Rejection, reproduction and reshaping – a field study on global budget control practices in multinational companies

• Published in: Qualitative research in accounting and management 2018-04, Vol.15 (1), p.24-52
• Main Authors: Kornacker, Julia, Trapp, Rouven, Ander, Katharina
• Format: Article
• Language: English
• Subjects: Budgets; Decision making; Economic reform; Field study; Foreign subsidiaries; Modernity; Multinational corporations; Roles
• ISSN: 1176-6093; 1758-7654
• DOI: 10.1108/QRAM-02-2017-0011

Purpose The purpose of this paper is to advance the understanding of the “globalisation” of management control systems (MCSs) by investigating whether and why budget control structures established in German headquarters (HQs) are transferred to their Chinese subsidiaries and whether and why these structures are (not) used as intended by the HQs. Design/methodology/approach The research is based on a field study comprising 23 multinational companies (MNCs). Following a dyadic research design, representatives of the German HQs and Chinese subsidiaries were interviewed. Data were collected during 58 semi-structured interviews with 78 management accountants and managers. Based on cross-case analyses, commonalities and differences were identified that provide insights into contextual influences that shape the way, in which global MCSs are de facto used at the subsidiary level. Findings The study provides evidence for different receptions at the subsidiary level. While the budget control structures established in the German HQs guide managerial decision-making in some cases, they get modified or even rejected in others. The findings suggest that these receptions are particularly contingent on the perceived utility of budget control structures among the locals, which is interrelated with the perceived predictability of future developments. In particular, the findings suggest that HQs may impact the paths of travel, given that an ex ante adjustment of global budget control structures may reinforce the reproduction of practices at the local level. The decision to adjust the structures is contingent on organisational characteristics. Research limitations/implications The paper encourages further research on the contextual influences that impact how MCSs established at the HQ level are used at the subsidiary level. The paper focuses primarily on environmental peculiarities, which are potentially less important for management control devices other than budget control. Thus, the generalisability of the findings of this paper to other management control devices may be limited. Practical implications The findings suggest that MNCs should consider how foreign employees receive global MCSs established at the HQ level and take the locals’ perception of the utility of structures into account. Adjusting global structures without undermining them may reinforce their reproduction at the local level. Originality/value Based on a field study approach, the paper provides the first