The balance between tailoring and standardizing control

Abstract

Abstract In multibusiness firms, control of subsidiaries by the corporate headquarters is shaped by two levels of factors: subsidiary‐specific factors and corporate‐wide factors. Subsidiary‐specific factors imply control that is tailor‐made to the characteristics of each individual subsidiary. Corporate‐wide factors imply control that is standardized across the subsidiaries within a firm. We argue that the balance between tailoring and standardization depends on the nature of the control mechanisms that corporate management uses to control its subsidiaries. Some mechanisms are more suited for tailoring, whereas others are more susceptible to standardization. Findings from a study of Dutch corporations reveal that control of subsidiaries can be characterized as tailored standardization. Autonomy is tailored to the individual subsidiaries within a firm. Integration, formalization, and communication are also subject to a corporate effect. Therefore, these three mechanisms are tailored to individual subsidiaries as well as standardized across the subsidiaries of a firm.