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Influence of an American parent on Management Control Systems in a Dutch subsidiary

Alink, Boudewijn (2013) Influence of an American parent on Management Control Systems in a Dutch subsidiary.

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Abstract:In this study the influence of an American parent on the Management Controls Systems (MCSs) in a Dutch subsidiary is explored. MCSs refer to all systems, rules, practices, values and other activities management puts in place in order to direct employee behavior. Different individual MCS components have been investigated solely, but this study explores MCSs by a fairly new approach: MCSs as a whole package. Also the comparison between MCSs in Dutch companies and Dutch subsidiaries of American parents is new. The MCS packages are evaluated on their applied configurations with MCS components and the tightness of applied MCS components. Research suggests that American companies tend to apply MCSs which are more oriented on hard controls and Dutch companies apply MCSs which are more oriented on soft controls. There are also indications that American companies apply tighter controls than Dutch companies do. This has led to the following two hypotheses: H1: Dutch subsidiaries with a US parent use a configuration of MCSs which is more oriented on hard controls and Dutch companies with a Dutch parent use a configuration of MCSs which is more oriented on soft controls. H2: Dutch subsidiaries with a US parent use a configuration of MCSs which applies tighter controls than Dutch companies with a Dutch parent do. These hypotheses are investigated by conducting interviews with a member of top management of four companies; two Dutch companies and two Dutch subsidiaries with an American parent. It were structured interviews for which I translated an extensive questionnaire of Malmi and Sandelin (see Annex 1). The interviews were audiotaped and transcribed verbatim. Subsequently an analysis was performed to check which MCS components are applied in both groups of companies and its importance in their configurations, and the extent of tightness of applied MCS components is determined. The findings show that Dutch subsidiaries with an American parent attach indeed more importance to the hard controls in their package of MCSs and the Dutch companies attach more importance to the soft controls in their MCS package. Regarding the tightness of applied controls the findings show that at least Dutch subsidiaries with an American parent apply tight controls, but because of ambiguous results within the two Dutch companies, it became not clear whether these are also applied tighter than in Dutch companies. The main contribution of the findings in this study is that national culture has a clear impact on the package of MCSs within a company, and subsidiaries seem to adjust their package of MCSs in the direction of the national culture of the parent from the moment of acquisition. The main implication is that one can realize that there are probably differences in the package of MCSs when it concerns distinct ‘national cultures’, and what these differences comprise, already before an acquisition. Companies can in this way acquaint oneself of expected upcoming changes in the package of MCSs already before the acquisition. Also in all other possible business relations including cross national cultures, it can be wise to take advantage of knowledge of existing differences in the packages of MCSs in both companies. In companies in which the package of MCSs does not prove to be effective, this research can be used as a support in the search, adaptation or application of other or tighter MCSs which fit better with the company, taking into account the 'national culture' of both parent company and subsidiary. Future research should focus on increasing the sample size to test the findings in this study.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
Link to this item:http://purl.utwente.nl/essays/63521
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