Governing sustainability in multinational companies: Headquarter‐subunit strategic alignment and control mechanisms

Abstract

Research Summary We contribute to extant research on subunit sustainability governance by introducing the concept of sustainability‐specific strategic alignment, that is, the pre‐implementation degree of similarity in importance assigned by headquarters (HQ) and subunits to sustainability issues. We theorize and find that subunit‐perceived divergence between HQ's and local stakeholders' priorities undermines alignment, clarifying why early attention alignment can stall sustainability diffusion even without implementation frictions. We furthermore examine the moderating effect of three HQ's control mechanisms (i.e., monitoring, direct management, and resource control), and find that direct management attenuates alignment loss even in high divergence contexts, whereas monitoring and resource control often fall short or backfire. Findings show that control mechanisms are not uniformly effective and must be tailored to subunits' agency problems and local contexts. Managerial Summary We argue that effective sustainability governance requires headquarters (HQ) and subunits to similarly prioritize sustainability issues. Our research shows that this sustainability‐specific alignment depends, in part, on the extent to which HQs' sustainability priorities reflect those of local stakeholders. When this perceived divergence is high, alignment suffers. We examine how HQ can respond through three control mechanisms: monitoring, direct management, and resource control. We find that only direct management supports alignment under high divergence. These findings highlight that not all control tools are equally effective and that multinational companies need to carefully manage sustainability goals across borders to ensure coherent and credible sustainability efforts across their subunits' networks.