Management Control in Central and Eastern European Subsidiaries

How can Multinational Corporations effectively manage and control their subsidiaries in transition countries? Our empirical study of 40 Multinational Headquarters for Central- and Eastern Europe sheds light onto effective subsidiary management in transition countries. More specifically, we explore how the context and culture of CEE impacts the choice and applicability of Headquarters control in subsidiaries. We find that the great majority of Multinationals govern their subsidiaries rather centrally and rely on a mix of formal and informal control mechanisms. Grounded on rich interviews with 50 senior executives we provide a model of fit between the type and extent of MNC control exerted and the specific transitional and cultural context of the region. Our study contributes to the understanding of management control twofold: Theoretically, by providing a comprehensive framework of factors determining the cross-border applicability of control mechanisms based on a literature review of 95 articles in leading international business journals. Empirically, by delivering keen insights by best practices into how control mechanisms can be successfully introduced in subsidiaries located in transition economies.