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Dealing with headquarters in the multinational corporation: a subsidiary perspective on organizing costs

Randi Lunnan (), Sverre Tomassen (), Ulf Andersson () and Gabriel Benito ()
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Randi Lunnan: BI Norwegian Business School
Sverre Tomassen: BI Norwegian Business School
Ulf Andersson: BI Norwegian Business School

Journal of Organization Design, 2019, vol. 8, issue 1, 1-24

Abstract: Abstract This study examines how subsidiaries in multinational corporations (MNCs) experience interactions with corporate headquarters. We conceptualize such interactions in terms of organizing costs, focusing on two key types of costs: bargaining costs and information costs. Specifically, we examine how distance, coordination mechanisms, and atmosphere influence the level of organizing costs in the headquarter-subsidiary relationship. Using survey data collected among 104 subsidiary managers in two MNCs, we show that relationship atmosphere significantly reduces both types of organizing costs, whereas distance increases bargaining costs. We also find that centralization and formalization reduce information costs, whereas social integration, contrary to our hypothesis, increases bargaining costs.

Keywords: Headquarter-subsidiary relations; Organizing costs; Coordination; Distance; Atmosphere (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1186/s41469-019-0052-y

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