Goal Conflicts and Corporate Control: Implications for Headquarters-Subsidiary Relationships of Multinational Corporations

When applied in headquarters-subsidiary contexts, agency theory traditionally promotes behavioral vs. output controls for principals (headquarters) to manage their agents (subsidiaries). Existing studies, however, have both theoretically and empirically largely neglected the role of social controls. Two reasons support this: (1) Agency theory as-sumes within-subsidiary homogeneity when it comes to subsidiaries and control strategies, and (2) goal conflicts are not precisely conceptualized. In this study, we acknowledge within-subsidiary heterogeneity and advance a nuanced view on goal conflicts, differentiating between conflicts pushed by central vs. pushed by local units. Examining 131 function-specific dyads between a headquarters and its six subsidiaries of a European MNC, we find the distinction of goal conflicts to matter for the effects of socialization and choice of behavioral vs. output control strategies.