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Psychic distance and budget control of foreign subsidiaries
Åbo Akademi University.
American University of Beirut.
2004 (English)In: Journal of International Accounting Research, ISSN 1542-6297, E-ISSN 1558-8025, Vol. 3, no 2, 79-93 p.Article in journal (Refereed) Published
Abstract [en]

This paper has two purposes: (1) to develop a theory about the impact of psychic distance on management control of multinational companies, and (2) to establish that psychic distance is an important factor for future research. We develop the concept of psychic distance, the interaction between geographic distance and culture, and test its impact empirically in a Finnish multinational company.

Results show that psychic distance interacts significantly with reliance on budget control in multinational companies, but not in the manner proposed. High budget emphasis is associated with high subunit performance in countries with small psychic distances, but not in countries with larger psychic distances. Budget participation dilutes this impact. This study confirms that psychic distance is a relevant factor to be considered in future research.

Place, publisher, year, edition, pages
2004. Vol. 3, no 2, 79-93 p.
Keyword [en]
psychic distance, budget control, multinational companies, culture
National Category
Business Administration
Identifiers
URN: urn:nbn:se:umu:diva-16671DOI: 10.2308/jiar.2004.3.2.79OAI: oai:DiVA.org:umu-16671DiVA: diva2:156344
Available from: 2007-01-24 Created: 2007-01-24 Last updated: 2017-12-14Bibliographically approved

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