With subsidiaries operating in various countries, MNCs find themselves surrounded by the complexity and cultural diversity that are different from their home countries. MNCs need to develop and choose the appropriate degree of management control to exert on their subsidiaries. The objectives of this research are (1) To study the factors that influence the degree of management control used by MNC headquarters on their subsidiaries in Thailand; (2) To study the degree of management control that American and Japanese MNCs exerted on their subsidiaries in Thailand; (3) To study the variables that influence the effectiveness of both American and Japanese subsidiaries in Thailand; and (4) To study the effect of management control exerted by American and Japanese MNCs on their subsidiary effectiveness. The research uses a survey-based method to examine American and Japanese subsidiaries operating in Thailand. The results indicate that (1) the degree of MNC ownership plays an essential role in determining the degree of each type of control system that the parent company might choose to control its subsidiaries; (2) the Nationality of MNC have influence the degree of control employed over their subsidiaries; (3) Cultural distance also plays as an important role in determining the degree of particular types of control; (4) Decision-making structure influences only the degree of output control used over the subsidiaries, but does not influence the degree of input control. The findings also indicate that American companies use both input control and output control more than do Japanese companies. Regarding the effectiveness of MNC’s subsidiaries, cultural distance is the only contextual factor found to play an important role in achieving the effectiveness of the subsidiary. In addition, the degree of input control used by American and Japanese MNCs over their subsidiaries in Thailand does not play an important role in determining the effectiveness of the subsidiary. On the other hand, output control will influence the subsidiary effectiveness when considered with other contextual factors. In summary, the subsidiaries will achieve high or low effectiveness when the degree of output control used over it are considered or examined with other contextual variables.
Keywords: MNCs, Management Control, Input Control, Output control, Degree of management ownership, Nationality of MNC, Cultural distance, Decision-making structure