Language and foreign subsidiary control: An empirical test

Previous research suggests that language competence has an effect on foreign subsidiary control but its precise nature remains unclear. In a sample of 119 Western-owned subsidiaries in Finland and China, we empirically tested how foreign subsidiaries with varying degrees of language competence were controlled. We carried out structured interviews with the general managers of these subsidiaries in order to assess the effect of language at the level of specific control mechanisms. According to our findings, the subsidiaries with low language competence were controlled to a greater extent by centralization and formalization than units with high language competence. Output control and socialization mechanisms appeared unaffected by language competence of subsidiary staff.