Management Control and the Decentralization of R&D

Abstract

The authors investigate organizational conditions influencing the allocation of decision rights made by headquarters of multinational corporations (MNCs) to their foreign R&D subsidiaries. The authors draw on the logic of management control theory to build their conceptual model and then develop this model using arguments from the R&D and time use literatures in order to test the direct and indirect effects of advanced R&D processes within the subsidiary. They find that control theory makes correct predictions in terms of three organizational conditions, namely, research nature, information asymmetry, and interdependencies, but not in terms of social controls. In addition, the authors uncover a significant interaction between research nature and advanced R&D processes that indicates a breakdown in control logic in situations of high time pressure and intense R&D effort. Their study extends the body of literature on organizational conditions that influence how R&D decision rights are allocated in the MNC by drawing attention to the task environment in the locations where R&D is performed.