The Decision-Influencing Use of Performance Measurement Systems in Relationships between Headquarters and Subsidiaries

Posted: 2 Dec 2007

See all articles by Andrea Dossi

Andrea Dossi

SDA Bocconi; Bocconi University - Department of Accounting

Lorenzo Patelli

University of Denver - School of Accountancy

Abstract

Although theoretical frameworks assume that performance measurement systems (PMS) can be employed for different uses, there is a lack of prior empirical research examining the use of PMS. In addition, recent International Business studies reveal many unresolved issues about the use of PMS to manage relationships between headquarters and subsidiaries. After summarizing the evolution of the use of PMS over three International Business eras, we focus on the decision-influencing use of PMS, operationalized as the influence of the PMS implemented by headquarters on subsidiaries' decisions. Based on International Business literature and Management Accounting research, we hypothesize that the subsidiary participation in PMS design, measurement diversity in PMS structure, the linking of PMS to reward, as well as headquarters' national culture, subsidiary size, and global pressure affect the influence of PMS on subsidiaries' decisions. We collected data through questionnaires emailed to 100 subsidiaries. Findings show that PMS have a greater influence on decisions in cases of higher subsidiary's participation in PMS design, headquarters' cultural tolerance for uncertainty, subsidiary's employees, and global pressure. Contrary to what is contended by advocates of multidimensional approaches to PMS, measurement diversity and the linking of PMS to reward mechanisms do not have a significant impact on the decision-influencing use. We discuss the empirical evidence providing qualitative arguments derived from a focus group, which reveals the existence of a PMS decoupling and helped us to describe four situations with different levels of decision-influencing use of PMS and different economic performance results. The presented quantitative and qualitative empirical evidence offers several insights for research on PMS within multinational companies.

Keywords: Performance measurement systems, Multinational companies, Focus group

JEL Classification: M4

Suggested Citation

Dossi, Andrea and Patelli, Lorenzo, The Decision-Influencing Use of Performance Measurement Systems in Relationships between Headquarters and Subsidiaries. Management Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1034342

Andrea Dossi (Contact Author)

SDA Bocconi ( email )

Via Bocconi 8
Milan, Milan 20136
Italy

Bocconi University - Department of Accounting

Via Roentgen 1
Milan, 20136
Italy

Lorenzo Patelli

University of Denver - School of Accountancy ( email )

2101 South University
Boulevard, Suite 355
Denver, CO 80208-8921
United States
303.871.2959 (Phone)
303.871.2016 (Fax)

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