Management Control in Central and Eastern European Subsidiaries

320 Pages·2009·1.885 MB·English

by  Barbara Brenner (auth.)

Management Control
in Central and Eastern
European Subsidiaries
Barbara Brenner
Management Control in Central and Eastern
European Subsidiaries
This page intentionally left blank
Management Control
in Central and Eastern
European Subsidiaries
Barbara Brenner
© Barbara Brenner 2009
Softcover reprint of the hardcover 1st edition 2009 978-0-230-20140-8
All rights reserved. No reproduction, copy or transmission of this
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Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
The author has asserted her right to be identified as the author of this work in
accordance with the Copyright, Designs and Patents Act 1988.
First published 2009 by
PALGRAVE MACMILLAN
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registered in England, company number 785998, of Houndmills, Basingstoke,
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Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Palgrave Macmillan is the global academic imprint of the above companies
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Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN 978-1-349-29954-6 ISBN 978-0-230-20174-3 (eBook)
DOI 10.1057/9780230201743
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources. Logging, pulping and manufacturing
processes are expected to conform to the environmental regulations of the
country of origin.
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Brenner, Barbara, 1976–
Management control in Central and Eastern European subsidiaries /
Barbara Brenner.
p. cm.
Includes bibliographical references and index.
1. International business enterprises – Management. 2. International
business enterprises – Europe, Central – Management. 3. International
business enterprises – Europe, Eastern – Management. I. Title.
HD62.4.B74 2009
658(cid:2).0490943—dc22 2008030131
10 9 8 7 6 5 4 3 2 1
18 17 16 15 14 13 12 11 10 09
Contents
List of Figures ix
List of Tables xi
List of Abbreviations xiii
1 Introduction: Problem, Relevance and Research Question 1
2 The Concept of Management Control 6
2.1 Defining ‘management control’ 6
2.2 The fundamentals of management control 10
2.2.1 Classification of control mechanisms 14
2.2.1.1 Formal vs. informal control 15
2.2.1.2 Output control vs. behavior control 16
2.2.1.3 Market, bureaucracy and clan controls 17
2.2.1.4 Bureaucratic control vs. cultural control 18
2.2.1.5 R esult control vs. personnel/cultural
control 19
2.2.1.6 P ersonal and impersonal vs. planned
and unplanned 20
2.2.1.7 A synthesis of control mechanisms 21
2.2.1.8 Control mechanisms used by this study 24
2.3 Management control in multinational corporations 29
2.3.1 Strategy determines organizational design
and type of control 30
2.4 S ynthesis: strategy, control mechanisms and
control extent 33
3 Literature Review of Current Studies on Management
Control in MNCs 39
3.1 Factors influencing management control 41
3.1.1 Environmental context 42
3.1.1.1 Uncertainty 46
3.1.1.2 H eterogeneity/complexity/institutional
framework 46
3.1.1.3 Economic and technological imperatives 48
3.1.2 Organizational context 49
v
vi Contents
3.1.2.1 Age 49
3.1.2.2 Subsidiary size 49
3.1.2.3 Ownership and resource provision 50
3.1.3 Culture 52
3.1.3.1 Country of origin effect 66
3.1.4 Moderators 69
3.1.4.1 Expatriates 70
3.1.4.2 The role of trust 72
3.1.4.3 International experience of
organizational units 74
3.1.4.4 Organization culture 74
3.1.4.5 Personality traits 75
3.1.5 Interaction of strategy, power and
interdependence 76
3.1.5.1 MNC strategy 76
3.1.5.2 Interdependence 77
3.1.5.3 Power 78
3.2 Discussion 78
3.3 A comprehensive model of management
control fit 81
4 Cultural Research on Central and Eastern Europe 85
4.1 The aftermath of communism 91
5 Method 92
5.1 Semi-structured interview 94
5.1.1 Potential sources of bias and ways of
dealing with it 97
5.2 Qualitative content analysis 101
5.2.1 Validity and reliability 104
5.2.1.1 Validity and reliability check in the
present study 105
5.3 Rationale for chosen methodology 105
6 Sample 108
7 Empirical Results: Western Management Control in CEE 115
7.1 Strategic choice: market entry strategy 115
7.1.1 Motives for market entry 115
7.1.1.1 Growth potential 116
7.1.1.2 Early birds and first movers 116
7.1.2 Market entry mode 117
Contents vii
7.2 Management control types in MNC headquarters 119
7.2.1 Explicit MNC control 120
7.2.1.1 Extent of centralization 120
7.2.1.2 Extent of standardization 124
7.2.1.3 Extent of formalization 129
7.2.1.4 Extent of output & performance control 130
7.2.1.5 Extent of expatriate control 135
7.2.1.6 Reasons for using Host-Country
Nationals (HCN) 145
7.2.2 Implicit MNC control 149
7.2.2.1 Control by lateral relations 150
7.2.2.2 C ontrol by informal communication
and personal intra-group networks 154
7.2.2.3 Control by international management
training 157
7.2.2.4 Control by organizational culture 163
7.2.3 Communication HQ-subsidiary 167
7.2.3.1 Intensity of communication 167
7.2.3.2 Group language 168
7.2.3.3 Communication functions 168
7.2.4 Conclusion: extent and types of control classified 168
7.2.4.1 Frequency of control types 168
7.2.4.2 Combinations of control types 169
7.2.4.3 C ontrol extent: operational versus
strategic control 173
7.3 Contingencies: the political and economic framework
in CEE 174
7.3.1 Political risk 176
7.3.1.1 Political instability 176
7.3.1.2 Bureaucracy 177
7.3.1.3 Corruption 178
7.3.1.4 Legal constraints 179
7.3.1.5 Summary political risk 179
7.3.2 Economic and firm level risk 179
7.3.2.1 R isk of concealment of relevant
information 179
7.3.2.2 D evelopment stage (maturity) and
poor data quality 182
7.3.2.3 Lack of understanding for Western
management concepts and control 184
7.3.2.4 Qualified personnel 185
viii Contents
7.3.2.5 S ummary of economic and firm
level risk 185
7.4 Culture 188
7.4.1 S ome CEE-wide parallels in cultural perceptions
based on communism 189
7.4.2 Moderators 209
7.4.2.1 Moderators on the organizational level 209
7.4.2.2 Moderators on the individual level 228
7.4.3 Propositions and managerial implications 232
8 Major Findings 236
8.1 C onclusion: cultural differences, contingencies,
moderators and management control in MNCs 236
8.2 Directions for future research 239
8.3 Discussion 240
8.4 Managerial implications 242
8.4.1 Determinants of effective management control
and business success in CEE 242
8.4.2 M anagerial implications of perceived cultural
differences 246
8.4.3 S trategic success factors for implementing
management control 246
8.4.3.1 Implementation challenges 246
8.4.3.2 Implementation mediators 253
9 Summary 262
9.1 Key findings on a glimpse 262
9.2 Summary 265
9.3 Culture, contingencies and MNC management
control in CEE 267
9.4 Culture 268
9.5 Contingencies 268
9.6 Moderators 269
9.7 Conclusion 269
9.8 The management challenge 270
Appendix 271
Bibliography 276
Index 303
Figures
1.1 Research design 4
2.1 Onion of organizational control and environment 11
2.2 Model of core control system 12
2.3 How organizational design affects behavior 13
2.4 E nvironment, strategy, organizational design, systems
and processes in MNCs 30
2.5 I nternal and external strategic, organizational design,
control, and cultural fit 31
2.6 Organizational context 32
2.7 The integration-responsiveness framework 33
2.8 Strategy determines control mechanisms and extent 34
2.9 I nteraction levels and extent of control between HQ and
subsidiaries 35
3.1 Elements of contingency approach 42
3.2 Description of the environment 45
3.3 Model of resource provision, key appointments
and control 52
3.4 Comprehensive framework of dynamic fit 82
4.1 D ifferences in ‘as if’ scores: Germanic versus Eastern
European cluster 89
4.2 Differences in ‘should be’ scores: Germanic versus Eastern
European cluster 90
4.3 D ifferences in Eastern European and Germanic
leadership-profile scores 90
5.1 Four contextual levels of the research Interview in
international business 98
5.2 S tep model of inductive and deductive category
development 102
7.1 HQ decision making and subsidiary autonomy 121
7.2 Network view on centralized control 122
7.3 Levels of standardization and formalization 124
7.4 Network view on standardization 125
7.5 A network view on formalization 129
7.6 Type of planning 131
7.7 Network view on detailed control and evaluation 132
ix