Title: Evolving Relationship between the Parent and Subsidiaries in Multinational Companies
Abstract: AbstractThere are some specific espoused values in every important multinational company which form their organizational cultures and create values which in turn may form commitment of its employees. The transmission of organizational culture from the headquarters to subsidiaries appears to be a core of the mechanism of managing overseas subsidiaries in multinational companies. The problem of setting up operations in a foreign country with a very different culture has its transaction cost. The thrust of the argument regarding the transaction cost is that companies design their managerial control to promote the reductions of these transaction costs. Both political and cultural problems reinforce the transaction cost arguments. The central question in the literature on MNCs is the extent to which their various foreign affiliates (or subsidiaries) act and behave as local firms versus the extent to which their practices resemble those of the parent corporation or some other global standard.Keywords: Multinational Companies, Strategy, Cultural Control, Parent Subsidiary Relationship.IntroductionA multinational company (MNC) today is becoming the central agent promoting globalization. Operating across products and markets, nations and cultures, MNCs face diverse problems and complex situations and therefore, create the most complex form of organization in existence. The transmission of organizational culture from the headquarters to subsidiaries appears to be a core of the mechanism of managing overseas subsidiaries in multinational companies6. During the process of transmitting culture, a parent unit of a company should successfully transfer the set of the core values that compose its organizational culture from their parent unit to the subsidiaries worldwide.In this paper, we have tried to formulate a theory from the transmission of organizational culture and tried to evaluate it in the context of the literature on multinational companies.There are some specific espoused values in every important multinational company which form their organizational cultures and create values which in turn may form commitment of its employees. These commitments are the indicator of successful performance of a company because creation of commitment leads to success of the company. We can call this interrelationship between culture and commitment as company citizenship. This company citizenship can be transmitted from one part of the globe to another by a multinational company through the transmission of its organizational culture, as a part of the company's strategic management process.Formation of this company citizenship based on firm's organizational culture creates unique competitive advantage of a multinational company as the part of its international strategy. A company citizenship can be formed even in a country with a very different national culture because the strong organizational culture of a multinational company which gave rise to the values of corporate management and operations management, can override difference in national culture between the home and the hostcountries of multinational companies.This paper is trying to evaluate the above concept in modem business world that the multinational companies, not countries, are establishing their own cultures over the globe. The corporate cultures of leading multinational companies are forming their own company citizenships within their borders and spreading their way of doing things globally. As there are different multinational companies with different organizational culture, there would be different company citizenships for different multinational companies rather than just one Anglo-American 'jet-set Global' culture124.The 'Jet-Set' culture emphasizes individualism, self-reliance, competition, uniqueness, hedonism and emotional detachment within a group. Vertical individualistic culture (US corporate culture) values competitiveness. …
Publication Year: 2014
Publication Date: 2014-02-01
Language: en
Type: article
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Cited By Count: 3
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