Patterns of Control in U.S., UK and European Multinational Corporations
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Abstract.This paper examines the type and level of control exercised by the parent corporationsover their foreign headquartersof 50 U.S., UK,and Europeanmultinational subsidiaries.Patternsof controlin the 3 nationalgroupsdifferin significantways, andthese differencesseem to have importantimplicationsfor othercharacteristicsof a company's organizationdesign and managerialstyle. * Headquarters control of subunit behavior and performance is a necessary integrating function in all complex organizations. Some organizational theorists, such as Williamson[1975], have even viewed the loss of control from one level of the organization to another as the limiting factor reflected in an organization's design and structure (that is, the ability to retain control as an organization grows is the factor which determines how large or complex an organization can become and still function). The importance of control as an integrating mechanism within organizations stems from the fact that it reduces uncertainty, increases predictability, and ensures that behaviors originating in separate parts of the organization are compatible and support common organizational goals. Given the complex environment facing most multinational corporations (MNCs) and the greater physical and cultural distances separating its subunits, exercising organizational control at the parent-subsidiary level is generally viewed as a much greater problem in multinationalthan in domestic companies [Brooke and Remmers 1970; Hawkins and Walter 1981]. There is an extensive and varied literature dealing with control systems and control processes in organizations [Hofstede 1967; Anthony, Dearden, and Vancil 1972; Giglioniand Bedeian 1974; Lorange and Scott Morton 1974; Newman 1975; Ouchi and Maguire 1975; Ouchi 1977]. Although almost all empirical studies of organizational control have been in domestic organizations, there are a few exceptions. Brandt and Hulbert [1976] studied certain aspects of control exercised by U.S., European, and Japanese MNCs over their Brazilian subsidiaries. Youssef [1975] analyzed the use of a ratherwide variety of control mechanisms in U.S. MNCs. Goehle [1980] studied centralization, usually referred to as "direct control," in U.S. MNCs. Edstrom and Galbraith[1977], viewing the socialization of managers through managerial transfer as another control mechanism, studied it in a number of European MNCs. One characteristic of this research in MNCs is that each study has tended to look at different aspects of control, so that at present there is a wide base and little height to the structure of the field. Although the present study continues in this tradition, it attempts to use an existing conceptual frameworkdeveloped by Ouchi as the primarybasis for analyzing and better understanding the use of control in MNCs.
INTRODUCTION
The study focuses on 2 types of control commonly used in MNCs:performance reporting systems and the assignment of parent company managers to foreign subsidiaries. Both can be viewed as cybernetic forms of control, and when
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