The hypermodern MNC—A heterarchy?

Strategic tensions in multinational corporations during global disruptions

Purpose

The purpose of this study is to investigate strategic tensions arising between corporate headquarters (CHQs) and a subsidiary during disruptive events.

Design/methodology/approach

This study adapted a case study approach combined with action research elements in the context of the COVID-19 pandemic. The focal company is an US information technology (IT)-company operating in Russia.

Findings

During the COVID-19 pandemic, some sectors and industries, such as the IT sector, received a unique impetus for development. At the same time, our subsidiary started to develop and implement a set of measures to explore and exploit nascent business opportunities without waiting for the formal approval of “subsidiary initiatives” by the CHQs or regional headquarters (RHQs). The subsidiary was able to postpone the implementation of corporate-wide projects which it saw as not well suited to the host country market at that time.

Originality/value

This study presents subsidiaries not as passive receivers of orders from CHQs or RHQs, but as active partners in the corporate management hierarchy capable to mold effectively certain corporate-wide initiatives and policies.

Multinational Enterprise Organizational Structures and Subsidiary Role and Capability Development: The Moderating Role of Establishment Mode

Multinational enterprises (MNEs) develop structural configurations for managing their geographically dispersed and disaggregated activities. These structures can be classified as (a) simple headquarters configurations (involves corporate, regional, divisional headquarters and mandated units) involving few direct reporting relationships; (b) network organizations involving no direct reporting relationships; and (c) matrix configurations involving multiple reporting relationships. While these structures are built for handling various complexities and purposes, it is unclear how they influence subsidiary role and capability development. We hypothesize how these structures influence subsidiary development and propose a moderating role of MNE establishment mode on the direct structure-subsidiary development relationship. Based on data from 429 foreign subsidiaries in New Zealand, our results show that subsidiary development varies across the structures such that simple headquarters configurations experience the least opportunities to develop. While the matrix and network structures as complex configurations offer distinct paths to subsidiary development, subsidiaries managed under the former are more likely to follow the developmental path of networking and interunit learning, and the subsidiaries managed under the latter are more likely to follow the path of autonomy and innovation. Furthermore, the positive association of network structure with subsidiary initiatives and autonomy is stronger for greenfield subsidiaries, whereas the positive association of matrix structure with subsidiary mandates is stronger for acquired subsidiaries.

The structural architecture of international industry networks in the global economy

Globalisation continuously produces novel economic relationships mediated by flows of goods, services, capital, and information between countries. The activity of multinational corporations (MNCs) has become a primary driver of globalisation, shaping these relationships through vast networks of firms and their subsidiaries. Extensive empirical research has suggested that globalisation is not a singular process, and that variation in the intensity of international economic interactions can be captured by 'multiple globalisations', however how this differs across industry sectors has remained unclear. This paper analyses how sectoral variation in the 'structural architecture' of international economic relations can be understood using a combination of social network analysis (SNA) measures based on firm-subsidiary ownership linkages. Applying an approach that combines network-level measures (Density, Clustering, Degree, Assortativity) in ways yet to be explored in the spatial networks literature, a typology of four idealised international network structures is presented to allow for comparison between sectors. All sectoral networks were found to be disassortative, indicating that international networks based on intraorganisational ties are characterised by a core-periphery structure, with professional services sectors such as Banks and Insurance being the most hierarchically differentiated. Retail sector networks, including Food & Staples Retailing, are the least clustered while the two most clustered networks-Materials and Capital Goods-have also the highest average degree, evidence of their extensive globalisations. Our findings suggest that the multiple globalisations characterising international economic interactions can be better understood through the 'structural architecture' of sectoral variation, which result from the advantages conferred by cross-border activity within each.

Communications between managers of manufacturing units of multinational corporations

Purpose

The paper identifies the factors that shape the intensity and perceived effectiveness of communications between heads of manufacturing units of multinational corporations (MNCs).

Design/methodology/approach

The paper is based on a survey of heads of MNCs’ manufacturing subsidiaries in Russia.

Findings

The authors found that the intensity of most inter-unit communication channels depends on the speed and magnitude of the changes experienced by manufacturing subsidiaries in products and production technologies. The assessment of the efficiency of a communication channel with high media richness strongly correlates to the intensity of its use.

Practical implications

Subsidiary managers are quickly mastering most easy-to-use channels (i.e. e-mail exchange, talking on the phone, reading corporate magazines) by themselves, but are minimizing their participation in time-consuming activities (i.e. corporate-wide and special conferences, arranging informal meetings with foreign peers) unless they have to manage rapid changes in products and production technologies. Thus, to intensify the voluntary use of inter-unit channels with high media richness, headquarters should instill in subsidiary managers the value of cooperation between manufacturing units. Moreover, the effectiveness of inter-unit channels with high media richness should be properly demonstrated to subsidiary managers to assuage their initial reluctance.

Originality/value

This paper presents communications between manufacturing units of multinational corporations not as the transfer of abstract knowledge but as routine processes of exchange of detailed information on valuable improvements of the existing practices and solutions to technical and organizational problems common in facility development and mastering new products.

The Network Firm as a Political Coalition

The article uses a qualitative case study of fifteen years in the production network that revolves about Fiat Auto to depict the “network firm” as a political coalition. The analysis touches on Fiat’s radical outsourcing of production in the 1990s, a short-lived and ill-fated alliance with General Motors in 2001, a descent to the brink of bankruptcy in 2004, a return to profitability by 2007, and, finally, the acquisition of control of Chrysler in 2009. The article reconstructs James March’s classic Carnegie model of the firm in light of the blurring of organizational boundaries. By marrying that model with ideas drawn from the literatures on organizational networks, social movements, and organizational politics, the article demonstrates that strategic decision-making at Fiat and at key suppliers shaped, and was shaped by, an interplay of frames and relational embedding within and across organizational boundaries. This shows how coalitional politics shape and are shaped by the shifting boundaries of the firm, and how those politics affect the evolution of the production networks that prevail across many contemporary industries.

Subsidiary Initiative Taking in Multinational Corporations: The Relationship between Power and Issue Selling

This paper investigates the political maneuvering that accompanies subsidiary initiative taking in multinational corporations. On the basis of an explorative empirical investigation of subsidiary initiative taking in the French subsidiaries of six German MNCs, the paper explores the activities that subsidiaries undertake to sell their initiatives, and the relationships among issue selling, subsidiary power and headquarters’ hierarchical power. The findings suggest that the use of issue-selling tactics is common when subsidiaries engage in initiative taking. In addition, the paper demonstrates that a low degree of issue selling is needed to obtain approval of an initiative in less asymmetrical headquarters–subsidiary power relationships (i.e. relationships in which subsidiaries are relatively powerful). In cases where power relationships are highly asymmetrical, issue selling is a necessity, but it is hardly a sufficient condition for obtaining headquarters’ approval. This renders issue selling to a second-rank power in subsidiary initiative taking, as it only works in conjunction with subsidiary power.

Subsidiary Embeddedness and Competence Development in MNCs A Multi-Level Analysis

Recent research on the competitive advantage of multinational corporations (MNC) has emphasized the importance of the ability of subsidiaries to assimilate new knowledge from their external environment. Such an ability is important for the individual subsidiary's own performance as well as for the possibility it affords the MNC to combine and use resources from different parts of the corporate system.

This paper explores the nature of business embeddedness at the subsidiary level and its role at the corporate level. It is suggested that the subsidiaries' embeddedness in a network of business actors can explain why certain subsidiaries demonstrate higher achievements than others, both in terms of their market performance and regarding their importance for competence development within the MNC. It is argued that the closer a subsidiary's external business relationships with suppliers and customers the easier it will be to assimilate new knowledge from outside, the more it will be able to innovate and therefore the more it will be able to advance its performance in the local market. Further, because embeddedness influences the innovative capacity of subsidiaries, it is also claimed to be a decisive factor in explaining which subsidiaries will contribute to competence development at the corporate level.

Hypotheses concerning the relationships between a subsidiary's external technical embeddedness, market performance and the subsidiary's importance for competence development at the level of the MNC are formulated and tested in a LISREL model. Data is used from 97 subsidiaries belonging to 20 global divisions of 13 Swedish multinational corporations. The results indicate that a subsidiary's extemal technical embeddedness can be a strong predictor of both its own expected market performance and its role as a provider of competence to other MNC units.

The paper concludes with a discussion about the role that a subsidiary can play as a bridgehead between external and intemal units of an MNC and the negative impacts that might occur if a subsidiary's business network is too embedded.

Dynamics of Central Control and Subsidiary Autonomy in the Management of Human Resources: Case-Study Evidence from US MNCs in the UK

This article revisits a central question in the debates on the management of multinationals: the balance between centralized policy-making and subsidiary autonomy. It does so through data from a series of case studies on the management of human resources in American multinationals in the UK. Two strands of debate are confronted. The first is the literature on differences between multinationals of different national origins which has shown that US companies tend to be more centralized, standardized, and formalized in their management of human resources. It is argued that the literature has provided unconvincing explanations of this pattern, failing to link it to distinctive features of the American business system in which US multinationals are embedded. The second strand is the wider debate on the balance between centralization and decentralization in multinationals. It is argued that the literature neglects important features of this balance: the contingent oscillation between centralized and decentralized modes of operation and (relatedly) the way in which the balance is negotiated by organizational actors through micro-political processes whereby the external structural constraints on the company are defined and interpreted. In such negotiation, actors’ leverage often derives from exploiting differences between the national business systems in which the multinational operates.

Knowledge Transfer Mechanisms and Global R&D Operations in MNCs

With the development of globalization, companies will need worldwide resources for R&D. Multinational corporations (MNCs) will rely on their subunits located in different countries for R&D. As a result, knowledge transfer between headquarters and subunits or among subunits will be crucial for MNCs to operate their R&D activities. This study explores the relationship between knowledge transfer and R&D operations, using a qualitative research approach including four multinational companies. We conducted a cross-case analysis connecting four R&D configurations and two knowledge transfer mechanisms: expatriate management policy and communication frequency. Results show that both transfer mechanisms are very important for MNCs for the management of knowledge transfer in global R&D operations. However, each of these mechanisms will need a different focus depending on R&D strategy and configuration. The paper summarizes recommendations for managers as drawn from these insights.

Language Fluency, Socialization and Inter-Unit Relationships in Chinese and Finnish Subsidiaries

High levels of trust and shared vision contribute to collaborative behaviour among units belonging to the same corporation. We examined the relationship of language fluency and socialization mechanisms to inter-unit shared vision and trustworthiness, using a sample of 310 inter-unit relationships involving subsidiaries of multinational corporations located in China and Finland. Results show that language fluency related significantly to shared vision and perceived trustworthiness in both the Chinese and Finnish subsidiaries. We also found socialization mechanisms to have a positive relationship to shared vision in the Chinese but not the Finnish sample, and no significant relationship to perceived trustworthiness in either sample. The interaction effects of language fluency and socialization mechanisms produced different results in the Chinese and Finnish samples. The study confirmed the importance of language fluency for inter-unit relationships and offered several suggestions for future research.