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nd that the benefits created for local economiesmay be not be as great as it initially appears.Electronic accessThe current issue and full text archive of this journal isavailable at https://www.emerald-library.com129European Business ReviewVolume 12 . Number 3 . 2000 . pp. 129±136
# MCB University Press . ISSN 0955-534X
Financial decisions
Steuer et al. (1973) investigated the extent ofinancial independence offered to MNCsubsidiaries. They found that it was possiblefor subsidiaries to achieve greater autonomyover certain aspects of financial control. Forexample, if the subsidiary's assets increased,the maximum capital expenditure whichcould be undertaken, without reference to thparent, increased. The same applied to highersales. Thus devolved responsibility increasedwith firm growth. In spite of the fact that 90per cent of subsidiaries experienced some
degree of centralised control, they concludedthat financial control was not tight.
In contrast, other studies have found thatfinancial decisions remained primarily under
the control of the parent. Van Den Buckleand Halsberghe (1984), in their analysis ofdecision making of MNC subsidiaries basedin Belgium, found financial decisions tendedto be centrally controlled. Young et al. (1985)
found that decisions concerning dividendpolicy and royalty payments were by far the
most centralised aspect of financial decisionmakingin foreign-owned subsidiariesoperating in the UK. There was, however,greater decentralisation in the choice ofcapital investment projects and in thefinancing of these projects.Thus, although Young et al. (1985) foundthat UK subsidiaries appear to be grantedconsiderable levels of autonomy in respect to
the majority of financial decisions, it should
be noted that the subsidiaries often operated
within centrally determined financial targets.
This suggests that subsidiaries are subject to
selective controls on financial matters.
Locate in Scotland (1997) found that 47
per cent of firms surveyed claimed to have
total responsibility for capital investment
decisions with 37 per cent having partial
responsibility. However, it is not clear what is
meant by partial responsibility, because the
term is not defined in the study. It could,
therefore, be the case that the firms had only
minimal strategic responsibility.
Production and marketing decisions
Steuer et al. (1973) found that 70 per cent of
the subsidiaries were free to set prices without
interference from the parent company. This is
not unexpected given that a rapid reaction
may be necessary to cope with changing
market conditions. In these circumstances,
the subsidiary management's local knowledge
of market conditions would be invaluable and
authority to take action would be desirable.
Steuer et al. (1973) also looked at the
control of exports and found that there were
significant restrictions on the actions of
subsidiaries. In general, however, subsidiaries
were not given the authority to decide which
markets to enter. This strategic decision
tended to be taken by the parent.
Young et al. (1985) found that there was a
high degree of autonomy with respect to
production and marketing decisions.
Operational issues such as volume output,
entering new UK markets, pricing policy and
advertising and sales distribution were among
the more decentralised decisions.
Locate in Scotland (1997) found that 91