Control and Coordination in Multinational Corporations

Abstract

The integration of FrenchandBritish subsidiariesintoU.S.-basedmultinationals is examined. A theorylinking the use of control andcoordination mechanismsto the need for predictability, flexibility, andthe cost of achieving themis investigatedbyrelatingorganizational structure, technology, foreigncommitment, financial performance, and nationality tothe use of coordination andcontrol. * For any large complex organization the problem of ensuring that its constituent parts act in accordance with overall policy is a central and continuing concern. The specialization of subunits which allows the organization to undertake complicated tasks requires an equally developed system of integration to bind them into an operational whole [Lawrence and Lorsch 1967, pp. 8-13; Blau and Schoenherr 1971, p. 8]. Inaddition to the differentiation stemming fromfunctional specialization, the organization is subject to divisive tendencies in the formof departmental interests, competing functional goals, and differentialdemands from the environment that lead subunits to pursue their own strategies [Karpik1978; Pfeffer 1978, pp. 6-7]. To overcome these centrifugal forces the leaders of the organization must maintaina system of integration that minimizes overlap and conflict among its varied subunits while allowing them the necessary flexibility to adapt to their particular environments. When the organization in question is a multinational corporation (MNC), the centrifugal forces tend to be more acute, increasing the problems of integration [Stopford and Wells 1972, pp. 18-19]. The foreign subsidiary is subject to the laws of the country in which it is located (the host country) as well as certain statutes of the nation in which the parent is domiciled (the home country). The foreignsubsidiaries must be differentiated enough to confront cultures, markets, and customs that contrast markedly with those of the home country, but this flexibility has to be accommodated within a structure that will provide the maximum contribution to corporate performance. Given these difficulties, the integration system of the multinational corporation has grown correspondingly complex [Wilkins 1974, p. 419]. The issue of integration of multinational corporations is of interest not only to managers withinthe firmbut to policy makers in home and host countries as well [United Nations 1978, pp. 19-28]. The degree to which control is retained by the center of the MNC, the supranational hierarchical levels above the foreign subsidiary, conditions the impact the host country may have on its foreign investors. The voluminous literatureon the multinational corporation contains a wide range of assumptions as to how closely foreign subsidiaries are controlled, but there is little empirical work to support any of these assertions [Goehle 1980, p. 8]. Inthis paper the results of an empiricalstudy of the integration processes in multinational corporations are reported. A number of factors that have been associated with the degree of integration are examined, and the relations...

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