International Business Review 9 (2000) 321–344 www.elsevier.com/locate/ibusrev Consequences of perception gaps in the headquarters–subsidiary relationship Julian Birkinshaw a , Ulf Holm b,c,* , Peter Thilenius b , Niklas Arvidsson c a London Business School, Sussex Place, Regent’s Park, London NW1 4SA, UK b Department of Business Studies, Uppsala University, Box 513, SE 751 20 Uppsala, Sweden c Institute of International Business, Stockholm School of Economics, PO Box 6501, S113 83 Stockhom, Sweden Abstract This paper is built on two premises: (1) that HQ and subsidiary managers often have differ- ent perceptions about the role of the subsidiary in the multinational corporation, and (2) that such differences have important implications for the management of the HQ–subsidiary relationship. Using data collected from 89 HQ–subsidiary dyads, we test and find support for a LISREL model, in which subsidiary managers’ overestimation of their roles is associated with greater HQ control of the subsidiary, which in turn is associated with a lower level of HQ–subsidiary cooperation.  2000 Elsevier Science Ltd. All rights reserved. Keywords: Headquarters-subsidiary relationship; Perception gap; Control; Cooperation One of the core issues in the study of multinational corporations (MNCs) is how to structure and manage the relationship between the headquarters and its foreign subsidiaries. During the last 10 years it has become more and more prevalent to talk about the MNC as an interorganizational network (Ghoshal & Bartlett, 1990), and to think in terms of the web of relationships that the subsidiary has with other actors in its corporate network. Within this perspective, it should not be forgotten that although resources and competencies are distributed among several foreign subsidi- * Corresponding author. Present address: Department of Business Studies, Uppsala University, Box 513, SE 75120 Uppsala, Sweden. Tel.: + 46-18-471-1612; fax: + 46-18-471-7301. E-mail addresses: jbirkinshaw@ibs.ac.uk (J. Birkinshaw), ulf.holm@fek.uu.se (U. Holm), peter.thi- lenius@fek.uu.se (P. Thilenius), iibna@hhs.se (N. Arvidsson). 0969-5931/00/$ - see front matter  2000 Elsevier Science Ltd. All rights reserved. PII:S0969-5931(00)00004-4