Multinational headquarter control of wholly owned foreign subsidiaries

Abstract

This paper examines how contingent factors relevant to the viability of wholly owned foreign subsidiary operations affect the management control system exercised by multinational corporation headquarters. We focus on two sets of contingent factors: first, strategic factors relating to corporate and competitive strategy; and second, integration factors relating to integration internal and external to a multinational corporation. We apply a control archetype approach to more comprehensively consider control exercised, relative to extant literature. Our evidence is based on data from a cross-sectional survey completed by 159 multinational corporation headquarters. Our findings indicate activity sharing corporate strategies, low cost competitive strategies, and higher internal integration, affect greater degrees of control. Differentiation based competitive strategies and external integration appear to have less substantial and narrower implications on the degree of control exercised. These findings are robust to sensitivity testing and are consistent with our expectations that headquarters exercise a higher degree of control in contexts perceived as less problematic.

Identifying the key factors of subsidiary supervision and management using an innovative hybrid architecture in a big data environment

“…A business strategy is influenced by the business's complexity and the external environment's uncertainty, but it also determines the company's product structure and competitive market, technology, and organizational structures (Lim et al 2018). On one hand, to achieve the synergy of strategy and operations in a parent-subsidiary company, the parent company imposes its overall strategic objectives into each subsidiary, then forms the subsidiary's business objectives and plans, conducting scientific assessments of each subsidiary's accomplishment of its annual business plan, thus strengthening management's control over subsidiaries (Matolcsy and Wakefield 2017). On the other hand, the parent company needs to regularly evaluate the subsidiary's operations, first pre-setting the subsidiary's operating efficiency indicators (such as sales, profits, inventory), and then using the subsidiary's financial reports to evaluate its annual operating benefits.…”

“…A management control system is the institutional arrangement for the daily business activities of enterprises, and it plays an important role in the management of the business by guaranteeing the execution of corporate strategies (Matolcsy and Wakefield 2017). In the process of supervising subsidiaries, the institutional system and operational mechanisms established by the parent company regulate various aspects of the subsidiary's daily operations.…”

Strategi Aliansi di Negara Berkembang: Industri Peralatan Medis Indonesia

“…Kerangka tugas dan tata perilaku sudah diatur dengan jelas sehingga memudahkan manajemen dalam mengelola sumber daya perusahaan. Keterlibatan kantor pusat di dalam kegiatan bisnis meningkatkan kemampuan perusahaan untuk mengelola informasi ex-ante, yang mana dapat meminimalisir risiko ketidakpastian yang dihadapi oleh perusahaan induk (Matolcsy & Wakefield, 2017). Pada whole owned subsidiary, perusahaan induk cenderung kurang efektif dalam menentukan proses atau ekspektasi komprehensif untuk manajemen portofolio, dibandingkan dengan berbagi aktivitas strategi perusahaan.…”