How institutional disruptions impact the choice of MNC subsidiary control systems

Abstract

Purpose

This study seeks to explicate how institutional disruptions impact multinational corporation (MNC) subsidiary control choices. It uses institutional theory to understand the influence of formal and informal institutions across countries on the type of control system employed in an MNC manufacturing subsidiary.

Design/methodology/approach

This study’s sample is based on a unique dataset from five trustworthy sources. We use multi-level models to account for the hierarchical nature of the sample of 1,630 multinational subsidiaries spread across 26 host countries by firms from 21 home countries.

Findings

The institutional distance between the host and the home country has a negative relationship with strategic control. In contrast, the home country’s power distance has a positive relationship with strategic control.

Originality/value

Study findings indicate the need to incorporate formal and informal institutional elements in the control system’s conceptual framing and design. This notion complements existing visualizations of optimizing MNC controls through extant articulations of minimizing governance costs through organizational design choices or strategic needs.

Citation

Elango, B. (2024), "How institutional disruptions impact the choice of MNC subsidiary control systems", Cross Cultural & Strategic Management, Vol. 31 No. 2, pp. 271-288. https://doi.org/10.1108/CCSM-02-2023-0019