Strategy and management control systems: A study of the design and use of management control systems following takeover

Abstract

This paper describes and analyses the approach taken by four well‐known Swedish companies to management control following takeover. The findings suggest two factors which can explain how the management control systems were designed and used after an acquisition: the corporate strategy of the acquirer and the business strategy of the acquired company. The case studies show how these forces could impose mutually inconsistent requirements on the management control system of the acquired firm, and also how these inconsistencies were resolved.

Determinants of Controlling in Foreign Subsidiaries of MNEs: On the Explanatory Potential of the Institutional Perspective

“…One of the reasons for the various explanations can be the ambiguity of the English notion of 'control'. For example, Nilsson (2002) assigns to the 'management control system' such constituents as the strategic planning and budgeting system, the performance measurement system, including the information on deviations from the budget, and other financial and non-financial information, capital expenditure procedures, and transfer pricing systems. The similarity of this approach to the understanding of the controlling system mentioned above accentuates the need to clarify the concepts in extant research.…”

“…The concept of controlling is often associated with a narrower concept of control (e.g. Nilsson, 2002;Granlund, 2003), which, according to Vollmuth (2000), is a simplistic approach, because controlling is in essence a management system. Control in MNEs involves planning, implementation, evaluation and revision of economic performance to ensure the achievement of goals by a complex and geographically dispersed whole (Daniels & Radebaugh, 2007).…”

“…Depending on the level of involvement of foreign capital and the organisation of the MNE, the importance of subsidiary control varies. In order to increase oversight of the subsidiary and to reduce asymmetries in the access to information, parent firms recur to controlling tools (Nilsson, 2002;Granlund, 2003;Moilanen, 2016;Bijlsma-Frankema, 2004). However, the relevance of the controlling system in parent-subsidiary relationships has not received significant attention in the existing studies, both in the disciplines of international controlling (Brenner, 2009;Czyczerski, 2007Czyczerski, , 2009Gigouline, 2001;Hanzlick, 2014;Roth & Nigh, 1992), as well as broader discipline of international management (Kutschker & Schmid, 2008;Holtbrügge & Welge, 2010).…”

“…In extant research on international controlling it is possible to identify research on the formation of a controlling system following mergers and acquisitions (Nilsson, 2002;Bijlsma-Frankema, 2004;Chang, Chang, & Wang, 2014;Granlund, 2003;Molainen, 2016). When focusing on corporate strategy as a key determinant of controlling systems, attention was paid to the consistency of the strategy of the acquiring and acquired firm (Nilsson, 2002), to a lesser extent focusing on issues such as the cognitive mapping of managers (Bijlsma-Frankema, 2004) or emotions of people involved in shaping the accounting and control systems (Molainen, 2016).…”

“…When focusing on corporate strategy as a key determinant of controlling systems, attention was paid to the consistency of the strategy of the acquiring and acquired firm (Nilsson, 2002), to a lesser extent focusing on issues such as the cognitive mapping of managers (Bijlsma-Frankema, 2004) or emotions of people involved in shaping the accounting and control systems (Molainen, 2016). This seems to be surprising given that attention was drawn to the importance of the so-called soft factors in the integration of acquired companies (Teerikangas, 2006).…”