Managerial compliance with charter changes: social capital dynamics in an emerging economy

Abstract

Purpose This study aims to investigate the microfoundational drivers of subsidiary managers’ compliance with headquarters-initiated charter changes in their subsidiary. It addresses a critical gap in the subsidiary alignment literature by shifting the focus from macro-level structural analyses to the individual-level, politically nuanced decision-making of subsidiary managers, particularly within the dynamic context of a high-growth emerging economy. Design/methodology/approach An exploratory qualitative study was conducted using a grounded theory approach. Data were collected primarily through in-depth, semi-structured interviews with 24 Guyanese subsidiary managers of multinational corporations (MNCs) operating in Guyana, selected for its rapid economic growth and theoretically rich institutional environment. The data were analyzed using thematic analysis to identify the underlying mechanisms influencing compliance decisions. Findings The study reveals that subsidiary managers’ compliance is a socially embedded political process, not merely a response to formal authority. Four key microfoundational mechanisms were identified: (1) participatory governance and co-creation, which foster psychological ownership; (2) instrumental compliance for personal and subsidiary gain, a calculative strategy to build social capital; (3) the binding power of positive social ties, rooted in deep personal trust and (4) pragmatic deference, based on acknowledged expertise gaps. These mechanisms aggregate to form two core dimensions driving compliance: relational embeddedness and cognitive embeddedness. Originality/value This research makes three key contributions. First, it provides a rare microfoundational lens on subsidiary alignment, specifying the individual-level mechanisms that link managerial actions to organizational outcomes. Second, it develops a nuanced model distinguishing between the independent, yet complementary, roles of relational and cognitive embeddedness in fostering compliance. Third, it challenges assumptions about institutional contexts by showing how perceived institutional voids in an emerging economy can intensify subsidiary managers’ reliance on internal MNC social structures, making compliance a strategic sanctuary.