The Future of Global Organizing: Volume 10

As markets become increasingly competitive, it is important for multinational corporations to generate value. Both headquarters and subsidiaries are responsible for contributing to value generation, albeit they may do so in different ways. This builds on the notion from the literature that it is possible to discern two separate concepts that relate to the generation of value, namely, value creation and value added. These concepts are often used interchangeably, without a clear distinction what they de facto reflect or what the underlying mechanisms of value creation and value added are.

Based on a set of assumptions regarding headquarters–subsidiary relations conceptual arguments related to value generation are developed.

Teasing out the differences between the concepts becomes important as it leads to a fuller understanding of what a headquarters do in different situations and of what a headquarters–subsidiary relationship entails for value generation.

In this chapter, it is argued that value-adding activities tend to be conducted by a headquarters, but are dependent on varying knowledge situations of headquarters, while the value creation process tends to take place at the subsidiary level.

The aim of the chapter is to evaluate the concept of corporate parenting styles, identify missing elements in the theoretical constructs, and develop new theoretical constructs.

The chapter provides a summary of the existing literature on corporate parenting styles and uncovers the missing elements in the theoretical constructs. New theoretical constructs fill the gaps.

The chapter presents a new typology of corporate parenting style by combining corporate parents’ processes of adding value to and extracting value from subsidiaries. The five-type typology of corporate styles outlines the different levels of value addition and value extraction and various degrees of reciprocity in both processes. This chapter determines the most important factors that affect the selection of corporate parenting style. It postulates that the multinational corporation should exhibit different parenting styles toward its subsidiaries simultaneously and should be ready to amend its parenting styles to reflect changes in a subsidiary’s strategy and its motives for corporate ownership.

A new agenda for empirical studies oriented toward variability of parenting styles is proposed. Empirical tests of our propositions are needed. I encourage researchers to extend our research by considering the regional (supra-national), industry, and individual levels of analyses.

The chapter provides a more realistic view of corporate parenting styles than that found in the previous literature and outlines promising directions for further theoretical and empirical research.

Today’s MNCs need to adopt smart ways of organizing to tap into the potential of their complex internal and external relationships. This requires MNCs to identify the relevant relationships and to develop appropriate relational skills and capabilities. Hence this chapter addresses two key questions: what kind of relational structures and qualities are conducive to value creation, and how can MNCs best develop and utilize their complex relationships?

The chapter reviews the main developments in the area of MNC organizing to date. Subsequently three examples of novel on-going research into MNC relationships are presented. Finally avenues for future research and links to related areas in international business research are discussed.

The relational perspective on the MNC is well-established. Past research, however, has mostly taken the view of the headquarters-subsidiary dyad without fully conceptualizing the multiplicity of relationships and interdependencies of individuals, groups, and units in the MNC. This chapter uncovers the relational skills required to improve MNC value creation abilities by influencing and leveraging connections among disparate units and individuals to tap their expertise and creative potential. This includes insights into abilities for managing and balancing multiple networks, abilities for mobilizing relevant network actors when driving bottom-up processes, and abilities for facilitating connections and collaboration among different actors.

This chapter advances the understanding and practice of multinational organizing. It presents novel ways to systematically address the complexities and interdependencies of relational effects on the ability of MNCs to create value.

This chapter will discuss the extent to which existing models on expatriate functions within the international business literature, still effectively capture the roles currently performed by expatriate managers. It analyse the Edstrom and Galbraith (1977) typology and present a conceptual framework on the roles currently performed by expatriate managers within MNCs. To do this, it will draw inspiration from the resource-based view (Barney, 1991; Peng, M. W. (2001). The resource-based view and international business. Journal of Management, 27, 803–829. Wernerfelt, 1984), and the organisation capability view (Grant, 1996). Following several propositions about managers’ key functions within MNCs, challenges of creating an all-encompassing framework on expatriate functions, and suggestions for future research and theoretical development will be identified.

This chapter will present a conceptual framework on expatriate functions.

Four decades since Edstrom and Galbraith’s seminal work, international developments have continued to impress upon the way MNCs organise and manage their worldwide activities. Yet, as the business environment progresses, theoretical models examining how international development impact the functions undertaken by expatriate managers within MNCs individuals are still relatively scarce. Hence, this chapter aims to contribute to the theoretical advancement in the area of expatriate functions by highlighting possible changes and expansion of expatriate managers within the current global business context.

This study aims to explore capability upgrading of EMNE’s subsidiaries in developed countries and how the parent-subsidiary relationship influences such upgrading.

The study adopts an interdisciplinary approach to capability upgrading of EMNEs subsidiaries in developed countries. It employs a single case study to explore this under-research area.

The analysis challenges the orthodox view and suggests broad-based capability upgrading has taken place in the EMNE-acquired subsidiaries ranging from product, process, functional to intersectoral. In addition, the capability upgrading was contingent on the degree of subsidiary autonomy and subsidiary mandates.

This study represents one of the first to examine capability upgrading and parent-subsidiary relationship in the context of EMNEs’ internationalisation activities.

We aim to identify the factors that led to a Belarusian firm’s initial fast internationalization and the reasons for slowing the process down thereafter.

The chapter is based on a single case study. We collected the data via 9.5 hours of interviews and also used the firm’s annual reports.

The case firm’s internationalization was “pushed” by the Belarusian economic environment – especially, the fear of governmental takeover. The founders felt that internationalizing would be less risky than fully focusing on their domestic market. It was also “pulled” by growth opportunities on foreign markets and also a founder’s personal contacts. The slowdown of the firm’s internationalization was caused by the lack of foreign market knowledge and other resources.

Despite of slowing the internationalization down and experiencing several fluctuations in foreign activities, the founders are satisfied with the firm’s internationalization. Thus, managers should not automatically regard such internationalization a failure: adjustments in the firm’s internationalization pace can be justified as it has to react to the changing economic and business environment.

The chapter shows that a born global’s internationalization can slow down, it can use its subsidiaries as bases for further gradual internationalization, and it can also experience fluctuations in internationalization.

We examine how subsidiaries of multinational companies communicate with headquarters about business opportunities they perceive in their local environment. Our aim is to provide in-depth insights into how communication is used to attract the attention of headquarters.

We study four communication processes of opportunities recognised by subsidiary managers in four different units within the same multinational corporation.

We find that communication is influenced by the subsidiaries’ perception of their relationship with headquarters. Importantly, we find that subsidiaries in emerging countries show different communication patterns than those in advanced markets. Our results further point out that multinationals from advanced countries face the challenge to respond to the increased salience of opportunities from emerging economies, while at the same time still working within existing communication patterns and structures that are not adapted to this new situation.

Our study presents communication processes within multinationals beyond the frequency of communication, including a variety of aspects of communication. Doing so, we are able to point out that open communication is not achieved with all subsidiaries, and what is worse, seems most of all to be challenged for subsidiaries in emerging markets, risking promising business opportunities in these markets.

The purpose of this chapter is to introduce an emergent type of INV (international new venture) – designated as “borderless firm” – present some recent cases and speculate about its future occurrence.

A search of the literature identified 25 cases that fitted, to a greater or lesser extent, the conceptual definition of a borderless firm presented in the chapter. We also found three teaching cases whose focus-firms fitted our definition.

The three firms present a combination of intentional design with fortuitous experimentation and intensively exploited relationships. They fulfill the key features of our definition.

This study is still embryonic and was driven by the authors’ conceptual thinking, based on their intuition about a new type of firm. Detailed data came from only three cases, but 25 other cases were identified, which did, to some extent, fit the definition of a borderless firm and, as such, could be studied with this focus in order to provide further evidence and to refine the conceptual definition and our understanding of the empirical manifestation of this type of firm.

We shed light on an interesting – and probably bound to occur more frequently in the future – type of firm with distinctive characteristics: a managerial mindset that does not feel constrained by geographical frontiers; a high geographical dispersion of value-added activities (beyond the sales and distribution activities that characterize most of the literature on Born Globals and INVs); and a multi-country pool of founders/managers and internationally dispersed staff.

The study presented in this chapter examines an increasingly important phenomenon in the internationalization of small and medium-sized enterprises (SMEs). Following technological developments, more and more SMEs are using high-commitment foreign market entry modes. These firms, called micromultinationals, have established subsidiaries in international markets despite their resource constraints. The study is an examination of a micromultinational’s development during its internationalization life-cycle regarding changes in international entry mode, organizational structure, communication, sharing of knowledge and control.

A multiple case study method has been selected for this research. Data has been collected from four Finnish micromultinationals.

The study postulates that despite smallness and youth, immediate multinationalization is possible, as is the simultaneous expansion of both geographic scope and operations. The international operation mode of the case companies has moved toward the highest-commitment entry modes during their internationalization life-cycle. The micromultinational’s globalization process takes time and continuous readjustments and development. Some of the cases have struggled with issues related to things such as communication and sharing of knowledge throughout their existence.

The results of the study suggest that any micromultinational should carefully consider their choice of investment mode (wholly owned greenfield vs. partly owned acquisition) to avoid the stagnation phase. The unlearning is difficult and with a certain path dependency, learning advantage of newness does not seem to exist even if a firm is small and relatively young.

This is the first study to examine the internal development of a micromultinational company during its internationalization life-cycle.

We propose team-based organizing as an alternative to more traditional forms of hierarchy-based organizing in global firms.

Advancements in the study of global teams, leadership, process, and outcomes were organized into four themes: (1) openness toward linguistic and value diversity as enhancing team creativity and performance, (2) knowledge sharing in team-based organizations, (3) the significance of social capital for global team leader role success, and (4) shared leadership, satisfaction, and performance links in global virtual teams.

We identify questions at three levels for bringing research on team-based organizing in global organizations forward. At the within-team individual level, we discuss the criticality of process and leadership in teams. At the between-teams group level, we draw attention to that global teams also need to focus on relationships and interactions with other teams within the same global firm, for example, when sharing knowledge. With respect to the across-teams organizational level, we highlight how bringing people together in global teams from different organizational units and cultures creates the potential for experiential individual and team-based learning, while making the firm more flexible and adaptable.

The potential of the relatively underexplored idea of global team-based firms as an alternative to hierarchy open up questions for empirical research, and further theorizing about the global firm.

Practitioners can learn about organizational, team, and individual challenges and benefits of global team-based organizing.

A century-old dominant organizational form is challenged when moving away from hierarchy- and hybrid-based forms of organizing toward team-based global organizing of work.

In this chapter we develop a conceptual model describing how global teams do more than accomplish discrete tasks, and create “spillover coordination” effects by influencing the amount of work-related direct contact among team members outside the task boundaries of the team. We theorize that spillover coordination is the result of relational and cognitive social capital developed through team interaction. We also propose that the design of the team and the context in which it operates influence the degree to which social capital develops.

We develop a conceptual model including propositions that can be tested empirically. We suggest avenues for future research.

Our model proposes that teams are a more powerful cross-border integration mechanism than originally thought in existing literature in international management and organizational behavior, since they affect social capital that can benefit the broader MNE beyond scope of the task and after the team disbands. Our approach suggests that MNE managers should be mindful of global team spillover effects and intentional in the way they design global teams if those benefits are to be achieved.

Most research on global teams, and teams in general, does not look past the task and time boundary of the team. We expand the view of team effectiveness to encompass those dimensions.

The purpose of this study is to present how a German-origin diaspora entrepreneur successfully introduces a new concept to Uzbekistan by orchestrating diaspora and local resources into a transnational diaspora venture, a kind of international new venture. Diaspora entrepreneurs can act as catalysts for market entry of innovations as they possess unique perspectives and competencies. Thus, the study increases the understanding of transnational diaspora entrepreneurship.

A single embedded case study supported with ethnographic methods was employed. The explorative strategy assisted to discover ways how the entrepreneur succeeded in entering this difficult market with a totally novel concept.

Perceived opportunity triggered the migration of the entrepreneur. Her transnational entrepreneurial competences and perspectives together with an efficient usage of various network resources in host and home country enabled a successful entry of the new venture as opposed to normal entry barriers. The study illustrates how diaspora effects can be employed for right timing and achieving first-mover advantages in diffusion of innovation and market entry.

The study contributes to the emerging stream of research on transnational diaspora entrepreneurship and introduces a unique “rich-to-emerging” diaspora venture entry in a transition economy. This is among the first catalyst cases that provide implications for the organization of entry process, diaspora entrepreneurship, and management. It represents a new form of international new ventures that succeeded where big players like Starbucks and McDonalds did not.

The chapter addresses two research questions. Firstly, where does the line between the highly internationalised small and medium enterprises (SME) and micromultinationals (mMNE) lie? Secondly, what are the success factors and hindrances to the process of becoming an mMNE? How to internationalise being a small company and build prosperous relationships on the foreign and domestic market on the way to becoming mMNE?

The single company longitudinal case study of a furniture producer from Poland is analysed. Data for the case was collected using six detailed interviews.

Due to different networking possibilities, which are often based on long-term but not formalised cooperation, sometimes the line between the highly internationalised SME, formally using only exporting and the mMNE is very narrow. The analysis corroborates the former studies concerning factors of the successful establishment of mMNEs, drawing attention to the importance of entrepreneurship and networking. However strong embeddedness in domestic relationships may constitute, at the same time, a driver as well as a hindrance in the process described.

The case study examines in detail the process of becoming an mMNE which may be used for teaching purposes regarding new organisational forms in international business.

We develop a concept of the global factory, first introduced by Buckley and colleagues (2004, 2009, 2010, 2011, 2014), as a stand-alone construct associated with significant predictive capacity, discuss dynamics of success of the global factory, and identify and analyze social mechanisms deployed by the lead firm head office.

We conceptualize the global factory as a form of a flagship network and augment internalization theory with insights from interorganizational networks research to explore the dynamics of the global factory’s origination and functioning.

We clarify under what conditions a global factory-type network is more likely to emerge and describe social mechanisms generated by the lead firm head office to help the global factory sustain itself and thrive. We argue that in order to benefit from potential efficiencies of the global factory, the lead firm head office must deploy combinations of social mechanisms. We further argue that the role of the lead firm head office is that of a joint value orchestrator and a social broker, in addition to the controlling intelligence function.

Future work on the global factory should include further conceptualization of social mechanisms deployed by the lead firm, exploration of operating mode heterogeneity within the global factory, and large-scale empirical research.

Lead firm managers should embrace the role of the joint value orchestrators and implement social mechanisms described in this chapter to facilitate smooth operation of the global factory.

Global factory governance further increases multinationals’ geographic reach and market power; yet, it is not a universal recipe for market success, and therefore global factories’ power to shape the global economy should not be overestimated.

By linking the global factory to networks literature, we have suggested a novel way to view the concept and articulated more fully its underlying assumptions. Further research on the global factory will help advance our understanding of the dynamics of the global economy and the role of multinationals, their head offices, and their managers in shaping the economy.

To provide a theoretical explanation of why outsourcing relationships are inherently dynamic, in that the dependence of each party upon the other inevitably changes over time and thus so too will the power asymmetries between the parties.

Our approach is theoretical and draws upon insights from resource dependence theory, transaction cost economics, and the resource-based view of the firm, to focus on the power asymmetries between the focal firm undertaking the outsourcing and its suppliers. We illustrate our arguments using a longitudinal case study of the evolving relationship between Apple and the Foxconn Technology Group.

For supplier firms, the message is to upgrade, develop distinctive resources and capabilities, and diversify the customer base. Otherwise, suppliers will forever be condemned to low operating margins and the threat of being replaced by cheaper, more agile rivals. For focal firms, the message is not to rest on your laurels. The potency of isolating mechanisms may well dissipate, suppliers will no doubt strive to lessen their positions of dependence and competitors will inevitably emerge, with the result that once-profitable outsourcing arrangements may quickly erode.

We highlight the crucial role played by isolating mechanisms to underpin power asymmetries in outsourcing relationships, and thus enable focal firms to appropriate the rents from externalized value chain activities. We argue that the efficacy of many isolating mechanisms will tend to dissipate over time as competitors emerge to imitate successful strategies and products, and as resource and capability asymmetries erode.

The first aim of the chapter is to offer a characterization of back-reshoring as a possible step of the firm’s nonlinear internationalization process. The second aim is to review the empirical literature on back-reshoring and to complement it with the findings of an extensive data collection.

In this chapter we adopted an explorative approach building on both theoretical and empirical literature from the fields of international business and international operations Management. We also collected secondary data on back-reshoring decisions in order to define the magnitude of the investigated phenomenon and to offer a primary characterization.

Our findings confirm that, though it cannot be considered a generalized trend, back-reshoring is a very topical issue for international business scholars. It represents an autonomous phenomenon consistent with the idea of nonlinear internationalization process.

The chapter is based on cross-sectional data. Longitudinal research is required in order to address the proposed research questions and help understanding “how much” and what kind of manufacturing will be housed in western countries in the near future.

This is the first attempt to conceptualize back-reshoring as a possible step of the firms’ internationalization process. It is also the first chapter that summarizes and discusses the literature and empirical evidence on back-reshoring emerging from a wide range of countries.

With the disaggregation and fine-slicing of global value chains, offshoring and outsourcing has become increasingly relevant for many MNEs. The purpose of this chapter is to understand the value creation of the receiving partner of outsourcing activities. This is a firm that will have many outsourcing alliances with partners, and one perspective to frame these alliances is the alliance portfolio perspective. We ask – how can a firm on the receiving end of outsourcing create value through the management of its alliance portfolio?

Through a case study of a company supplying products to manufacturing industries, we investigate ways in which the company adds value for customers through different models of customer integration. Applying an alliance portfolio perspective, we study benefits of grouping alliances with customers and suppliers.

Whereas most studies of alliance portfolios have focused on value creation within a portfolio, we find that the mediating capability of coordinating between groups or portfolios of alliances is critical. We also see that the risk aspect is important for firms receiving outsourcing activities.

Our findings have implications for the strategy and organization of the mediating firm on the receiving end of outsourcing. We have only data from one firm, and therefore our findings need to be tested further.

Our findings have implications for managers organizing large alliance portfolios to include risk and mediation capabilities.

The chapter uses original in-depth data.

The purpose of this research is to understand how power relations in global value chains (GVCs) shape the upgrading of offshoring service providers (OSPs). More specifically, the chapter addresses two questions: (1) How power asymmetry in GVC shapes the upgrading prospects for OSPs? and (2) How OSPs manage the power asymmetry in GVC and upgrade to a more favorable position?

The context for this study is the software value chain. Drawing upon relational economic geography and GVC literature, we build an analytical framework based on three conceptual building blocks: client power, upgrading, and upgrading practices. Based on the analytical framework and in-depth interviews, we design a case study of one OSP in the Pakistani software industry, referred to as OSP#A.

The findings reveal that GVCs exercise a high level of power on OSPs. This power is exercised through enforcing certain conditions to participate and coordinate in GVCs. However, it is found that OSP#A is not passive recipient of these demands. Instead, it actively manages the power asymmetry through building practices to adapt and collaborate in GVCs and attain relational proximity.

The chapter highlights the significance of upgrading practices and conceptualizing upgrading as a process of improving relational power in GVCs by attaining relational proximity.