The Influence of Multinational Enterprises on Subsidiaries: Context Matters

Accounting, Auditing and Accountability Journal, Vol.31 (2), pp.703-724, 2018

22 Pages Posted: 23 Jan 2020

See all articles by Inya Egbe

Inya Egbe

Independent

Emmanuel Adegbite

University of Nottingham

Kemi C. Yekini

De Montfort University, Leicester Business School

Date Written: 2018

Abstract

Purpose – This paper examines how differences in the institutional environment of a multinational enterprise (MNE) shape the role of management control systems (MCSs) and social capital in the headquarters-subsidiary relationship of an emerging economy MNE.

Design/methodology/approach – A case study design was adopted in this research. Data was gathered by means of semi-structured interviews, document analysis and observations. Interviews were conducted at the Nigerian headquarter (HQ) and United Kingdom (UK) subsidiary of the Nigerian multinational enterprise.

Findings – The study found that the subsidiary operated autonomously, given its residence in a stronger institutional environment than the HQ. Instead of the HQ depending on MCSs as a means of coordination and control, it relied on social capital that existed between the HQ and the subsidiary to coordinate and integrate the operation of the foreign subsidiary studied.

Originality/value – The reliance on social capital as a means of coordination and control of the foreign subsidiary in this study is significant, given that previous studies have indicated that multinational HQs normally employ MCSs as a means of control of foreign subsidiaries. Also, while previous studies have suggested that MNEs HQs have better expertise which enables them to design and transfer MCSs to foreign subsidiaries, this study found that such expertise relates to the institutional environment from which the HQ is operating from. Through the lens of institutional sociology theory and social capital theory, these findings directly contribute to the literature on the transference of practices and control systems in accounting and international business literatures.

Keywords: Emerging multinational enterprises; Multinational enterprises; Management control systems; Social capital; New institutional sociology; Headquarter-subsidiary relationship

Suggested Citation

Egbe, Inya and Adegbite, Emmanuel and Yekini, Kemi C., The Influence of Multinational Enterprises on Subsidiaries: Context Matters (2018). Accounting, Auditing and Accountability Journal, Vol.31 (2), pp.703-724, 2018, Available at SSRN: https://ssrn.com/abstract=3512733 or http://dx.doi.org/10.2139/ssrn.3512733

Inya Egbe

Independent ( email )

Emmanuel Adegbite (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Kemi C. Yekini

De Montfort University, Leicester Business School ( email )

The Gateway
Leicester, LE1 9BH
United Kingdom

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