Headquarters‐foreign subsidiary control relationships: three conceptual frameworks

Abstract

When a corporation establishes a subsidiary in a foreign country, its managers must decide how much control they need to maintain over the subsidiary′s managers. A headquarters‐foreign subsidiary control relationship (HSR) can be one of centralization or decentralization. The first framework proposes that national culture influences the HSR. The second framework posits that certain situational factors influence the HSR in all countries. The third framework puts forth the idea that either too much centralization or too much decentralization eventually leads to organizational ineffectiveness. Therefore, effective HSRs are those which are balanced. A balanced HSR is attained when headquarters (HQ) managers make decisions based on: an understanding of the cultural and other needs of foreign subsidiary managers; an understanding of the needs of specific organizational situations; and an organizational global vision, core values, and cultural principles which are shared by all subsidiary managers.

Citation

Rodrigues, C.A. (1995), "Headquarters‐foreign subsidiary control relationships: three conceptual frameworks", Empowerment in Organizations, Vol. 3 No. 3, pp. 25-34. https://doi.org/10.1108/09684899510094954