Control Concepts in Multinational Corporations (MNCs)

- The Case of Swiss MNCs with Foreign Subsidiaries in India -

DISSERTATION
of the University of St. Gallen,
Graduate School of Business Administration
Economics, Law and Social Sciences (HSG)
to obtain the title of
Doctor of Oeconomiae



submitted by

Sigu Muringaseril
from
Germany and India



Approved on the application of

Prof. Dr. Li-Choy Chong
and
Prof. Dr. Narendra M. Agrawal


Dissertation no. 3398

Niedermann Druck, St.Gallen, 2007
The University of St.Gallen, Graduate School of Business Administration,
Economics, Law and Social Sciences (HSG) hereby consents to the printing of
the present dissertation, without hereby expressing any opinion on the views
herein expressed.


St.Gallen, October 15, 2007


The President

Prof. Ernst Mohr, PhD






To my parents


Jacob Cherian Muringaseril
and
Kunjamma Muringaseril


Acknowledgements

With this dissertation, another important milestone has been successfully
accomplished in my long journey of personal and professional development.

Therefore, I would like to take this occasion to thank my supervisor Prof. Dr. Li-
Choy Chong (University of St.Gallen) for providing me with this great
opportunity as well as the necessary discretion to develop my dissertation. I am
equally indebted to my co-supervisor Prof. Dr. Narendra M. Agrawal (Indian
Institute of Management, Bangalore) for the numerous inspiring discussions we
had in India as well as in Switzerland throughout the course of this research
project. Personally as well as professionally, I greatly cherish the time spent with
both the professors over the last couple of years.

Great endeavours always come with little sleep and lot of sacrifice. Hence,
finally, I would like to express my deepest gratitude to those dearest to my heart:
my father, Jacob Cherian Muringaseril, my mother, Kunjamma Muringaseril, and
my wife, Bobby Jacob Muringaseril. Without their love and endless support this
and many other endeavours in my life would definitely have not been possible. I
owe them everything.


St.Gallen, October 2007

Sigu Muringaseril


I
Table of Contents


Abstract .................................................................................................... IV
List of Exhibits........................................................................................... V
I. Introduction.......................................................................................1
A. Motivation................................................................................................. 1
B. Structure of the Thesis ............................................................................. 2
II. Literature Review and Framework................................................3
A. International Management ....................................................................... 3
1. Contemporary Reflexion .................................................................. 3
B. Multinational Corporation Characteristics................................................ 4
1. Overview ........................................................................................... 4
2. Typology........................................................................................... 4
C. Subsidiary Characteristics......................................................................... 8
1. Subsidiary Role and Subsidiary Strategy ......................................... 9
2. Subsidiary Autonomy and Centralisation....................................... 13
3. Subsidiary Involvement and Entry mode ....................................... 16
4. Subsidiary Age ............................................................................... 19
C. Environmental Characteristics............................................................... 20
1. General Remarks ............................................................................ 20
2. Risk and Environmental Uncertainty ............................................. 20
3. Outcome Uncertainty and Outcome Measurability........................ 22
D. Control Modes ....................................................................................... 23
II
1. Behaviour Control .......................................................................... 24
2. Bureaucratic Control ...................................................................... 25
3. Culture Control ............................................................................... 25
4. Output Control................................................................................ 28
5. Monetary Incentive Compensation.................................................. 29
E. Theories.................................................................................................. 31
1. Agency Characteristics................................................................... 31
2. Stewardship Characteristics............................................................ 33
III. Hypotheses.......................................................................................35
IV. Research Design.............................................................................40
A. Research Methodology .......................................................................... 41
B. Research Process.................................................................................... 44
1. Population and Sampling................................................................ 44
2. Data Collection............................................................................... 47
3. Data Analysis.................................................................................. 50
3.1. Multiple Regression Analysis............................................... 50
3.2. Binomial Logistic Regression Analysis................................ 54
3.3. Correlation Analysis ............................................................. 55
C. Variables and Measures ......................................................................... 56
1. Control Variables............................................................................ 57
2. Structural Variables ........................................................................ 58
3. Environmental Variables ................................................................ 60
V. Results ..............................................................................................61
VI. Discussion............................................................................................69
A. General Discussion of Results ............................................................... 69
III
B. Conclusion ............................................................................................. 74
1. Continuance of Formal and Structural Control .............................. 74
2. From Unidimensional to Multidimensional Control ...................... 75
3. Portfolio of Operative and Strategic Control .................................. 76
4. Aptitude of Control Modes.............................................................. 76
VII. Reflexion and Implications for Future Research........................77
A. Critical reflexion and Limitations.......................................................... 77
B. Implications for future research............................................................. 79
VIII. Closing Remarks .............................................................................80
References .................................................................................................83
Appendix .................................................................................................107
Questionnaire..........................................................................................111











IV

Abstract


The purpose of this dissertation was to conduct an empirical examination of the
types and degrees of control exerted by Swiss Multinational Corporations
(MNCs) on their Foreign Subsidiary Companies located in India, in dependence
of certain structural and environmental properties.

Applying agency and stewardship theory, the author used the constructs of
culture control, bureaucratic control and monetary incentive compensation to
conceptualise and test the governance mechanisms imposed by Headquarters to
limit diverging activities at the Subsidiary Company level.

The present research is a logical outgrowth of extant research done in this field of
international management to the Indo-Swiss context. For this purpose, the author
generated primary data from more than 70 Business Units of Swiss Foreign
Subsidiaries operating in India.

V
List of Exhibits


Exhibit 01: MNC Typologies................................................................................. 7
Exhibit 02: Schematic Comparison of Models of Subsidiary Strategy ............... 13
Exhibit 03: A Set of Control Predictors and Explanatory Variables ................... 35
Exhibit 04: Hypotheses Exemplarily Illustrated .................................................. 40
Exhibit 05: A Selected Set of Multivariate Data Analysis Techniques ............... 42
Exhibit 06: Relationship Between Paid-Up Capital and Culture Control............ 61
Exhibit 07: Relationship Between Paid-Up Capital, Bureaucratic Control as well
Monetary Incentive Compensation................................................... 62
Exhibit 08: Influences of Subsidiary Company Strategy and Subsidiary
Autonomy on Culture control ........................................................... 63
Exhibit 09: Influence of Subsidiary Company Strategy and Autonomy on
Bureaucratic Control ......................................................................... 65
Exhibit 10: Influence of Subsidiary Company Strategy and Autonomy on
Incentive Compensation.................................................................... 66
Exhibit 11: Influence of Outcome Measurability on the Use of Monetary
Incentive Compensation.................................................................... 67
Exhibit 12: Relationship Between the Different Control Modes......................... 68
Exhibit 13: Summary of Hypotheses Tested........................................................ 69
1
I. Introduction

A. Motivation
Advancement in technology, an increasing rate of globalisation, deregulation and
alleviation of restrictions has caused significant structural changes across the
globe and has increased the pressure of a highly selective market environment on
the various economic agents.

Particularly Multinational Corporations (MNCs), comprising of its headquarters
and its various foreign affiliated entities, which are geographically dispersed and
partly goal disparate (Ghoshal & Bartlett, 1990), are facing intensified multi-
point or hypercompetition since they expand across geographical and economic
borders not only to pecuniarily exploit arbitrages but also to explore and
strategically benefit from dynamic locational differences.

The purpose of this dissertation is to conduct an empirically based examination
of the types and degrees of control exerted by Swiss Multinational Companies on
their foreign subsidiaries located in India. Applying agency and stewardship
theory, we conceptualise and test the types and degrees of control imposed by
Headquarters (HQs), located in a relatively stable environment, on their affiliated
entities abroad, which are embedded in an uncertain and volatile habitat.

A thorough review of literature as well as previous analyses of similar conceptual
set-ups in different empirical contexts should not only help in developing an
adequate framework and subsequently deriving hypotheses, but also should help
us ultimately reveal through empirical testing whether and to what extent certain
structural as well as environmental properties moderate types and degrees of
2
control that are exercised by focal organizations to align actions, interests and
goals with their affiliated entities abroad.

The main objective of the present work thereby, is to apply a theoretical set of
propositional arguments to a new empirical context in order to examine and
contrast its predictive ability and limitations and to ultimately not only contribute
to the process of theory development through theory testing but to increase our
understanding of control MNCs use to monitor their affiliated entities and the
circumstances that influence its usage.

The present study is a logical outgrowth of extant research done in this field of
international management (O'Donnell, 2000, Chang & Taylor, 1999, Ghoshal &
Nohria, 1989), to the Indo-Swiss context. The rationale for this investigation is
not only rooted in the magnifying role played by India as a rapidly emerging and
attracting market but also results from the circumstance that previous, large-scale
empirical studies have mainly captured Anglo-American, Japanese or Korean
HQs-perspectives.

Keywords: multinational corporations; subsidiary company; control modes;
agency theory;


B. Structure of the Thesis

In the initial section of the paper, the author briefly outlines the point of
departure. Section two follows the objective to review certain streams of
literature as well as empirical studies in order to not only portray relevant
characteristics of the subjects and units of analysis but to also lay the
informational and conceptual foundation of this research. Section three will then
describe the various hypotheses derived in this study. The operationalization of
3
the variables and constructs, the population and sampling procedures, the
methodologies applied for the data collection and hypotheses testing will be
discussed in section four. The results of the statistical analyses are subsequently
described and discussed in section five. The final section ultimately summarizes
the findings, highlights limitations and provides recommendations for future
research.


II. Literature Review and Framework


A. International Management

1. Contemporary Reflexion
On the basis of Werner's (2002) typology, research within the field of
International Management can be broadly divided into two major categories: (i)
research on pure International Management, which is concerned with aspects of
management that do not exist in domestic firms (Ricks, 1991); and (ii) research
on cross-national or cross-cultural studies, which includes comparative studies on
management practices designed either cross-nationally or cross-culturally.

Most heavily researched, within the large body of International Management
literature, is the first category, comprising research on the description (Hendry,
1996), measurement (Makhija, Kim and Williamson, 1997), antecedents (Autio,
Spienza and Almeida, 2000, Reuber and Fischer, 1997) and consequences
(Geringer, Tallman and Olsen, 2000, Palich and Gomez-Meija, 1999) of
transnational expansion of companies, research on market entry related aspects
(Madhok, 1997, Buckley and Casson, 1998, Erramilli, 1996, Pan, Li and Tse,
1999 & Pan and Tse, 2000), studies on expatriate management and repatriation
(Gregersen, Hite and Black, 1996, Egelhoff, 1984, Kobrin, 1988 & Borkowski,
1999), multinational corporations (Bartlett, 1986, Bartlett and Ghoshal, 1989,
4
Harzing, 2000) as well as headquarters and subsidiary relationships (Birkinshaw,
1997, Taggart, 1998, Gupta, Govindarajan and Malhotra, 1999 & Roth and
O'Donnell, 1996).


B. Multinational Corporation Characteristics

1. Overview
Of the above mentioned areas and streams of International Management,
literature on Multinational Corporations (MNCs) has attracted substantial
attention among researchers. According to Ricks (1991) research on MNCs form
the core of international business research. This area includes, among other
aspects, reviews on the interactions between markets, governments and
Multinational companies (Dunning, 1992, Rugman and Verbeke, 1998), studies
on strategic processes within multinationals and models and descriptions, on
which the author will elaborate on in the subsequent section. Various aspects of
parent-subsidiary relationships in MNCs have been studied intensively for many
years (Martinez and Jarillo, 1989) as well.

2. Typology
Seizing Harzing's (2000) chain of argumentation, the author states that a
typology becomes useful in two ways: first, it significantly reduces complexity
through the creation of classifications with a set of related characteristics and,
second, if conceptually meaningful typologies can be developed, they can then
serve descriptive and predictive purposes. This section, hence, follows the
objective to highlight relevant structural characteristics of Multinational
corporations for the present research through a discussion of some existing key
typologies.

5
Various attempts have been made in literature to capture the true richness of
MNCs with definitions and concepts. Perlmutter (1969) for instance, used a
taxonomy which was based on management styles namely geo-, poly- and
ethnocentric - to measure a firms degree of multinationality. Porter (1986)
distinguished between multidomestic and global firms based on the configuration
and coordination of the firms value chain. The framework developed by
Prahalad and Doz (1987) offers a rather context oriented classification based on
the nature of business, differentiating between global, multi-focal and local firms.
Probably Bartlett's and Ghoshal's (1989) four-fold typology of multinational,
international, global and transnational companies has been the most influential
and extensive one. The typology constructed, inter alia, included, environmental,
corporate, subsidiary, control and human resource characteristics. Many of the
studies on various aspects of MNCs that followed used either Bartlett and
Ghoshal's or a similar typology as a fertile base for their own research. Such
studies have been conducted by Sundaram and Black (1992), Leong and Tan
(1993), Ghoshal and Nohria (1993) and Roth, Schweiger and Morrison (1991), to
name a few. With the degree of centralisation being the predominant dimension
for differentiation, Martinez and Jarillo (1989) had distinguished between global
companies, i.e. companies labelled by a high degree of centralisation, and
multinational firms, who rather enjoy a laissez-faire doctrine and a great deal of
latitude.

Harzing (2000) has extensively reviewed and classified previous studies which
tried to conceptualise MNC typologies, concluding that, first, despite substantial
differences in details (e.g. number and types of variables included), most of the
studies show a considerable convergence in the basic characteristics (for example
with respect to the classification and characterization of companies, namely
multidomestic, global and transnational firms). Second, consistent with Weick's
(1995) posit of theory itself being a continuum, with guesses and speculations at
its beginning and explanations and models at its end, the first studies within this
theoretical stream were mainly descriptive and clinical in nature. Thereby
6
employing small samples and rather qualitative research. While later studies
attempted to test variables in a more systematic manner on a large-scale and
quantitative basis, thus being rather conclusive.

Empirically, especially in early premature stages of research, where little is
known about a phenomenon, when contemporary perspectives seem inadequate
because of little empirical substantiation, case study research is more appropriate
(Eisenhardt, 1989b). Therefore it is of no big surprise that most of the early
studies within the area of MNCs (Stopford and Wells, 1972, Doz, 1980, Bartlett,
1986, Prahalad and Doz, 1987, Bartlett and Ghoshal, 1989, White and Poynter,
1990) methodologically employed qualitative approaches, namely either
interviews or in-depth case studies.

Some researchers later on claimed that, hierarchy, as an approach of modelling
multinationals was being discussed by scholars without explicitly characterizing
the construct of hierarchy. As a consequence, and based on Simon's (1962) work,
Hedlund (1993) finally generated some general assumptions underlying the
modelling of MNCs as hierarchies. These assumptions are: (i) pre-specification
and stability of tasks and relationships, (ii) instrumentality and additivity of
individual elements of the organisation, (iii) unidirectionality and universality as
well as (iv) coincidence of knowledge, action and people hierarchies (Hedlund,
1993). Over time and especially in the nineteen eighties, it became increasingly
apparent to researchers that hierarchical models may not fully and adequately
reflect the complexity and reality of MNCs (Birkinshaw and Morrison, 1995).

7
Authors Type of study
Perlmutter (1969) Conceptual polycentric ethnocentric geocentric
Doz (1980) Empirical National responsiveness World-wide integration -
Porter (1986) Conceptual Multidomestic industry Global industry -
Bartlett (1986) Conceptual/Empirical Multinational Global Transnational
Prahalad and Doz (1987) Empirical Locally responsive Integrated Multifocal
Bartlett and Ghoshal (1989) Empirical Multinational Global Transnational
White and Poynter (1990) Empirical Geographic area Global product Matrix
Roth, Schweiger and
Morrison (1991) Empirical Multidomestic Global -
Wolf (1996) Empirical Single market strategy Integration strategy Interaction strategy
Typologies

Exhibit 1: MNC Typologies
Source: amended and modified from Harzing (2000)

Hence, more recently, research culminated in newer conceptualisations of
Multinational Corporations. In contrast to the early more static considerations of
Multinationals, another quite interesting though poorly acknowledged impetus of
thought has been received to the body of MNC research by Allen and Pantzalis'
(1996) approach. Both researchers invited scholars to consider Multinational
Corporations on a continuum of multinationality with purely domestic firms on
the one end of the spectrum and perfectly global firms on the other end, with
each MNC having its own distinct degree of multinationality based on the
composition and concentration of its foreign subsidiary network. A further,
interesting model of a rather heterarchical MNC structure has been designed by
Hedlund (1986). A multi-centred approach that dissolves the hitherto existing
dyadic "Home Country / Headquarters" and "Host Country / Subsidiary"
perspective and considers subsidiary as a semi-autonomous entity within a
differentiated system with less of calculative and coercive control to more
appropriately reflect the increasingly critical strategic role played by subsidiaries
(Hedlund, 1986).

8
The idea of heterarchy in discussing MNCs has been used before, to contrast
hierarchy, though, without giving any explicit definition or concept. The term
heterarchy is being used by MNC researchers to capture that part of reality which
is increasingly being non-hierarchically organised. Within this school of thought
(Safarian, 1966, White and Poynter, 1984, 1990, Poynter and Rugman, 1982,
Crookell, 1986, D'Cruz, 1986), subsidiaries have a much greater element of
strategic choice, more precisely, subsidiary managers are equipped with
considerable latitude to formulate strategy. And the strategy itself is greatly
constrained to context only. According to Birkinshaw and Morrison (1995), there
are three characteristics that distinguish a heterarchical from a hierarchical model
(i) dispersion of managerial capabilities and decision-making authority
throughout the organisation, (ii) the lateral relationships existing between a
foreign subsidiary and its affiliated entities, and (iii) the multidimensionality of
coordination, e.g. product and geography. Some of these aspects will elaborated
further at a later stage.


C. Subsidiary Characteristics

For the purpose of this research, it will suffice to say that a Foreign Subsidiary is
defined as any operational unit of a Multinational organisation at company level,
which is situated outside the parent country. Therefore, the terms "Foreign
Subsidiary", "Subsidiary Company (SC)", "Foreign Affiliated Entity",
"Subsidiary" and "Foreign Engagement" will be used interchangeably. The
relevant environment of a Foreign Subsidiary comprises not only of a multitude
of external linkages but also of a great deal of vertical and lateral linkages within
the MNC network (Ghoshal and Bartlett, 1990). However, it shall be noted, that
lateral linkages, i.e. relationships between the Foreign Subsidiary and its
affiliated entities, are conceptually excluded due to the direction and purpose of
this study.
9

1. Subsidiary Role and Subsidiary Strategy
For the sake of conceptual clarity, it shall be further noted, that research on
subsidiary roles and subsidiary strategies are somewhat capturing two sides of
the same coin and subsequently, are heavily interrelated and even partly
competing. Technically, research on the first category greatly considers this
aspect of Headquarters-Subsidiary Company relationship from the angle of a
head office, with subsidiaries having a role, whereby its role is being derived and
assigned by the corporate headquarters out of a holistic perspective (Birkinshaw,
1997). Whereby, research on the second category directly ties in at the subsidiary
level, focusing on business strategy of the foreign entity from a subsidiary
perspective (Birkinshaw, 1997).

Looking at the chronicle of research, one can observe a significant shift in the
perception of the role over time, played by MNCs affiliated entities abroad, so
called Foreign Subsidiaries. From initially miniature replicas of the parent
company, with to some extent, single function operations to corporate entities
with responsibilities for high value activities (Birkinshaw, 1996). Or to state
more strikingly, from simple cost contributors to high value creators.

During the early phases of MNC research, there was wide acceptance on the
integrable aspects of MNCs while some corporate functions ought to be
coordinated at the global level and others at the local level (Evans, Doz &
Laurent, 1989). Efforts were made to centralize and formalize the processes
within MNCs in order to benefit from scale economies and hence governance
mechanisms were rather, hierarchically and corporate processes rather, centrally
designed.

A Foreign Subsidiary's role was determined by the parent company and simply
assigned to the affiliated entity abroad (Birkinshaw, 1997). The process of target
10
definition and strategy formulation was under the control of the Headquarters and
Foreign Affiliated Entities, mainly, did only the implementation and execution of
the parental directive. In this phase of a rather functional operation, subsidiaries
assembled or marketed the parent's products and product lines in their respective
local markets (White & Poynter, 1984).

Researchers later on began to increasingly emphasize on external conditions and
started to gradually integrate more and more peripheral aspects into their models.
New contextual conditions such as differences in political, regulatory,
technological, cultural or societal environments, in which Foreign Entities
encounter distinct forces driving the competitive landscape in the local markets,
for instance. More and more dynamic and environmental aspects of the
relationship began to be exposed and as a consequence, decentralization was
postulated (Bartlett & Ghoshal, 1986). Internally, researchers also started to
focus on macro variations of control systems and processes across entire MNCs
(Gupta & Govindarajan, 1991). From a contingency theory perspective, Ghoshal
and Nohria (1989) consequently postulated that overall organisational
adaptiveness has to be enhanced by matching the increasing heterogeneity in the
context with appropriate differentiation in structure.

In this rather recent phase of research, Foreign Affiliated Entities are not only
given considerable autonomy with variable scope of decision (Taggart, 1998).
But the shift towards the set-ups of subsidiaries allowed researchers to define
subsidiaries as value-creating entities and based on the notions of their own
business decisions (Peterson & Brock, 2002), allowed them to analyse the
multiple strategic roles played by those corporate units as well. Such a shift in
perspective envisions subsidiary managers with considerable latitude, who try to
rather utilize their own strategic discretion and capabilities than to respond to
parental decree.

11
White and Poynter (1984) highlighted this natural progression of Foreign
Subsidiaries in a study, which was greatly acknowledged by scholars in this field.
Based on subsidiary activities, White and Poynter (1984) differentiated among (i)
marketing satellites, who simply market products within their respective host
countries, but which are centrally produced, (ii) rationalized manufacturers, who
produce certain component parts of a product and deliver them internationally as
part of an international manufacturing system (iii) product specialists, who
develop, produce and market a particular, limited product or product line for
multi-country markets, as they have specialized competencies related to that
product as well as the required set of resources, and (iv) subsidiaries that employ
a strategically independent strategy and who has the necessary capabilities as
well as the required discretion to develop lines of business for either local, multi-
country or global markets (White & Poynter 1984).

Following studies stressed and acknowledged that without the diversity of
opportunities through the market initiatives at the Foreign Subsidiary' level,
MNCs ability to adapt to changing environmental demands would be severely
constrained (Birkinshaw, 1997).

To some extent, the aforementioned change over time can be explained by the
interplay of two partially competing forces, namely, the pressure for global
integration and the pressure for local responsiveness (Prahalad & Doz, 1987).
Pressure for local responsiveness arises as MNCs have to respond to the
organizational environments in which they are embedded in and the extent can
differ significantly between the Affiliated Entities. This form of forces may be
ignited by the necessity for shorter time-to-market life-cycles, host country
regulations, highly demand oriented products and processes and subsequently the
need for product or process adaptations, to name a few. This is further supported
by environmental adaptation theories, such as the contingency approach, which
emphasizes the need for a strategic fit between external environment and internal
structure and point out that organizations have to continuously adapt to their
12
extra-firm environment in order to succeed. Pressure for global integration is,
inter alia, caused by decreasing profit margin, the potential to cut costs and
realize transnational scale economies, capital and technology intensity of
products or endeavours to exploit commonalities across products and processes
(Prahalad & Doz, 1987).

In the context of the present study, the author specifically focuses on, and later
on will empirically test, a strategy construct which is, to a great extent, related to
the concepts and ideas of 'partial world product mandates, lateral centralisation &
centres of excellence' (Roth and Morrison, 1992; Roth and O'Donnell, 1996, O'
Donnell, 2000, Poynter and Rugman, 1982 & Frost, Birkinshaw and Ensign,
2002), where the foreign entity has considerable competencies and
responsibilities for a set of value activities, associated with a particular product
for a multi-country market or geographic region respectively. Equipped in such a
manner, the author further assumes, that the foreign entity may also enjoy a great
deal of organisational flexibility in modelling its own processes. Scholars early
claimed, that organisational units require a certain level of latitude to
independently design a set of coherent organisational processes that support the
requirements of a new product (Abernathy & Clark, 1985). Conceptually, this
form of subsidiary role is also close to Frost, Birkinshaw and Ensign's (2002)
understanding of a centre of excellence as an organisational unit, which
embodies a set of capabilities and with the latter being leveraged by other parts
of the company group. However, a Foreign Subsidiary may not be
organisationally congruent with a centre of excellence. Multiple centres can
coincide or coexist within a single subsidiary or the competence profile of a
centre of excellence can also, alternatively, embody distinct functional areas of
various subsidiary companies.

To summarize, a basic comparison of strategies developed by Taggart (1997) is
illustrated in Exhibit 2.

13
Quiescent Constrained
Independent
Receptive Autonomous Taggart
(1997)
World
Mandate
Specialised
Contributor
Local
Implementor
Birkinshaw &
Morrison
(1995)
Active Receptive Autonomous Jarillo &
Martinez
(1990)
Black Hole Strategic
Leader
Contributer Implementer Bartlett &
Ghoshal
(1986)
Others Strategic
Independent
Product
specialist
Rationalised
Manufacturer
Miniature
Replica
Marketing
Satellite
White &
Poynter
(1984)
Quiescent Constrained
Independent
Receptive Autonomous Taggart
(1997)
World
Mandate
Specialised
Contributor
Local
Implementor
Birkinshaw &
Morrison
(1995)
Active Receptive Autonomous Jarillo &
Martinez
(1990)
Black Hole Strategic
Leader
Contributer Implementer Bartlett &
Ghoshal
(1986)
Others Strategic
Independent
Product
specialist
Rationalised
Manufacturer
Miniature
Replica
Marketing
Satellite
White &
Poynter
(1984)

Exhibit 2: Schematic Comparison of Models of Subsidiary Strategy
Source: Taggart (1997)

This shift of locus is logically accompanied by a number of implications on the
various facets of mutual interactions between Headquarters and its Foreign
Subsidiaries.

2. Subsidiary Autonomy and Centralisation
Another important structural characteristic of subsidiaries, with relevance to this
study, is subsidiary autonomy. Autonomy within organisations is 'related to the
division of the decision making authority between a local unit and an outside
organisation that controls it' (Garnier, 1982), or 'between centre and periphery in
an organisation' (Taggart, 1997), as in our case of multinational organisations,
between the Headquarters and its Foreign Subsidiary companies. It is worth
being noted at this point that theory (Roth and Morrison, 1992, Ghoshal, Korine
and Szulanski, 1994 & O'Donnell, 2000) frequently conceptualizes subsidiary
autonomy as the obverse of centralisation, whereby, centralisation is referred to
as 'the extent to which the locus of decision-making lies in the higher levels of
the chain of command' (Martinez & Jarillo, 1991).
14

According to Taggart (1997), within the body of early studies, some found
widespread use of centralisation of decision making and control (Dunning, 1958,
Safarian, 1966, Deane 1970 & Brooke and Remmers, 1970), while others
suggested higher degrees of decentralisation (Johnstone, 1965, Roccour, 1966 &
Garnier et al. 1979). Not really surprising, in lieu of the aforementioned, two
diametrically opposed perspective within the parent-subsidiary relationship, a
researcher can basically take. Namely, that of either a head-office/role or a
subsidiary/strategy perspective. This causing a trade-off, with subsidiary role
research favouring centralisation as well as control and subsidiary strategy
research preferring autonomy (Birkinshaw, 1997). Having said this, we can
assume that higher degrees of centralisation at the Headquarters' level will
correspond to lower degrees of autonomy at the subsidiary level and vice versa.

It is probably these inconsistent results in early studies that led later work to
tackle and analyse autonomy related issues more specifically. The division of
discretion between Headquarters and its Foreign Affiliated Entities, thereby, is
very much a function of a set of complex factors. It is this structural delegation of
decision making that also serves as a framework for the identification of
responsibilities and functions (Welge, 1981). Factors which can influence the
degree of autonomy that a subsidiary enjoys can be broadly divided into two
categories, namely (a) differences in parent and host country's environmental
context, and (b) structural characteristics of MNCs such as the subsidiary's
relative importance, ownership, degree of interchange of products or the size of a
multinational organisation (Garnier, 1982). Complementarily, Hedlund's (1981)
study indicates that a high level of intra-network transfer of goods as well as
market share reduces, whereas the subsidiary size in relative and absolute terms
increases its autonomy. Yet, Gates and Egelhoff (1986) point out that
Headquarters' influence as a moderator of the level of autonomy is probably the
most crucial and pronounced factor of all.

15
Subsidiary autonomy, which relates more to and is reflected in the formal
organisation structure (Ghoshal, Korine & Szulanski, 1994), discernibly
influences the latitude of subsidiary managers. Unlike pure influence, which can
also flow upward or horizontally, autonomy largely stems from structural
attributes and mainly flows downward (Bacharach and Lawler, 1980). Increasing
autonomy qualifies managers to perform corporate related strategic and operative
tasks far more independently. This is confirmed by many scholars (Rugman and
Bennett, 1982 & White and Poynter, 1984). Such strategic as well as operative
tasks include resource allocation, investment decisions, product or pricing
policies, target group selections, quality control decisions or development of
production plans and hence, most of the functions of the value chain (Martinez &
Jarillo, 1991).

Functionally, while autonomy is further advocated by Ghoshal and Bartlett
(1988) to facilitate the creation and diffusion of innovation at subsidiary level,
Ghoshal, Korine & Szulanski (1994) empirically found no perceptible influence
of autonomy on the intensity of inter-unit communication, namely, on both, the
level of information flow between Headquarters and subsidiary and between
lateral linkages of subsidiaries.

Interestingly, Prahalad and Doz (1981) illustrated that, at a much broader level
and as a consequence, the delegation of authority towards subsidiaries itself can
ignite a quasi-perpetual process with subsidiaries gaining further independence
from Headquarters with the implication for control and coordination being that,
as subsidiaries gain expertise, start performing excellently and mature with
respect to strategic resources, (i.e. technology, capital or access to markets) the
ability of Headquarters to control subsidiaries will be significantly reduced.
Scholars like Martinez and Jarillo (1991) support these findings by confirming
that autonomous subsidiaries, due to very little interdependencies, require the
least amount of coordination and control while subsidiaries who pursue higher
degrees of integration and centralisation, which correspond to lower degrees of
16
autonomy, make intense use of practically almost all kinds of coordination and
control mechanisms.

However, this may not belie that Headquarters remain the strategic apex of the
Multinational organisation and the ultimate responsibility for coordination and
overall strategic direction lies with the focal organisation in the home country.
The locus of control shifts but yet the interdependence remains.


3. Subsidiary Involvement and Entry mode
A further important aspect to be highlighted refers to the alteration in the
institutional arrangements established to conduct cross-border transactions within
a firm, the so-called market entry modes. Entry decisions have been of strong
interest to researchers for a very long time. In the 1960's, the main focus of
studies was export vs. foreign-direct investments (FDIs). In the 1970's, further
strategic options such as licensing and franchising were included. And since the
1990's, with the growing importance of emerging markets and equity regulations
as commonly practiced market entry barrier, international joint ventures (JVs)
have drawn the attention of scholars (Buckley & Casson, 1998).

Entry modes can be considered from a hierarchical perspective. Following the
conceptualisation made by Kumar and Subramaniam (1997), one can
differentiate between equity and non-equity modes of market entry on the first
hierarchical level, based on a probable equity involvement. At the second
hierarchical level, equity modes can be further subdivided into (equity) joint
ventures and wholly owned subsidiaries with both requiring a major resource
commitment in the host country. On the other hand, non-equity modes can be
further differentiated into contractual agreement and export (Pan & Tse, 2000)
with each institutional arrangement having its own merits and disadvantages.

Export is mainly characterized by domestic value creation, administrative control
and physical transfer of products and goods either directly through the company
17
itself or indirectly through intermediaries. The basis for a contractual agreement
is a binding contract between the company and an agent to produce and market
the product in the host country, in return for an economic rent (Kumar &
Subramaniam, 1997). Joint ventures, as institutionalized and equity based
arrangements, are realised through the pooling of tangible and intangible assets
between the company and its JV-partner and additionally through sharing or joint
ownership. The concept of wholly owned subsidiaries, with full ownership over
foreign operations as an integral characteristic, can be implemented either
through brownfield (acquisition) or greenfield investments.

Empirically, the preferential use of the aforementioned modalities to transfer a
product or service assimilated over time, as contextual conditions, started to
increasingly influence the choice of foreign market entry modes, a possible
epiphenomenon of increasing pressure for local responsiveness. The choice for
an entry mode, thereby, very much depends on a set of different factors.
According to Pan and Tse (2000) & Kumar and Subramaniam (1997), these so-
called predictors can be broadly categorized into firm-specific, product-specific,
(Erramilli & Rao, 1993, Kim & Hwang, 1992, Kumar & Subramaniam, 1997 and
Madhok, 1997), industry-specific and country-specific factors (Anderson &
Gatignon, 1986, Kogut & Singh, 1988 and Tse, Pan & Au, 1997).

From a theoretical perspective, the question of whether and to what extent
organizations should adapt and hence structurally respond to their environment,
has been central to a large number of environmental adaptation theories such as
institutional theories or contingency approaches.

From a transaction cost perspective, the preference for a particular market entry
mode and hence a firms degree of engagement or foreign involvement, will to a
great extent reflect a firm's desire to minimize transaction costs. The question of
how a firm should organize its boundaries in order to minimize transaction costs
becomes central. Transaction costs, inter alia, include costs of monitoring, costs
18
of establishing supplier relations, costs regarding the after sales market
(Dunning, 1989).

Market entry modes have been investigated using the theoretical lenses of
cultural and national factor frameworks as well. Kogut and Singh (1988)
hypothesized that increased cultural distance between home and host country,
increases the level of risk in post-acquisition integration and hence firms may
prefer less risky arrangements as modes of transaction. Their findings illustrated
that greater cultural distance predominantly resulted in joint-ventures and
greenfield investments rather than acquisitions. Similarly, Gatignon and
Anderson (1988) found evidence that cultural distance, rather leads to partial
than full ownership.

Agarwal and Ramaswami (1992) have examined in one of their studies, the
independent and joint influences of some of these factors on the choice of an
entry mode by applying multinomial logistic regression analysis. They concluded
that though firms want to increase their market presence through foreign direct
investments, their ability however is constrained to market knowledge
(Anderson, 1997), size and multinational experiences (Agarwal & Ramaswami,
1992). Kogut and Singh (1998) directly related cultural aspects to different
international operation modes, inter alia, stating that in contrast to wholly owned
subsidiaries, joint ventures may be troubled not only by the cultural distance of
the partner but also due to the concerns of sharing proprietary assets.

Further conceptual frameworks with explanatory power to some extent are the
eclectic model, also frequently referred to as the OLI-model, developed by
Dunning (1980) based on ownership specific, location specific and
internalisation specific advantages and the Swedish Uppsala model (Johanson &
Vahlne, 1977). Based on these distinct schools, literature, by and large,
distinguishes between two ways of modelling the process of alteration in
institutional arrangements. While the former is a static approach with entry
modes emanating from single stage decisions, the latter posits a dynamic
19
contemplation. In the second school, entry modes are considered to be a
continuum of gradually increasing levels of resource commitment (Chu &
Anderson, 1992) as a result of increasing market knowledge. Calof and Beamish
(1995), who epically investigated in one of their studies the general causes and
patterns of change in entry modes, consistently and concludingly, portray a
firms process of internationalisation itself as an ongoing sequence of adaptations
to a continuously changing international environment (Calof & Beamish, 1995).


4. Subsidiary Age
Conceptually, the construct of firm or subsidiary age is not new. Numerous
studies have examined the concept of firm age and its relations to various aspects
of internationalisation. Some have investigated why firms internationalize at an
early age (Oesterle 1997, McDougall, Shane and Oviatt, 1994 & Oviatt and
McDougall, 1997), others like Autio, Sapienza and Almeida (2000) have
examined the effects of firm age on international sales, its knowledge intensity
and the imitability of its core technology; Evans' (1987) study examined the
influence of firm age on company growth, the variability of its growth and the
probability of firm dissolution, suggesting that the latter will decrease with firm
age.

In the context of this study, the author assumes that the age of the Subsidiary
Company has an influence on the strength of relationship between the structural
variables under observation and control that is imposed by focal organizations on
their Foreign Affiliated Entities. This rationale is grounded in the presumption (i)
that increasing time of operation leads to a more solid embedding of the
Subsidiary Company into its corporate environment and (ii) organisational
learning at various levels within the Subsidiary Company increases with the
period of the Subsidiary Company's operations. Such as, an increase in
managerial and technical proficiency, higher host-country environmental
competencies and experiences or more profound market knowledge possessed by
20
local managers, which in turn leads to greater attempts to circumvent
Headquarters' governance mechanisms.


C. Environmental Characteristics


1. General Remarks
The centrality of the concept of environment with its components and dimensions
has been recognised by literature for a very long time (Lawrence and Lorsch,
1967; Perrow, 1967; Duncan, 1972). According to Werner (2002), this area of
research among others includes studies on global economy (Aram, 1997,
Czinkota and Ronkainen, 1997 & Denison et al. 1996), on domestic and global
market structures (Arora and Gambardella, 1997, Mascarenhas, 1996), on
political and regulatory environments in the home and host countries (Guilln,
2000, Nehrt, 1998, Rugman and Verbeke, 1998, Moon & Lado, 2000) and
research on the measurement and management of environmental risks (Shrader,
Oviatt and McDougall, 2000, Werner, Brouthers and Brouthers, 1996).


2. Risk and Environmental Uncertainty
Generally, the term risk is used to denote the probability of the occurrence of a
likely event. And if the probability of occurrence is unknown, we refer to it as
uncertainty. The term "risk" thereby actually does not state anything as to
whether a possible deviation from the expected values is positive or negative.
However, many management scientists and organisational theorists commonly
assign the label "risk" not only with strictly negative deviations and outcomes but
also use "risk" and "uncertainty" interchangeably. Despite these misconceptions
in theory, which are more than simply semantic, the author, for the sake of
usability of previous concepts and constructs in this study, will follow the
commonly established practice in the usage of the terms and ideas of risk and
uncertainty. Further, Jauch and Kraft (1986) accent, that a significant amount of
21
the theoretical and empirical work on environmental risks is based on the implicit
assumption that uncertainty is dysfunctional to outcomes and performances but
this may not be applicable as illustrated in their proposed model.

Environmental uncertainty or perceived environmental uncertainty is being
viewed as one of the key issues top managements and organizational
administrators have to cope with. Milliken (1987) noted that the construct has
often been inadequately understood. These problems and a lack of consistency in
prior conceptualizations made her develop not only a general definition but also
suggest three types of uncertainties about environments, namely state uncertainty
or perceived environmental uncertainty, effect uncertainty and response
uncertainty (Milliken 1987). Effect uncertainty refers to the inability to predict
the nature of the effect of a future state of the environment on the organization
and response uncertainty denotes the inability to predict the consequences of a
response choice (Buchko, 1994). State uncertainty or perceived environmental
uncertainty occurs when management perceives the organization's environment
to be unpredictable or perceives the prediction to be less accurate (Buchko,
1994). According to Milliken (1987) it is this type of uncertainty which is
conceptually closest to what is subject to general usage. Uncertainty about
environmental variables that impact corporate outcomes, as a consequence,
reduces the predictability of corporate performance and subsequently increases
risk (Miller, 1992).

Several studies have tried to develop appropriate measures of risk. According to
Miller (1992), literature on risk conceptualisation and measurement in the field
of international management can be broadly divided into two categories, namely
(i) the "particularist" view, which investigates uncertainties individually (e.g.
political risks or exchange rate risks), and (ii) the multidimensional and
integrated approach, which avoids exclusion of other interrelated risk variables
and hence investigates specific uncertainties jointly, with multidimensional and
integrated approaches forming the majority of risk measurement techniques.

22
A brief overview on measurement research shall follow. Lawrence and Lorsch
(1967) examined uncertainty associated with a specific job or function and hence
Milliken (1987) suggested that this scale may not be adequate to measure an
organizations general environment. Duncan (1972) conceptualized uncertainty
based on two dimensions, namely complexity and dynamism, and three
operational indicators that had been derived from these two categories. Downey,
Hellriegel and Slocum (1975) and Tosi, Aldag and Storey (1973) have
empirically assessed measurement properties of both concluding that both scales
have significant weaknesses. A more comprehensive and sophisticated scale was
developed by Miles and Snow (1978). The so-called "perceived environmental
uncertainty scale" developed by Miles and Snow comprises six subscales and 25
items where each of those six subscales correspond to six key sectors of external
environment namely supplier, competitor, financial market, government,
regulatory environment as well as unions. The respondents are asked to rate the
degree of predictability applying a seven-point Likert scale. Euromoney's proxy
for uncertainty, the "Euromoney country risk rating" uses nine categories that
more or less fall into three broad groups: analytical indicators, credit indicators,
and market indicators and ultimately calculates a weighted score for each
country.


3. Outcome Uncertainty and Outcome Measurability
Following the afore-mentioned chain of argumentation, environmental
uncertainty becomes, inter alia, manifest in outcome uncertainty caused through
host country or industry volatility. Outcome uncertainty denotes the probability
that the action undertaken by an agent (for example a Foreign Subsidiary
manager) will ultimately result in the intended outcome (O'Donnell, 2000). With
increasing uncertainty, the manager will have less influence on the outcome as
outcomes are only partly a function of the agent's efforts (Jensen & Meckling,
1976). Under these premises, outcomes will be increasingly affected by
undetermined and unsystematic disturbances from the environment. Hence when
outcome uncertainty is high, outcome based control modes as well as
23
performance related incentive compensations become less attractive to (i) the
principal, since the cost of shifting risk to the agents is much higher (Eisenhardt,
1989a), particularly when agents are risk avers, and (ii) to the agent, where the
lack of attractiveness to the agent is caused by his inability to diversify risk to the
same extent as the principal can generally do. Empirically, the outcome
uncertainty is frequently conceptualised and assessed by the outcome
measurability. The author, more specifically, will revert to this point later.


D. Control Modes

Generally, control can be defined as the sum of activities or mechanisms used to
obtain information about behaviours and decisions. It is to utilize the former to
regulate the conduct of activities so that the results are in accordance with the
plans, goals and expectations of the controller (Child, 1973).

Top managers at the Headquarters, who increasingly derive a considerable share
of sales and profit from overseas subsidiaries, or top executives who have a
significant part of their assets attributable to overseas operations, would not only
like to be assured that subsidiaries continue to contribute to the overall success of
the group but also have an increased desire to exercise control over these
affiliated entities abroad (Prahalad and Doz, 1981). Management researchers,
likewise, have been greatly concerned with issues and aspects of control in
organisations (Lawrence and Lorsch, 1967; Child, 1973; Edstrm and Galbraith,
1977; Mintzberg, 1979).

As businesses and companies became increasingly global, studies started to more
heavily focus on coordination and control mechanisms used by Multinational
Corporations as well as subsidiary companies (Nobel and Birkinshaw, 1998;
Borkowski, 1999; Chang and Taylor, 1999; Taylor, 1999; Gupta, Govindarajan
and Malhotra, 1999; Ferner, 2000; O' Donnel, 2000). Control mechanisms were
24
mainly used to integrate the activities within MNCs. However, it is generally
accepted that mechanisms used by multinationals to coordinate and control their
foreign affiliated entities are neither original nor exclusive to MNCs (Martinez
and Jarillo, 1989). Yet, the complexity and idiosyncrasies of MNCs make it an
interesting subject of study.


1. Behaviour Control
Behaviour control denotes control obtained by observing and monitoring the
behaviour of subordinates (Egelhoff, 1984). However, personal surveillance
requires a clear understanding of mean-end relationships because only then are
appropriate instructions possible. This form of monitoring is considered to be the
most direct one. Taken to its logical extreme, behaviour control would lead to
behaviour formalisation (Egelhoff, 1984). Ouchi and Maguire (1975), in one of
the early studies on organisational control examined the conditions that govern,
inter alia, behaviour control suggesting that especially in small organisations and
even more importantly when mean-end relations are completely understood,
behaviour control is exerted. Their research further indicated a decrease in
behaviour control as the hierarchical level increased.

On the very practical end, time-intensity, high control costs entailed with this
form of regulation and the frequent lack of proximity between controller and
his/her object of control make this form of control less attractive. Also, it is
considerably more restrictive than the other forms. Thus, it is quite likely that
MNCs use techniques other than behaviour control to monitor Foreign
Subsidiary management.





25
2. Bureaucratic Control
Bureaucratic control denotes integrating mechanisms such as rules, policies,
procedures and objective or target performance setting, to manage subsidiary
activities (Roth and Nigh, 1992). Plans and schedules are pre-established, rules,
policies and procedures are formalised and information and communication
systems are standardised, with all former elements being specified impersonally
(Van de Ven, Delbecq and Koenig, 1976). Bureaucratic control strategies reduce
Headquarters' direct involvement in Foreign Subsidiaries by replacing active
control (Roth, Schweiger and Morrison, 1991) through impersonal methods
(Edstrm and Galbraith, 1977) and explicit delineation of objectives. It utilizes
the extensive set of rules, regulations and procedures to restrict and limit
subsidiary management's activities and authorities (Baliga & Jaeger, 1984).
However, this requires that organisational members accept the legitimacy of an
organisation's authority. This mode of control is considered to be a relatively
simple form of controlling subunit activities, resulting in a greater degree of
decentralization (Galbraith, 1973). Object of control is organisational execution
and the output of activities rather than managerial behaviour. Hence it may limit
operational flexibility and organisational adaptiveness to a greater extent but at
the same time reduces the required verbal communication between headquarters
and subsidiary company to a minimum.


3. Culture Control
Corporate culture is considered to be a pattern of values, norms, beliefs and
expectations shared by the organizations members (Schwartz & Davis, 1981).
These patterns serve as adaptive and regulatory mechanisms and are an important
guide to behaviour in addition to the explicit rules which exist. Especially in
instances where it is difficult to specify, monitor and control behaviour or output,
organisations may indoctrinate these values and norms to their organisational
members and hope that their acts are in accordance with the company's intents.
(Baliga & Jaeger, 1984). This form of control is rather implicit and informal and
26
coordination here is based on a broad and commonly accepted corporate culture.
Corporate culture finds its explicit organisational articulation in its symbols,
languages, perceived atmosphere, practices and in its corporate identity. Certain
corporate and human resource related practices facilitate the evolution and
diffusion of corporate culture within an organisation like a careful selection and
integration of new organisational members or training and socialisation. Further
facilitators are long-term employment, consensual decision-making or repeated
interactions among corporate members.

One, very practical way of exerting culture control in a MNC context is through
recruiting parent country nationals for international subsidiary positions (Ouchi,
1979) and consequently this mode of control may be adopted in culturally high
distant subsidiaries. Edstrm and Galbraith (1977) refer to this as control by
socialisation, characterized by (i) a significant number or proportion of
expatriates in top and middle management position in Foreign Subsidiaries, (ii)
de-emphasis of formalisation and (iii) an increased exchange of information
between Headquarters and its Foreign Affiliated Entities. These expatriates use
commonly shared assumptions as well as indoctrinated values and implement
social and corporate standards within the subsidiary companies, which are
derived from the Headquarters. In this context, Perrow (1971) observed an
interesting phenomenon associated with culture control denoted as the paradox of
decentralisation which states that the degree of control exerted in a decentralized
organisation can be even higher than in a centralized one. Again the assumption
is that, once organisational members have internalized firm's values, we can
expect them to make similar decisions under similar circumstances. Clegg and
Gray (2002) underpin these findings by arguing that most of the expatriates are
sent abroad on the basis of an ethnocentric staffing policy. Ethnocentric view
suggests that key positions in foreign subsidiaries should be staffed with parent
country nationals while the geocentric view, for instance, advises staffing
selections based on competencies and not on nationality (Perlmutter & Heenan,
1974). This kind of implicit cultural control over subsidiaries may not only
27
reduce agency costs due to shared values and goals but also makes rigid
bureaucratic control less necessary (Markus and Pfeffer, 1983).
Complementarily, Gong (2003) found empirical support for one of his
propositional arguments which state that with greater cultural distance, the
impact of parent countrys expatriate staffing policy on subsidiary performance
will be increasingly positive.

Since environmental characteristics surrounding a Multinational Corporation are
quite different or partly even unique, the extent to which companies use
expatriates or foreign assignments even within a single MNC can differ. Based
on a set of environmental (e.g. political risk, cultural distance and competition) as
well as organisational (e.g. level of complexity and interdependence) variables,
Boyacigiller (1990) has designed a model to account for the differential
utilization of expatriates in U.S. multinationals. However, in the past few years,
managers and academics (Zeira and Banai, 1983, Tung, 1987 & Harvey, 1989)
likewise have noted a marked reduction in the assignment of expatriates abroad.
This trend of replacement through host country nationals is inter alia fuelled by
lower costs, increasing managerial and technical proficiency in many countries,
indigenous operations, higher host-country environmental competencies and
more profound market knowledge possessed by local managers (Kobrin, 1988).

While recognizing the increased use of host country nationals, Kobrin (1988)
however maintains that (American) Multinationals may potentially face
difficulties in exercising control and in creating informal organisational links
across subunits. Underpinning Bartlett's (1982) argument that MNCs need to be
simultaneously, globally integrated and locally responsive, Boyacigiller (1990)
and Kobrin (1988) advocate from a control perspective that the phase-out of
expatriates has probably gone too far. However, in accordance with Gong (2003),
one may counter argue that parent companies, through a process of cultural
learning, may socialize host country nationals into their corporate culture and
hence, in such a manner, may still be able to exercise culture control.
28
4. Output Control
Output control is largely exerted through performance reporting systems which
evaluate the subsidiarys output (Chang & Taylor, 1999) and implies that data
such as sales figures, return or profit are considered suitable and can be used to
monitor operations. In contrast to behaviour or bureaucratic control, companies
enjoy substantial organisational flexibility to choose the means and deliver
jointly predefined results. But the risk will be more or less transferred completely
to the agent as outcomes are only partly a function of behaviour (Jensen &
Meckling, 1976). Hence, particularly in culturally distant environments, where
uncertainty may possibly be higher, this mode of control can be less attractive to
the principal as well as the agent.

The process of managing and controlling individual corporate units through the
medium of measurable and prioritized results is not really new. Substantial
importance has been given to this particular domain of management techniques
approximately two decades before. Management by Objectives (MbO) refers to a
closed loop process, where managerial attention is clearly focused on results
rather than on activities and comprises co-determination of objectives, schedules,
measurement variables and control means (Duffy, 1989). Dirsmith, Jablonsky &
Luzi (1980) have epically assessed MbO as a management technique based on a
number of variables such as organizational perspectives, planning and control
orientation, flow of information, finally concluding that MbO serves as a control
mechanism by providing for feedback and measurement of objective attainment.
Not only in agency theory is information considered to be a commodity which
brings about costs but at the same time, it can be purchased as well (Eisenhardt,
1989a) thus giving information systems increased importance as a mechanism to
impose control. Such a consideration implicitly assumes that the principal can
limit the diverging and aberrant activities of the agent by investing money in
corresponding information systems such as MbO i.e. in output based control
modes.

29

5. Monetary Incentive Compensation
Given that subsidiaries are not only increasing in size and scope but also
maturing in terms of technology, capital and management resources scholars
have been greatly concerned about more subtler and newer forms of control
types. Another way of aligning headquarters' and subsidiary company's goals is
through the use of financial incentives, in which a portion of subsidiary
management's compensation is outcome-based (O'Donnell, 2000).

Conceptually, the total compensation for the management comprises fixed as
well as variable components. Fixed components mainly include a fixed salary
and fringe benefits such as cars, housing, school etc., while variable components
include short-term and long-term incentives and individual or group elements for
instance. According to the company's pay strategy or pay policy, the pay mix will
vary in terms of relative allocation. Balkin and Gomez-Mejia (1987) have
examined the effectiveness (which denotes the extent to which the compensation
strategy contributes to the achievement of organisational objectives) of different
pay strategies, arguing that effectiveness significantly depends on the match
between compensation strategy on the one hand and organisational as well as
environmental characteristics on the other (e.g. high-tech vs. traditional firms,
stage in product life cycle, scale or profitability etc.). Further conditions of
relevance for designing such a system include the decision horizon (a balance
between short-term and long-term objectives) (Rappaport, 1978), the executives
attitude and behaviour towards risk (Salter, 1973), his preference for direct pay,
deferred income and benefits (Lewellen and Lanser, 1973) or its link to
meaningful financial measures (Murthy and Salter, 1975).

Hierarchically, most of the early studies focused on the effects of compensation
strategies upon corporate level. Hence more recent studies (Galbraith and
Merrill, 1991, Gupta and Govindarajan, 1986) have started to concentrate on
30
business-unit level indicating possible trade-offs between different functional
strategies (e.g. R&D / Innovation - oriented vs. marketing - oriented strategies).
Interestingly, Gupta and Govindarajan (1986) further posit that the determination
of reward should be specified by some combination of a strict formula and
subjective assessment by the superior. A strict formula ensures reliance on rather
an objective formula with the merits of great precision and no exercise of bias in
assessing. Whereas a subjective assessment, allows for managers to pay attention
to tasks and objectives which are less operational and quantifiable, but at the
same time, of great importance (Gupta and Govindarajan 1986).

Martinez and Jarillo (1989) have thoroughly studied control mechanisms through
an exhaustive literature review finding that those mechanisms used by
Multinationals have evolved over time from focusing on the more formal and
structural tools initially to an appreciation of the subtler and informal forms of
coordination. They have argued that, in the early years, practically all studies
centred on the formal mechanisms of coordination such as departmentalization or
grouping of organizational units, centralization, formalization, standardization as
well as output and behaviour control. Then, from the 1980s onwards research
increasingly started dealing with informal, subtler mechanisms such as
socialization, acculturation and informal communications. From a contingency
perspective both authors argue that changes in the internationally competitive
environments forced strategic adaptations and adequate internal differentiation
by Multinational Corporations and hence the described evolution in theory was
driven by an occurred evolution in practice Martinez and Jarillo (1989). Werner
(2002) points out that type and degree of control is, inter alia, related to and
moderated by the role played by subsidiary, the level of interdependence, degree
of ownership or MNC nationality for instance.


31
E. Theories

Before directing particular attention to the theoretical perspectives applied in the
present study, a brief operationalization of the term theory is given below. A
theory is 'an ordered set of assertions about a generic behaviour or structure
assumed to hold throughout a significantly broad range of specific instances'
(Sutherland, 1975). According to Whetten (1989), and tied to its necessary
components, a theory must contain the following elements (i) a set of factors (i.e.
variables, constructs and concepts; relevant question: what?), (ii) a set of
internally consistent relationships of variables (i.e. introduction of causality;
relevant question: how?), and (iii) dynamics that justify the selection of factors
and proposed causal relationships (i.e. constitution of theory's assumptions:
why?). He further comments that, while these three elements together form the
essential ingredients of a simple theory, namely description and explanation, the
rather temporal and contextual questions of who? where? when? constitute the
range of a theory (Whetten, 1989). While data describes which empirical patterns
are observed, theory explains why these empirical patterns are observed (Sutton
and Staw, 1995).

Concordantly with Weick (1995) the author emphasizes that a good theory is the
result of socially constructed and cooperative development process.


1. Agency Characteristics
Agency theory provides theoretical underpinnings for various research efforts.
Whenever the completion of a task within a hierarchical relationship necessitates
the delegation of authority, which is actually central to the structure of any
multiperson business organization, agency analyses become useful (Jacobides &
Croson, 2001). In such a situation, the principal engages one or more agents to
perform some services on his behalf and hence delegates some decision-making
authority towards the agents. Agency problems occur due to an incongruence of
goals, an asymmetry of information and a diverging attitude towards risk.
32
However, this has to be accompanied by a particular model of man, which has
been neoclassically derived. The idea of homo economicus who is
opportunistic, individualistic and mainly self-serving (Donaldson & Davis,
1991). Such an economic view of utility maximization and own expenditure
minimization causes agency problems such as moral hazards (attempt to exert
less effort) and adverse selection (refers to the mispresentation of an agent's
abilities).

According to agency theory, the principal will generally attempt to control agents
in order to minimize the costs of the agency relationship. Agency costs refer to
the expenditures by the principal to monitor the agent, the bonding expenditures
by the agent and the residual loss, defined as the experienced reduction in
welfare of the principal (Jensen & Meckling, 1976). Within this domain,
contracts are considered to be the prime governing mechanisms to limit the
agents self-serving behaviour. Agency theory, in particular the principal-agent
research, is about determining the most efficient contract alternative, given
certain assumptions about people, organization and information in a particular
situation (Eisenhardt, 1989a).

Applied to the particular context of Multinational organisations, the
Headquarters-Subsidiary relationship by all means, has a principal - agent (Roth
& ODonnell, 1996) or principal - multi agents structure. In this given context,
agency theory highlights the principal-agent relationship between the parent
company acting as a principal and the subsidiary acting as an agent. The design
of control now plays an important role while organizations expand and
internationalise, particularly, as it serves as an essential integration function in
MNCs. Increasing complexity and differentiation of structures, as side effects of
increasing degrees of internationalisation of Multinationals, generate a crucial
need to monitor and coordinate activities (Geringer & Hebert, 1988), as
Headquarters do have to ensure that the various activities originating and
33
executed in its foreign subunits are compatibly coordinated and support the
commonly shared objectives of the overall organisation (Egelhoff, 1984).

While operating the strategic objectives and interests (especially in culturally
distant and different contexts), management practices or types of control may
diverge and might not be salient for the principal at the Headquarters (Yan, Zhu
& Hall, 2002). According to Holmstrom, the more autonomy the agent enjoys,
the greater the information the agent possesses, the greater the specialized
knowledge required to perform the task and subsequently the greater the chances
for the occurrence of moral hazard and hidden information (Holmstrom, 1979).
This will possibly result in higher risks and uncertainties and therewith in higher
agency costs (Davis, Schoorman & Donaldson, 1997). In such cases, agency
theory traditionally suggests governing contracts like behaviour control, culture
control or output control for monitoring agents (Ekanayake, 2004).

2. Stewardship Characteristics
Assumptions made in agency theory, particularly about individualistic and self-
serving utility maximizers might not hold for all managers. Hence, newer, critical
writings posit that an additional theory might be needed to explain principal -
manager or Headquarters - Subsidiary relationships.

Stewardship theory, which is more a psychological and sociological approach to
governance, takes up an alternative perspective. In contrast to the economic
approach of agency theory, stewardship theory argues that managers are not
opportunistic, self-serving agents but rather good stewards of a company, who
work pro-organizationally and diligently, as well as behave in a collective
manner (Donaldson, 1990). Therefore, firstly, as can be seen from the
aforementioned behavioural premises, stewardship theory applies a distinct
model of man. Secondly, when a principal engages a manager to perform certain
tasks on his behalf, the situational assumption underlying the delegation of
authority is one that is characterized by aligned interests between steward and
34
principal, rather than by diverging goals and asymmetric information (Davis,
Schoorman and Donaldson, 1997). Stewards place a higher value to or have a
higher utility respectively on cooperative and pro-organisational behaviour.
Proponents of stewardship theory argue that in trade-off situations, stewards are
believed to work towards the overall organisations interest, and by doing so they
will simultaneously meet personal needs. Further, if performance variations arise,
then these are mainly caused by structural or situational differences in which the
steward is located rather than by the steward himself. It is these structural or
corporate characteristics that determine the facilitation of effective actions
(Donaldson and Davis, 1991).

Analogue to agency theory, stewardship theory is grounded in control as well.
However, in contrast to agency approaches, it posits empowering governance
structures and recommends control to be rather centralised with managers
(Dalton et. al., 1999). It exceedingly considers structures that facilitate and
empower stewards (Davis, Schoorman and Donaldson, 1997) to be far more
appropriate, further arguing that stewards' autonomy should be deliberately
increased. Specifically, with respect to Top Management level executives such as
the CEOs, for instance, stewardship theorists argue that they should be given
highest authority and discretion that will ultimately help to attain superior
performance. The rationale behind such kind of 'involvement oriented' (Lawler
1986) approaches is that challenges and responsibility will develop self-
regulatory behaviour and make stewards control their own behaviour. Too much
control imposed on stewards may not only lower their motivation but also - if a
manager rather prefers a stewardship over an agency relationship - can possibly
become counterproductive.

Both theories seem to be partially competing, but moreover it seems possible that
each of these theoretical approaches has validity in its own domain. Donaldson
(1990) somewhat argues, that stewardship theory may possibly prove appropriate
when coalition between principals and stewards persists, but if the same coalition
is called into question, agency theory might prove better. Interestingly, through
35
his form of argumentation for conditional appropriateness, he adds a dynamic
component into the organisational economics and management theory -
discussion.


III. Hypotheses

For recapitulation, Figure 3 exemplarily shows a set of structural, environmental
and control variables derived from theory to graphically add order to the
underlying conceptualisation of this research. The relevant set of factors for the
present dissertation, which have been extensively highlighted in the preceding
sections and repeatedly included in Figure 3, are based on an array of causal
assumptions between the variables, now transformed into propositional
arguments. The same will be further operationalised and empirically tested
hereinafter.


Environment
Control
Degree
Type
Multinational Corporation
HQ - level:
- Nationality
- Firm Size
- Degree of Involvement
- Degree of Internationalisation
- Level of Interdependence
etc.
SC - level:
- Subsidiary Role
- Subsidiray Age
- Tenure of Subsidiary President
- Subsidiary Relative Importance
- Subsidiary Autonomy
- Entry Mode
- Task / Decision Characteristics
etc.
PC & HC - level:
- Environmental Uncertainty
- Outcome Uncertainty
- Geographical & Cultural Distance
etc.
Behaviour, Bureaucratic,
Output, Culture Control
Incentive Compensation etc.
Low, Moderate, High
etc.
Environment
Control
Degree
Type
Multinational Corporation
HQ - level:
- Nationality
- Firm Size
- Degree of Involvement
- Degree of Internationalisation
- Level of Interdependence
etc.
SC - level:
- Subsidiary Role
- Subsidiray Age
- Tenure of Subsidiary President
- Subsidiary Relative Importance
- Subsidiary Autonomy
- Entry Mode
- Task / Decision Characteristics
etc.
PC & HC - level:
- Environmental Uncertainty
- Outcome Uncertainty
- Geographical & Cultural Distance
etc.
Behaviour, Bureaucratic,
Output, Culture Control
Incentive Compensation etc.
Low, Moderate, High
etc.
Environment
Control
Degree
Type
Multinational Corporation
HQ - level:
- Nationality
- Firm Size
- Degree of Involvement
- Degree of Internationalisation
- Level of Interdependence
etc.
SC - level:
- Subsidiary Role
- Subsidiray Age
- Tenure of Subsidiary President
- Subsidiary Relative Importance
- Subsidiary Autonomy
- Entry Mode
- Task / Decision Characteristics
etc.
PC & HC - level:
- Environmental Uncertainty
- Outcome Uncertainty
- Geographical & Cultural Distance
etc.
Behaviour, Bureaucratic,
Output, Culture Control
Incentive Compensation etc.
Low, Moderate, High
etc.

Exhibit 3: A Set of Control Predictors and Explanatory Variables
Source: Author

36
Hypotheses are defined as 'concise statements about what is expected to occur'
(Sutton and Staw, 1995). However, these empirically testable and propositional
arguments should not contain logical arguments about why empirical
relationships can be expected. Hypotheses have to be motivated by a
combination of causal reasoning and prior empirical findings, which provide
further support for the underlying theory (Sutton and Staw, 1995), while the
logical argumentations as to why empirical relationships can be expected are in
fact part of the justification process of hypotheses.

According to what has been illustrated, theoretically and empirically, in the
previous sections of the present work, the author hypothesizes that:


Hypothesis 1a: As the parent company's degree of involvement increases, the
degree of culture control will increase.

Hypothesis 1b: As the parent company's degree of involvement increases, the
degree of bureaucratic control will increase.

Hypothesis 1c: As the parent company's degree of involvement increases, the
degree of monetary incentive compensation will increase.


In compliance with agency theoretical considerations, the Hypotheses H
1a,
H
1b,

and

H
1c
are based on the notion that, increasing degrees of involvement, as
denoted by rising levels of paid-up capital, increase the principal's incentive to
monitor and control the foreign subsidiary. The rationale for this assumption is
rooted in the inherent risk associated with a high mobilisation of tangible and
intangible resources, particularly, if this is accompanied by difficulties in being
able to revert an investment decision which, consequently, may lead to high
opportunity or even sunk costs. Hence, top executives who have a significant part
of their assets attributable to overseas operations have an increased desire to
37
exercise control over these affiliated entities abroad (Prahalad and Doz, 1981).
Therefore, the author explicitly assumes that focal organisation's propensity to
impose higher degrees of control will similarly increase across the selected
control types, irrespective of the characteristics associated with the individual
control modes.


Hypothesis 2a: As the subsidiary's strategic role increases, the use of culture
control will increase.

Hypothesis 2b: As the subsidiary's strategic role increases, the use of
bureaucratic control will increase.

Hypothesis 2c: As the subsidiary's strategic role increases, the use of monetary
incentive compensation will increase.


The author further assumes that the importance of a subsidiary to its parent, as
denoted by its strategic role of regional centralisation, will positively moderate
the level of control exercised by the parent on its Affiliated Entity abroad. A high
level of strategic importance to the overall success and prospect of the focal
organisation does not necessarily require a high level of financial commitment to
the subsidiary. However, the subsidiary may be conceptually envisioned as a
high value creating entity and hence equipped with considerable capabilities to
utilize its own resources and competencies. Withal, the rising asymmetry of
information, due the gradual increase in knowledge on processes and foreign
product markets, accumulated with a subsidiary's growing strategic role for a
mandated product, additionally entails a certain amount of uncertainty to the
foreign engagement and ergo further increases the incentive to monitor and
control the economic agent more closely (Holmstrom, 1979).

38
H
1a
and H
2a
shall explicitly reflect a propositional challenge, made in this study,
of a phenomenon that gradually diffuses not only within the theoretical
landscape. Over the last couple of years, theoretically as well as empirically,
scholars observed a shift from an ethnocentric to a more geo- and polycentric
staffing policy within multinational organisations. Previous studies and empirical
findings indeed indicate that the number of expatriate assignments gradually
decreased and expatriate managers are perceptibly replaced by host country
nationals. The high assignment failure rates combined with the enormous costs of
expatriate assignments in terms of direct expenses, management time and human
misery definitely provide some explanatory power to this phenomenon (Kobrin,
1988). Nevertheless, the author challenges some of these findings in previous
studies by hypothesizing that expatriates, as a mode of imposing culture control,
are still deployed overseas and that the phenomenon is positively moderated by
increasing levels of strategic (H
2a
) and financial (H
1a
) importance of foreign
subsidiaries.


Hypothesis 3a: As the subsidiary's autonomy increases, the use of culture
control will decrease.

Hypothesis 3b: As the subsidiary's autonomy increases, the use of bureaucratic
control will decrease.

Hypothesis 3c: As the subsidiary's autonomy increases, the use of monetary
incentive compensation will decrease.


Hypotheses H
3a,
H
3b
and H
3c
are based on the foundation of stewardship theory.
Stewardship theory postulates subsidiary autonomy to be deliberately extended
(Davis, Schoorman and Donaldson, 1997), so that managers can perform
corporate related tasks far more independently and effectively. In compliance
with this chain of argumentation, the author hypothesizes that increases in
39
organisational latitude through increased autonomy shall lead to structural
situations that empower managers at the level of the Foreign Subsidiary
company. Conditions empowering Subsidiary manager can be partly realized
through decreasing levels of control exerted by Headquarters over their foreign
subunits and may not necessarily require lower levels of self-imposed
governance mechanisms from subsidiary company's side.


Hypothesis 4: As outcome measurability increases, the use of monetary
incentive compensation will increase.


H
4
mirrors the assumption that increasing degrees of environmental stability, as
conveyed by higher levels of outcome measurability, will positively moderate the
use of monetary incentive compensation, as betoken by an increasing proportion
of performance based incentives in the total compensation package. Outcome
based contracts indeed align the preferences of agents with those of the principal.
In one of her studies, Eisenhardt (1989a) found empirical evidence for the
positively hypothesized relationship between outcome measurability and
outcome-based contracts (e.g. commissions, stock options, transfer of property
rights).


Hypothesis 5a: As the use of monetary incentive compensation increases, the
use of bureaucratic control will increase.

Hypothesis 5b: As the use of monetary incentive compensation increases, the
use of culture control will increase.


H
5a
and H
5b
shall mirror another conceptual challenge designed in this study.
Assuming in fact unidimensional control approaches, early researchers rather
40
investigated substitutive relationships between different control mechanisms.
Contrary to some of those early findings, the author, in this study, alternatively
assumes a simultaneous deployment of certain control types. Hence, the
hypothesized relationship in the contemporaneous exertion of distinct
governance mechanisms is rather assumed complementary and subsequently
positive in nature.


0, if Host country national
1, if Parent country national
y
H1:
Degree of
Involvement
Culture
Control
(+)
Independent &
Metrically scaled
Bureaucratic
Control
Parent Sales
H1a:
Dependent variable
Ordinally scaled / dichotomous
MonetaryIncentive
Compensation
Control variables:
Subsidiary Age
Dependent variable
Metrically scaled
Dependent variable
Metrically scaled
H1b:
H1c:
=
0, if Host country national
1, if Parent country national
y
H1:
Degree of
Involvement
Culture
Control
(+)
Independent &
Metrically scaled
Bureaucratic
Control
Parent Sales
H1a:
Dependent variable
Ordinally scaled / dichotomous
MonetaryIncentive
Compensation
Control variables:
Subsidiary Age
Dependent variable
Metrically scaled
Dependent variable
Metrically scaled
H1b:
H1c:
=

Exhibit 4: Hypotheses Exemplarily Illustrated
Source: Author


IV. Research Design

A research design takes the following elements integratively into account:
Statement of research questions, determination of hypotheses (stemming from
prior observations and existing theories), definition as well as operationalization
of manifest and latent variables, selection of statistical tests to resolve
hypotheses, identification of population and sample, data collection (which
either provides support or refutes evidence for proposed hypotheses), data
analysis and interpretation of results (conversion of raw data into probabilistic
and meaningful explanations) and, finally, the overall evaluation of the process
(Black, 1999).

41
Thereby, the framework should provide answers to the following questions,
namely: Which sources of information will be used? What type of information
will be used to answer the research questions? What samplings will be used?
Which techniques will be applied to gather data? How will the data be analyzed?
(Cooper & Schindler, 1998).

The author will gradually provide answers to the above mentioned questions in
the subsequently following sections.


A. Research Methodology

Research techniques generally have to be scientific in nature. According to Black
(1999) the term "scientific" thereby refers to a systematic, empirically based and
replicable approach, that contributes to the process of theory development.

Research methodologies can be principally categorised into qualitative and
quantitative approaches. Research objectives, appropriateness of assumptions as
well as nature of applied variables thereby play important roles in the choice of
the right research techniques.

Quantitative research: When researchers want to look for nomothetic or law-like
relationships among certain phenomena of interest, by means of quantifications
and accurate measurements, this form of inquiry becomes relevant. Quantitative
methods, i.e. statistical analysis of experimental, survey or archival data, intend
to reveal common patterns that either characterize a population or a sample
thereof, on a large scale basis (Bentz and Shapiro, 1998). Quantitative research is
strongly based on the collection of considerable data from representative samples
for a few variables, while qualitative research tends to pursue fewer subjects but
investigates in greater depth (Black, 1999). Quantitative methods are well-suited
to identifying overall patterns, testing theories and developing predictions.

42
Figure 5 exemplarily illustrates a selected set of multivariate data analysis
techniques. A sequence of certain questions rightly addressed will lead to the
appropriate methodology.


Non-
metric
Metric
dependent
variable
scale of
variable
more
than
one
dependent
variables
dependent
variable
No Yes
Metric Binary
Metric
Non-
metric
Non-
metric
independent
variable
independent
variable
independent
variable
Yes No
SEE
MCA w/dummy
variables
Canonical
Analysis w/
dummy variable
CHAID
Multiple
Discriminant
Analysis
Logit and Probit
Analysis
Multiple
Regression
w/dummy
variables
Loglinear
Multiple
Regression
Multiple
Classification
Analysis
Automatic
Interaction
Detection
Conjoint
Analysis
Multiple
Discriminant
Analysis
MANOVA
Canonical
Analysis
LISREL
Amos
Non-metric
Factoranalysis
Latent Structure
Analysis
Nonmetric
MDS
Nonmetric
Clusteranalysis
Cluster
Analysis
Factor
Analysis
Multidim.
Scaling
Non-
metric
Non-
metric
Metric
Non-
metric
Metric
Non-
metric
Both
Non-
metric
Metric
dependent
variable
scale of
variable
more
than
one
dependent
variables
dependent
variable
No Yes
Metric Binary
Metric
Non-
metric
Non-
metric
independent
variable
independent
variable
independent
variable
Yes No
SEE
MCA w/dummy
variables
Canonical
Analysis w/
dummy variable
CHAID
Multiple
Discriminant
Analysis
Logit and Probit
Analysis
Multiple
Regression
w/dummy
variables
Loglinear
Multiple
Regression
Multiple
Classification
Analysis
Automatic
Interaction
Detection
Conjoint
Analysis
Multiple
Discriminant
Analysis
MANOVA
Canonical
Analysis
LISREL
Amos
Non-metric
Factoranalysis
Latent Structure
Analysis
Nonmetric
MDS
Nonmetric
Clusteranalysis
Cluster
Analysis
Factor
Analysis
Multidim.
Scaling
Non-
metric
Non-
metric
Metric
Non-
metric
Metric
Non-
metric
Both

Exhibit 5: A Selected Set of Multivariate Data Analysis Techniques
Source: Emory and Cooper (1991)

Qualitative research: In contrast, qualitative research methods are rather used to
reveal and detail characteristics of individual or group cases, based on the
qualitative analysis of mainly qualitative data. Through detailed and more in-
depth observations, one intends to get a bit closer to the underlying causal forces.
This is of particular importance especially in the early stages of theory
development. Methods and approaches that fall under the category of qualitative
research inter alia include case study, participatory inquiry, interviewing,
participant observations or interpretive analysis (Denzin and Lincoln, 2005).

Within the body of literature on research methodologies, two schools of thought
can be identified, one supporting the view that quantitative methods are not
reconcilable with qualitative approaches, while others posit a convergent multi-
method application (Dachler, 1997; Scandura and Williams, 2000; Jick, 1979).
43
Supportive to the second school, Snow and Thomas (1994) inter postulate a
balanced research agenda with multi-faceted research approaches. In lieu of the
fact that no single research method is capable of adequately addressing the
different methodological issues like validity or reliability (Jick, 1979), the
second, rather combined approach seems only reasonable.

Validity refers to the logic of inferences drawn from a study and, according to
Cook and Campbell, serves as the best approximation to the truth or falsity of
conclusions and predictions (Cook & Campbell, 1976). The concept of validity
inter alia encompasses three different facets, namely internal validity, external
validity and construct validity. Internal validity concerns causality and requires
a covariation between the variables under investigation to be asserted of a true
cause-and-effect relationship (Scandura and Williams, 2000). External validity
refers to the generalizability across different times, settings and individuals, and,
is closest to the common understanding of generalizability. A close fit between
the construct an instrument is supposed to measure and the actual observations
made with the same instrument, determine a high construct validity (Bernard,
2000). Reliability is characterised by the level of consistency supplied in a series
of measurements over several replications. The concept of reliability comprises
test-retest reliability, parallel test reliability (e.g. interrater reliability) and
internal consistency (e.g. Cronbach's coefficient alpha) (Emory and Cooper,
1991).

Researchers do have to be aware of flaws and shortcomings inherent in single
methodologies and subsequently think about obtaining corroborating evidence by
applying a combination of methods to examine the same phenomenon (McGrath,
1982). This is referred to as triangulation. The potency of triangulation is based
on the notion that the weaknesses of each research strategy will be equilibrated
by the strength of the counter-balanced methodology (Jick, 1979). The basic idea
is that, different theories, methods, techniques or sources are applied to get a
richer understanding of the phenomenon under observation. Denzin (1978) refers
to this as 'multiple triangulation'.
44
B. Research Process

1. Population and Sampling

The basis for the sampled population is Foreign Affiliated Entities of Swiss
Multinational Companies with operative and strategic engagements in India.
Headquarters are located in Switzerland. Epistemologically, it will suffice to say
that the term "engagement" formally encompasses the full bandwidth of
institutional arrangements established to conduct cross-border transactions within
a firm, starting from non-equity to equity operations.

Using multiple data sources (such as company directories, databases, internet or
publicly accessible lists) around 130 Swiss Multinationals with various
operations in India were identified as the theoretical population of the study. Pure
portfolio investments (such as investments in stocks, bonds and other long-term
marketable securities, as well as banking liabilities) or meanwhile liquidated or
merged companies were excluded, ultimately resulting in the relevant practical
population size of approximately 113 Swiss Multinationals. To ensure
probability sampling and relative industry distribution of firms, amongst others,
the final set of firms was distilled in a multi-step process.

The Corporate Headquarters were approached, in an initial contact, via telephone
for identification of the targeted executives at the Headquarters and Subsidiary
company level and also for pre-information purposes about the study. Subsequent
to that, an information package comprising further relevant background
information on the study was sent to the concerned person within the parent
company. Upon receipt of the final approval from the HQs regarding the
companies' participation in the study, the corresponding Top Managers of the
Subsidiary Companies were addressed, for specification of further particulars.
This process was accompanied by additional preparatory research to obtain
further information on the targeted companies such as locations in India,
company structure, affiliated industry, no. of strategic business units etc.
45

Surprisingly most of the empirical studies to date have primarily looked at
corporate-levels of Foreign Subsidiaries. While corporate strategic decisions tend
to be more portfolio-oriented (portfolio of various strategic business units),
business unit or strategic business unit (SBU) decisions are more market and
product oriented (Galbraith and Merrill, 1991). Strategic business units can have
distinct competences and capabilities, resource requirements or information
processing demands that must be accommodated in the relationship. Hence, the
author believes that only at the level of strategic business units, an appropriate
level of abstraction and aggregation can be reached, which ultimately leads to
relatively homogenous units of analysis.

Consequently, strategic business units have been chosen as units of analysis in
this study. However, for the preservation of independence and to prevent larger
companies from biasing the results, only a maximum of 2 business units per
parent company have been included into the sample. For the present work, the
author was able to ultimately use a sample of more than 70 business units of
Swiss Foreign Subsidiaries in India. The basic idea of sampling is that some
elements in a population provide useful and valuable information on the entire
population. The goodness of a sample can be assessed through its validity.
Validity of a sample depends upon (i) accuracy, which is defined as the degree to
which bias is absent and (ii) precision, i.e. precision of estimate which can be
measured by the standard error of estimate, for instance (Emory and Cooper,
1991).

46
The study is further based on a cross-sectional design. Companies included in
present work operated in various industry groups such as:


I. Machinery and Parts
(i.e. General, Cement, Electrical, Textiles, Pumps & Valves)
II. Services
(i.e. Financial, Engineering, Software)
III. Chemicals
(i.e. General, Lubricants, Pharmaceuticals)
IV. Instruments and Appliances
V. Vehicles and ancillaries
(i.e. no Original Equipment Manufacturers /OEMs, Suppliers only)
VI. Machine and Small Tools and
VII. Trading


India was chosen as the location of Swiss Foreign Subsidiaries due to the
following reasons:

India's continuous attractiveness and its strong long-term economic
outlook (Khanna & Huang, 2003).
Swiss companies are starting to increasingly consider India as a target
market in the scope of their international business development strategies.
The author was able to collect primary data, in the context of a research
project, which was conducted under the patronage of the Swiss State
Secretariat for Economic Affairs (SECO).


47
2. Data Collection
Field study was used to collect the data required to conduct the testing analysis of
the propositions stated above. The spectrum of techniques that can be applied
generally within field studies include case studies, observations, interviews or
surveys.

To obtain adequate data for the purpose of the present work, the author has
conducted interviews. Interviews, as methodological tools, are conversations
which aim at obtaining information in an asymmetric relationship between
interviewer and interviewee based on certain ground rules (Gubrium and
Holstein, 2001).

Much diversity can be found within conventional interview techniques, each with
its own advantages and disadvantages. Roughly, the following forms of
interviews can be distinguished: (i) according to the degree of control over
responses: unstructured interviews, semi-structured interviews and structured
interviews, (ii) according to number of respondents: individual interviews and
group interviews, and (iii) according to the type of data collection: face-to-face
vis--vis telephone interviews.

As mentioned above, to conduct the survey for purposes of the present work, the
author has applied fully structured, face-to-face interviews with individual
respondents as informants. The rationale behind the use of this kind of interview
was (i) a highly structured and standardised interview design to assure that the
variation observed in the data results from the variation in the constructs being
measured and to avoid, to the greatest extent possible, biasing and interviewer
errors (Couper and Hansen, 2001); (ii) despite higher costs and longer data
collection periods, the author decided in favour of face-to-face interviews
because of its appropriateness for longer interviews particularly when
accompanied by complex questions, (iii) its higher response rates (low response
rates can potentially reduce the confidence as to the generalizability of the survey
results to the population from which the survey is drawn (Snow and Thomas,
48
1994)), and (iv) the greater flexibility in terms of question content (Singleton and
Straits, 2001).

The prime advantage of a survey as a data-collection technique is its efficiency in
generating a large amount of data which can ultimately be subject to statistical
analysis (Snow and Thomas, 1994). The survey was designed to mainly yield
metrically scaled, as well as a few non-metrically, but ordinally scaled
information. Hence, response categories were primarily operationalised in the
form of Likert-scales, ratings, and rankings or in the case of a few closed
questions, interviewees were directly asked to specify their answers numerically
(e.g. Paid-up Capital or Year of Establishment). No open-ended questions were
included in the questionnaire.

As targeted interviewees, two options were incorporated: (i) a HQ-based
Executive with responsibility for the business operations in India, or (ii) the
locally based Country head of the Swiss Foreign Subsidiary, who is responsible
for the entity's activities in the region. The Headquarter based respondent was
particularly addressed when formally the level of Foreign Engagement of the
Swiss company was low and hence, captive infrastructure in India was moderate,
e.g. as in cases of direct export or contractual agreements for instance.

Further, multiple responses from some of the sampled companies have been used
to validate the same on the constructs measured using primary data. For this
purpose, an assessment of the level of interrater agreement was performed by
calculating the Pearson product moment correlation across certain metrically
scaled questionnaire items for each pair of multiple responses. For recapitulation,
interrater reliability denotes the correlation between scores given by the two
raters and indicates the consistency of ratings. Interrater assessment shall help in
addressing the research methodological issue of reliability (parallel test
reliability).

49
A few pilot interviews were conducted in the initial phase to refine the concepts,
latent variables and constructs as well as the length, sequence and
operationalization of questions included (for clarity and relevance purposes).
These results were used to further calibrate the data collection tool. Data
collection occurred over a period of three months.

The entire interview survey was first prepared in German and in the subsequent
step translated into English. Parts of the survey were then re-translated back into
German in order to verify whether the intended meanings of the variables and the
items used were accurately captured.

Prior to conducting the sampled interviews on-site in India and Switzerland, a
detailed interview training session was provided to the additional two
interviewers. In the first step, a general introduction of the project (i.e. goals,
project design, underlying theoretical streams etc.) as well as a thorough
introduction of the survey material (i.e. questionnaire: structure, sequence,
variables and constructs, operationalization of items, response categories: Likert-
scales, rankings, ratings etc.) was given to familiarize the interviewers with the
entire set-up.

In the second and subsequent session, interviewers received general introductions
of the interviewing practices (i.e. procedure, duration, neutral interview
technique etc.) and briefings on common interviewer, interviewee and situation
related errors (i.e. response sets, halo effects, pseudo-opinions, social desirability
effects as well as social distance and sponsorship effects).


50
3. Data Analysis
The triangulation design applied in the context of this paper encompasses (a)
Multiple linear regression, (b) Binomial logistic regression as well as (c) Pearson
product moment and Point biserial correlation analyses, techniques all of which
will be briefly introduced and described in the subsequent pages.


3.1. Multiple Regression Analysis
Multiple regression analysis is used by researchers, if one wants to study the
dependence of one metrically scaled dependent variable, frequently referred to as
"Regressand", on one or more metrically scaled explanatory variables, frequently
referred to as "Regressors". Although it examines the dependence between
Regressand and Regressors, correlation does not automatically imply causation.
The assumption of an underlying causal relationship between endogenous and
exogenous variables has to rather come from theory or scientific hunch. The
prime purpose of this technique is to obtain predicted values of the endogenous
variable through estimations of the respective regression coefficients and
specification of the model as well as to draw inferences on how closely the
obtained parameters are to the true values of the population (Gujarati, 2003).

Generally, a multiple regression model with two explanatory variables can be
formulated as

i 0 1 1i 2 2i i
i
Y = + X + X + u

where

i Y is the estimated value of i Y , 1i X and 2i X denoting the independent

variables and where 0 is the regression constant, 1 and 2 are the regression
coefficients to be estimated with 0 known as the intercept and 1 and 2 as the
partial slope or regression coefficients. Mathematically, u
i
is nothing but the
difference between the actual values i Y and the estimated values

i Y , as can be
seen above. Statistically, u
i
is a random variable, a quantity whose taken values
51
are either positive or negative and to which a probability distribution is assigned.
Technically, it is nothing but a stochastic error or disturbance term which
subsumes all the inexplicitly stated, non-systematic influences on Y
i
(Gujarati,
2003). Generally, the regression constant together with the regression
coefficients are determined in such a manner that the sum of squared differences
between actual Y values and estimated

Y values is a minimum. The equation is

thereby defined by the ordinary least square (OLS) criterion. Unlike hierarchical
linear models, usual regression analysis equations contain only one stochastic
disturbance term.

As mentioned earlier, it is the appropriateness of assumptions that plays an
important role in the choice of the right research technique. Hence, the following
part aims at briefly highlighting some of the major assumptions underlying
regression analysis:

(1) Homoscedasticity
Heteroscedasticity refers to the circumstance that the variance of the disturbance
term var (u
i
) in the equation for any value of the independent variable X is not
constant. If the error term has a constant variance, they are said to be
homoscedastic. In the presence of heteroscedasticity in the disturbances, the
estimates for the regression coefficients remain unbiased (Cohen et al., 2003),
however, it can lead to inefficient parameter estimates (e.g. standard errors,
confidence intervals) and hence, as a result, can lead to wrong inferences (e.g.
significance tests) when statistically testing the hypotheses (White, 1980).
Econometricians say, as a rule of thumb, that the ratio of conditional variance at
different values of X should not exceed 10.

Symbolically, homoscedasticity can be written as

i i i
2 2
var (u) = E(u - E(u)) =

52
The absence of a subscript on
2
indicates that the variance of u
i
for each X
i
is a
constant, positive number.

After a first optical inspection through constructing a few scatterplots (where one
plots the residuals in turn against each of the independent variable and the
predicted value

Y ), various statistical tests can be applied to detect

heteroscedasticity, such as (i) the Goldfeldt-Quant test, which is particularly
used when it is believed that the variance consistently increases or decreases with
increasing X; its calculation also requires a reordering of observations with
regard to the X variable that supposedly causes heteroscedasticity, (ii) the
Breusch-Pagan test (which is designed to detect linear forms of
heteroscedasticity, frequently observed when time-series data is being analysed)
or (iii) the general White-test (a special case of the BP test) which can test all
forms of heteroscedasticity, however requires large sample sizes and has less
statistical power (Greene, 2007).

(2) Autocorrelation
This assumption simply postulates that disturbances, given any two X values, X
i

and X
j
(with i j), are uncorrelated (Gujarati, 2003) and hence can be written as

cov (u
i,
u
J
|X
i
, X
j
) = E {(u
i
- E(u
i
)| X
i
} {(u
j
- E(u
j
)| X
j
} = 0, for all i j

To identify the presence of autocorrelation in the residuals of a regression model,
researchers can exemplarily either perform a Durbin Watson test or Box-Pierce
Q test. The Box-Pierce Q statistics is commonly used to test the null hypothesis
that the first K autocorrelations are zero. Though autocorrelation can arise in
cross-section data among contiguous units as well, then referred to as spatial
correlation. For instance, in the so called "keeping up with the Joneses - effect",
when error terms pick up the effect of omitted variables (Maddala, 2001).

53
(3) Multicollinearity
This statistical property states that there should be no perfect linear relationship
among the explanatory variables. To state more simply, there should be no
perfect correlation between the independent variables. Otherwise, statistically
and conceptually, both independent variables in the equation can be modelled by
one.

With higher correlations, it becomes increasingly difficult to determine the actual
effect of X on Y. Econometricians generally state that high collinearity does not
per se violate this assumption, indicating that it may inevitably lead to higher
standard errors, wide confidence intervals for the regression coefficients and
subsequently to smaller t-statistics.

Multicollinearity can be detected with the specification of tolerance (TOL) or the
variance inflation factor (VIF), for instance, which can be written as

2
1 j j TOL R = and
2
1
1
j
j
VIF
R
=

whereas R
j
2
denotes the correlation coefficient between the exogenous variables
(Gujarati, 2003) with high values of R
j
2
indicating highly correlated independent
variables. It shall be noted that the variance inflation factor is the inverse of
tolerance. j TOL values close to 1 indicate little multicollinearity, whereas values
close to 0 indicate substantial threat with respect to the violation of the
multicollinearity assumption. j VIF displays how much of the variance of the
coefficient estimate is being inflated by multicollinearity, with values of the j VIF
that are substantially less than the threshold of 10 being considered non-
problematic (Cohen et al. 2003).

All hitherto explicitly illustrated assumptions are basically drawn with the
purpose to cancel out, to the extent possible, unsystematic influences that might
act on Y. Further assumptions include variability in X values, the number of
54
observations to be greater than the number of parameters or explanatory
variables, linearity of the model in its parameter or a zero mean value of
disturbance (Gujarati, 2003).


3.2. Binomial Logistic Regression Analysis
To operationalize a regression model that relates the independent variables to
probability estimations of group membership for the dependent variable (Tansey
et al., 1996), two of the most commonly used functions in management research
are the probit and logistic functions.

The choice of a logistic model in this study and its predominant use in theory is
based on its various advantages over a probit model, which includes for instance
its advantage in the interpretation of regression coefficients in terms of the odds
(more in-depth discussion on further advantages and disadvantages over the
probit model can be found in (Cohen et al., 2003)).

Principally, logistic regression analysis yields a probability estimation for the
occurrence of the response variable, given the values of the predictor (Davis &
Offord, 1997), using a maximum likelihood estimation procedure. Binary or
binomial logistic regression analysis is considered to be an appropriate statistical
technique when the dependent variable is categorical (nominally scaled with
values coded 0 or 1) and the independent variables are metrically scaled,
frequently denoted by covariates (Reese & Bierend, 1999). It further offers major
advantages that make it more suitable in many situations than a two group
discriminant analysis, for instance. It may be preferred for the following reasons:
(i) it does not strictly rely on the assumptions of multivariate normality and equal
variance - covariance matrices and (ii) due to its ability to incorporate nonlinear
effects (Hair et al., 1998).

55
With the help of a latent (an empirically unobservable) random variable z
k
the
continuous values of X are transformed through a linear combination into the
values of Y, 0 and 1 (Backhaus et al., 2006).



Now, in order to fully operationalize a regression model for dichotomous
outcomes, one additionally requires, as mentioned above, a mathematical
function that relates the predictor X through the random variable to the predicted
probability score of being a case (y = 1 or y = 0). To yield the probability
estimation for the occurrence of value 1, regression analysis accesses the logistic
function

k
1
p ( y = 1 ) =
1 + 1
k
k k
z
z z
e

e e

=
+


with e = 2.71828183 (Euler's number) being the basis for the probability
function.

3.3. Correlation Analysis
The prime objective of correlation analysis is to measure the degree or strength
of association between two variables which is expressed by the correlation
coefficient. The selection of an appropriate coefficient depends on the measure of
the variable pairs under observation.

For the purpose of the present research, the author will use Pearson product
moment correlation coefficient (for variables of interval scale) as well as Point
1

1 0
0 0
k J j k k
J
j
z x u
w i t h
i f z k
y k
i f z k

=
= +

56
biserial coefficient (since one variable is metrically scaled and the second
variable is of nominal scale).

The Point biserial coefficient is calculated as follows:




where p x and q x are the Y means of the two groups of the dichotomy, * s is the
standard deviation of the sample and with p being the proportion in one group
and q = 1 - p being the proportion in the other group.


C. Variables and Measures

As mentioned earlier, one of the main purposes of the present research is to
conduct an empirically based examination of the extent to which certain
structural as well as environmental properties moderate types and degrees of
control mechanisms used by focal organizations to align the activities, interests
and objectives with their affiliated entities abroad. The following section now
provides the operationalization of those manifest as well as latent variables used
in the present study.

The Cronbach's alpha is an important measure of the reliability of an instrument.
It is frequently applied to latent variables, variables which, in contrast to manifest
variables, cannot be directly observed. The construct validity of such multi-item
variables, frequently referred to as internal reliability, can be measured through
Cronbach's alpha. As a rule of thumb, internal consistency coefficient alpha for a
particular construct requires a value of 0.7 or higher to be further considered as a
reliable instrument.

*
p q
pb
x x
r pq
s

=
57
The Cronbach's alpha is calculated as follows (Black, 1999)

2
1
2
1
1 x
N
i
i
S
N
N S

=
(
(
( =

(
(

where N is the number of items of a latent construct, S
i
2
denotes the variance of
the individual items and S
x
2
is the variance of the entire construct. In order to
calculate the degree of internal reliability for an unobservable variable, certain
basic premises have to be met. For instance, (i) we require a consistent level of
measurement across all items / items have to be of the same scale as well as (ii) a
consistent conceptualisation of the items with regards to content and range of
values. Consistent with our previous discussion on methodological issues
associated with respective research strategies, the calculations of Cronbach's
coefficient alpha will help to further address and resolve reliability issues.


1. Control Variables

Culture control: This form of rather implicit control can be operationalised
through the use of expatriates for top management team positions at
Foreign Subsidiaries, i.e., recruiting of parent country nationals vs. host
country nationals to head the companies operations abroad; In such a case,
the endogenous / dependent variable becomes dichotomous with values
taking 0 for host country nationals and 1 for parent country nationals.

Alternatively, following Edstrm and Galbraith's (1977) concept of
socialization, culture control can be measured through the indication of (1)
the number of managers comprising the subsidiary top management team
and (2) number of managers who are host country nationals.

58
Monetary incentive compensation: This form refers to the aligning of
Headquarters and Subsidiary Company goals through the use of financial
incentives. Key informants were asked to indicate the percentage of
compensation paid through each of the following components: (1) fixed
salary (2) fringed benefits (3) short-term incentive and (4) long-term
incentive. The sum of percentages allocated to elements (3) and (4) is used
to measure the degree of monetary incentive compensation. This measure
of monetary incentive compensation was patterned after a similar measure
used by Galbraith and Merrill (1991) & Balkin and Gomez-Mejia (1987).
The endogenous variable is metrically scaled (interval scale).

Bureaucratic control: To measure the extent of bureaucratic control, which
denotes mechanisms such as rules, policies, explicit delineation of
objectives to manage subsidiary activities, respondents were asked to
indicate on a five-point Likert scale the frequency with which certain
information such as operating expenditures, sales figures or capital
equipment purchased were shared. The construct was operationalised
through seven items. The construct is based on several previous
conceptualisations, including Ghoshal and Nohria (1989), O'Donnell
(2000), Galbraith (1973). The dependent variable is metrically scaled (of
interval scale). The Cronbach's coefficient measured for bureaucratic
control was 0.711. The construct therefore has an acceptable degree of
reliability and can be used for further analysis.


2. Structural Variables

Parent Company Sales: Sales revenue, as a parent company specific
contingency, is assumed to influence the relationship between the
structural variables of interest in this study and the control modes. This
variable is measured as the natural logarithm of the annual sales of the
59
parent company, since natural logarithm reduces heteroscedasticity
(Kerlinger, 1986). The variable is metrically scaled (of interval scale).

Subsidiary age: Subsidiary age has been operationalized through
indication of the Year of Establishment (YoE) of the Foreign Subsidiary
Company. The variable is metrically scaled (of interval scale) as well.

Statistically, both variables, parent company sales and subsidiary age,
shall provide control for potentially biasing effects and hence, are
designed as control variables in this study.

Degree of involvement: Paid-up capital was used to assess the degree of
parent companies foreign involvement. The informants were asked to
indicate the paid-up capital in 2006, cumulated since the subsidiary
company's inception. This exogenous variable is metrically scaled (of
interval scale).

Subsidiary role: In accordance with a large body of research (D' Cruz
1986, Crookell 1984, Poynter and Rugman, 1982 & Rugman and Benett,
1982), the strategy of regional centralisation is being conceptualised in
such a manner that the subsidiary handles research and development,
procurement, production as well as marketing and sales for a mandated
product within a multi-country market or for a geographic region
respectively; This measure of strategic role was patterned after a similar
measure used by Roth and Morrison (1992), Roth and O'Donnell (1996) &
O'Donnell (2000). The construct was operationalised through nine items
with realisation being measured on a five-point Likert scale. The
Cronbach's coefficient measured for subsidiary role was 0.714.
Indicating a favourable degree of reliability and hence can be used for
further analysis.

60
To assess the various roles played by a Foreign Entity, literature has
alternatively operationalized Subsidiary Company mandates through the
number (single vs. multiple functions) and types of Foreign Subsidiary
functions relocated to the host country (Chang and Taylor, 1999).
Operationalized in such a manner the explanatory variable would be
metrically scaled (of interval scale) as well.

Subsidiary autonomy: Despite being part of the formal organisation
structure, subsidiary autonomy is a latent variable construct (Ghoshal,
Korine & Szulanski, 1994). This measure was patterned after a similar
measure used by Ghoshal, Korine & Szulanski, (1994), Ghoshal and
Nohria, (1989) & O'Donnell (2000). Subsidiary autonomy as an
independent variable in this study is metrically scaled (of interval scale).
The internal consistency measure, conceptualised in form Cronbach's ,
for this scale is 0.866, indicating a highly satisfactory degree of reliability.


3. Environmental Variables

Outcome measurability: Outcome measurability has been used in this
study as a manifestation of environmental uncertainty which is caused
through the host country or industry volatility. The construct was
operationalised in the form of a five item variable and the corresponding
realisations were measured on a five-point Likert scale (O'Donnell, 2000).
Outcome measurability used as an independent variable is metrically
scaled (of interval scale). The Cronbach's coefficient exhibited for
outcome measurability as a construct was 0.905 and indicates a highly
favourable degree of reliability. This latent variable can, hence, be
doubtlessly included for further analyses.

For conceptualizing environmental uncertainty the so called perceived
environmental uncertainty scale developed by Miles and Snow (1978) can
61
be alternatively used. It comprises six subscales, where each of those
subscales corresponds to six key sectors of external environment. The
respondents then are asked to rate the degree of predictability using a
seven-point Likert scale.


V. Results

The following section provides the results of the statistical tests performed to
investigate the hypotheses derived and described above.

Exhibit 6 presents the results of binary logistic regression analysis conducted to
examine the relationship between paid-up capital, as covariate, and culture
control, as dichotomous dependent variable. As results of Exhibit 6 indicate, no
significant relationship was found between the level of involvement and the
recruiting of parent or third country nationals for top positions in the
international subsidiaries located in India. Hence Hypothesis 1a was not
supported.


Independent Variables Culture control
B Wald

Paid-up Capital 0.002 0.598

SCage 0.064 0.793

PCsales 0.000 0.70

- 2 Log Likelihood 45.726
Model Chi-Square 8.378

Exhibit 6: Relationship Between Paid-Up Capital and Culture Control
Source: Author

62

Hypotheses 1b and 1c investigated the moderating effect of the parent company's
degree of involvement, indicated through its paid-up capital, on bureaucratic
control and monetary incentive compensation respectively. For both relations, a
positive moderating effect was assumed. Exhibit 7 summarizes the findings of
the multiple regression analyses conducted to test H 1b und H 1c. However, no
significant moderating effect was found for either dependent variable. Therefore,
neither H 1b nor H 1c was supported.


Independent Variable Bureaucratic control
a
Incentive Compensation
a


Paid-up Capital 0.001 0.002
(0.000) (0.003)

SCage 0.011 - 0.514
(0.016) (0.355)

PCsales - 0.002* 0.002
(0.000) (0.000)

R
2
0.174 0.076
Adjusted R
2
0.114 0.009
F 2.884 1.130
a Unstandardized regression coefficients are shown; standard errors are in parentheses

* p < 0.05

Exhibit 7: Relationship Between Paid-Up Capital, Bureaucratic Control as well Monetary Incentive
Compensation
Source: Author


Exhibit 8 highlights the results of the binary logistic regression analyses
performed to test Hypotheses 2a and 3a. H 2a predicted that with increasing
strategic relevance of the Subsidiary Company, captured through subsidiary's
63
increasing role, Headquarters' propensity to exert implicit culture control will
increase.


Independent Variables Culture Control
a

Model 1 Model 2 Model 3
B Wald B Wald B Wald

Subsidiary role 2.149** 9.547 1.664** 8.087

Subsidiary autonomy - 0.880 2.926 - 0.098 0.072

SCage 0.155 4.257 0.131 3.169 0.100 2.911

PCsales 0.000 0.043 0.000 0.754 0.000 0.278

- 2 Log Likelihood 48.557 51.851 62.554
Model Chi-Square 22.632 19.338 8.634

a Unstandardized regression coefficients are shown;

** p < 0.01

Exhibit 8: Influences of Subsidiary Company Strategy and Subsidiary Autonomy on Culture
control
Source: Author


The analyses conducted and presented in Exhibit 8 shows that H 2a was
supported and a significant positive impact of strategic role on culture control
was found. The probability estimation yielded through logistic regression was p
= 0.759. Statistically, the hit ratio of 75.9% is higher than its proportional as well
as maximum random likelihood and hence a relevant and robust indicator for the
degree of culture control exerted. Hypothesis 3a investigated the relationship
between increasing degrees of subsidiary autonomy and decreasing degrees of
culture control. As shown in Exhibit 8, no significantly moderating effect was
found between the two variables. Hence H 3a was not supported. But the
64
negative sign of the correlation coefficient indicates a rightly assumed direction
of association between the two variables.

To assess the goodness of the binary logistic regression model as well as its
overall fit, further tests, i.a. Cox & Snell R-Square and Nagelkerkes R-Square,
frequently referred to as the Pseudo R-Square statistics of logistic regression
models, were performed. Both statistics (Cox & Snell R
2
= 0.342, Nagelkerkes
R
2
= 0.467) were found to be at an acceptable level.

At this point, it is important mentioning that both independent variables, i.e.
subsidiary role and subsidiary company, were found to be significantly correlated
(r = 0.421; p = 0.001). Hence the author had to examine whether the
multicollinearity assumption has been violated and if yes, to what extent the
violation has had any degrading effects on the parameter estimates (i.e.
regression coefficients, standard errors, confidence intervals and t-statistics).
Recapitulating, this statistical property posits that there should be no perfect
linear relationship among the independent variables, with high collinearity not
necessarily and automatically violating the multicollinearity assumption.

Therefore, special attention has to be paid to the respective models (models 1,
models 2 and models 3) within Exhibit 8, 9 and 10, where, in order to examine
the collinearity effects, in a first step, the equations were redefined with
iteratively dropping out one of the supposedly interacting explanatory variables.

Additionally, in a second step, the corresponding values for tolerance and
variance inflation factor of the two multiple regression equations (used to test H
2c & 3c as well as H 2b & H 3b) were measured with TOL
SCroleSCauto
taking value
0.823 and VIF
SCroleSCauto
taking value 1.216 respectively. These statistics (confer
step 1 and step 2) being performed, the author can satisfactorily state that the
presence of multicollinearity does not degrade the parameter estimates in the
present regression equations to such an extent, that the multicollinearity
assumption is being violated.
65

Exhibit 9 and 10 highlight the results of multiple regression analyses performed
to examine the influences of subsidiary company role and autonomy, as
Regressors, on bureaucratic control and monetary incentive compensation, as
Regressands, respectively, with all variables being at the interval scale.



Independent Variables Bureaucratic control
a

Model1 Model2 Model3


Subsidiary role -0.069 0.026
(0.094) (0.089)

Subsidiary autonomy 0.218** 0.190**
(0.090) (0.082)

SCage 0.009 0.013 0.01
(0.007) (0.007) (0.007)

PCsales -0.0001* 0.0002* -0.0001*
(0.000) (0.000) (0.000)

R
2
0.235 0.155 0.227
Adjusted R
2
0.180 0.110 0.187
F 4.290 3.481 5.588
a Unstandardized regression coefficients are shown; standard errors are in parentheses

* p < 0.05

** p < 0.01

Exhibit 9: Influence of Subsidiary Company Strategy and Autonomy on Bureaucratic Control
Source: Author


As shown in Exhibit 10 subsidiary role was found to moderate monetary
incentive compensation and the relationship (Hypothesis 2c) is highly significant
66
(p = 0.001). However, data illustrated in Exhibit 9 reveals that, subsidiary
company mandates were not significantly related to bureaucratic control
(Hypothesis 2b). Nevertheless, interestingly, the statistically indicated
relationship between the former is negative. This direction of relationship is
important as it is exactly what the author has expected and in contrast to previous
empirical studies, has conceptually challenged.



Independent Variables Monetary Incentive Compensation
a

Model 1 Model 2 Model 3

Subsidiary role 8.098*** 8.129***
(2.240) (2.019)

Subsidiary autonomy 0.071 3.294
(2.143) (2.145)

SCage -0.397 -0.395 -0.441
(0.167) (0.162) (0.183)

PCsales 0.0004 0.0004 0.0004
(0.000) (0.000) (0.000)

R
2
0.311 0.311 0.151
Adjusted R
2
0.262 0.275 0.106
F 6.328 8.588 3.367
a Unstandardized regression coefficients are shown; standard errors are in parentheses

*** p = 0.001

Exhibit 10: Influence of Subsidiary Company Strategy and Autonomy on Incentive Compensation
Source: Author


Further, data shown in Exhibit 9 supports Hypothesis 3b, which states the
influence of subsidiary autonomy on bureaucratic control. As previously
mentioned, bureaucratic control was conceptualised in a reversely scored
67
manner, with higher scores indicating loosening degrees of control. Hence a
significantly positive relationship between the former indicates that with
increasing degree of autonomy, the degree of impersonal, bureaucratic control
decreases.

The regression coefficient resulted from the equation model to test the
association between subsidiary autonomy and monetary incentive compensation
was not found to be significant. Hence, Hypothesis 3c was not supported.

The Durbin Watson statistics performed to assess the degrees of correlation
between the disturbances in the two multiple regression equations (used to test H
2c & 3c as well as H 2b & H 3b) revealed no significant presence of first order
autocorrelation. Values measured were Durbin Watson
H2c&H3c
= 2.055 and
Durbin Watson
H2b&H3b
= 1.270 respectively.


Independent variables Monetary Incentive Compensation


Outcome measurability 6.268**
(2.288)

SCage -0.403
(0.162)

PCsales 0.0023
(0.000)

R
2
0.252
Adjusted R
2
0.208
F 5.715
a Unstandardized regression coefficients are shown; standard errors are in parentheses


** p < 0.01
Exhibit 11: Influence of Outcome Measurability on the Use of Monetary Incentive Compensation
Source: Author

68

Exhibit 11 presents the results of the regression model used to test Hypothesis 4.
The data supports Hypothesis 4, which says that with increasing outcome
measurability, the use of monetary incentive compensation increases. The
relationship was found to be positive and significant.

Exhibit 12 provides the results of the correlation analyses performed to test
Hypotheses 5a and 5b. Correlation analysis was applied, since no causal
relationship was assumed between the different types of control, which,
conceptually, are endogenous variables.


Monetary Incentive Compensation

Bureaucratic control
a
-0.404*

Culture control
b
0.103
a Pearson correlation coefficient between the control mechanisms is shown
b Point biserial correlation coefficient between the control mechanisms is shown;
Note: Culture control is a dichotomous variable
* p < 0.05

Exhibit 12: Relationship Between the Different Control Modes
Source: Author


Hypothesis 5a was tested with Pearson product moment correlation statistics,
since both variables were metrically scaled and Hypothesis 5b was tested with
Point biserial correlation statistics, as culture control was operationalised as a
dichotomous variable and hence underlying data were at interval and nominal
scale.

69
As indicated by the significantly negative correlation coefficient, the data
supports Hypothesis 5a, which states that with increasing use of bureaucratic
control, the use of monetary incentive compensation increases. However, data
presented in Exhibit 12 do not provide support for Hypothesis 5b, which
examined the correlation between culture control and monetary incentive
compensation, as no significant relationship was found.


VI. Discussion

This part of the study follows the objective to summarize and discuss major
findings of the relationship between the environmental and structural attributes
on the one hand and the control mechanisms on the other.

A. General Discussion of Results
Exhibit 13 provides a summarizing overview of the hypotheses tested in the
present work and serves as a basis for the following discussion.

HYPOTHESES
SIGN SUPPORT
H 1a: Involvement Culture Control + No
H 1b: Involvement Bureaucratic Control + No
H 1c: Involvement Monetary Incentive Compensation + No
H 2a: Subsidiary Role Culture Control + Yes
H 2b: Subsidiary Role Bureaucratic Control + No
H 2c: Subsidiary Role Monetary Incentive Compensation + Yes
H 3a: Subsidiary Autonomy Culture Control - No
H 3b: Subsidiary Autonomy Bureaucratic Control - Yes
H 3c: Subsidiary Autonomy Monetary Incentive Compensation - No
H 4: Outcome measurability Monetary Incentive Compensation + Yes
H 5a: Monetary Incentive Compensation Bureaucratic Control + Yes
H 5b: Monetary Incentive Compensation Culture Control + No
Exhibit 13: Summary of Hypotheses Tested
Source: Author
70
Interestingly and contrary to the author's expectations, no hypothesized
moderating effects of increasing levels of financial involvement on control
mechanisms were found. What may be the reasons of failure to find a moderating
effect of parent company's involvement on subsidiary control?

A look at the statistics shown in Exhibit 7 reveals, that the coefficient of
determination R
2
for both the regression models, which is commonly used as a
measure of the goodness of fit of a regression line, is low. The percentage of total
variation explained by the respective models is only 17.4 % and 7.6%
respectively. A coefficient of determination R
2
of 0 would be mean that there is
no relationship between the exogenous and the endogenous variables. One
feasible explanation may arise from the measure used to operationalize the parent
company's degree of involvement. The author used the level of paid-up capital as
a proxy for the focal organisations engagement in India. Alternatively, the author
could have used other financial or structural measures such as the amount to total
capital invested or foreign assets attributable to overseas operations (Chang and
Taylor, 1999), (for a more comprehensive overview refer to the work of Nguyen
and Cosset (1995)).

The strategically increasing relevance of Subsidiary Companies for the long term
prospect of the parent company, inter alia, finds its articulation in the role played
by the affiliated units abroad. From entities with initially single function
operations, these entities have now emerged as increasingly important parts of an
international value chain. Endowed with considerable latitude for research and
development, production, marketing as well as sales and distribution, they
increasingly accumulate specialized knowledge with respect to mandated
products. From an agency perspective, it was argued that such situations of
increased strategic relevance will lead to increased attempts to control and align
agent's activities.

Two of the suggested relationships, namely subsidiary role's moderating effect on
culture control as well as on monetary incentive compensation, were supported.
71
However, no evidence was found for the moderating effect on bureaucratic
control. Now, how can these results be interpreted?

Taking up Perrow's (1971) paradox of decentralisation, which states that the
degree of control exerted in decentralised organisations can be even higher than
that in centralised ones especially when culture control is applied, we may find
logical explanations as to why Hypotheses H2a and H2c were supported and
Hypothesis H2b not. Culture control is an implicit form of control exerted
through internalised values and norms. Nevertheless, expatriates tend to be
strongly committed to Headquarters (Gregersen & Black, 1996). Unlike
bureaucratic control, which utilizes an extensive set of rules, regulations and
procedures, culture control does not regulate and hence restrict subsidiary
management's activities as extensively.

Organisational units need a certain degree of discretion to not only design their
own set of organisational processes that support new products (Abernathy &
Clark, 1985) but to also reconfigure internal and external competencies to
address the rapidly changing environments (Teece, Pisano & Shuen, 1997). This
may, at the same time, explain why, despite increased inducement to control
caused by the unit's growing strategic importance for the parent company, no
empirical evidence was found for the exertion of increased bureaucratic control.
Consistent with this chain of argumentations, monetary incentive compensation
also aligns rather than limits subsidiary management's goals and initiatives,
through the use of performance related financial incentives. It leaves enough
latitude for managers to utilize their own resources as well as competencies and
at the same time provides room for operational flexibility, which is important to
pursue the strategy of regional centralisation. This may also explain why the
relationship between increasing subsidiary role and increasing use of monetary
incentive compensation was found to be significantly related, resulting in
Hypothesis 2c being supported.

72
Subsidiary autonomy was another structural characteristic of interest to this
study. Based on the theoretical considerations, particularly based on those of
stewardship theory and its behavioural premises, it was argued, that managers, as
good stewards of a company, require enabling and empowering corporate
structures (Davis, Schoorman and Donaldson, 1997) for effective actions. To
facilitate the same, proponents of this theory posit exceeding degrees of
subsidiary autonomy. In compliance with this line of argumentation, the author
had hypothesized that increasing levels of subsidiary autonomy will ultimately
lead to decreasing levels of subsidiary regulations and control, which in turn
reflect a more empowering contextual environment. As it has already been
illustrated in the previous section, data supported the hypothesised inversed
moderating effect of autonomy on bureaucratic control. However, neither culture
control nor monetary incentive compensation were found to be significantly
related to subsidiary autonomy. What are plausible explanations to this?

Subsidiary autonomy is very much related to and reflected in the formal
organisation structure (Ghoshal, Korine & Szulanski, 1994). Stronger than any
other mechanism under consideration in the present study, it directly influences
the degree of latitude subsidiary management enjoys. Despite a high reduction in
active control, bureaucratic control, through the pre-establishment of plans,
formalisation of procedures and standardisation of systems (Van de Ven,
Delbecq and Koenig, 1976), strongly limits an entity's organisational and
operational flexibility. Hence, changes in the level of autonomy will inevitably
entail discernible changes in the framework of intra-firm structural relationships.
In contrast to that, monetary incentive compensation as well as culture control
are rather more implicit and subtler forms of governance and hence do not
restrict organisational adaptiveness. Having said this, its seems to be quite logical
as to why changes in the degrees of autonomy were significantly related to
bureaucratic control only.

Outcome measurability as a latent construct was used in this study to capture the
concept of environmental uncertainty. For recapitulation, it denotes the degree
73
with which outcomes are specifiable and quantifiable. In this work it was
hypothesised that higher measurability, which reflects lower levels of perceived
environmental uncertainty, will influence the use of monetary incentive
compensation positively. As shown in the previous section, this hypothesis was
supported as these variables are significantly related, indicating a strong match
between compensation structure and environmental characteristics.

High degrees of state uncertainty naturally cause significant difficulties to not
only measure outcome but also in determining whom to reward (O'Donnell,
2000). From an agency theory perspective, researchers (Eisenhardt, 1989a;
Jensen & Meckling, 1976) have additionally argued that, especially in such
situations, risk will increasingly be transferred to the agent, as outcomes are only
partly a function of one's own efforts. But what if the agent is risk averse and,
unlike the principal, is not able to diversify risk. On the contrary, this implies
that, monetary incentive compensation becomes increasingly attractive with
lower degrees of uncertainty and, in turn, with higher degrees of measurability,
not only to the agent, due to the aforementioned reason, but also to the principal,
as the costs of shifting risk to the agent and hence the costs entailed with this
form of governance is lower.

Last but not least, the author investigated the relationship between the distinct
control mechanisms. Contrary to the frequently shared assumption of a partially
substitutive relationship between different control modes, the author rather
assumed a complementary nature of applied control. As indicated in the last
section, one hypothesised relationship, more precisely, that between monetary
incentive compensation and bureaucratic control, was found empirically
supported, while no significant evidence was found for the assumed correlation
between monetary incentive compensation and culture control. What do these
results imply?

Let's consider the following situation in which a subsidiary company not only
plays a strategically important role for the parent company but is also
74
simultaneously embedded in a relatively stable environment. From what has been
illustrated so far, Headquarters, in order to further limit subsidiary's latitude, may
favour a combination of bureaucratic control and monetary incentive
compensation over a combination of the latter with culture control. One plausible
explanation for such a constellation directly results from the characteristics
associated with the respective governance mechanisms. Monetary incentive
compensation does not enable immediate actions. They are rather designed based
on long-term considerations. Through the extensive set of rules and procedures,
bureaucratic control mechanisms, however, endorse prompt sanctions. A second
source of explanation can possibly be found in the monitoring costs associated to
the respective types of control. Expatriate staffing very much entails high control
costs making this option frequently less attractive to companies which face
higher resource constraints. This being said, in such specific cases, an
organisational control design concept comprising bureaucratic control and
monetary incentive compensation can be considered more suitable.


B. Conclusion

One of the main purposes of the present work was to examine the types and
degrees of control imposed by Headquarters on their Foreign Subsidiaries
depending on certain environmental and structural characteristics. Thereby, the
author focused on 3 types of governing mechanisms which are commonly
applied in Multinational Corporations. This chapter presents some of the
conclusions drawn from the findings in this study.


1. Continuance of Formal and Structural Control
Generally, governance and control play an essential integrating function in
Multinational organisations. The importance of control stems from the fact that
Headquarters do have to ensure that the various activities originating from and
executed in its geographically dispersed subunits are compatibly coordinated and
75
support the overall objectives of the organisation as a whole (Egelhoff, 1984).
The higher the degree of specialisation or differentiation among the various intra-
firm units, the higher the need for mechanisms of integration. In integrating these
operations, Headquarters do have a choice. A choice in specifying the types and
levels of control it has with its respective overseas subsidiaries.

Based on an exhaustive review of literature on control used by Multinational
Corporations, Martinez and Jarillo (1989) describe an observed evolution in
those mechanisms of coordination and integration. From initially more structural
and formal mechanisms to subtler and informal mechanisms of control. The
former category includes departmentalization, centralisation, bureaucratic control
as well as output and behaviour control. The latter category comprises mainly
lateral relations such as task forces and interdisciplinary teams, informal
communication and socialisation frequently referred to as organisational culture.
This evolution is mainly explained by changing environmental influences faced
by Multinational Corporations. However, the findings of the present work
indicate a continued presence of formal and structural mechanisms of control in
internationally operating firms. Both results are not mutually contradictory. Yet,
for the moment (the author will elaborate on this point in the following sections),
it will suffice to note the persisting existence of control mechanisms of the first
category, namely, the existence of structural and formal control.


2. From Unidimensional to Multidimensional Control
An increasing number of recent studies on control exercised within firms indicate
another trend that moves from unidimensional approaches towards more
complex, multidimensional control systems. Meaning that various monitoring or
integration mechanisms are deployed simultaneously within organisations. These
instruments are then added to and not substituted for each other. Interestingly and
consistent to these previous findings, the results of this study support this
theoretically as well as empirically observed phenomenon for the given context.
While the author has investigated the relationship between distinct control types,
76
he found significantly related evidence for a complementary and simultaneous
deployment of certain control types.


3. Portfolio of Operative and Strategic Control
In compliance with what has been illustrated so far, it can be further argued that
companies do selectively combine their efforts of coordination based on the
characteristics associated with the various control types. As previously stated
integrating mechanisms such as bureaucratic control rather focus on rules and
procedures and hence limit operational flexibility. Clearly, this type of control is
highly operative in nature. In contrast to that, monetary incentive compensation
schemes strongly focus on the end of mean-end relationships and therefore
strategically align subunits' activities. As shown in one of the empirically
supported hypothesis, monetary incentive compensation is significantly
correlated to bureaucratic control and hence, by all means, it can be stated that, in
the given empirical context, companies do apply a combined set of operative and
strategic measures to align interests and activities.


4. Aptitude of Control Modes
If the strategically increasing role of subsidiary companies, from single function
operators and simple cost contributors to high value creators, is accompanied by
a high state of environmental certainty, a set of less formal but rather subtler and
more strategic control mechanisms must be applied. In such a manner
Headquarters can endorse strategic initiatives at the subsidiary company level
and avoid containment of operational flexibility at the functional level. However,
on the contrary, if parent companies, want to narrow organisational latitude and
rather prefer operative control over operations, more formal and structural
mechanisms such as bureaucratic control must be applied. This will help limiting,
more strongly, potentially diverging and aberrant activities at the Subsidiary
Company level, particularly when the magnitude of incentives for managers is
moderate due to increasing environmental volatility and uncertainty.
77
VII. Reflexion and Implications for Future Research


A. Critical reflexion and Limitations

Finally, it will be noteworthy to critically reflect on the present work. The first
few comments refer to the theoretical and conceptual part of the dissertation,
whereas the final comments focus on methodologies as well as the empirical
context applied to this study.

Firstly, the author would like to comment on the theoretical approaches applied
in the present work. Agency theory as well as stewardship theory mainly served
as the basis for deriving the hypotheses used to predict the type and level of
control exerted in Multinational Corporations. Agency theory and as well as its
economic view of a utility maximising, opportunistic and self-serving agent who
attempts to exert less effort may be too simplistic to accurately model today's
reality in Multinational Corporations (O'Donnell, 2000). Further theories such as
intraorganisational network approaches, comparative national culture
frameworks, and self-regulating behavioural approaches could have been
applied alternatively. However, does agency theory become less important or
even obsolete within this context? The question must be clearly negated as the
principal-agent structure with all its possible epiphenomena like self-interest,
goal divergence and information asymmetry still remains. Ergo, a rather
combined multi-theoretical application can be the only plausible answer. Further
research is necessary to help us understand when, for instance, agency theory
rather fits into the organisation and management theory framework, relative to
stewardship theory and vice versa.

The next point targets the control modes applied for the purpose of this research.
Alternative to the three types of governing mechanisms examined in this study,
further control concepts could have been investigated. Following the
78
aforementioned evolution of control mechanisms applied by Multinational
Corporations, one could have examined some of the subtler forms of control,
namely the use of interdisciplinary or temporary teams, the intensity of informal
communication flows through the number of meetings or transfer of managers
among corporate subunits or the establishment and diffusion of organisational
culture within affiliated entities abroad.

Another point of criticism focuses on the dyadic design of relationship assumed
between the focal organisation and its subsidiary companies in this study. Given
the fact that multinational organisations usually comprise more than one entity
abroad, this complexity reducing assumption, drawn for the purpose of analytical
simplicity, may not adequately capture and accurately mirror empirical dynamics
in organisations. Hedlund's (1986) concept of heterarchy or network models,
where organisations are considered to be a web of formally and informally
structured arrangements may be more appropriate since a clear tendency can be
perceived with regard to an increase in the density and proliferation of linkages
among different economic entities. Hence, for further studies, a subset of the
aforementioned organisational characteristics has to be specified more
adequately.

The third set of comments refers to the operationalization of variables and the
application of methodologies. Exemplarily, in this study, culture control has been
operationalised as a dichotomous variable, which can take values of 0 and 1.
Alternatively, following Edstrm and Galbraith (1977), culture control could
have been operationalised by measuring the ratio of the number of managers who
are from host or third country to the total number of managers comprising the top
management team in a Foreign Subsidiary. This would have caused a change in
the measurement scale of the variable, i.e. from nominal scale to interval scale
and hence would have naturally led to the application of distinct data analysis
techniques. A change from binary logistic to multiple regression analysis and
from Point biserial to Pearson product moment correlation analysis.

79
Finally, some critical remarks shall be made with respect to the empirical data
set. Cross section data, i.e. data on several variables at one point in time, have
been collected and applied for the hypothesis testing. Cross section data has its
own heterogeneity problems such as size and scale effects which have to be taken
into account (Black, 1999). A further valid point of criticism may refer to one of
the idiosyncrasies resulting from the Indo-Swiss empirical context and its effect
on the results with specific reference to the extraordinarily high number of small
and medium sized Swiss companies operating in India. Underdog companies
frequently face higher resource constraints (Eisenhardt, 2002), i.e. lack of
financial positions, lack of possibilities to distribute costs across different
products or product lines. This can, to a great extent, determine control decisions.
Another crucial aspect to be considered is the origin of the company. Since
management processes, values or norms and consequently patterns of decision-
making are, at least partly, shaped by cultural characteristics (Kelley, Whatley &
Worthley, 1987) the nationality might influence its preference for types and
levels of control exerted.


B. Implications for future research

Evidently, a study such as this can greatly benefit from extensions and
replications with following properties:

Firstly, as subsidiaries mature with respect to strategic resources, as businesses
and industries change with respect to the nature of competition, Multinational
Corporations should find substitutive mechanisms of control (Prahalad and Doz,
1981) and hence, subtler and more informal control types shall be investigated.
This will lead to an understanding of the functioning of newer mechanisms of
control in transnational organisation. However, this does not imply that classical
control modes are less important. As previously stated, the reality is that control
mechanisms are greatly overlaid and that any Headquarters-Subsidiary
80
relationship will exhibit multiple types of control to varying degrees (Birkinshaw
and Morrison, 1995).

This leads us to the second property, the application of comprehensive control
strategies, i.e. simultaneous imposition of distinct control mechanisms. Such
complex control systems have to be investigated more intensively in order to
enhance our understanding of the interdependencies among the different
mechanisms.

Thirdly, control concepts shall be more strongly related to its consequences in
order to evaluate the efficiency and efficacy of various control types.

Finally, for the sake of analytical simplicity, the exertion of control has been
examined under certain MNC-specific structural premises such as a dyadic
architecture with vertical Headquarters and subsidiary company linkages,
excluding additional lateral linkages between subsidiary and further affiliated
entities. Such complexity reducing, though fairly restrictive corporate
assumptions, shall be further loosened for future studies. This is of great
importance, since applicability and appropriateness studies of newer, more
informal control systems, like lateral decision making for instance, structurally
require a specific corporate design as pendant.


VIII. Closing Remarks

Multinationals Companies, in their quest for ways to gain and sustain
competitive advantages in a growingly global business environment, have started
to increasingly approach newly emerging markets. Parent companies, in their
pursuit to not only to pecuniarily exploit arbitrages but to also explore and
strategically benefit from locational differences, assign their Foreign Subsidiaries
with different mandates.
81

In implementing these mandates, Foreign Subsidiaries encounter new and
distinct market forces along with differing environmental conditions. These
peculiarities in the corporate periphery necessitate appropriate differentiation in
the internal structure of Multinational Companies - such as a stronger shift of
locus towards the set-ups of subsidiaries, which will naturally be accompanied by
various implications on the diverse vertical and lateral linkages between
Headquarters and Subsidiary Company. These, amongst others, include a general
revision of the Foreign Subsidiary's role or strategy, an increased delegation of
decision making authority towards subsidiary managers, more operational
flexibility to design its own processes and sufficient latitude to enhance
organisational adaptiveness.

However, this should not belie the fact that the ultimate responsibility for
coordination and overall strategic direction lies with the Headquarters, generating
a crucial need to compatibly coordinate the various activities executed at the
subsidiary level, so that they ultimately support the overall objectives of the
corporate group.

Control concepts play an essential role in performing the aforementioned
integrating function. However, the aptitude and effectiveness of respective
control strategies significantly depends on numerous factors, inter alia, on
structural and environmental aspects.

Hence, as previously mentioned by the author, the purpose of this dissertation
was twofold. Firstly, it was the author's intention to apply a theoretical set of
empirically testable and propositional arguments to a new context in order to
examine its predictive ability and limitations. Through this process of theory
testing, the author hopes to have contributed to the process of theory
development within the field of subsidiary management and subsidiary control,
which forms the core of Headquarters-Subsidiary relations research.

82
Secondly, the epistemological aim was to further increase our understanding of
control Multinational Corporations exert to manage their Affiliated Entities
abroad. Once a clear and thorough understanding, of how types and degrees of
control are being moderated by specific structural and environmental
contingencies, has been established, this relational framework can serve for
descriptive and predictive purposes in the given context.

To conclude, following Whetten's (1989) posit that a good theorist inter alia has
to have the sensitivity to find a balance between the virtues of
comprehensiveness and parsimony, the author hopes that present work was able
to strike such a balance and provides impetus for future research within this field
and context.


83
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107
Appendix

Interview Directory of Sampled Companies

COMPANY NAME FIRST NAME FUNCTION LOCATION

ABB LTD. Uppal Ravi Managing Director
Bangalore/
India

ALL E TECH Mian Ajay Chief Executive Officer
Noida/
India

BALDOR ELECTRIC INDIA
PVT. LTD.
Raibagi Sunil Director
Pune/
India

BLASER SWISS LUBE INDIA
PVT. LTD.
Chakraborty Santosh Managing Director
Delhi/
India

BOBST INDIA
PVT. LTD.
Keller Rodolphe President
Pune/
India

BRUDERER PRESSES
INDIA PVT. LTD..
Fernandez P.A. Director
Mumbai/
India

BTS INVESTMENT ADVISORY Guggenbhl Alastair Managing Partner
Zurich/
Switzerland

BUHLER (INDIA)
PVT. LTD.
Mane Dipak Managing Director
Bangalore/
India

BURCKARDT COMPRESSION
(INDIA) LTD.
Rao Rallabhand Managing Director
Pune/
India

CFL CROSSFREIGTH Singh Yogesh Chief Executive Officer
Rmlang/
Switzerland

CLARIANT CHEMICALS Meier Heiner Vice Chairman & MD
Mumbai/
India

CONCAST AG Zuber Jacques President & CEO
Zurich/
Switzerland

CREDIT SUISSE Doshi Mihir Managing Director
Mumbai/
India

DURECO INTERNATIONAL Durrer Markus Principal
Horw/
Switzerland

ENDRESS+HAUSER FLOWTEC
INDIA PVT. LTD.
Bhandiwad President & Director
Aurangabad/
India

GEBERIT AG (SCHWEIZ) Ernst Christian Head International Sales
Rapperswil/
Switzerland

108
COMPANY NAME FIRST NAME FUNCTION LOCATION

GEORG FISCHER AG Elben Helmut
Head of Corporate
Planning
Schaffhausen
/
Switzerland

GIVAUDAN Pal Ajit Regional Director
Bangalore/
India

GUEDEL
INDIA PVT. LTD.
Raibagi Sunil Director
Pune/
India

HOLCIM Hugentobler Paul
Executive Committee
Member
Zurich /
Switzerland

HUBER+SUHNER ELECTRONICS
PVT. LTD.
Banz Benedikt Chief Executive Officer
Gurgaon/
India

INTEGRA HINDUSTAN CONTROL
LTD.
Parikh Madhukar Chief Executive Officer
Vadodara/
India

KAIZEN INSTITUTE (INDIA)
PVT. LTD.
Puri Ashok Managing Director
Delhi/
India

KARL SOTRZ Eicher Anton Director Sales
Tgerwilen/
Switzerland

KBA-GIORY INDIA
PVT. LIMITED
Gupta Atul Chief Executive Officer
Delhi/
India

KISSSOFT AG Dinner Hanspeter Director Distribution
Hombrechtik
on/Switzerla
nd

KUEHNE+NAGEL
PVT. LTD.
Mueller Volkmar Managing Director
Gurgaon/
India

KUONI INDIA
LTD.
Dhanbhoora Rustom
CEO - Managing
Director
Mumbai/
India

LONZA LTD INDIA Umkanth
Subramanya
n
Managing Director
Mumbai/
India

LPS BOSSARD Jain Rajesh Managing Director
Rotakh/
India

LUWA INDIA
PVT. LTD.
Abrell Gottfried President
Bangalore/
India

METTLER-TOLEDO Malhotra Ashok Managing Director
Mumbai/
India

NESTLE INDIA
LTD.
Roland Martial
Chairman & Managing
Director
Gurgaon/
India

NOVARTIS INDIA
LIMITED
Shahani Ranjit Vice Chairman & MD
Mumbai/
India

109
COMPANY NAME FIRST NAME FUNCTION LOCATION

NOVOLEX GMBH Meier Daniel Chief Executive Officer
Oberriet/
Switzerland

OTTO-HOSTETTER INDIA
PVT. LTD.
Pradhan S Chief Executive Officer
Bangalore/
India

PACKSYS GLOBAL
PVT. LTD.
Beat Rupp Manging Director
Rueti/
Switzerland

PIT SOLUTIONS von Ziegler Dieter Chief Executive Officer
Murg/
Switzerland

RIETER AUTOMOTIVE AG Thbaud Frdric Vice-President
Winterthur/
Switzerland

RIETER INDIA
PVT. LTD.
Enderle Michael Chairman
Delhi/
India

SAURER ARBON AG Schler Rolf Erik Area Sales Manager
Arbon/
Switzerland

SAUTER RACE Suresh R. Director
Chennai/
India

SCHILLER HEALTHCARE INDIA
PVT. LTD
Sanghvi Vikram Managing Director
Mumbai/
India

SCHOELLER TEXTILE AG Kuehne Ruedi Chief Financial Officer
Sewelen/
Switzerland

SCHURTER INDIA
PRIVATE LTD.
Lokhandwala Agari Managing Director
Vadodara/
Switzerland

STUBLI INDIA Mahajan Surjit Singh Managing Director
Mumbai/
India

SUHNER INDIA
PVT. LTD.
Amann Philipp Chief Executive Officer
Bangalore/
India

SWISS INTERNATIONAL AIRLINES Schmid Urs General Manager
Mumbai/
India

SWISS RE SERVICES Date Dhananjay Managing Director
Mumbai/
India

SYNGENTA INDIA Apte Prakash Managing Director
Mumbai/
India

SYNGENTA SEEDS Nadga Surendra President
Pune/
India

USTER Rathnam V.R. President
Bangalore/
India

110
COMPANY NAME FIRST NAME FUNCTION LOCATION

VICTORINOX INDIA
PVT. LTD
Goel Anish Managing Director
Mumbai/
India

XL INSURANCE Popp Thomas Chief Executive Officer
Gurgaon/
India

ZIEGLERTEX INDIA
PVT. LTD
von Ziegler Dieter Chief Executive Officer
Murg/
Switzerland













111
Questionnaire


A. General Information on Your Company
I. Contact Details
Name:
First name:
Function:
Company:
Department:
Street / No:
Postcode / Town / Country:
Telephone:
Mobile (optional):
Fax:
E-mail:
II. Questions on Your Parent Company
Plant manf./engineering Electronics Telecommunications
Automotive/supplier Food/beverages/tobacco Mail order
Construction Optics/precision mech. Textiles
Electrical engineering Pharma/chemical Services
Equipment manufacturer IT/software Others
1. 2. 3.
2004 2005 2006
a. 10 years ago:

c. 2006 (last financial year)
2004: CHF 2005: CHF 2006: CHF
1
a. 10 years ago:

c. 2006 (last financial year)
2004: CHF 2005: CHF 2006: CHF
2. In which sector(s) does the Parent Company operate? (Multiple answers possible)
3. Please state three most important strategic business areas of the Parent Company.
Please specify

4. Please quantify the number of employees in the Parent Company for the last three years.

5. Please specify the share of foreign employees to total employees of the Parent Company?
% of total number of employees
b. 5 years ago: % of total number of employees
% of total number of employees
6. Please quantify the Parent Company's sales volume (in CHF millions) over the last three years.
7. Please specify the share of foreign sales to total sales of the Parent Company?
% of total sales volume
b. 5 years ago: % of total sales volume
% of total sales volume
8. Please quantify your company's profits (in CHF millions) over the last three years.



112


III. Questions on the Subsidiary Company in India

YoE: INR m 2006: INR m
1. 2. 3.
Plant manf./engineering Electronics Telecommunications
Automotive/supplier Food/beverages/tobacco Mail order
Construction Optics/precision mech. Textiles
Electrical engineering Pharma/chemical Services
Equipment manufacturer IT/software Others
Plant manf./engineering Electronics Telecommunications
Automotive/supplier Food/beverages/tobacco Mail order
Construction Optics/precision mech. Textiles
Electrical engineering Pharma/chemical Services
Equipment manufacturer IT/software Others
2004 2005 2006
2004: INR 2005: INR 2006: INR
2004 2005 2006
2004: INR 2005: INR 2006: INR
2
1. In what year did you start your operations in India?
2. What is the level of paid-up capital in INR millions?
3. Please name the three most important strategic business units / subsidiaries in India. (By order of importance)
Year of Establishment

Please specify
4. In which sector(s) does your 1. Business Unit / Subsidiary in India operate? (Multiple answers possible)
5. In which sector(s) does your 2. Business Unit / Subsidiary in India operate? (Multiple answers possible)
Please specify
6. Please quantify the number of employees of your 1. Business Unit / Subsidiary in India for the last three years.

7. Please quantify the sales volume (in INR m) of your 1. Business Unit / Subsidiary in India over the last three years.
8. Please quantify the number of employees of your 2. Business Unit / Subsidiary in India for the last three years.
9. Please quantify the sales volume (in INR m) of your 2. Business Unit / Subsidiary in India over the last three years.








113
Please state the number of hierarchical levels in the business unit in
India. (Top management, middle management, etc.)




Since what date has the current head (CEO, General Manager,
Country Manager, etc.) been in his post in the business unit in
India? (MM/YYYY) (MM/YYYY) (MM/YYYY)
Please specify the nationality of the Country Head
Please specify the nationality of the respective Business units/
Subsidiaries
Subsidiary strategy
Indicate to the extent in which each of the following factors
characterize the role of the subsidiary for its major product or product
line:
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
Monetary incentive compensation

Management / Leadership Style
Business Unit 1 Business Unit 2
No. of hierarchical levels No. of hierarchical levels
Please quantify the average size (number of people) in the first
three hierarchical levels.
No. of people in top management No. of people in top management
No. of people in top management No. of people in middle management
% HCN % HCN
No. of people in lower management No. of people in lower management
PCN = Parent Country National,
HCN = Host Country National,
TCN = Third Country National.
PCN = Parent Country National,
HCN = Host Country National,
PCN = Parent Country National,
HCN = Host Country National,
Please define the composition of the following hierarchical levels:
PCN = Parent Country National,
HCN = Host Country National,
TCN = Third Country National.
% PCN % PCN
% HCN % HCN
% TCN % TCN
% PCN % PCN
% HCN % HCN
% TCN % TCN
PCN = Parent Country National,
HCN = Host Country National,
TCN = Third Country National.
(c) Lower management level
(b) Middle management level
(a) Top management level
% TCN % TCN
% PCN % PCN
Business Unit 1 Business Unit 2
Subsidiary primarily executes the strategy developed at the
Headquarters?
(1 = to a very great extent 5 = to a very little extent) rev. scored!
Subsidiary has international responsibility for procurement
activities?
(1 = to a very little extent - 5 to a very great extent)
Subsidiary has international responsibility for R&D activities?
(1 = to a very little extent - 5 to a very great extent)
Subsidiary has international responsibility for production activities?
(1 = to a very little extent - 5 to a very great extent)
Subsidiary has international responsibility for marketing and after
sales activities?
(1 = to a very little extent - 5 to a very great extent)
Subsidiary has international responsibility for certain secondary
activities?
(1 = to a very little extent - 5 to a very great extent)
The subsidiary posses some key strategic decision making authority
concerning a mandated product or product line?
(1 = to a very little extent - 5 to a very great extent)
Subsidiary has a high level of specialized knowledge regarding a
product or product line?
(1 = to a very little extent - 5 to a very great extent)
International market development costs are incurred by the
subsidiary?
(1 = to a very little extent - 5 to a very great extent)
% Short term incentives % Short term incentives
% Long term incentives % Long term incentives
Business Unit 1 Business Unit 2
Indicate the percentage of Top Management compensation paid
through each of the following components:
% Fixed salary % Fixed salary
% Fringed benefits % Fringed benefits





114
Subsidiary autonomy
Indicate the relative influence of the headquarters and the subsidiary
on the following aspects related to the subsidiary:
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
Outcome measurability

1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
Bureaucratic monitoring

1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
1 5 1 5
Business Unit 1 Business Unit 2
Changes in product policy (i.e. new product design)
(1 = HQs decides alone - 5 = subsidiary decides alone)
Changes in communication policy
(1 = HQs decides alone - 5 = subsidiary decides alone)
Changes in price policy
(1 = HQs decides alone - 5 = subsidiary decides alone)
Selection of material suppliers
(1 = HQs decides alone - 5 = subsidiary decides alone)
Changes in the manufacturing process
(1 = HQs decides alone - 5 = subsidiary decides alone)
Production schedules and plans
(1 = HQs decides alone - 5 = subsidiary decides alone)
Quality controls decisions
(1 = HQs decides alone - 5 = subsidiary decides alone)
Target group/market selection
(1 = HQs decides alone - 5 = subsidiary decides alone)
Business Unit 1 Business Unit 2
Changes in organisation structure (i.e. reorganisation)
(1 = HQs decides alone - 5 = subsidiary decides alone)
Changes in staffing policy (i.e. hiring or promotion)
(1 = HQs decides alone - 5 = subsidiary decides alone)
Changes in corporate finance (i.e. equity or debt financing)
(1 = HQs decides alone - 5 = subsidiary decides alone)
The objectives of this subsidiary are clearly stated
(1 = to a very little extent - 5 to a very great extent)
There are specific performance objectives for this subsidiary
(1 = to a very little extent - 5 to a very great extent)
Performance targets are set for this subsidiary
(1 = to a very little extent - 5 to a very great extent)
The outcomes toward which this subsidiary works are specified
precisely
(1 = to a very little extent - 5 to a very great extent)
This subsidiary's important objectives are stated numerically
(1 = to a very little extent - 5 to a very great extent)
Business Unit 1 Business Unit 2
Operating expanditures
(1 = daily, 2 = weekly, 3 = monthly, 4 = quarterly, 5 = annually)
Sales figures
(1 = daily, 2 = weekly, 3 = monthly, 4 = quarterly, 5 = annually)
Quality control assessments
(1 = daily, 2 = weekly, 3 = monthly, 4 = quarterly, 5 = annually)
Budgeting process
(1 = daily, 2 = weekly, 3 = monthly, 4 = quarterly, 5 = annually)
Resource allocation
(1 = daily, 2 = weekly, 3 = monthly, 4 = quarterly, 5 = annually)
Capital equipment purchases
(1 = daily, 2 = weekly, 3 = monthly, 4 = quarterly, 5 = annually)
Strategic business plans
(1 = daily, 2 = weekly, 3 = monthly, 4 = quarterly, 5 = annually)

DR. DES. SIGU MURINGASERIL
CURRICULUM VITAE

Page 1 of 4


PERSONAL INFORMATION

Address: Asia Research Centre (ARC)
University of St.Gallen (HSG)
Dufourstrasse 40A
CH-9000 St. Gallen
Switzerland

Phone: + 41 71 2242489
Mobile: + 41 79 4392272
Email: sigu.muringaseril@unisg.ch
Date of Birth: 27 February 1977
Nationality: German (Indian Origin)
Marital Status: Married




CAREER OBJECTIVE

To leverage the expertise and knowledge gained in the field of strategic and international
management thereby providing corporate houses the required infrastructure to efficiently and
efficaciously manage their business operations worldwide.


EDUCATIONAL PROFILE

DOCTOR UNIVERSITY OF ST.GALLEN (HSG), SWITZERLAND 2004-07
OF Specialization in International Management:
ECONOMICS Multinational Corporations (MNCs)
(Dr. oec.) Headquarters-Subsidiary Relationships (HQs-SCs)
Control Concepts within MNCs

PREDICATE: WITH GREAT HONORS (VERY GOOD)

Doctoral Thesis:
Control Concepts in Multinational Corporations (MNCs)
The Case of Swiss MNCs with Foreign Subsidiaries in India

Supervisor:
Prof. Dr. Li-Choy Chong
University of St.Gallen (HSG), Switzerland

Co-Supervisor:
Prof. Dr. Narendra M. Agrawal
Indian Institute of Management Bangalore (IIMB), India
DR. DES. SIGU MURINGASERIL
CURRICULUM VITAE

Page 2 of 4

VISITING SCHOLAR INDIAN INSTITUTE OF MANAGEMENT BANGALORE 2005-07
Research & Operating base

DIPLOM-KAUFMANN UNIVERSITY OF TBINGEN, GERMANY 2003
Equivalent to MBA Major in Strategic Management and Marketing
Minor in Management & Organizational Psychology


PROFESSIONAL PROFILE - BUSINESS

FOUNDER & CHAIRMAN INDIA SYMPOSIUM - BRAND EQUITY: MILLION SWISS FRANC PLUS
Founded in 2005 Annually recurring leadership platform which strives to foster the
economic and social ties between India and the German-speaking
Website: regions of Europe, consisting of Germany, Switzerland and Austria
www.india-symposium.org actively and sustainably.


PREVIOUS SPEAKERS & PARTICIPANTS include
Ministers, Ambassadors & Top Executives of ABB, Allianz, Citigroup,
Credit-Suisse, DaimlerChrysler, Ernst&Young, Evalueserve, Holcim,
IBM, Infosys, KPMG, McKinsey&Company, Rieter, SAP, Siemens,
Swiss International Airlines, SwissRe, Swiss State Secretariat for
Economic Affairs SECO, UNCTAD, World Economic Forum (WEF)
and Zurich Financial Services.

TRAINEESHIPS PORSCHE 2002/03
Headquarters, Stuttgart / Germany
Product Management Cayenne and Carrera GT
Member of the Porsche Pool - Talent Search Program

DAIMLERCHRYSLER 2001
Headquarters, Stuttgart / Germany
Product Management Telematics

INDO-GERMAN CHAMBER OF COMMERCE 2000
Head Office, Mumbai/India

CONSULTING TYPE OF PROJECTS 2004-07
Various Projects Strategic Scenario Development, Benchmarking Projects, International
Market Development to name just a few

CLIENT PORTFOLIO
Small and Medium Sized Enterprises (SMEs), Multinational
Corporations (MNCs) and Governmental Organisations.
DR. DES. SIGU MURINGASERIL
CURRICULUM VITAE

Page 3 of 4


PROFESSIONAL PROFILE - ACADEMIA

INITIATOR & RESEARCH PROJECT ON
PROJECT LEADER INTERNATIONALIZATION OF SWISS COMPANIES TO INDIA
In cooperation with and under the patronage of Swiss State Secretariat
for Economic Affairs / Swiss Federal Ministry for Economics;
Examination of up to 100 Business Units of Swiss Foreign Subsidiaries
in India

INITIATOR FIT FOR INDIA - PROGRAM @ UNIVERSITY OF ST.GALLEN
Internship and Trainee - platform for HSG Students in India; Target:
Cross-sectional design; 10-15 internships in India p.a.

PROMOTER & ADVISOR EXECUTIVE AND BUSINESS TRIPS TO INDIA
Executive MBA 2005/06 - 45 Executives
Business Delegation 2006 - German Bank incl. 48 corporate clients

PROGRAM DIRECTOR ASIA CONTEXT AT IIMB
Exchange Program of HSG in 2005 and 2007

GUEST LECTURES EXECUTIVE MBA IN GENERAL MANAGEMENT
India-specificat University of St.Gallen 2005/06

EXECUTIVE MBA IN LOGISTICS MANAGEMENT
at University of St.Gallen 2005/06

SWISS CHAMBERS OF COMMERCE AND INDUSTRY
Event Partner & Regular Speaker 2006/07

PUBLISHING EUROPEAN ACADEMY OF MANAGEMENT CONFERENCE 2005
Exemplarily; List of publications available upon request



MISCELLANEOUS

INVITATION & CII INDIA RECEPTIONS AT THE WORLD ECONOMIC FORUM
PARTICIPATION in Davos 2005, 2006, 2007 and 2008

DELEGATE CAREER 2005, SINGAPORE
Delegate of the University of St. Gallen (HSG), Switzerland
DR. DES. SIGU MURINGASERIL
CURRICULUM VITAE

Page 4 of 4


LANGUAGES

German, English, Malayalam, French, Hindi


PERSONAL SKILLS & COMPETENCIES

Leadership Skills
Analytical Skills
Intrinsically motivated, highly dedicated and strongly committed


PERSONAL INTERESTS

Family
Sports: Soccer, Karate and Chess


REFERENCES

Prof. Dr. Narendra M. Agrawal Indian Institute of Management Bangalore (IIMB)
Professor for Organizational Behaviour (Letter of Reference available on request)

Prof. Dr. Li-Choy Chong University of St.Gallen (HSG)
Director, Asia Research Centre (Letter of Reference available on request)







Dr. des. Sigu Muringaseril
Dated the 21
st
day of January 2008