Navigating MNE control and coordination: A critical review and directions for future research

Control and coordination efforts are at the heart of MNE functioning. Yet, our review reveals that the literature on MNE control and coordination lacks conceptual clarity, which may hamper the development of the field. In this critical review, we synthesize the literature over the past decade using a conceptual framework rooted in new internalization theory. Research remains fairly coarse regarding how various configurations and interactions of control and coordination mechanisms affect intended outcomes. We note a paucity of multilevel studies, direct investigations of microfoundations, and comparison studies between intra- and inter-MNE relationships. Insufficient attention has been paid to adaptation issues and the impact of external dynamics on the need for, and operationalization of, control and coordination mechanisms. These gaps are concerning, since external trends are changing the organizational landscape and MNE boundaries are becoming increasingly fuzzy. Going forward, a more nuanced conceptualization of outcomes is needed, one that specifies proximal outcomes which mediate the achievement of distant goals. We use our augmented conceptual framework to identify other key areas for future research. We also call for more research on how disruptive forces affect both the use and outcomes of organizational mechanisms aimed at achieving control and coordination.

Supplementary Information

The online version contains supplementary material available at 10.1057/s41267-023-00600-7.

Capturing Value in Platform Business Models That Rely on User-Generated Content

Business models increasingly depend on inputs from outside traditional organizational boundaries. For example, platforms that generate revenue from advertising, subscription, or referral fees often rely on user-generated content (UGC). But there is considerable uncertainty on how UGC creates value—and who benefits from it—because voluntary user contributions cannot be mandated or contracted or its quality assured through service-level agreements. In fact, high valuations of these platform firms have generated significant interest, debate, and even euphoria among investors and entrepreneurs. Network effects underlie these high valuations; the value of participation for an individual user increases exponentially as more users actively participate. Thus, many platform strategies initially focus on generating usage with the expectation of profits later. This premise is fraught with uncertainty because high current usage may not translate into future profits when switching costs are low. We argue that the type of user-generated content affects switching costs for the user and, thus, affects the value a platform can capture. Using data about the valuation, traffic, and other parameters from several sources, empirical results indicate greater value uncertainty in platforms with user-generated content than in platforms based on firm-generated content. Platform firms are unable to capture the entire value from network effects, but firms with interaction content can better capture value from network effects through higher switching costs than firms with user-contributed content. Thus, we clarify how switching costs enable value for the platform from network effects and UGC in the absence of formal contracts.

Ensuring Adaptation While Seeking Efficiency: Tiered Outsourcing and Skip-Level Supplier Ties in the Airbus A350 Program

When outsourcing design tasks, firms want their suppliers to be both efficient and adaptive. Whereas efficiency is necessary to reap economic gains from outsourcing, adaptation is required to deal with interdependencies as the design evolves. Achieving both objectives simultaneously, however, is difficult because procurement contracts require a trade-off between providing incentives for efficiency and facilitating adaptation. In the presence of formal contracts that provide strong incentives for efficiency, ensuring adaptation thus requires effective relational contracts between the buyer and the supplier. But because the focus of prior research has been on dyadic buyer–supplier relationships, it is unclear how the efficiency–adaptation trade-off can be mitigated in the multitier supplier systems that are common in many industries. Addressing this gap, we argue that in hierarchical supplier systems, relational contracts between contractual partners become more important, but at the same time harder to establish, than in single-tier supplier systems. An in-depth case study of the adaptive frictions that arose in the Airbus A350 program allows us to illustrate this challenge of tiered outsourcing. Moreover, we show how Airbus came to resolve the frictions by leveraging skip-level ties—direct informal contacts to lower-level suppliers with which no contractual relationship existed, thus replacing the archetypal notion of a supplier hierarchy by a more complex relationship structure. We discuss the boundary conditions of our findings and suggest propositions for the emergence of skip-level ties in tiered outsourcing.

How Firms Build Isolating Mechanisms for Knowledge: A Study in Offshore Research and Development Captives

Understanding how firms protect their knowledge from leakage is becoming increasingly important, especially when knowledge is not well protected by legal mechanisms such as patents. The rapid rise in research and development (R&D) activities taking place in offshore locations that only offer weak legal protection for intellectual property provides the ideal context to study this question. Using interview and survey data from captive R&D centers of multinational firms in India, we (1) identify five organizational practices that firms use to protect their knowledge from leaking to competitors in offshore locations, (2) consider whether these practices limit knowledge leakage or limit damage from leaked knowledge, and (3) explore whether they are complements or substitutes.

Managerial Coordination Challenges in the Alignment of Capabilities and New Subsidiary Charters in MNEs

Subsidiary-level change requires the alignment of subsidiary charters and capabilities. Yet, the mechanisms through which the alignment of charters and capabilities unfolds are not yet well understood. In this paper, we investigate alignment from the perspective of managerial coordination. Drawing on a longitudinal study of a global IT firm, we identify three coordination mechanisms (charter-, experience-, and interaction-based coordination). By tracing the shifts in these coordination mechanisms over time and by specifying the implications of each mechanism for capability level change, we explain how managerial coordination influences alignment via subsidiary level capability change as well as alignment via the potential renegotiation of charters. This also allows us to provide new insights into situations of misalignment by explaining that particular mechanisms of coordination may become a source of decoupling between subsidiary actions and HQ mandates and may also result in capability level inertia. Moreover, while prior research has already acknowledged the role of interaction-based coordination for capability level change we show how and why such a mechanism of coordination emerges.