Match!

Dealing with headquarters in the multinational corporation: a subsidiary perspective on organizing costs

Published on Dec 1, 2019
· DOI :10.1186/s41469-019-0052-y
Randi Lunnan13
Estimated H-index: 13
(BI Norwegian Business School),
Sverre Tomassen6
Estimated H-index: 6
(BI Norwegian Business School)
+ 1 AuthorsGabriel R. G. Benito25
Estimated H-index: 25
(BI Norwegian Business School)
Abstract
This study examines how subsidiaries in multinational corporations (MNCs) experience interactions with corporate headquarters. We conceptualize such interactions in terms of organizing costs, focusing on two key types of costs: bargaining costs and information costs. Specifically, we examine how distance, coordination mechanisms, and atmosphere influence the level of organizing costs in the headquarter-subsidiary relationship. Using survey data collected among 104 subsidiary managers in two MNCs, we show that relationship atmosphere significantly reduces both types of organizing costs, whereas distance increases bargaining costs. We also find that centralization and formalization reduce information costs, whereas social integration, contrary to our hypothesis, increases bargaining costs.
  • References (99)
  • Citations (0)
📖 Papers frequently viewed together
73 Citations
33 Citations
193 Citations
78% of Scinapse members use related papers. After signing in, all features are FREE.
References99
Newest
#1Jan Schmitt (WU: Vienna University of Economics and Business)H-Index: 2
#2Benoit Decreton (WU: Vienna University of Economics and Business)H-Index: 4
Last. Phillip Christopher Nell (WU: Vienna University of Economics and Business)H-Index: 15
view all 3 authors...
How will digitalization influence the role of corporate headquarters (CHQs) and their relationships with their operating units? We recently asked 67 senior CHQ managers this question. The results suggest that CHQs expect to become more powerful and more involved in their operating units. These conclusions seem to be driven by perceptions that the ongoing digitalization will provide CHQ managers with more timely and better information. In this “Point of View,” we discuss the potential pitfalls of...
1 CitationsSource
#1Nicolai J. Foss (Bocconi University)H-Index: 5
The corporate headquarters (CHQ) is an important part of the organization of large firms; yet, it is neglected in organization design theory. In this brief essay, I argue that we need a better understanding of the CHQ to further our understanding of the link between the top-management team and the rest of the organization, and to improve our understanding of the costs and benefits of hierarchical organization in general. I outline a number of organizational economics ideas that may help addressi...
2 CitationsSource
#1Björn Ambos (HSG: University of St. Gallen)H-Index: 22
#2Sven Kunisch (HSG: University of St. Gallen)H-Index: 8
Last. Adrian Schulte Steinberg (HSG: University of St. Gallen)H-Index: 2
view all 4 authors...
Prior research has advanced classical agency theory to account for various characteristics of headquarters (HQ)-subsidiary relations in the multinational corporation (MNC). In an attempt to contribute to this line of research, in this paper, we propose and test an agency model for HQ-subsidiary relations inside the MNC. Drawing on classical agency assumptions, we develop a baseline hypothesis that links informal controls (i.e., socialization), HQ-subsidiary goal conflicts, and the HQ’s use of fo...
6 CitationsSource
#1Phillip Christopher Nell (WU: Vienna University of Economics and Business)H-Index: 15
#2Philip Kappen (Uppsala University)H-Index: 9
Last. Tomi Laamanen (HSG: University of St. Gallen)H-Index: 18
view all 3 authors...
In this paper, we provide an introduction to the Special Issue entitled ‘Divide and Rule? The Emergence and Implications of Increasingly Disaggregated and Dispersed Headquarters Activities in Contemporary Firms’. The purpose is two-fold. First, we propose a conceptualization of headquarters activities as a dynamic system in which activities can be distributed organizationally and spatially. We explicitly break with the dominant view of the prior research on ‘the headquarters’ as a single, identi...
16 CitationsSource
#2Sven KunischH-Index: 8
Abstract Despite the increasing use of the agency perspective in studies of headquarters-subsidiaries relations in the multinational corporation (MNC), opponents fundamentally question its utility. In an attempt to contribute to this debate, we evaluate prior studies and develop considerations for future research. Our review of extant studies of headquarters-subsidiaries relations that make (explicit) use of the agency perspective reveals two significant shortcomings. First, we identify a need t...
9 CitationsSource
#1Randi LunnanH-Index: 13
#2Sverre TomassenH-Index: 6
Last. Gabriel R. G. BenitoH-Index: 25
view all 3 authors...
Abstract The chapter examines how distance, integration mechanisms, and atmosphere influence the level of organizing costs and subsidiary initiatives in headquarter–subsidiary relationships. Survey data were collected at the subsidiary level in one major Norwegian multinational company. Empirical analyses were based on regression and partial correlation analyses. Organizing costs are driven by distance to headquarters as well as the integration mechanisms and the atmosphere that exists in subsid...
4 CitationsSource
#1Tatiana Kostova (USC: University of South Carolina)H-Index: 26
#2Valentina Marano (NU: Northeastern University)H-Index: 7
Last. Stephen Tallman (UR: University of Richmond)H-Index: 28
view all 3 authors...
We review the contributions to research on headquarters–subsidiary (HQS) relationships published in the Journal of World Business (known as the Columbia Journal of World Business until 1997) from the late 1960s to the present day. Based on 81 articles on the topic, we identify trends and dominant approaches in the journal's contributions to this area and link them to trends in the broader field of international management (IM) research and practice. We underline the journal's pioneering role in ...
62 CitationsSource
#1Markus Menz (HSG: University of St. Gallen)H-Index: 6
#2Sven Kunisch (HSG: University of St. Gallen)H-Index: 8
Last. David J. Collis (Harvard University)H-Index: 17
view all 3 authors...
AbstractThe corporate headquarters (CHQ) is the central organizational unit in the contemporary corporation and is critical for value creation in the overall firm. Since the early 1960s, a significant body of research on the CHQ has evolved along two separate but related streams. The first stream focuses on the CHQ in the multibusiness firm, whereas the second stream concerns the CHQ in the multinational firm. In this article, we promote a consistent multimarket firm perspective that draws on re...
37 CitationsSource
#1Anne K. Hoenen (WU: Vienna University of Economics and Business)H-Index: 3
#2Tatiana Kostova (USC: University of South Carolina)H-Index: 26
The nature of global business today increases the complexity of multinational companies and highlights the challenges of managing headquarters–subsidiary (HQ–Sub) relationships. We identify key unresolved issues in HQ–Sub relations including closing the gap between headquarters’ expectations and subsidiary performance, managing the nested hierarchical relationships across multiple organizational layers, and aligning these relationships across diverse subunits embedded in different social context...
56 CitationsSource
#1Sven KunischH-Index: 8
Last. Andrew CampbellH-Index: 3
view all 3 authors...
A survey of 761 of the largest corporations in North America and Europe showed that the number of corporate functions had increased at about a third from 2007 to 2010. Leaders at three out of four companies believed that their functions' influence had grown. At the same time, complaints about the performance of those functions were increasing. The authors combined their survey data with insights from structured interviews at large European multibusiness organizations to understand why corporate ...
18 Citations
Cited By0
Newest
Abstract Multinational enterprise (MNE) subsidiaries abroad are important organizations in their own rights. They typically hold some of the MNE’s most critical resources, and operate at the forefront of complex international environments. In this review, we identify and organize theoretical and empirical research on subsidiary management based on over 600 articles in leading academic journals. We develop a conceptual framework that integrates complementary streams of theoretical and empirical r...
3 CitationsSource