For over four decades, IB scholars have been conceptualizing and empirically examining the organizational structure of the multinational corporation (MNC) without really…
For over four decades, IB scholars have been conceptualizing and empirically examining the organizational structure of the multinational corporation (MNC) without really placing relationships at the center of attention. It therefore remains unclear what characterizes those relationships beyond subunits’ roles, motivation, or control mechanisms. Relationship as a term has often been used but rarely defined in the IB literature on intra-firm networks. We develop arguments that position such relationships as the focal unit of analysis. We extend current IB literature to examine in detail the nature and dynamics of relationships in MNCs by borrowing insights from Industrial Marketing and Purchasing research, which focuses on the relational nature and dynamics of interactions between actors. We offer a theoretical framework and develop a conceptual model that brings to the fore the multiplexity and temporality of relationships in MNCs. We also argue that intra-MNC network relationships can be seen as an evolving process and advocate for shifting away from variance-based and typological views toward a process view for examining relationships. Theoretically, understanding what characterizes the nature of MNC intra-firm relationships and what processes contribute to structuring them provides important insights into the global configuration of the MNC and the required organizational design mechanisms needed for MNC existence and resilience. The study is timely and practically relevant in the sense that considering intra-firm relationships deserves even more attention in the current global economic environment when accessing external resources becomes costly and/or inefficient.
Building on transaction cost economics (TCE) and recent critique on international business (IB) research, we intend to sharpen our knowledge on the application of TCE in…
Building on transaction cost economics (TCE) and recent critique on international business (IB) research, we intend to sharpen our knowledge on the application of TCE in entry mode studies.
We develop a two-sided model of transaction costs by considering the multinational corporation (MNC) and the local partner.
Overall, we illustrate that the decisions firms undertake are not always in line with traditional MNC-centric TCE reasoning. Specifically, we identify three situations when “traditional” TCE predicts transaction costs lower than they actually are. Based on our findings we derive implications for future TCE studies.
Our study is among the first to highlight the relevance of potential partners’ transaction costs during market entry. Our model of dually impinged transaction costs is supposed to guide future research and can be of direct use to firms assessing costs of entry.
Using a managerial cognition lens, we investigate the organizational design issues facing multinational corporation (MNC) managers. We apply concepts hitherto untested in…
Using a managerial cognition lens, we investigate the organizational design issues facing multinational corporation (MNC) managers. We apply concepts hitherto untested in the international management (IM) literature to a longitudinal study of reconfiguration efforts within a large, Asian MNC. We focus on how organizational design outcomes can be affected through mental interventions that provoke changes in senior executives’ mental representations of what the MNC is and can be to achieve a strategic redirection and redesign. We draw on extensive interview and other qualitative data. Our study contributes to the literatures on MNC design and to our understanding of the important, but largely neglected, micro-foundational role of cognition in IM. This field research on executive judgment and decision-making in real time offers unique insights into the dynamics of MNC design.
How headquarter (HQ) and subsidiary actors end conflicts and reach agreements is an important but still under-researched question in multinational corporations (MNC…
How headquarter (HQ) and subsidiary actors end conflicts and reach agreements is an important but still under-researched question in multinational corporations (MNC) literature. This conceptual article approaches these conflict dynamics from the Convention Theory perspective. Convention Theory draws attention to justice principles (known as “order of worth”) and to the material aspects in relations between MNC actors. We offer a framework that contributes to HQ-subsidiary relations research in three ways: (1) it links conflicts to justice principles, (2) it enriches the understanding of the stability of agreements, and (3) it sheds light on the activities needed for realizing preferred arrangements.
The article develops a model which conceptualizes headquarter-subsidiary relations in the multinational corporation as a multilevel discursive struggle between key…
The article develops a model which conceptualizes headquarter-subsidiary relations in the multinational corporation as a multilevel discursive struggle between key managers. At the first level, the relations are conceptualized as a discursive struggle over decisions and actions using rationalistic discourses. At the second level, they are viewed as a discursive struggle over power relations using control and autonomy discourses. Finally, underlying the first two, at the third level, headquarter-subsidiary relations are conceptualized as a discursive struggle over managers’ worldviews using cultural (pre)conceptions about “the self” and “the other.”
Purpose – The purpose of the chapter is to introduce an actor-centered conflict perspective into research on multinational company (MNC) coordination. We first develop a theoretical framework of conflictual processes in MNC coordination and then use an empirical study of a German MNC in Japan to illustrate how cultural coordination in MNC subsidiaries triggers conflict processes.
Methodology/approach – The chapter integrates conflict theory and models of MNC coordination. The empirical study is based on qualitative data.
Findings – Coordination programs in MNC such as cultural integration through shared values lead to substantial conflictual processes. Local actors apply micro-political tactics to resist, delay or adjust coordination instruments developed by MNC headquarters.
Originality/value of chapter – The chapter applies conflict theory to MNC coordination issues, a field of research which so far is dominated by contingency approaches.
This paper illuminates the distinction between individual and organizational actors in business-to-business markets as well as the coexistence of formal and informal…
This paper illuminates the distinction between individual and organizational actors in business-to-business markets as well as the coexistence of formal and informal mechanisms of coordination in multinational corporations. The main questions addressed include the following. (1) What factors influence the occurrence of personal contacts of foreign subsidiary managers in industrial multinational corporations? (2) How such personal contacts enable coordination in industrial markets and within multinational firms? The theoretical context of the paper is based on: (1) the interaction approach to industrial markets, (2) the network approach to industrial markets, and (3) the process approach to multinational management. The unit of analysis is the foreign subsidiary manager as the focal actor of a contact network. The paper is empirically focused on Portuguese sales subsidiaries of Finnish multinational corporations, which are managed by either a parent country national (Finnish), a host country national (Portuguese) or a third country national. The paper suggests eight scenarios of individual dependence and uncertainty, which are determined by individual, organizational, and/or market factors. Such scenarios are, in turn, thought to require personal contacts with specific functions. The paper suggests eight interpersonal roles of foreign subsidiary managers, by which the functions of their personal contacts enable inter-firm coordination in industrial markets. In addition, the paper suggests eight propositions on how the functions of their personal contacts enable centralization, formalization, socialization and horizontal communication in multinational corporations.
The purpose of this study is to examine how foreign firms consider natural disaster risk in subsequent investment decisions in a host country and whether different…
The purpose of this study is to examine how foreign firms consider natural disaster risk in subsequent investment decisions in a host country and whether different location portfolios can serve to mitigate investment risk.
The author sample includes data on 437 Fortune Global 500 firms and their initial entry into Chinese provinces between 1955 and 2008.
Using a fixed effects logit model of discrete time event history analysis, results show that geographic proximity to same multinational corporation (MNC) subsidiaries and different MNC subsidiaries from the same home country mitigates the negative effect of natural disasters on MNC entry into an affected province, while geographic proximity to other MNC subsidiaries from different home countries does not.
The knowledge needed to respond to severe disasters appears to be highly context-specific and shared only between firms with a high degree of commonality and trust.
The role of HQ in the contemporary MNC has recently received a good deal of research attention. This article argues that the contemporary MNC requires an organizational…
The role of HQ in the contemporary MNC has recently received a good deal of research attention. This article argues that the contemporary MNC requires an organizational model that can embrace different perspectives of the HQ role. The same HQ must at times hierarchically lead the firm and at other times assume a more passive, facilitative role that allows direct interaction and decision making among the subunits to coordinate interdependency within the firm. To achieve this integration, the article proposes a contingency model that specifies when the HQ should assume a hierarchical role and when it should assume a facilitative role.
As multinational corporations are becoming larger and more complex, it becomes increasingly difficult to balance between the need for overall standardization in the…
As multinational corporations are becoming larger and more complex, it becomes increasingly difficult to balance between the need for overall standardization in the multinational corporation (MNC) and the need for local responsiveness. In order to allow subsidiaries to react on challenges and opportunities within their local markets, they should be granted with a certain level of decision-making autonomy. However, this freedom can facilitate a misalignment of activities among the headquarters and its subsidiaries.
This study suggests that subsidiaries should be granted with the autonomy to pursue own activities. There should, however, be limits to their independence, which should be aligned through a dialogue between the headquarters and the subsidiary. This study finds a positive correlation between strategic and operational autonomy and subsidiary performance when these are combined with a strong intra-organizational network relationship. Furthermore, the study argues that within operational autonomy it is important to distinguish between everyday activities that do not need approval from headquarters, and activities that should be decided in collaboration between the headquarters and the subsidiary. Subsidiaries that are operating in technological complex markets should be granted with the autonomy to take advantage of inter-organizational network relationships in order to exploit local knowledge and capabilities. However, this poses the risk of the subsidiaries losing connectivity to the MNC. In order to reduce this risk, the headquarters should combine such initiatives with a strong collaboration with its subsidiaries.
By establishing a strong intra-organizational network relationship, autonomy can have a positive effect on subsidiary performance.