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Control in Multinational Firms: the Role of Price and Hierarchy

In: Organization Theory and the Multinational Corporation

Author

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  • Jean-FranÇois Hennart

Abstract

How do firms manage to perform their functions efficiently? How do they constrain individual behavior to make it compatible with the overall goals of the firm? These age-old questions take on new significance in the context of the MNC (see, for example, Brooke and Remmers 1970; Doz and Prahalad 1981; Hedlund 1981, 1986; Prahalad and Doz 1981; Baliga and Jaeger 1984; Gates and Egelhoff 1986; Bartlett 1986; Welge 1987; Egelhoff 1988; Bartlett and Ghoshal 1989). In MNCs the problem of control is particularly acute. Geographical and cultural distance increase the cost of establishing control, and make it difficult for MNCs to secure the cooperation of their foreign affiliates. Overcentralization of decisions leads to paralysis, while excessive decentralization results in chaos (Doz and Prahalad 1981).

Suggested Citation

  • Jean-FranÇois Hennart, 1993. "Control in Multinational Firms: the Role of Price and Hierarchy," Palgrave Macmillan Books, in: Sumantra Ghoshal & D. Eleanor Westney (ed.), Organization Theory and the Multinational Corporation, chapter 7, pages 157-181, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-22557-6_7
    DOI: 10.1007/978-1-349-22557-6_7
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    Cited by:

    1. Buckley, Peter & Kandemir, Destan & Liu, Steven Y.H. & Gençtürk, Esra F., 2024. "An internalization perspective on subsidiaries’ reputation and its impact on subsidiaries’ marketing advantage: The moderating roles of resources and autonomy," Journal of Business Research, Elsevier, vol. 175(C).
    2. Ajai S Gaur & Chinmay Pattnaik & Deeksha Singh & Jeoung Yul Lee, 2019. "Internalization advantage and subsidiary performance: The role of business group affiliation and host country characteristics," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1253-1282, October.
    3. Quattrone, Paolo & Hopper, Trevor, 2005. "A 'time-space odyssey': management control systems in two multinational organisations," Accounting, Organizations and Society, Elsevier, vol. 30(7-8), pages 735-764.
    4. Andersson, Ulf & Björkman, Ingmar & Forsgren, Mats, 2005. "Managing subsidiary knowledge creation: The effect of control mechanisms on subsidiary local embeddedness," International Business Review, Elsevier, vol. 14(5), pages 521-538, October.
    5. Vachani, Sushil, 1999. "Global diversification's effect on multinational subsidiaries' autonomy," International Business Review, Elsevier, vol. 8(5-6), pages 535-560, October.
    6. José Allouche & Isabelle Huault, 1998. "Contrôle, coordination et régulation:les nouvelles formes organisationnelles," Revue Finance Contrôle Stratégie, revues.org, vol. 1(2), pages 5-31, June.

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