Subsidiary control in Japanese, German and US multinational corporations: Direct control from headquarters versus indirect control through expatriation

Abstract

This study examines the degree to which Japanese, German and US multinational corporations (MNCs) use two different subsidiary control mechanisms: direct control through headquarters and indirect control through staffing key positions in subsidiary management with expatriates. On the basis of data from 617 subsidiaries, we found that US MNCs focus more on the former, whereas Japanese MNCs rely primarily on the latter. German MNCs take a middle position. Furthermore, we found across all three countries that the more technical management functions are controlled more tightly than more culturally sensitive areas. The reliance of Japanese MNCs on subsidiary control through expatriates suggests that these corporations have a particularly acute need to invest in global talent management systems.

Management control in multinational companies: a systematic literature review

“…Pudelko and Tenzer (2013) found that US MNCs focus on finance and production to control subsidiaries whereby marketing aspects frequently complement the financial dimension (Coates et al 1995; Pudelko and Tenzer 2013). While social control of expatriates is of minor relevance (Chang and Taylor 1999;Pudelko and Tenzer 2013), US MNCs stress process control by imposing strict rules and procedures (Chow et al 1999;Sheu et al 2004). In addition, US MNCs seem prone to centralization, although they are willing to concede decision rights to their subsidiaries if required (Williams and van Triest 2009).…”

“…Although still important, the weight attributed to financial measures is lower than in other regions (Borkowski 1999;Chung et al 2006). Expatriates play a minor role for controlling foreign subsidiaries compared to Japanese MNCs (Pudelko and Tenzer 2013). Eleven studies investigate MNCs headquartered in Germany, six with explicit focus on nationality or culture.…”

Leadership development and global talent management in the Asian context: An introduction

“…Returning to the convergence and divergence debate, as a group, the authors in this Special Issue present evidence in favor of a convergence trend driven by education and international work experience (Boermans and Roelfsema), the pursuit of alignment in MNCs (Pudelko and Tenzer, 2013;Schmidt et al, 2013;Van Velsor et al, 2013) and basic competencies valued and shared across cultural contexts (Bosch et al, 2013). There is some evidence of simultaneous divergence, for example, more weight on certain managerial competencies (Bosch et al, 2013), minimal cultural differences in control and alignment strategies in organizations (Pudelko and Tenzer, 2013), leadership development strategies (Van Velsor et al, 2013) and hierarchical differences in the adoption of standardized approaches to leadership talent management (Schmidt et al, 2013); however, the overall message is one of similarity rather than large differences in what is valued as leadership competencies, how leaders are selected and trained, and the alignment processes in multinational organizations.…”

“…Although there is ample opportunity for Chinese managers to gain managerial experience within China in light of the sizeable amount of FDI in China and the abundance of Western-style MBA programs in that country, the Chinese in general do place a premium on learning from abroad. Pudelko and Tenzer (2013) focus on a critical element of alignment within a diversified sample of multinational organizations with home bases in Japan, Germany and the United States and operating in the other two countries. Japanese respondents from the sampled MNCs assigned a higher proportion of expatriates to high subsidiary positions than did the US or German MNCs.…”

“…There is some evidence of simultaneous divergence, for example, more weight on certain managerial competencies (Bosch et al, 2013), minimal cultural differences in control and alignment strategies in organizations (Pudelko and Tenzer, 2013), leadership development strategies (Van Velsor et al, 2013) and hierarchical differences in the adoption of standardized approaches to leadership talent management (Schmidt et al, 2013); however, the overall message is one of similarity rather than large differences in what is valued as leadership competencies, how leaders are selected and trained, and the alignment processes in multinational organizations. These findings are, by and large, consistent with those found in the Conference Board Report (2013).…”