This study examines how subsidiaries in multinational corporations (MNCs) experienceinteractions with corporate headquarters. We conceptualize such interactions in termsof organizing costs, focusing on two key types of costs: bargaining costs andinformation costs. Specifically, we examine how distance, coordination mechanisms,and atmosphere influence the level of organizing costs in the headquarter-subsidiaryrelationship. Using survey data collected among 104 subsidiary managers in two MNCs,we show that relationship atmosphere significantly reduces both types of organizingcosts, whereas distance increases bargaining costs. We also find that centralization andformalization reduce information costs, whereas social integration, contrary to ourhypothesis, increases bargaining costs.