What influences the degree of interactive use of performance measurement systems employed within relationships between headquarters and subsidiaries?

• In Event: Management Accounting

Abstract

Controlling modern multinational companies demands interactive control systems because subsidiaries often perform important strategic roles and have interdependent relationships with headquarters. This study examines whether the degree of interactive use of performance measurement systems (PMS) is influenced by nine factors related to the design of PMS and characteristics of the relationships between headquarters and subsidiaries. Consistent with the hypotheses that are tested within a sample of large foreign subsidiaries of multinational companies, PMS are found to be used more interactively when subsidiaries are proactively involved in strategic actions and relationships between headquarters and subsidiaries are highly interdependent. Also, findings show that the degree of interactive use of PMS is positively influence by the diversity, comprehensiveness, and participative design of the indicators included in PMS. Finally, subsidiary size and headquarters national cultural attributes have a significant influence on the degree of interactive use of PMS. No significant empirical support is found for the influence of a subsidiary’s global mindset and profitability. The conclusions of this study are insightful for both international business literature and management accounting research.

Author

• Lorenzo Patelli, University of Denver