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Culture and management control interdependence: An analysis of complementary control choices to delegation in Western cultural regions

Journal article
Authors Teemu Malmi
Christian Ax
David Bedford
Piotr Bednarek
Rolf Bruehl
Johan Dergård
Maurice Gosselin
Michael Hanzlick
Sophie Hoozée
Poul Israelsen
Otto Janschek
Daniel Johanson
Tobias Johansson
Dag Oivind Madsen
Carsten Rohde
Mikko Sandelin
Torkel Strömsten
Thomas Toldbod
Jeanette Willert
Published in Accounting, Organizations and Society
ISSN 0361-3682
Publication year 2020
Published at Department of Business Administration, Accounting
Language en
Links https://doi.org/10.1016/j.aos.2020....
Keywords Management control; delegation; incentives; complementarity; interdependence; culture
Subject categories Business Administration

Abstract

This study examines the influence of cultural regions on the interdependence between delegation of decision rights and other management control (MC) practices. In particular, we assess whether one of the central contentions of agency theory, that incentive contracting and delegation are jointly determined, holds in different cultural regions. We argue that the MC practices that operate as a complement to delegation vary depending on societal values and preferences, and that MC practices other than incentive contracting will complement delegation in firms in non-Anglo cultural regions. Using data collected from 584 strategic business units across three Western cultural regions (Anglo, Germanic, Nordic), our results show that the interdependence between delegation and incentive contracting is confined to Anglo firms. In the Nordic and Germanic regions, we find that strategic and action planning participation operate as a complement to delegation, while delegation is also complemented by manager selection in Nordic firms. Overall, our study demonstrates that cultural values and preferences significantly influence MC interdependence, and suggests that caution needs to be taken in making cross-cultural generalizations about the complementarity of MC practices.

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