Control mechanisms of MNEs: an empirical study

Singh, Satwinder and Wood, Geoffrey and Darwish, Tamer K and Alharbi, Jaithen (2016) Control mechanisms of MNEs: an empirical study. Multinational Business Review, 24 (3). pp. 279-300. ISSN 1525-383X

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Abstract

This paper seeks to explore variations in the extent of control mechanisms, according to country of origin and organizational characteristics, in a challenging country of domicile. A survey research design involving the use of a questionnaire as the primary data source was adopted. A total of 350 subsidiaries were initially randomly selected and contacted in person, or via telephone and e-mail, of which 147 agreed to take part in the study and responded to the survey. We find that MNEs from highly financialized Liberal Market Economies (LMEs) will be associated with a greater reliance on formalized control mechanisms; this will enable the MNE’s headquarters to closely monitor subsidiary managers according to objective measures, in order to ensure that the maximum shareholder value is released. Our study reveals a greater reliance on control mechanisms in larger firms, reflecting a desire to maximise bureaucratic economies of scale. We find that the presence of expatriates regardless of country of origin leads to greater decentralization, suggesting foreign firms do not trust local staff This is one of few studies of this nature conducted for the region of Middle East – and the only one we are aware of for Saudi Arabia. Further, it sheds new light on the impact of contextual circumstances on how closely firms monitor their subsidiaries, the challenges of doing business in the Gulf region, and the consequences of the large scale usage of expatriates.

Item Type: Article
Article Type: Article
Uncontrolled Keywords: Multinational Enterprises (MNEs), Control mechanisms, Middle East
Subjects: H Social Sciences > HG Finance > HG4001 Finance management. Business finance
Divisions: Schools and Research Institutes > Business School > Business and Human Resource Management
Research Priority Areas: Applied Business Research
Depositing User: Susan Turner
Date Deposited: 15 Aug 2016 09:12
Last Modified: 23 Sep 2017 19:47
URI: http://eprints.glos.ac.uk/id/eprint/3834

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