Institutional context effects on managerial practices in a European multinational company

The present study investigates the effect of institutional contexts on managerial practices within a multinational company. Questionnaires measuring actual and ideal managerial practices were completed in four different subsidiaries of the same MNC. Results show that the practices of subsidiaries operating in countries with a higher degree of institutional labor-market regulation were less formalized and directive than in those subsidiaries located in countries with a lower degree of labor-market regulation. It was also found that the degrees of acceptance of these practices differed significantly across institutional contexts: in less restrictive institutional contexts formal and directive practices were more desirable than in more restrictive institutional contexts. It is argued that there is an inverse relationship between the flexibility of subsidiaries' institutional contexts and the flexibility of their practices (formality and directiveness). Implications and limitations of this study are discussed.