondents on all variables and the demographic characteristics of the respondents. The results show no significant differences between early and late respondents. In sum, our data does not appear to suffer from non-response bias. Finally, we check whether the answers from CEOs differ from those of other management positions (chair of the subsidiary board, financial director or other member of the subsidiary board) on all variables and we find no significant differences, indicating that the answers are unlikely to be biased due to the different respondents functions (with respect to the presence of active boards: Likelihood-ratio chi-square=0.42, p=0.52). Active Board. Active board is a dummy variable equal to 1 if a foreign subsidiary has an active board and zero otherwise. To identify whether a subsidiary board is active, we ask respondents whether there is a board of directors in their foreign subsidiaries. If they answer "yes," we ask them to rate the extent to which the board performs a list of 21 tasks from -3 (not at all) to +3 (to a great extent). This list, consisting of all possible tasks performed by an active board, is presented in Appendix A. We develop this list based on [START_REF] Kriger | The increasing role of board of foreign subsidiaries in MNCs: An empirical study[END_REF] and [START_REF] Wan | Board structure, process and performance: Evidence from publiclisted companies in Singapore[END_REF]. Among these board tasks, the first 15 tasks are related to control and coordination in the MNE, while the remaining 6 tasks are related to advisory and service on the external environment. We consider a foreign subsidiary to maintain an active board if it satisfies two conditions: first, there is a board of directors in the foreign subsidiary; second, the board performs at least one of the 21 tasks (rated higher than -3). As Belgian Company Law requires all firms to have a board, if respondents answer that there is no board in their foreign subsidiaries, their subsidiary boards are actually rubber stamps (inactive). Therefore, we consider a board to be a rubber stamp (inactive) either when it is reported that there is no board in the foreign subsidiary, or that the board does not perform any of the 21 tasks (all rated at -3).

Independent Variables

World mandate. Based on [START_REF] Birkinshaw | Configurations of strategy and structure in subsidiaries of multinational corporations[END_REF], we ask respondents whether the subsidiary currently sells finished products/services outside Belgium. If they answer "yes," we ask them to identify whether the subsidiary is a world mandate subsidiary. The definition of 18 world mandate subsidiary is given in the questionnaire. In this study, world mandate subsidiary is a dummy variable (world mandate) equal to 1 if the respondent reports that the subsidiary is a world mandate subsidiary and zero otherwise. To test the validity of this measure, we ask respondents whether the subsidiary performs any of the following activities: manufacturing, marketing/retail, R&D, purchase and supply, business services. The literature shows that world mandate subsidiaries are responsible for a broad scope of value-added activities [START_REF] Ambos | Innovation and control in the multinational firm: a comparison of political and contingency approaches[END_REF][START_REF] Birkinshaw | Configurations of strategy and structure in subsidiaries of multinational corporations[END_REF][START_REF] Ghoshal | International differentiation within multinational corporations[END_REF][START_REF] Gupta | Knowledge flows and the structure of control within MNCs[END_REF][START_REF] Nohria | Differentiated fit and shared values: Alternatives for managing headquarters-subsidiary relations[END_REF]. Consistently, we find that our world mandate subsidiaries perform significantly more activities than the rest of the subsidiaries in our sample (t=-6.58, p<0.0001), which demonstrates the validity of our measure.

Relative size. Relative size is measured by the foreign subsidiary's total number of employees at the end of 2008, divided by the MNE's total number of employees. The foreign subsidiary's total number of employees is obtained from the Bel-first database. The MNE's total number of employees is obtained from the annual reports of non-European MNEs and from the Amadeus database for European MNEs.

Local Responsiveness. Local responsiveness is measured using a seven-point Likert-scale ranging from -3 (not at all) to +3 (to a great extent). We ask respondents the extent to which the subsidiary adapts activities to the needs of the Belgian market. The literature shows that subsidiaries with sales only in the host country have higher levels of local responsiveness [START_REF] Birkinshaw | Configurations of strategy and structure in subsidiaries of multinational corporations[END_REF][START_REF] Yu | Local linkages and their effects on headquarters' use of process controls[END_REF]. Consistently, we find that local responsiveness is significantly higher for those subsidiaries that have sales only in Belgium (t=4.20, p<0.0001), which demonstrates the validity of this measure. [START_REF] Pearce | Board composition from a strategic contingency perspective[END_REF][START_REF] Linck | The determinants of board structure[END_REF], we measure a foreign subsidiary's past performance by its average annual Return on Equity in 2005, 2006, and 2007, obtained from the Bel-first database.

Control Variables

We include absolute size, headquarters country, geographical distance and cultural distance as control variables based on prior research. Additionally, we control for the effect of other control mechanisms exerted by headquarters on the presence of active boards by including CEO's headquarters management position, the use of expatriate managers and corporate socialization.

Absolute size. Firm size represents the scope and complexity of the firm's operations [START_REF] Boone | The determinants of corporate board size and composition: an empirical analysis[END_REF][START_REF] Lehn | Determinants of the size and structure of corporate boards: 1935-2000[END_REF][START_REF] Linck | The determinants of board structure[END_REF]. Previous studies show that larger firms have more need for board monitoring and building external linkages [START_REF] Boone | The determinants of corporate board size and composition: an empirical analysis[END_REF][START_REF] Boyd | Corporate linkages and organizational environment: A test of the resource dependence model[END_REF][START_REF] Hermalin | The determinants of board composition[END_REF][START_REF] Lehn | Determinants of the size and structure of corporate boards: 1935-2000[END_REF][START_REF] Linck | The determinants of board structure[END_REF][START_REF] Mak | Determinants of corporate ownership and board structure: Evidence from Singapore[END_REF][START_REF] Pearce | Board composition from a strategic contingency perspective[END_REF]. Accordingly, a larger subsidiary is more likely to maintain an active board. Therefore, we control for the absolute size of foreign subsidiaries, which is measured via the subsidiary's total number of employees at the end of 2008, obtained from the Bel-first database.

Headquarters country. Prior research indicates that the nationality of an MNE influences

the type of control mechanisms headquarters exerts over its foreign subsidiaries and the roles of subsidiary boards [START_REF] Chang | Control in multinational corporations: The case of Korean manufacturing subsidiaries[END_REF][START_REF] Chow | The importance of national culture in the design of and preference for management controls for multi-national operations[END_REF][START_REF] Chung | The influence of subsidiary strategic context and head office strategic management style on control of MNCs: The Experience in Australia[END_REF][START_REF] Egelhoff | Patterns of Control in US, UK and European Multinational Enterprises[END_REF][START_REF] Kriger | The increasing role of board of foreign subsidiaries in MNCs: An empirical study[END_REF]. Therefore, we control for headquarters country by a dummy Geographical distance. Geographical distance increases the difficulties for headquarters to obtain complete and accurate information and to control foreign subsidiaries. Thus, MNEs are more likely to maintain active boards in geographically dispersed foreign subsidiaries to control subsidiary management. In this study, geographical distance is measured by the 1,000 kilometers distance between the capital cities of headquarters country and host country.

Cultural distance. Similar to geographical distance, cultural distance also increases the difficulties for headquarters to obtain complete and accurate information and to control foreign subsidiaries [START_REF] Gong | Subsidiary Staffing in Multinational Enterprises: Agency, Resources, and. Performance[END_REF][START_REF] Roth | Foreign subsidiary compensation strategy: An agency theory perspective[END_REF]. An active board can monitor subsidiary management on behalf of headquarters. Moreover, an active board could provide advice and counsel on the local culture and environment. Cultural distance is calculated via the formula developed by [START_REF] Kogut | The effect of national culture on the choice of entry mode[END_REF] and used in several studies [START_REF] Chang | Control in multinational corporations: The case of Korean manufacturing subsidiaries[END_REF][START_REF] Roth | Foreign subsidiary compensation strategy: An agency theory perspective[END_REF]. We use the scores on four culture dimensions of [START_REF] Hofstede | Cultures and organizations: Software of the mind[END_REF]: power distance, uncertainty avoidance, individualisms, and masculinity.

Other control mechanisms. As an active board could be a control mechanism for managing foreign subsidiaries as well as an instrument for dealing with the external environment, there may be a substitution or complementary effect between the presence of an active board and other control mechanisms. Previous studies show that MNEs often transfer managers from headquarters to their foreign subsidiaries [START_REF] Boyacigiller | The role of expatriates in the management of independence, complexity and risk in multinational corporations[END_REF][START_REF] Chung | The management of information and managers in subsidiaries of multinational corporations[END_REF][START_REF] Gaur | Institutional environments, staffing strategies and subsidiary performance[END_REF][START_REF] Gong | Subsidiary Staffing in Multinational Enterprises: Agency, Resources, and. Performance[END_REF][START_REF] Tan | Why a multinational firm chooses expatriates: integrating resources-based, agency and transaction costs perspectives[END_REF]. Moreover, headquarters often rely on corporate socialization to integrate foreign subsidiaries into MNEs [START_REF] Chalos | Determinants of the use of various control mechanisms in US-Chinese joint ventures[END_REF][START_REF] Chung | The influence of subsidiary strategic context and head office strategic management style on control of MNCs: The Experience in Australia[END_REF][START_REF] Chung | The management of information and managers in subsidiaries of multinational corporations[END_REF][START_REF] O'donnell | Managing foreign subsidiaries: Agents of headquarters or an interdependency network?[END_REF]. Accordingly, in this study, we [START_REF] Chalos | Determinants of the use of various control mechanisms in US-Chinese joint ventures[END_REF] and [START_REF] O'donnell | Managing foreign subsidiaries: Agents of headquarters or an interdependency network?[END_REF], using a sevenpoint Likert-scale ranging from -3 (not at all) to +3 (to a great extent). We ask respondents the extent to which headquarters visits the subsidiary frequently, organizes international training programs, and attaches a strong corporate culture to subsidiaries.

RESULTS

Descriptive Statistics

…Insert Table 1

around here…

Table 1 presents the headquarters country and the legal form of the subsidiaries in our sample, along with respondent tenure. The headquarters of our sample subsidiaries are located in 14 different countries, mainly in the U.S. (18 subsidiaries), France (18 subsidiaries), and the Netherlands (13 subsidiaries). The majority of sample subsidiaries have the legal form of NV (73 subsidiaries). On average, respondents have been working approximately eight years in their subsidiaries. Additionally, our sample subsidiaries operate across 25 two-digit standard industrial (10 subsidiaries). None of the sample subsidiaries are listed on a stock market. On average, the boards in our sample perform 12 tasks out of the 21 total tasks. Appendix B presents the number and percentage of our sample subsidiaries performing each of the 21 board tasks (rated higher than -3). The boards in our sample emphasize more monitoring related tasks than service related tasks.

In our sample, the respondents from 23 foreign subsidiaries answer that there is no board in their subsidiaries. As Belgian Company Law requires all firms to have a board, we consider these boards to be rubber stamps (inactive). Among the remainder 60 subsidiaries that have a board, three perform none of the 21 board tasks (all rated at "-3"). Since an active board performs at least one of the 21 board tasks, we consider the three boards to be rubber stamps (inactive) as well.

…Insert Table 2 around here… Table 2 Panel A presents the mean, standard deviation, and spearman correlations for all variables used in the main analysis. As expected, the presence of an active board is positively correlated with absolute size, relative size and cultural distance. To check for multicollinearity, To test our hypotheses, we estimate logistic regressions with the dummy variable active board as the dependent variable. Logistic regression analysis is often used to describe the relationship between a binary or dichotomous outcome variable and one or more explanatory variables [START_REF] Hosmer | Applied Logistic Regression[END_REF]. We use three different methods as reported in Table 3.

In Model 1, we estimate robust standard errors to correct for possible heteroskedasticity [START_REF] Huber | The behavior of maximum likelihood estimates under nonstandard conditions[END_REF][START_REF] White | A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test of Heteroskedasticity[END_REF]. In Model 2, we estimate robust standard errors clustered by 14 headquarters countries to adjust for the potential correlations between foreign subsidiaries headquartered in the same country [START_REF] Petersen | Estimating standard errors in finance panel data sets: Comparing approaches[END_REF][START_REF] Wooldridge | Cluster-Sample Methods in Applied Econometrics[END_REF]. In Model 3, we estimate robust standard errors clustered by 23 industries to adjust for the potential correlations between foreign subsidiaries operating in the same industry [START_REF] Petersen | Estimating standard errors in finance panel data sets: Comparing approaches[END_REF][START_REF] Wooldridge | Cluster-Sample Methods in Applied Econometrics[END_REF] 5 .

As shown in Table 3, all logit models are significant. Overall, our logit models correctly predict 84.34% of cases. Hypothesis 1a posits a positive relation between world mandate subsidiary and the presence of an active board, which is supported. Our results also provide strong support for Hypothesis 1b, which posits a positive relation between a subsidiary's size relative to the MNE and the presence of an active board. Hypothesis 2a predicting a positive relation between a subsidiary's local responsiveness and the presence of an active board is supported as well. Finally, we find a significant negative relation between a subsidiary's past performance and the presence of an active board, which is consistent with Hypothesis 2b.

With regard to control variables, first, a foreign subsidiary is less likely to maintain an active board if the subsidiary has its headquarters in an Anglo-Saxon country 6 . This is parallel to [START_REF] Kriger | The increasing role of board of foreign subsidiaries in MNCs: An empirical study[END_REF] 24 mechanisms, compared to European and Japanese MNEs. One possible explanation could be that Anglo-Saxon MNEs focus more on short-term performance and use more outcome control [START_REF] Chang | Control in multinational corporations: The case of Korean manufacturing subsidiaries[END_REF][START_REF] Chow | The importance of national culture in the design of and preference for management controls for multi-national operations[END_REF][START_REF] Chung | The influence of subsidiary strategic context and head office strategic management style on control of MNCs: The Experience in Australia[END_REF][START_REF] Egelhoff | Patterns of Control in US, UK and European Multinational Enterprises[END_REF], which decreases the need for active boards. Second, a foreign subsidiary is less likely to maintain an active board if the subsidiary CEO holds a management position at the MNE headquarters, indicating that there is a substitution effect between CEO's headquarters management position and the presence of an active board. Third, a foreign subsidiary is more likely to maintain an active board if it is more culturally distant from headquarters (supported by all the models) and if it is more geographically distant from headquarters (supported by Model 1 and Model 3).

Finally, Model 2 suggests that if a subsidiary CEO is a headquarters country national, the subsidiary is more likely to maintain an active board. One possible explanation could be that the headquarters country national has less understanding on local conditions. Therefore, if a subsidiary CEO is a headquarters country national, an active board may help the subsidiary CEO build connections with local stakeholders and access local resources.

Robustness Checks …Insert Table 4 around here…

We conduct several robustness checks examining the presence of active boards in foreign subsidiaries. The results are reported in Table 4 7 . First, we use an alternative measure of active board. We consider a foreign subsidiary to maintain an active board if there is a board in the foreign subsidiary that performs at least five of the 21 tasks 8 . This measure results in 54 active [START_REF] Kogut | The effect of national culture on the choice of entry mode[END_REF]. The World Value Survey is an ongoing academic project by social scientists to assess the state of sociocultural, moral, religious and political values of various cultures around the world (available online at www.worldvaluessurvey.org). The survey measures all major areas of human concerns along two dimensions: traditional vs. secular-rational values, and survival vs. self-expression values [START_REF] Inglehart | Modernization, cultural change and democracy[END_REF]. The results are reported in Model 6. Finally, we measure the use of expatriate managers by a seven-point Likert-scale ranging from -3 (not at all) to +3 (to a great extent). In the questionnaire, we ask respondents the extent to which headquarters use expatriate managers to directly control the subsidiary's operations. The results are reported in Model 7. As shown in Table 4, the results from all the models support Hypothesis 1a, Hypothesis 1b, and Hypothesis 2a, and marginally support Hypothesis 2b. The results with respect to significant control variables are consistent with our main analysis reported in Table 3. However, the coefficient of expatiate is not significant if we use the alternative measure of expatriate, indicating that if the expatriate manager is not the subsidiary CEO, there is no effect on the presence of an active board. Additionally, we measure relative size using a foreign subsidiary's sales (or total assets) divided by corporate total sales (or total assets), and we measure absolute size via a foreign subsidiary's sales (or total assets). The results of these tests (untabulated) are similar to those reported in our main analysis. Next, we conduct several additional analyses examining the degree of board activeness, instead of the presence of active boards. Table 5 reports the results. The degree of board activeness is measured in two ways. In Model 8, we measure the degree of board activeness by summing and averaging the standard scores of the 21 board tasks (Mean=-0.69; Std. Dev. =1.75; Cronbach's alpha=0.92). OLS robust regression is used. In Model 9, we measure the degree of board activeness by the percentage of tasks the board performs (Mean=0.59; Std. Dev. =0.44).

As the dependent variable is a proportion bounded between 0 and 1 (including 0 and 1), fractional logistic regression is appropriate [START_REF] Papke | Econometric methods for fractional response variables with an application to 401(k) plan participation rates[END_REF]. Both models support Hypothesis 2a (at the significance level of 0.10). However, the rest of the hypotheses are not supported. These results indicate that the factor that influences the presence of an active board in a foreign subsidiary may not have an impact on the degree of board activeness. This may be due to the conflict between different board tasks, which reduces the total variance of the degree of board activeness. [START_REF] Leksell | The board of directors in foreign subsidiaries[END_REF] suggest that there is a conflict between external roles (advisory, external relations) and internal roles (control and monitoring, coordination and integration). When performing internal roles, the subsidiary board needs information about corporate policies and procedures and about the management and allocation of internal resources, while part of this information is not always deemed suitable to disclose to outside directors who are residents of the host country [START_REF] Leksell | The board of directors in foreign subsidiaries[END_REF] 10 .

Finally, prior research suggests that ownership structure, CEO tenure, firm age and legal form influence the role and composition of boards in standalone firms [START_REF] Björkman | Managing Swedish and Finnish multinational corporations: The role of the board of directors in French and Norwegian subsidiaries[END_REF] , 2007;[START_REF] Lehn | Determinants of the size and structure of corporate boards: 1935-2000[END_REF][START_REF] Linck | The determinants of board structure[END_REF]. Moreover, incentive compensation as an important control mechanism may have a substitution or complementary effect on the presence of an active board. Therefore, we include these variables as control variables 11 . Similar to our main analysis, we estimate logistic regressions using three different methods. The results (untabulated) with respect to our hypothesized relations and significant control variables are consistent with our main analysis reported in Table 3. However, ownership structure, CEO tenure, firm age, legal form and incentive compensation are not significant in any logit model.

CONCLUSIONS AND DISCUSSION

With the increasing rate of globalization and rapidly intensifying competition, an important challenge facing MNEs is the successful management of foreign subsidiaries. The literature has concentrated on boards in standalone firms, codes of good governance in a given country and control mechanisms in MNEs. However, very little is known about the role of subsidiary boards in the governance of foreign subsidiaries. Motivated by these observations, this study examines the conditions under which a foreign subsidiary maintains an active board. Using survey and archival data from 83 foreign subsidiaries operating in Belgium with headquarters in 14 different countries, we find that a foreign subsidiary is more likely to maintain an active board if it is a world mandate subsidiary, if it is larger relative to the MNE, if it has a higher level of local responsiveness, and if its past performance is poorer. Further, the presence of an active board in a foreign subsidiary is related to other control mechanisms deployed in the subsidiary. In particular, a foreign subsidiary is less likely to maintain an active board if the subsidiary CEO holds a management position at the MNE headquarters. This study contributes to the literature in several ways. First, while prior research focuses on various types of control mechanisms in MNEs, our study provides insight into the conditions under which an active board is more likely to be present. Our results suggest that a MNE's decision to maintain an active board in a foreign subsidiary seems to relate to the agency problem between headquarters and subsidiary management and the dependence of the subsidiary on the external environment. Therefore, an active board could be used as a control mechanism for managing foreign subsidiaries, as well as an instrument for dealing with the external environment. Second, while most prior research uses only a single theory to explain board characteristics, our findings suggest that a combination of agency theory and resource dependence theory provides comprehensive explanations on the presence of active boards.

This study yields implications for top managers of MNEs. First, our results suggest that an active board might be of strategic importance to enhance subsidiary governance. Thus, top managers may consider maintaining an active board to govern foreign subsidiaries, as well as to deal with local issues. Moreover, in order to delegate appropriate tasks to an active board, it is important to analyze and evaluate the specific knowledge and resources of the subsidiary and the external environment. Second, top managers may face a tradeoff between assigning monitoring tasks and assigning service tasks to an active board due to the conflict between different board roles. Finally, the results from our control variables indicate that the presence of an active board in a foreign subsidiary is related to other control mechanisms deployed in the subsidiary. Therefore, top managers may consider the costs and benefits of different control mechanisms when delegating an active board in foreign subsidiaries.

This study also yields implications for policy makers. Corporate governance regulators have developed different codes of good governance at the country level, which provide best practice (Aguilera andCuervo-Cazurra, 2004, 2009). However, there are few governance recommendations that deal with corporate governance issues in MNEs. The MNE represents a complex organization with headquarters in one country and operating across many countries. This study shows that an active board may be an important internal governance mechanism for managing foreign subsidiaries, as well as an instrument for dealing with the external environment. Therefore, corporate governance regulators may consider developing governance recommendations that emphasize the importance of subsidiary boards in the oversight of foreign subsidiaries.

This study has some limitations. First, it only provides evidence on foreign subsidiaries operating in Belgium, where there are few restrictions on governance structures and the conduct of business (see Doing Business Survey, 2010). The findings of this study may not be generalized to subsidiaries operating in significantly different institutional settings. Second, as we select the largest subsidiary of those MNEs that have more than one subsidiary operating in Belgium, our results represent only the practices of the largest subsidiaries. Third, as our data are crosssectional, we could not test causality in the model. Longitudinal research on subsidiary boards could further extend the findings of this study. Finally, our sample size is quite small, which might limit our ability to identify statistically significant relationships.

Despite the limitations, this study opens opportunities for future research. First, while this study provides evidence on the conditions under which subsidiary boards are active, future research is needed to investigate how headquarters delegate different roles to active boards according to the environmental and strategic contingencies faced by foreign subsidiaries.

Second, this study is based on majority owned and wholly owned foreign subsidiaries. In these subsidiaries, headquarters are able to rely on their ownership position to decide whether their Finally, while this study provides some evidence that the presence of an active board in a foreign subsidiary is related to other control mechanisms deployed in the subsidiary, future research could further explore this issue by testing the substitutability and complementarity of different governance mechanisms for managing foreign subsidiaries.

NOTES

1. Foreign subsidiaries are legally separate entities that are majority owned by headquarters and operating outside headquarters countries. We focus on boards in foreign subsidiaries because MNEs are exposed to more control problems for their foreign subsidiaries than for their domestic subsidiaries. Moreover, compared with local companies of host countries, it is more difficult for foreign subsidiaries to build connections with local stakeholders and access local resources.

2. According to Commission Recommendation 2003/361/EC of 6 May 2003, "a very small enterprise is an enterprise that employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million". "A small enterprise is an enterprise which employs between 10 and 49 persons whose annual turnover and /or annual balance sheet total does not exceed EUR 10 million".

3. In the questionnaire design stage, we use various methods to control for common method biases, based on the suggestions of [START_REF] Podsakoff | Common method biases in behavioral research: A critical review of the literature and recommended remedies[END_REF]. First, we obtain our dependent variable (active board) and explanatory variables from different sources, which eliminates the tendency of the respondents to respond in a lenient manner. Second, we did not ask the respondents directly whether there is an active board in their subsidiaries. Instead, we asked the respondents to rate a list of 21 board tasks. This list is developed based on the existing instrument [START_REF] Kriger | The increasing role of board of foreign subsidiaries in MNCs: An empirical study[END_REF][START_REF] Wan | Board structure, process and performance: Evidence from publiclisted companies in Singapore[END_REF] and none of the 21 items tasks is likely to reflect socially desirable behavior. Third, in the cover letter of the questionnaire, we promise the respondents that they are assured of complete confidentiality and their answers to the questionnaire will only be used for our research. There are no right and wrong answers and they should answer as honestly as possible. Applying these methods reduces the likelihood that our respondents conform to socially desirable standards and provide biased answers. [START_REF] Kriger | The increasing role of board of foreign subsidiaries in MNCs: An empirical study[END_REF]. Moreover, Japanese MNEs use control mechanisms in a different way than other MNEs. For example, Change and Taylor (1999) find that Japanese MNEs use more staffing control than their American counterparts do. In our sample, we only have five Japanese subsidiaries, all of which maintain an active board. Therefore, we could not add a dummy variable to control for the influence of Japanese MNEs on the presence of active boards. However, when we delete the five Japanese subsidiaries and reestimate our models, the results are similar to those reported in the main analysis.

5. We also included industrial dummies in Model 1 and Model 2. We grouped our sample into five broad industrial sectors: manufacturing (SIC 20-39), trading (SIC 50-59), service (SIC 70-89), transportation , and construction (SIC [START_REF]Bring corporate culture into the subsidiary[END_REF][16][START_REF]Provide advice and counsel to the subsidiary[END_REF]. The results suggest that industrial sectors are not significantly related to the presence of active boards. As adding too many independent variables decreases the power of the test, we delete these dummies from our analysis.

6. Since there is a predominance of headquarters from the US, the Netherlands and France, we included the Netherlands dummy and the France dummy in our models, in addition to the Anglo-Saxon dummy. The results show that subsidiaries headquartered in the Netherlands or France are not significantly different from the rest of subsidiaries in determining the presence of active boards (Netherlands: β=-0.85, p=0.59; France: β=1.14, p=0.71). As adding too many independent variables decreases the power of the test, we delete these dummies from our analysis.

7. Similar to our main analysis, we estimate the logit models using three different methods (robust standard errors, robust standard errors clustered by headquarters countries, robust standard errors clustered by industries). The results using these methods are similar. Therefore, we only report the results using robust standard errors estimation in Table 4. 8. We also consider an active board if there is a board in the foreign subsidiary that performs at least three of the 21 board tasks. The results with respect to our hypothesized relations and control variables are consistent with our main analysis reported in Table 3. 9. Note that MNEs may shift a significant proportion of their incomes into low statutory tax rates host countries to reduce their overall tax liabilities [START_REF] Collins | Cross-jurisdictional income shifting and earnings valuation[END_REF]Rego, 2003). This may reduce the quality of accounting figures of foreign subsidiaries Further, financial reporting in Belgium suffers from tax bias, as there is a strong link between the accounting profit and the taxable profit of a company. 10. We also conduct a number of complementary analyses using the extent to which boards perform monitoring tasks, and the extent to which boards perform service tasks as dependent variables respectively. Consistent with the agency theory prediction, we find that world mandate and relative size are significantly related to monitoring tasks (world mandate: β=0.70, p<0.001; relative size: β=0.23, p<0.001), but not significant to service tasks. This indicates that the 11. In theses analyses, ownership structure is measured using a dummy variable (wholly owned) equal to 1 if a foreign subsidiary is wholly owned by the MNE. CEO tenure is measured by the number of years that the subsidiary CEO has worked in the CEO position, obtained from the questionnaire. Subsidiary age is measured by the number of years the subsidiary is established/acquired by the headquarters. Legal form is measured using a dummy variable (NV) equal to 1 if the subsidiary's legal form is N.V. Incentive compensation is measured by four items in the questionnaire, using a seven-point Likert-scale ranging from -3 (not at all) to +3 (to a great extent), based on the [START_REF] Chow | The importance of national culture in the design of and preference for management controls for multi-national operations[END_REF]. We asked respondents to indicate the extent to which their headquarters compensate subsidiary CEOs based on their performance relative to their budget. (2000), using a seven-point Likert-scale ranging from -3 (not at all) to +3 (to a great extent). We ask respondents the extent to which headquarters visits the subsidiary frequently, organizes international training programs, and attaches a strong corporate culture to subsidiaries.

R

  mechanisms employed in MNEs. Therefore, these two theories may provide valuable insights into the presence of active boards in foreign subsidiaries.

  A foreign subsidiary is more likely to maintain an active board when its past performance is poorer.

  added activities and needs to cope with the demands from many sectors of the external environment. Similarly, if a foreign subsidiary is large relative to the MNE, it plays an important role in the MNE in terms of seeking resources from the external environment. An active board could be used to reduce the subsidiary's dependence on the external environment and secure key resources. In sum, agency theory and resource dependence theory are relevant and complementary in the analysis of active boards in foreign subsidiaries.RESEARCH SETTING AND DATA COLLECTIONOur sample consists of foreign subsidiaries operating in Belgium. By focusing on foreign subsidiaries in the same host country, we minimize the influence of host country institutional and cultural factors on the presence of active boards in foreign subsidiaries. The statistical office of the European Union reports that Belgium has a higher percentage of foreign investment inward flows than most European countries(Eurostat, 2010). According to Belgian Company Law, a foreign subsidiary must register as a separate legal entity. The most common legal forms are the Naamloze Vennootschap (NV) and the Besloten Vennootschap met Beperkte Aansprakelijkheid (BVBA). An NV is set up by at least two persons who contribute a fixed amount of capital in return for shares in the firm. An NV can issue bearer shares that are freely transferable. In contrast to an NV, a BVBA has a lower minimum capital requirement for establishment, while its shares are transferrable only under specific conditions. The board in an NV should be composed of at least three directors unless the firm has only two shareholders, in which case the board should be composed of two directors. A BVBA should have at least one director. Directors are held liable for any shortcomings during their management and for any loss resulting from , firms in Belgium have a one-tier board structure. No conditions of board tasks or composition are imposed on non-listed companies.

  the field of accounting and finance to read the questionnaire. After making revisions, we designed an attractive layout for the questionnaire, printed them on good-quality paper, signed each cover letter, and distributed them together with pre-paid return envelops to the senior managers of target subsidiaries. The initial survey (conducted in December 2008) and three follow-ups yielded 87 (21%) returned questionnaires3 . Four responses are discarded due to large numbers of missing values, which results in a sample of 83 responses used to test our

  -Saxon) equal to 1 if the subsidiary has a headquarters in an Anglo-Saxon country, obtained from the Bel-first database 4 .

  results are reported in Model 4. Second, we use an alternative measure of past performance. We measure a foreign subsidiary's past performance by its average annual Return on Assets in 2005, 2006, and 2007, obtained from the Bel-first database 9 . The results are reported in Model 5. Third, we use the culture index of the World Value Survey 2005/2006 to recalculate cultural distance according to the formula developed by

  active boards. Future research could extend this study to other forms of subsidiaries such as joint ventures. Third, this study is based on foreign subsidiaries operating in Belgium, where boards have a one-tier structure. Future research could extend our understanding of subsidiary governance by investigating the role and structure of subsidiary boards based on subsidiaries operating in other countries where boards have a two-tier structure.

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	relative to the MNE, the strong strategic position of the subsidiary allows subsidiary
	management to obtain greater information and specialized knowledge that are important to the
	MNE's operations
	R e v i e w
	C o p
	y
	10

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	environment for key resources, it becomes more important for the subsidiary to maintain
	relations with the stakeholders who provide the resources. International business studies suggest
	that headquarters often adjust control mechanisms to facilitate subsidiaries accessing key
	resources
	R e v i e w
	C o p
	y
	11

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	such as local customers, local suppliers, and local government for key resources. An active board
	could manage external relations with local stakeholders, provide advice on local conditions, and
	facilitate the access to local resources
	R e v i e w
	C o p
	y
	12

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	MEASURES
	Dependent Variable
	R e v i e w
	C o p
	y
	17

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	R e v i e w
	C o p
	y

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	Past performance. Similar to previous studies
	R e v i e w
	C o p
	y
	19

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  mechanisms, namely CEO's headquarters management position, the use of expatriate managers and corporate socialization. CEO's headquarters management position is a dummy variable equal to 1 if a subsidiary CEO holds a management position at the MNE headquarters, obtained from the questionnaire. The use of expatriate managers is measured by a dummy variable (expatriate) equal to 1 if the subsidiary CEO is the headquarters country national, obtained from the questionnaire. Corporate socialization is measured by three items in the questionnaire based on

	include three control
	R e v i e w
	C o p
	y
	21

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	classification codes, with some concentration in chemicals (8 subsidiaries) and wholesale trade-
	durable goods
	R e v i e w
	C o p
	y
	22

Table 2

 2 Panel B reports the variance inflation factors (VIF) of our explanatory variables. All VIF scores are below 2, indicating that multicollinearity is not a problem.

	Hypothesis

Tests Page 22 of 46 Corporate Governance: An International Review Corporate Governance: An International Review

	…Insert Table 3 around here…
	R e v i e w
	C o p
	y
	23

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  who reports that North American MNEs view subsidiary boards as less useful

	R e v i e w
	C o p
	y

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	…Insert Table 5 around here…
	R e v i e w
	C o p
	y
	26

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	recommendations and regulate the behavior and structure of boards of directors
	R e v i e w
	C o p
	y
	29

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  Prior research also shows that Japanese MNEs use subsidiary boards more actively than either European or North American MNEs

	4.
	R e v i e w
	C o p
	y
	31

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  subsidiary's importance to the MNE and the degree of board activeness may be due to the conflict between different board roles.

	insignificant relation between
	R e v i e w
	C o p
	y
	32

TABLE 1 Sample Subsidiaries by Headquarters Country, Legal Form and Respondent's Tenure (N=83)

 1

	e v i e w
	C o p
	y

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R e v i e w C o p y

TABLE 2 Panel A: Means, Standard Deviations and Correlations of Dependent, Independent, and Control Variables (N=83)

 2 Active board is a dummy variable equal to one if a foreign subsidiary has an active board. World mandate is a dummy variable equal to one if the respondent defines the subsidiary as a world mandate in the questionnaire. Relative size is measured by the foreign subsidiary's total number of employees at the end of 2008, divided by the MNE's total number of employees. Local responsiveness is measured by a Likert-scale question asking the respondents the extent to which the subsidiary adapts its activities to the needs of the Belgian market. Past performance is the average annual ROE over 2005-2007. Absolute size is the logarithm of the total number of the subsidiary's employees. Anglo-Saxon is a dummy variable equal to one if the subsidiary is headquartered in an Anglo-Saxon country. Geographical distance is the 1,000 kilometers distance between the capital cities of headquarters country and host country. Cultural distance is calculated using the procedure developed by[START_REF] Kogut | The effect of national culture on the choice of entry mode[END_REF]. CEO's headquarters management positions is a dummy variable equal to one if the subsidiary CEO holds a management position at the MNE headquarters. Expatriate is measured by a dummy variable equal to 1 if the subsidiary CEO is the headquarters country national. Socialization is measured by three items based on[START_REF] Chalos | Determinants of the use of various control mechanisms in US-Chinese joint ventures[END_REF] and O'Donnell

			Corporate Governance: An International Review						Page 40 of 46
	Variables	Mean S.D. 1	2	3	4	5	6	7	8	9	10	11	12
	1. Active board	.69	.47 1.00
	2. World mandate	.28	.45 .19 † 1.00
	3. Relative size	.04	.08 .28** .02	1.00
	4. Local responsiveness	1.08 2.05 .15	-.31** -.02	1.00
	5. Past performance	22.80 53.77 -.17	-.04	-.03	-.02	1.00
	6. Absolute size	2.29	.44 .22*	.17	.40** .07	-.07	1.00
	7. Anglo-Saxon	.30	.46 -.12	.24*	.10	-.28* -.08	.01	1.00
	8. Geographical distance	2.41 3.42 .05	.10	.02	-.15	-.13	-.08	.58*** 1.00
	9. Cultural distance	.33	.28 .21*	.22* -.02	-.10	.04	.06	.23*	.11	1.00
	10. CEO's headquarters management position	.19	.40 -.13	.38** .11	-.11	.01	.04	.15	.10	-.01	1.00
	11.Expatriate	.28	.45 .01	-.02	-.12	-.15	.07	-.06	.06	-.01	-.09	-.17	1.00
	12.Socialization	.81 1.35 -.05	.04	.06	.15	.04	.06	.01	.06	-.02	.23*	.02	1.00
			Corporate Governance: An International Review

Notes: (1) Significance level: †p<.10, *p<.05, **p<.01, ***p<.001 (two-tailed test).

(2)

In the above two tables,

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TABLE 3 Logistic Regressions Explaining the Presence of Active Boards in Foreign Subsidiaries (N=83)

 3 Significance level: †p<.10, *p<.05, **p<.01, ***p<.001 (two-tailed test). (2) Model 1 estimates robust standard errors using Huber-White standard estimation. Model 2 estimates robust standard errors clustered by 14 headquarters countries. Model 3 estimates robust standard errors clustered by 23 industries. (3) Standardized regression coefficients are reported. (4) Z-scores are reported in parentheses.[START_REF]Take part in the selection of the subsidiary's[END_REF] Please see Table2for variable definitions.

	Main research variables World mandate Relative size Local responsiveness Past performance Other variables Absolute size Anglo-Saxon Geographical distance Cultural distance CEO's headquarters management position Expatriate Socialization "Pseudo" R 2 Log Pseudolikelihood Wald Chi-square P-value Notes: (1) Page 42 of 46 Model 1 Model 2 Model 3 3.21** (2.78) 2.53*** (3.19) 3.21** (2.61) 3.82*** (3.38) 3.05*** (3.18) 3.82*** (4.22) 1.27** (3.04) 1.33** (2.68) 1.27*** (3.38) -.82* (-1.99) -.53* (-2.37) -.82 † (-1.82) .52 (.89) .37 ( 1.60) .52 (.88) -3.15*** (-3.19) -3.15*** (-3.63) .65* (2.23) .01 (.02) .65* (2.01) 1.03** (2.76) .69*** (3.93) 1.03** (2.76) -2.34* (-2.40) -2.00* (-2.12) -2.34*** (-3.43) 1.23 (1.49) 1.10*** (3.26) 1.23 (1.33) -.51 (-1.44) -.59 † (-1.80) -.51 (-1.25) .43 .34 .43 -29.38 -33.94 -29.38 28.15 2936.59 48.58 .00 .00 .00 Corporate Governance: An International Review
	Corporate Governance: An International Review

TABLE 4 Logistic Regressions Explaining the Presence of Active Boards in Foreign Subsidiaries (Robustness checks, N=83)

 4 Significance level: †p<0.10, *p<0.05, **p<0.01, ***p<0.001 (two-tailed test). (2) Model 4 uses an alternative measure of the presence of active boards. We consider a foreign subsidiary to maintain an active board if there is a board in the foreign subsidiary that performs at least five of the 21 tasks. Model 5 uses an alternative measure of past performance based on the average annual ROA over 2005-2007. Model 6 uses an alternative measure of cultural distance based on the culture index of the World Value Survey 2005/2006. Model 7 uses an alternative measure of expatriate, which is a seven-point Likert-scale ranging from -3 (not at all) to +3 (to a great extent), obtained from the questionnaire. (3) Standardized regression coefficients are reported. (4) Z-scores are reported in parentheses.[START_REF]Take part in the selection of the subsidiary's[END_REF] Please see Table2for variable definitions.

	Main research variables World mandate Relative size Local responsiveness Past performance Other variables Absolute size Anglo-Saxon Geographical distance Cultural distance CEO's headquarters management position Expatriate Socialization "Pseudo" R 2 Log Pseudolikelihood Wald Chi-square P-value Notes: (1) Page 43 of 46 Corporate Governance: An International Review Model 4 Model 5 Model 6 2.06* (2.06) 3.21** (2.91) 3.12** (2.74) 3.33** (3.13) 3.38*** (3.28) 3.46*** (3.40) .99** (2.79) 1.27*** (3.26) 1.07** (2.97) -.62 † (-1.78) -.44 † (-1.76) -.75 † (-1.83) .40 (.94) .59 (1.08) .52 (.79) -2.69** (-2.87) -2.84*** (-3.39) -3.45** (-3.13) .59* (2.06) .76** (2.67) .32 (.81) .84* (2.39) 1.01** (2.60) 1.24* (2.43) -2.13* (-2.16) -2.57* (-2.43) -2.11* (-2.29) .77 (1.10) 1.02 (1.32) 1.55 † (1.79) -.37 (-1.07) -.55 † (-1.68) -.61 (-1.61) .36 .42 .42 -34.03 -29.87 -29.90 21.95 28.94 27.25 .02 .00 .00	Model 7 3.34** (3.09) 3.90*** (3.23) 1.24** (2.78) -.80 † (-1.79) .35 (.60) -3.70** (-3.06) .90* (2.35) .98* (2.30) -2.57** (-2.62) .48 (1.44) -.63 (-1.59) .42 -29.85 19.80 .05
	Corporate Governance: An International Review

TABLE 5 Regressions Explaining the Degree of Board Activeness in Foreign Subsidiaries (Additional analyses, N=83)

 5 Significance level: †p<.10, *p<.05, **p<.01, ***p<.001 (two-tailed test). (2) In Model 8, the degree of board activeness is measured by summing and averaging the standard scores of the 21 board tasks. Robust regression estimation is used. T-scores are reported in parentheses. In Model 9, the degree of board activeness is measured by the percentage of tasks the board performs. Fractional logit model is used. Z-scores are reported in parentheses. (3) Standardized regression coefficients are reported. (4) Please see Table2for variable definitions.

	Main research variables World mandate Relative size Local responsiveness Past performance Other variables Absolute size Anglo-Saxon Geographical distance Cultural distance CEO's headquarters management position Expatriate Socialization R 2 Log Pseudolikelihood AIC/BIC F-value P-value Notes: (1) Page 44 of 46 Model 8 Model 9 Robust regression Fractional logit regression .22 (.74) .62 (1.05) .11 (1.14) .28 (.94) .23 † (1.95) .46 † (1.90) -.09 (-.97) -.14 (-.71) .27* (2.28) .60* (2.29) -.64* (-2.31) -1.24* (-2.10) .18 † (1.84) .42 † (1.80) .27* (2.23) .49* (2.14) -.30 (-.86) -.90 (-1.41) .27 (1.08) .70 (1.42) .01 (.11) -.08 (-.30) .26 -43.27 AIC=1.33 BIC=-247.34 3.82 .00 Corporate Governance: An International Review
	Corporate Governance: An International Review

Corporate Governance: An International Review Corporate Governance: An International Review Corporate Governance: An International Review Corporate Governance: An International Review Corporate Governance: An International Review Corporate Governance: An International Review Corporate Governance: An International Review Corporate Governance: An International Review


published or not. The documents may come   L'archive ouverte pluridisciplinaire

In many areas of histopathology there are one or two leading texts that everyone uses and few authors attempt to compete with. This is not the case in orthopaedic pathology where there are many books on the market, with no single work being generally regarded as the definitive text covering all aspects of this field. This perhaps reflects the fact that, while tumour pathology is well dealt with, non-tumour orthopaedic pathology remains problem area.

In the preface, the editor states that the book is aimed at the surgical pathology resident with the hope that it may also be of use to the practising pathologist, graduate student, academic orthopaedic surgeon or skeletal radiologist. The preface also states that the book should serve as a benchside companion, suggesting a fairly ambitious duality of purpose.

So how well does it serve its potential purposes? From educational point of view, there are good sections on bone and joint anatomy and physiology, and the book covers the broad background of bone and joint diseases well, although it seems a little strange to have two sections on biomechanics. The sections on radiology, molecular biology and tumour management also provide useful background information. Also, of particular value are the sections on bone infections and prosthesis pathology, topics often poorly covered by other texts, This book is perhaps not so strong as a bench text for the surgical pathologist. At a practical level one can generally divide orthopaedic and soft tissue pathology into tumour and non-tumour pathology, although there is some overlap. Tumours are well covered by detailed authoritative texts such as Enzinger and Weiss and Mirra, but there is arguably a role for a briefer text to set one on the right diagnostic path. The tumour pathology chapters of this book do serve this function to some extent. The bone chapter would be improved by more and better quality photomicrographs, given that bone tumour diagnosis is so strongly dependent on morphology. The soft tissue chapter lacks detail on how to distinguish between differential diagnoses but, given its brevity relative to the size of the subject, it is a brave attempt, is nicely illustrated and would be quite a good read for someone preparing for a professional examination that covers musculoskeletal histopathology. The non-tumour sections do provide some useful information for the surgical pathologist, but it is presented more from an educational than a practical point of view.

To conclude, I think that this is a reasonably good reference text on basic musculoskeletal pathology with one or two particularly good sections. It would be suitable for an enthusiastic resident with an interest in musculoskeletal pathology and is probably a worthwhile investment for a training department. I would not recommend it as a bench reference text for the surgical pathologist.

  Review of Bone Pathology J S Khurana (Ed.), Humana Press for Histopathology