Human resource control in MNCs: a study of the factors influencing the use of formal and informal control mechanisms

Abstract

This study tests the effects of different internal and external factors on Multinational Corporations' (MNCs) use of formal versus informal mechanisms to control their human resources. Responses to a survey of 74 General Managers (GMs) of US subsidiaries in Mexico were used to test the hypotheses. The use of formal and informal mechanisms of control was associated with the extent to which the MNC had a global strategy as well as with the strength of localization forces such as local dependence and local regulations. Level of employee education, a subsidiary characteristic, also predicted the extent to which MNCs used informal control mechanisms. Most importantly, the results suggest that, even though they share some antecedents, each type of control mechanism, namely formal and informal, has a different set of internal and external antecedents. Indeed, our data hint that informal and formal control mechanisms are not mutually exclusive and that, on the contrary, they can fruitfully co-exist because they satisfy different internal and external demands.

Keywords:

• MNC control
• human resources
• subsidiary
• formal controls
• informal controls

Acknowledgement

The authors would like to thank the University of Houston's Office of Sponsored Programs for its financial assistance on this study.