A study on multinational company’s management control and coordination mechanism towards subsidiaries in Malaysia

Control is the company’s headquarters tool in coordination mechanisms. Headquarters employ the control tool to coordinate the subsidiaries by factors of corporate value, social norm and the power of decision-making. Controls play an important function in companies’ coordinate mechanism especially in multinational companies to be “strategically focused” (Damayanthi & Gooneratne, 2020). The controls lead the headquarters to coordinate the subsidiaries on rules, procedure, performance and behaviour to achieve target and objective as organization planned. The authority to choose the controls depends on each of the organization’s headquarters to coordinate the subsidiaries. This study is focused on the effect of bureaucratic control, output control and cultural control on multinational companies’ control and coordination mechanism towards foreign subsidiaries.

1. To examine the impact of bureaucratic control on control and coordination mechanism on foreign subsidiaries in Kulim.

2. To examine the impact of output control on control and coordination mechanism on foreign subsidiaries in Kulim.

3. To examine the impact of cultural control on control and coordination mechanism on foreign subsidiaries in Kulim.

This study reviewed the literature about the effects of bureaucratic control, output control and cultural control on management control and coordination mechanisms of foreign headquarters towards subsidiaries.

A control and coordination mechanism is defined as a set of coordination processes between organizations to guide the overall controlled system (Cha, 2019). Control and coordination mechanisms provide guides to corporate headquarters on a perspective of intervening in the control (Venzin, Vizzaccaro, & Rutschmann, 2018). Multinational companies conduct various coordination mechanisms to lead their subsidiaries. Control and coordination mechanism assists the headquarters management to transmit the company’s values, principle to the employees in subsidiaries (Coelho, Evanschitzky, Sousa, Olya, & Taheri, 2020). According to Zhang, Wu, Wen, and Douglas (2022), control is tools in multinational companies to ensure the headquarters use authority to create standardization from home countries to subsidiaries in host countries. Control and coordination mechanism is creating rules and regulation values to monitor and guide the employees. Zeng, Grogaard, and Bjorkman (2023) described control and coordination mechanism as the fundamental essence for multinational companies. Control and coordination mechanisms eliminate the geographical boundaries to pursue the coordination interrelationship between headquarters and subsidiaries. Multinational companies’ control and coordination is focused on integrating objectives and targets of headquarters in subsidiaries’ units. According to Sageder and Durstmuller (2018) and Patel, Boyle, Bray, Sinha, and Bhanugopan (2019), multinational companies implement control as the process of influencing the subsidiaries by bureaucratic, output and culture by using corporate power and authority to coordinate the distinct tasks of employees located in different locations (Dingsoyr, Moe, & Seim, 2018).

Bureaucratic control is an important tool in organization, and it would be adaptable in organization based on the situation. Bureaucratic control is the organization’s accepted rules to create equitable policies to employees for aspects of competency rather than personal favouritism (Barclay, 2018). Bureaucratic control is a power of organization to emphasize control, authority and empowerment. An organization with a bureaucratic control coordination is characterized as an organization in hierarchical, stable, regulated, generally aware, certainty action and power-oriented (Thakur, Hale, & AlSaleh, 2018). Oliveira, Rodrigues, and Craig (2020) stated that, bureaucratic control emphasizes moral practice in organizations to protect dignity, eliminate conflict and to enhance legal principles to eliminate impartiality. Along with that, the authors believed the efficient work administration shaped in bureaucratic control led to developed economic growth. Natukunda (2021) described that bureaucratic control on control and coordination mechanism relied on rules and regulations to enforce employee behaviour. Patel et al. (2019) described that bureaucratic control on coordination mechanism on rules and procedures shape subsidiaries behaviour and promote collective action. Multinational companies executed the bureaucratic control by appointing the home country managers to foreign subsidiaries in order to administer direct supervision. This practice facilitates the headquarters to maintain and replicate the corporate originality of behaviours, knowledge, procedure and strategies in foreign subsidiaries. Bureaucratic control coordination reduces information asymmetry between the headquarters and subsidiaries in order to provide transparent information. Bureaucratic control enables headquarters to create awareness among foreign subsidiaries on corporate objectives and goals to meet the headquarters expectations (Minciullo & Pedrini, 2019).

Output control becomes more significant when direct employee monitoring is not feasible, which implies managers in managing their employees to focus on goals, performance measures and outcomes (Groen, van Triest, Coers, & Wtenweerde, 2018). Ambos, Kunisch, Leicht-Deobald, and Schulte-Steinberg (2019) stated that multinational companies coordinate output control to evaluate annual performance by measuring market share, customer satisfaction, company growth and development. Nielsen, Kristensen, and Grasso (2018) described that output control is used as a tool to measure the subsidiaries’ performance based on the outcomes. These measures track several performance indicators by taking into account past, present and desired performance. Output control makes clear coordination links between performance management, job evaluations and incentive results by using management information systems between headquarters and subsidiaries (Patel et al., 2019). In output control, management contributed indirect control and coordination towards employees. Despite this, the employee’s compensation and reward were determined by high evaluation and measurement (Amenuvor, Basilisco, Boateng, Shin, Im, & Antwi, 2022). Groen et al. (2018) and Ambos et al. (2019) stated that headquarters allowed the subsidiaries’ managers to coordinate the subsidiary units by determining the effective coordination mechanism in order to reach specific predefined objectives and achieve the headquarters desired outcome. Output control coordinates subsidiary performance by using quantitative evaluation criteria like profitability, market share, productivity and performance indicators (Patel et al., 2019).

Cultural control is a method to set the guidelines and influence the subsidiaries’ employees to organizational desired values (Passetti, Battaglia, Bianchi, & Annesi, 2021). Patel et al. (2019) described, cultural control to attain headquarters' desired culture of norms and philosophy rather than task-related actions. Expatriates are the headquarters’ vehicle to share the core values to ensure that the norms and values are identical between headquarters and subsidiaries. As a result, indirect control and direct control through institutionalization is used to accomplish cultural control. Nielsen et al. (2018) and Lill, Wald, and Munck (2020) stated that cultural control creates global transparency between headquarters and subsidiaries to be consistent in coordination mechanism by identifying the issues and the potential improvement in employee’s activities. According to Zhang et al. (2022), in multinational organizations, great leadership is determined by the ability to eliminate cultural conflicts between different cultural backgrounds of employees from home country and host country. “Value based” or “integrity oriented” cultural control connect to employee’s humanistic nature on an emotional level, stimulate the intrinsic drive, encourage ethical behaviours and strengthen the sense of belonging to the organization coordination mechanism.

Prior scholars described, control and coordination mechanism guide the headquarters regarding overall control system and mechanism to coordinate their subsidiaries. On that basis, headquarters execute the authority to create standardization rules and principles to monitor and lead the foreign subsidiaries by eliminating the geographical boundaries. Also, earlier researchers declared that multinational companies were influenced by bureaucratic control, output control and culture control to coordinate the subsidiaries. In view of that, earlier studies expressed how bureaucratic control emphasizes headquarters’ authority on control and coordination mechanism by replicating corporate originality of behaviour, knowledge and procedure in foreign subsidiaries. Aside, output control is indirect control on coordination towards subsidiaries. However, output control is used as a tool to measure the subsidiaries’ performance based on the quantitative evaluation in order to achieve headquarters’ desired outcome. Furthermore, researchers described, cultural control is similarly a set of guidelines to coordinate the subsidiaries’ employees to headquarters’ desired culture of norms and philosophy to eliminate cultural conflicts between different cultural backgrounds of home country and host country employees. Out of all this, although preceding researchers have emphasized the headquarters influence in types of control on control and coordination of subsidiaries, however, in a circle of bureaucratic control, output control and cultural control, researchers remain undiscovered about the type of control that influences the multinational companies on control and coordination mechanism towards foreign subsidiaries. In pursuit of that aim, this study bridged the gap by discovering the type of control that influenced foreign headquarters on control and coordination mechanism towards subsidiaries, especially in Kulim Industrial Area.

This study adopted classical agency theory and contingency theory to relate the controls on control and coordination mechanism of multinational companies. Classical agency theory explains about headquarters and subsidiaries’ interaction to headquarters in implementing formal control and informal control on coordination mechanism. Besides, the contingency theory explains about headquarters’ formal control and autonomy provided by headquarters towards subsidiaries in coordination mechanism.

Classical agency theory emphasizes the interest in control and coordination mechanisms of the headquarters as (principles) to ensure the subsidiaries as (agents) maximise the principal strategies approach in the formal and informal control on coordination mechanisms (Ambos et al., 2019). In agency theory, bureaucratic control and output control are alternatives. In that context, if headquarters rely on one of these two control options, the reliance on other control is less on coordination mechanism. Multinational companies’ headquarters as a long-standing practice implement three alternatives to deal with the agency problems. Foremost, headquarters understand the challenges to influence subsidiaries’ (agents) behaviour and coordinate the strategies through output control in order to achieve headquarters’ (principles) desired outcomes. However, through this way, the risk and accountability for output outcomes is bound to subsidiaries (agents). Second, the headquarters (principles) engage in bureaucracy on monitoring systems by creating rules and procedures targeted at minimizing information asymmetries and eliminating the goal conflict. The third, headquarters (principles) eliminate the goal conflict by implementing bureaucratic control by socialization. Socialization contributes to (agents’) autonomy by indoctrination into headquarters’ (principles) values, interest and goal leading to driving the subsidiaries to engage in headquarters’ (principles) goals and objectives. As a result of this option, bureaucratic control and cultural control are implemented on control and coordination mechanism; however, output control implementation becomes less.

Contingency theory concept is that organizational effectiveness depends on organization’s environment, structures and processes’ interlink between each other rather than being a single ideal method to construct organizational structures. Kano and Verbeke (2018) described, in contingency theory, multinational companies coordinate the formal control through centralized and decentralized to subsidiaries’ units. Contingency theory is connected with multinational companies and its environment. There are two types of view in contingency theory, information processing view and differentiated network view. The two views of contingency theory stand in the same perspective of “multinational companies are victims of the environment”. In the information processing view, multinational companies focus on the ability to process complicated product and market information. The headquarters solves this conflict by formal control and coordinating the level of complex information that has to be coordinated. In this perspective, centralized and decentralized apply in formal control. Aside, differentiated network perspective is between the environments and activities of diverse subsidiaries. Adaptation is executed between headquarters and the environment at the subsidiary’s units. In this level, multinational companies’ challenges are to create administrative links between headquarters and subsidiaries by providing autonomy while simultaneously implementing strict controls to each subsidiary’s unit in particular circumstances. In this view, decentralized formal controls are executed.

The section describes research design and measurement instruments. The data were analysed by used SPSS version 27.

This research is based on basic research. This study generated knowledge about three types of controls in multinational companies as independent variables: bureaucratic control, output control and cultural control. The dependent variable of this study was control and coordination mechanism. This study analysed knowledge about bureaucratic control, output control and cultural control on control and coordination mechanism outcomes from foreign subsidiaries. This study conducted hypothesis testing to study the relationship of dependent variable and independent variables. It was a directional hypothesis testing the relationship between independent variables and dependent variable.

This study gathered information for hypotheses to test the relationship between independent variables and dependent variable by quantitative method by distributing the questionnaire.

This study was based on a cross-sectional time horizon. Based on change management as described by Galli (2018), organizational changes are not easy and not all the changes are the same because it depends on the situation. In any changes, the management has to consider many change models and methodologies according to the situations and it will take a long-term period to analyse. By relating to this, this study is about multinational companies’ control and coordination mechanism, the changes on the control decision will take a long-term period. On account of this reason, this study of the respondent’s information for the one time is valid. For that reason, the questionnaire was distributed and collected for one time.

This study’s total population is 38 multinational company subsidiaries for foreign headquarters located in the Kulim Industrial Area. The population database refers to 2 internet sources. The links are about overall companies operating in Kulim Industrial Area. This study selected multinational company’s subsidiaries for foreign headquarters due to this study solely focusing on analysing the type of controls on control and coordination mechanism outcomes from foreign subsidiaries.

This study sample size was 35 determined by the Table Krejcie and Morgan and Raosoft sample size.

Unit of analysis of this study is organization because this study conducts analysis about the multinational company’s subsidiaries for foreign headquarters from Kulim Industrial Area. This study chose multinational companies located in Kulim, because in Asia’s Kulim, Kedah is the important investment location to the multinational companies of wafer fabrication, semiconductors, optoelectronics, and medical devices in addition with new and emerging technologies. Moreover, many multinational companies are sustaining in Kulim Industrial Area for many years (KHTP, 2022). The respondents for this study are management staff levels, for each of the companies represented by one respondent.

This study population database refers to the 2 internet sources as linked below. The links are about overall companies operating in Kulim Industrial Area. This study selected solely multinational company’s subsidiaries for foreign headquarters from the two websites as below.

1. Dnb.com (2022) 

2. KHTP (2023) 

This study used judgmental sampling to collect information to achieve the objective of this study. This study selected one representative to collect information about the type of controls on control and coordination mechanism outcomes from multinational company’s foreign headquarters subsidiaries located in Kulim Industrial Area. Management levels staff align with headquarters on control and coordination mechanism to the subsidiaries’ departments. For this reason, this study’s respondents were management level staff.

This study designed a questionnaire in Google Form to collect essential information for this study. The questionnaire’s questions have been adapted. This Google Form questionnaire is divided into five sections, shown in Table 1. Section 1 questions about demographics, the information about respondent’s details, designation, and duration of year of working experience, department name and the headquarters country name. While Section 2, 3, 4 and 5 are questions about the variables, they represent the dependent variable (control and coordination mechanism) and independent variables (bureaucratic control, output control and culture control), respectively, adapted from different sources, shown in Table 2.

The questionnaires used in this study were designed to collect information from respondents.

This study gathers data from respondents by distributing questionnaires. This questionnaire has closed-ended answers and was created by using the Google Forms software. The questionnaire was distributed by email method. The questionnaire was distributed via Email and LinkedIn Messenger to management level staff respondents from Kulim multinational company’s subsidiaries.

According to Table Krejcie and Morgan and Raosoft, the sample size is 35 for a population of 38. This study response rate adheres to the minimum recommended sample size. A total of 38 questionnaires were distributed to 38 multinational companies’ subsidiaries in the Kulim Industrial Area. Unfortunately, during data collection progress, one of the multinational companies was closed down and the other two multinational companies did not respond. As a result, this study adheres to the minimum recommended sample size.

This section presented the analysis data of this research which was used by software Statistical Package for Social Science (SPSS) Version 27 to measure the data.

Frequency analysis shows the percentage of respondent’s demographic factors.

In total, 35 questionnaires were returned from 38 populations of multinational companies’ foreign subsidiaries from Kulim Industrial Area. Of the total, 51% (17) are male management staff and 49% (18) are female management staff from Kulim industrial multinational companies.

The questionnaire respondents were management level staff; they were managers, assistant managers and executives. The highest percentages of respondents were from managerial level work more than 10 years from the Human Resource department. 57.1% were manager-level respondents, assistant managers were 28.6% and 14.3% were executive level of respondents. Data for this study were analysed from foreign subsidiaries located in the Kulim Industrial Area respondents. The respondents were management-level staff who had worked in present multinational companies for more than 10 years in human resource departments, with the second highest from the operations department.

There was a total of 35 multinational companies located in Kulim Industrial Area which had foreign headquarters; the highest respondents were 31.4% from Japanese foreign headquarters subsidiaries and United States multinational company’s subsidiaries. Chinese and German multinational companies’ headquarters subsidiaries were 8.6%. 5.7% were from Australia multinational company’s subsidiary. The other category of company’s headquarters were 14.3% from Canada, Sweden, Netherland and Ireland.

In the percentage of wholly owned by headquarters, 85.7% of respondents stated that their company’s majority is wholly owned by headquarters.

This section discusses the information gathered from data collection about the dependent variable, control and coordination mechanism followed by independent variables of bureaucratic control, output control and cultural control derived from 35 sample populations from multinational company’s foreign headquarters subsidiaries from Kulim Industrial Area.

Table 3 shows bureaucratic control is high in multinational companies in Kulim Industrial Area(mean = 4.1914, SD = 0.66967). It is shown that bureaucratic control is the type of control that influences the majority foreign subsidiaries in Kulim Industrial Area. The second highest of mean is cultural control (mean = 4.1740, SD = 0.67118). Following bureaucratic control, cultural control is another tool that influences the control and coordination mechanism of multinational companies in Kulim Industrial Area. In output control, value mean is high but when compared with other two variables, output control value mean is low (mean = 4.1595, SD = 0.67420). Control and coordination mechanism is the highest among respondents when it is conveyed as a dependent variable to this study. The mean of control and coordination mechanism is (mean = 4.3204, SD = 0.64178).

The skewness, between −2 and +2, and the kurtosis value determined all the data are in normal distribution with sample size (n) 35, as shown in Table 4.

Table 5 shows 30 items in questionnaires with a 5-point Likert scale, the measurement value for Cronbach’s alpha value shows that all variables greater than 0.90 were highly reliable.

The correlation coefficient between three independent variables bureaucratic control, output control and cultural control on dependent variable control and coordination mechanism is calculated. The Pearson correlation shows in Table 6 that variables are between ±0.80 to ±1.00 in a very stronger relationship.

R-square value is 0.899. Table 7 shows the independent variables bureaucratic control, output control and cultural control 89.9% observed on control and coordination mechanism. The remaining 10.1% other variables can be included in control and coordination mechanism which are excluded in this study.

Table 8 shows the Coefficients of Multiple Regression for P-value significant and Standardized Beta coefficients value. The P-value for the variables in this study expressed below 0.05 is statistically significant. The control and coordination mechanism by bureaucratic control has a significant relationship with value is 0.002. The Beta value β = 1.285, indicates that bureaucratic control has a positive effect on control and coordination mechanism. The control and coordination mechanism by cultural control has a significant relationship with value 0.001 and the Beta value β = 1.171 indicates that cultural control has a positive effect on control and coordination mechanism. The control and coordination mechanism by output control has a significant relationship with value 0.010. Output control is significant with control and coordination mechanism but based on Beta value β = −1.507 reflect that the output control has a negative impact on control and coordination mechanism. Based on beta value in assessing the higher impact on control and coordination mechanism, while comparing bureaucratic control Beta value β = 1.285, cultural control β = 1.171, the output control demonstrated has a more significant negative impact on control and coordination mechanism with Beta value β = −1.507.

Table 9 shows the hypothesis tested result between independent variables, bureaucratic control, output control and cultural control on dependent variable control and coordination mechanism.

This section discusses about the outcome of the previous chapter about research objectives and hypotheses tested.

Bureaucratic control is strict control that guides the multinational companies on manual policy, rules, and procedure and socialization strategies on control and coordination mechanism to ensure the subsidiaries’ and headquarters’ objectives consistent with corporate rules (Patel et al., 2019). The correlation between bureaucratic control on control and coordination mechanism is highly correlated. The hypothesis specifying the relationship between bureaucratic control and control and coordination mechanism was accepted with regression in significant relationships. In comparison to output control and cultural control, bureaucratic control has a high significant contribution to control and coordination mechanism. Therefore, this study discovered bureaucratic control as the type of control influenced by foreign headquarters on control and coordination mechanism towards subsidiaries especially located in Kulim Industrial Area.

Foreign headquarters and subsidiaries in Kulim industrial are having a negative impact on output control on control and coordination mechanism. Output control is to measure the outcomes of subsidiaries to evaluate compensation rather than behaviour through written manual books and information exchange to ensure all subsidiaries adhere to the same rule setting and achieve the desired results (Patel et al., 2019). The lack of direction by direct control in output control on control and coordination mechanism impacts the multinational companies profit in the long run. When the output control on control and coordination mechanism is low in direct interaction that is focused on overall outcome, the headquarters is unable to measure subsidiaries performance (Yi, Fortune, & Yeo, 2019). In this circumstance, headquarters knows very little about the subsidiaries’ employees’ abilities, and the compensation is pay based on output results. This is increased employee dissatisfaction on unfair compensation for their efforts and lead to raise demotivation to achieve headquarter desired outcomes and increase turn over (Sagedar et al., 2018). The correlation between output control on control and coordination mechanism is highly correlated, but it is low correlated when compared to bureaucratic control and cultural control. The hypothesis pointed out the relationship between output control on control and coordination mechanism was accepted with regression in a significant relationship, but the contribution has a negative impact. Output control on control and coordination mechanisms has a negative impact between foreign headquarters and subsidiaries in the Kulim Industrial Area.

Multinational companies’ cultural control on control and coordination mechanism is by headquarters’ expatriate managers from different cultural backgrounds who direct the local employees in host countries. Hence, cultural control on control and coordination mechanism influence subsidiaries’ employees by socialization on corporate values, leader’s ethical norms, by training, written books and practices to pursue management-approved values. Coordination cultural control provides freedom to employees in job tasks to create competency in decision-making and enhance the subsidiaries skills in problem-solving (Zhang et al., 2022). The correlation between cultural control on control and coordination mechanism is highly correlated. The hypothesis indicated that the relationship between cultural control on control and coordination mechanism was accepted with regression in significant relationships. Following bureaucratic control, cultural control has a significant contribution on control and coordination mechanisms to subsidiaries especially located in Kulim Industrial Area. Foreign headquarters monitor subsidiaries by bureaucratic and at the same time provide autonomy to drive the subsidiaries to corporate values.

Agency theory and contingency theory contributed to this study.

According to agency theory, bureaucratic control and output control are alternatives in control and coordination mechanism towards subsidiaries. In this study, bureaucratic control was highly correlated compared to output control and cultural control. Output control has a negative impact between foreign headquarters and subsidiaries, as evidenced by the hypothesis tested. Following bureaucratic control, cultural control is another method in control and coordination mechanism that contributes to foreign headquarters to place a greater emphasis on subsidiary autonomy and the responsibility for goals and values fully under headquarters responsibility. Foreign headquarters monitor subsidiaries in Kulim Industrial Area by bureaucracy and simultaneously provide autonomy to drive the subsidiaries to corporate desired characteristics. The contingency theory approaches control from two perspectives: information processing and differentiated networks. In the information processing view, multinational company foreign headquarters area focuses on formal control, by conducting bureaucratic control on control and coordination mechanism to subsidiaries in Kulim Industrial Area by centralized and decentralized balance achieved. In a differentiated network view, the headquarters implement cultural control on control and coordination mechanism to create administrative links and autonomy for subsidiaries in Kulim Industrial Area through formal decentralization.

This study contributed knowledge to managers and organizations about control and coordination mechanism. Managers to control the company subsidiaries and employees, bureaucratic control are essential to apply on control and coordination mechanism. Bureaucratic control is a formal control to an organization, and it leads to monitoring and influencing the employees by rules, procedure to achieve corporate objectives. Besides formal bureaucracy control, employers should understand the importance of providing autonomy to subsidiaries and employees. Depending solely on bureaucracy tends to be an inflexible working environment to employees. Cultural control is influenced by norms to create uniformity behaviour between the subsidiaries and employees. Employers should understand that bureaucratic socialization control on control and coordination mechanism is important to organizations and employees to minimize conflicts. Output control has a negative impact on organizations and subsidiaries located in different locations. Output control on control and coordination mechanism ensures the productivity target to meet the standard quality. Output control gives a measurable result on the outcome and determines the employee’s performance evaluation. Output control should monitor in direct control on control and coordination mechanism otherwise it will impact the company’s long-term profit when employee’s performance is measured by outcome results not based on individual ability.

This study has few limitations. This study observed three independent variables; bureaucratic control, output control and cultural control to contribute to control and coordination mechanism. Other control significant to dependent variable control and coordination mechanisms is excluded in this study.

As types of controls in multinational companies, this study selected bureaucratic control, output control and cultural control. In the three variables, output control has a negative impact on control and coordination mechanism. Ensuing researchers to investigate the negative view on effect of control on control and coordination mechanisms, this study suggests that output control is one of the variable options. This study suggests future research to analyse multinational companies’ strategies through a mix of quantitative and qualitative to be more comprehensive.

The relationship between headquarters and subsidiaries is essential for multinational companies to conduct business in foreign countries. The geographical distance between headquarters and subsidiaries creates a challenge to monitor subsidiary activities. In order to ensure subsidiaries to engage with headquarters values, control and coordination mechanism are required at both the headquarters and the subsidiaries. As stated by prior scholars, headquarters obtain type of controls as a tool to coordinate the subsidiaries located in different variance locations. Moreover, the researchers declared that multinational companies’ headquarters were significantly influenced by bureaucratic control, output control and cultural control as a method to coordinate the foreign subsidiaries. Therefore, with this insight, this study analysed the impact of bureaucratic control, output control, and cultural control on control and coordination mechanism of multinational companies towards foreign subsidiaries. Additionally, to develop the knowledge, this study conducted to discover between bureaucratic control, output control and cultural control, the type of control that influences foreign headquarters on control and coordination mechanism towards subsidiaries. In pursuit of that aim, this study analyzed multinational companies’ types of controls on control and coordination mechanism towards foreign subsidiaries in Kulim Industrial Area. Bureaucratic control is a formal system coordinated by procedure, corporate rules and regulations. Output control measures the employee performance based on final outcome as planned and cultural control is to control employee’s behaviour based on headquarter management value and norm. Therefore, as analysed from collected data from multinational companies in the Kulim Industrial Area, bureaucratic control, output control and cultural control have significant relationships on the control and coordination mechanisms towards subsidiaries in Kulim Industrial Area. However, this study discovered, compared to output control and culture control, bureaucratic control is the type of control influenced by foreign headquarters on control and coordination mechanisms towards subsidiaries in Kulim Industrial Area. This conveys that foreign headquarters of subsidiaries in Kulim Industrial Area influence bureaucratic control to employ the power to establish strict guidelines by creating rules and procedures towards subsidiaries to ensure the headquarters’ objectives are consistent with corporate rules. Following bureaucratic control, cultural control has a significant contribution on control and coordination mechanisms to subsidiaries in Kulim Industrial Area. Foreign headquarters implement bureaucratic control by socialization by monitoring subsidiaries by bureaucracy; at the same time, provide autonomy to drive the subsidiaries to corporate values. Aside from that, derived from collected data, this study detected that the output control has a significant relationship with negative impact on control and coordination mechanism between foreign headquarters and subsidiaries in Kulim Industrial Area. This discloses that the low direct interaction of output control creates a conflict between foreign headquarters and subsidiaries in Kulim Industrial Area when the output result determines the subsidiaries performance. In view of the negative impact, this study suggested to subsequent researchers to investigate the negative view on the effect of type controls on control and coordination mechanisms by adding output control as one of the options in the variable. As a final point, bureaucratic control, output control and cultural control have significant relationships on control and coordination mechanism of multinational companies in Kulim Industrial Area. However, output control has a negative impact between foreign headquarters and subsidiaries in Kulim Industrial Area.

Above all, we extend our gratitude to Universiti Utara Malaysia (UUM) for providing support to completing this research.