Controlling Latin American subsidiaries from Finnish headquarters - the dominant control type and factors affecting the control type choices

Abstract

Objectives of the Thesis The objective of this study is to specify how Finnish MNCs control their subsidiaries in Latin America through investigating which is the dominant control type: social, behavior or output; what are the principal mechanisms used for control and what is the effect of home country background and host country environment on control type choices. The reasons for studying this topic are that Latin America is an increasing market area for Finnish companies measured by investments and trade and the need for more research concerning subsidiary control in the area to provide information about the subsidiary control issues in Latin America to Finnish managers operating in the region.

Methodology and Data Collection A quantitative research method was selected because the aim is to verify earlier theories and in nature the research is more deductive. The data was collected through a self completion questionnaire survey that was designed with an internet based program called SurveyMonkey. It was administered via e-mail to all the subsidiaries of Finnish MNCs in Brazil, which in total are 44 subsidiaries. Eleven answers were received. The data is somewhat small, but the lack of earlier evidence on the matter makes it valuable.

Main Findings The results suggest that all of the three control types, social, behavior and output, are used in the subsidiaries investigated. This supports the view that the control types do not exist in the pure form but are mixed to constitute a control system. Social control received the strongest support, output control obtained the second strongest support and behavior control was supported less. The findings regarding the host country environment imply that there is evidence that its effect to the control decisions is less influential than more influential. Additionally there was support to the argument that the home country background of the MNC has influence on the control type choices. The overall conclusion thus is that the MNC home country background has more effect to the control type choices than the subsidiary host country environment and the control types in order or dominance are 1. social control, 2. output control, 3. behavior control