Academic journal article IUP Journal of Management Research

The Importance of National Culture in the Design of Management Control Systems: Evidence from Morocco and Italy

Academic journal article IUP Journal of Management Research

The Importance of National Culture in the Design of Management Control Systems: Evidence from Morocco and Italy

Article excerpt


The parent companies tha t create foreign subsidiaries need to control them, especially when the foreign subsidiary has a strategic importance for the parent company (Johnson et al., 2001). To facilitate the control process, the parent company tends to transfer its Management Control Systems (MCSs) to the foreign subsidiary, as it is interested in promoting a similar philosophy within the group (Schneider, 2006). MCSs are defined as a process by which managers make sure that the strategies of the organization are put into practice (Anthony, 1988). MCSs provide information that is intended to be useful to managers in performing their jobs and assisting organizations in developing and maintaining viable patterns of behavior (Otley, 1999). Roth et al. (1991) argued that having a shared management philosophy could increase efficiency, reduce communication time and contribute to the success of corporate strategy. Moreover, it is well known that management theories developed in one culture cannot be easily exported to other cultures (Keplinger, 2012). The transfer of MCSs clashes with the cultural diversities of the host country (national culture), because the national culture could affect the management style (Hofstede, 1980).

The diversity in MCSs can be due to several factors such as technology, company size, sector or other contextual variables (Child, 1981). While some differences depend on contextual factor, others however cannot be explained (Child, 1981; and Lincoln and Kalleberg, 1990). The diversity in MCSs can also be due to the cultural diversities (Hofstede, 1980; Trompenaars and Turner, 1998; and Chow et al., 1999). Many scholars have tried to understand the impact of national culture on management (Hofstede, 1980; D'Iribarne, 1989 and 1991; Chow et al., 1999; Ciambotti, 2001; House, 2004; and Hofst ede et al., 2010). This led to the development of an intense debate between these scholars and other scholars on the relationship between national culture and the MCSs. These authors concluded that it is important to consider the national culture to understand the management control diversity.

Literature suggests that people from different cultures have different attitudes to similar management practices (Chow et al., 1997). Varela et al. (2010) suggest that managerial practices require local customizations addressing the cultural variations of employees' behavior. Accordingly, effective MCS in one environment can prove dysfunctional in other environments (Chow et al., 1996). Further, this is because MCS practices are functional to a cultural synergy (Kanungo, 2006). In this context, companies have to adopt managerial styles that are legitimated within the subset of socio-political designs of context (Roberts and Greenwood, 1997).

On the one hand, the parent companies have a desire to transfer control systems to promote the same managerial philosophy, on the other, the relationship between MCSs and national culture implies an adaptation to local specificities. This research aims to understand what behavior the company adopts to cover this gap. The paper also aims to understand how the national culture impacts the design and the implementation of MCSs. In particular, the research focuses on the impact of national culture on the functions of MCSs-planning, organizing, measurement and evaluation.

The paper is structured as follows: it presents a review of related literature, followed by discussion of the methodology used in the paper. Subsequently, the results are discussed, and finally, the conclusion is offered.

Literature Review

National culture implies the cultural values shared between people belonging to the same (geographically-defined) nation. Many scholars have attempted to measure and compare national cultures. The most widely used models are: Hofstede (1980 and 1991), Trompenaars and Turner (1998), House (2004), and Hofstede et al. (2010). In all these models, national culture is defined by some indicators (Table 1). …

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