| strategies has become a standard in international management textbooks. In particular, the ‘transnational strategy’ is advocated by some gurus, but considered unworkable by other scholars. Yet, despite the popularity of the framework, and the concept of ‘transnational strategy’ in particular, surprisingly little evidence exists for under which conditions this strategy is most appropriate. This paper revisits the typology using a contingency approach suggesting that the transnational strategy works well if it “fits” with other elements of a subsidiary's strategy. We test hypotheses derived from this perspective on a sample of subsidiaries in two emerging economies. We find that transnational strategy enhances subsidiary performance in particular if the subsidiary is wholly owned, if it was not established by acquisition, and if it is highly export oriented. Show
IntroductionThe merits of standardization and localization of products and processes have been a pivotal theme in international strategic management research. A leading framework is the integration-responsiveness (IR) framework. Following Prahalad and Doz (1987), Bartlett and Ghoshal (1989) argue that local responsiveness and global integration can indeed be achieved simultaneously, and develop a typology based on a matrix of four strategies: international, multi-domestic, global and transnational. This typology has become a standard analytical tool in strategic management (e.g., Hill & Jones, 2013) and international business textbooks (e.g., Peng, 2014, Peng and Meyer, 2011). Bartlett and Ghoshal recommend that multinational enterprises (MNEs) pursue a transnational strategy combining both global integration and local adaptation. Yet even companies they highlight as role models have since struggled, and have reverted to more ‘global’ organizational structures. Recent textbooks thus suggest that the ‘transnational’ strategy is rather idealistic and most firms have to make critical choices between global integration and local adaptation (e.g., Peng, 2014, Verbeke, 2013). However, solid empirical evidence regarding the merits of alternative types of strategy is surprisingly scarce. Few studies actually present solid evidence if and for whom either strategy would actually enhance subsidiary performance, as acknowledged by Ghoshal (1987) himself. Our starting point for revisiting the Bartlett and Ghoshal typology is that the quest for generally applicable rules or performance effects may be futile because different strategies are effective for different types of subsidiaries. In particular, a transnational strategy combining global integration advantages with local responsiveness put high demands on the organization itself, such that it is not beneficial for every subsidiary. Therefore, a contingency framework is required to assess the merits of alternative strategies, and to identify under which conditions respectively global, multi-domestic and transnational strategies enhance subsidiary performance (Grewal et al., 2008, Katsikeas et al., 2006, Roth, 1995). Hence, our research question is: For which subsidiaries does a transnational strategy enhance subsidiary performance? Recent advances on knowledge management in MNEs emphasize the importance of knowledge exchanges and control mechanisms for different MNE strategies (Andersson et al., 2002, Meyer et al., 2011, Monteiro et al., 2008). The four types of strategy vary in the complexity of internal coordination and knowledge flows (Harzing, 2000, Pla-Barber, 2002, Wolf and Egelhoff, 2002). International strategies involve little explicit exploitation of either global integrating advantages or local adaptation advantages, and thus limited ongoing exchange of knowledge. Global strategies integrate strategic decisions and centralize core operations; knowledge flows thus are primarily top down, and control is tight. Multi-domestic strategies assign subsidiaries a specific scope with respect to local markets, but allow more local adaptation. Transnational strategies create the most complex coordination challenges. They involve extensive intra-organizational trade, strategic coordination and knowledge exchange not only between headquarters and subsidiaries, but across subsidiaries in different countries. The different subsidiaries of the MNEs thus are highly interdependent both strategically and operationally (Harzing, 2000). To enable such complex coordination, the MNE needs not only formal structures but informal mechanisms (Foss et al., 2010, Tallman and Chacar, 2011). Bartlett and Ghoshal, 1987, Bartlett and Ghoshal, 1989 thus advocated the need for distinct organizational capabilities and a shared organizational culture that encourages cooperation and knowledge sharing. Extending this line of thought, we argue that a transnational strategy can have a positive effect on subsidiary performance if it ‘fits’ with other aspects of the subsidiary strategy. The trade-offs between integration and responsiveness are particularly pertinent in countries with a distinct local business environment that inhibits the smooth transfer of business models. Especially in emerging economies, institutional frameworks often require idiosyncratic adaptations, while the local resource endowment is typically rich in labor but short of specialist human capital (Luo, 2003, Meyer and Peng, 2005, Xu and Meyer, 2013). In consequence, we expect a larger variation of strategies adopted by MNEs operating in such countries, and have thus chosen as our empirical field two emerging economies, Poland and Hungary. Our data are drawn from a questionnaire survey and include 345 observations of subsidiaries of MNEs. The dataset thus provides a rich variation of corporate strategy in a rapidly evolving context. Our results support our theoretical expectations that transnational strategies outperform other strategies if they fit with other aspects of the subsidiary strategy, specifically full ownership, establishment not by acquisition, and a high degree of export orientation. This paper contributes to the literature in several ways. First, we develop a contingency perspective and offer empirical evidence on one of the most popular sets of concepts in the international strategy literature, transnational strategy, and the underlying the integration-responsiveness framework (Bartlett & Ghoshal, 1989), which to date suffers from a lack of empirical verification of its performance implications. Second, we offer new insights into subsidiary performance extending work on parent-subsidiary relationships (Birkinshaw and Morrison, 1995, Fang et al., 2013Nell and Ambos, 2013, Tang and Rowe, 2012, Tian and Slocum, 2014) to show how strategy affects performance at the subsidiary level. Section snippetsThe integration responsiveness (IR) frameworkIn the 1980s and early 1990s, scholars began to systematically investigate the strategies of MNEs along the dimensions of local adaptation and global integration. Early studies tend to treat these dimensions as opposite poles of the same scale, or at as two highly correlated scales (Dow, 2006, Luo, 2001, Roth and Morrison, 1990, Venaik et al., 2005). Prahalad and Doz (1987) challenge this approach suggesting that the two dimensions are not exclusive but can be combined if suitable A contingency perspective on subsidiary performanceThe performance of subsidiaries is contingent on a wide range of organizational and contextual variables at both the subsidiary and parent level. For example, Chan, Makino and Isobe (2010) in a variance decomposition analysis find that about 19% of subsidiary performance is explained by parent level variables, and 14–17% by subsidiary level variables. Hence, both parent and subsidiary level strategy variables are critical for subsidiary performance. Specific influences on subsidiary performance Sample and surveyTo test our propositions, we need detailed information on the strategies of MNEs and their subsidiary in a context that likely exhibits considerable differences to the MNEs headquarters. Thus, we use a dataset developed through a questionnaire survey in two Central European emerging economies: Poland and Hungary. The two economies experience idiosyncratic local pressures for adaptation, while at the same time offering opportunities for global product strategies due to the rapidly evolving ResultsModel 1 only includes the control variables, and confirms that most of them are highly significant and signed as expected. The overall model statistics are satisfactory, with R2 for within-country of 0.90 pointing to the high contribution of firm specific rather than country-level effects. In line with our expectations, this model suggests that greenfield subsidiaries and joint ventures perform better than acquisitions (base case), older subsidiaries perform better, as do subsidiaries receiving Contributions and future researchWhile Bartlett and Ghoshal's framework remains popular in strategy and international business textbook and is a commonly used framework among practitioners, there clearly is a need to tie this framework better to contemporary research and in that way enhance its usefulness, or to revise it where necessary (Meyer and Estrin, 2014, Rugman et al., 2011). We have proposed to advance this agenda by developing a contingency perspective where different types of strategy are related to other Managerial implicationsOur results provide insights into a question of substantive concern to international managers, namely when and where to use either of the four types of strategy identified by Bartlett and Ghoshal (1989). We proposed that the performance of subsidiaries is contingent on the fit of the MNE strategy with other aspects of strategy at the subsidiary level; our results demonstrate this contingent nature of the performance impact of strategy types. First, we have found few significant direct effects ConclusionsOur paper reexamines one of the key textbook models of international business – the Bartlett and Ghoshal typology – by providing some empirical evidence when which strategy is appropriate. Despite its popularity, the IR model lacked empirical validation (apart from specific applications in the field of marketing (Grewal et al., 2008, Roth, 1995). We find support for a contingency model emphasizing strategic fit of the strategy with the context (especially cultural distance) and the mode of AcknowledgementsWe thank the British Academy and the Taiwan National Science Council for financial support under their joint program (grant JP90013 and NSC99-2911-I-003-003-2). We particularly thank helpful comments from the JWB editor Mike Peng and two anonymous reviewers. We owe special thanks to CEIBS colleagues Tae-Yeol Kim and Chen Zhen, who provided critical help with the statistical analysis. We also thank to the research teams who collected the data, for helpful comments from Raquel Meneses as well as References (90)
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Despite theoretical justifications for the context significance for internationalization, the existing literature is fragmented and overlooks whether and how firms originating in distinct countries differ in their knowledge development processes. Relying on the antecedents, decisions, and outcomes, and the theory, context, characteristics, and methodology frameworks, we bridge this gap by reviewing 81 papers published in leading journals since 2007. Our paper extends the literature by classifying knowledge development during firm internationalization from emerging and advanced countries. We show how environmental and status differences create diverse effects on the type of knowledge firms seek, the ways they acquire and integrate it, and the consequent internationalization decisions. Among notable further directions, we emphasize shifting focus from organization- to individual-level learning in diverse organizational contexts. 2021, International Business Review Show abstractNavigate Down Extant international business (IB) literature on Headquarter (HQ)-subsidiary relationships has established that where decision-making occurs, it influences a firm’s performance. Existing studies propose that the degree of autonomy in decision-making at subsidiary level is not the same for all value chain activities, paying more attention to upstream activities. This paper contributes by exploring decision-making autonomy in downstream strategic sales activities. Sales has rarely been centre stage in IB investigations and we therefore lack thorough understanding of its role and importance within the MNE decision-making processes. Conducting a mixed methods exploratory study in the fast-moving consumer goods sector in Germany, we test for antecedents and outcomes of subsidiaries’ strategic sales decision-making autonomy. Results confirm external and internal embeddedness as antecedents, and the dominant role played by the local context, but provide insights into potential risks of internal embeddedness. Results challenge existing theory inasmuch as subsidiary importance is not a significant driver. A critical implication of this finding is that, compared to upstream activities, the HQ may not have the option of mandating a subsidiary to transfer sales strategy skills and knowledge across the network. Our results show that, in an era of globalisation of sales, and internationalisation of retailers, HQ managers must pay heed to directly interacting with subsidiaries and to sharing strategic sales decision-making across the network to consolidate the MNE’s global sales strategy. 2021, Journal of International Management Show abstractNavigate Down This study advances the debate on the global integration–local responsiveness imperative and theorises the contingency effects of vertical and horizontal coordination mechanisms to unfold the benefits of strategic agility and internationalisation speed. We offer a comprehensive picture arguing that strategic agility and internationalisation speed affect firms' growth mode choices in pursuit of internationalisation, and highlight the advantages and disadvantages of network-based and acquisitive growth modes that ultimately influence international success. Using data from British, German, Austrian, Swiss and Malaysian small and medium-sized firms, we find some surprising results. In contrast to prior studies, we find that strategic agility and internationalisation speed are inseparable in pursuit of international success. However, our study shows that while both are necessary, they are insufficient both alone and combined — they require different coordination mechanisms, namely strategic intent and horizontal coordination, and trigger different growth mode choices to internationalise. Combined, our findings suggest that firms need to orchestrate conflicting demands with respect to the dual global integration–local responsiveness imperative. 2020, International Business Review Show abstractNavigate Down Managers of international subsidiaries, especially subsidiary CEOs, operate at critical interfaces within multinational enterprises (MNEs) and hold strategic responsibility for the operations in their country. Yet, their impact on subsidiary performance has received scant research attention. Building on the subsidiary entrepreneurship and strategic leadership literatures, we develop a model of how subsidiary CEOs’ entrepreneurial leadership affects subsidiary performance, and how this relationship is moderated by the subsidiary context that determines managerial discretion. We combine survey data of 291 international subsidiaries in South Korea with archival data to test our hypotheses. Our results show that subsidiary CEOs’ entrepreneurial leadership enhances subsidiary performance and that this relationship is strengthened by managerial discretion. Our study highlights the pivotal role of subsidiary CEOs within MNEs and contributes to a microfoundational understanding of international subsidiary management. 2020, Journal of Business Research Show abstractNavigate Down This study reviews the presence of articles related to Central and Eastern Europe (CEE) in Web of Science (WOS). Bibliometric analysis first reveals the trends of CEE-related articles in the areas of international business (IB), management and economics up to 2016. The results show steady growth in absolute and relative numbers after 1990, intensifying since 2010. Second, we conduct topic research using network analysis with blockmodeling. We identify a network of topics and their interrelations over time and used them to periodise the CEE-related research in IB. The most-cited CEE-related IB articles and the main citation path are also presented. The analysis adds to the discussion of how the CEE region is explored in IB research, its contributions, impacts and the challenges facing regional research in the future. In this study, a methodology and framework for performing a comprehensive bibliometric analysis on regional IB research is applied. 2019, International Business Review Show abstractNavigate Down Our study applies the well-known, market-strategy focussed integration-responsiveness (IR) framework and extends it to incorporate the non-market corporate political strategies of MNC subsidiaries. We find government regulation and the market strategies of integration and innovation have positive relationships with MNC subsidiary political activities. Interestingly, whereas the market strategy of innovation has a positive effect on subsidiary performance (but not on legitimacy), the non-market corporate political activities undertaken by MNC subsidiaries enhance subsidiary legitimacy (but not subsidiary performance). In addition, both market innovation and non-market subsidiary political activities are useful tools to gain favourable government decisions. Overall, our study incorporates both market and non-market strategies within a single overarching IR framework, and highlights their complementary role in achieving the twin goals of performance and legitimacy respectively. Research article Journal of World Business, Volume 50, Issue 1, 2015, pp. 144-148 Show abstractNavigate Down Drawing on the knowledge-based view (KBV) of the firm, this study compares value creation between US manufacturing and service firms entering China through strategic alliances. Using an event study applied on a sample of 192 manufacturing and 105 service firms, the results indicate that value creation for manufacturing and service firms differ. For service firms, having a Chinese state-owned-enterprise as a partner, marketing agreement, and/or Chinese partner creates greater value. These findings highlight the significance of knowledge acquisition versus accession in US–Chinese partnerships. Research article Characteristics and determinants of insourced and offshored projects: A comparative analysisJournal of World Business, Volume 50, Issue 1, 2015, pp. 108-121 Show abstractNavigate Down Similar in-house (or insourced) and offshored software development data were paired to find differences (if any) on four project performance criteria: project elapsed times, size, data quality, and same-source nations. For each paired project, the differences between five technical variables (development type, application type, architecture, development platform, and programming language) were considered. The resource dependency theory was used to examine the technical differences between matched projects. Additionally, Hofstede's cultural dimensions were used to analyze the performance of offshored software projects. Data from the International Software Benchmarking Standard Group (ISBSG) was used. The main empirical findings were as follows: project completion time is significantly shorter for in-house development projects; and firms prefer offshoring for new projects, client-service platforms, and newer application languages. Some of Hofstede's cultural dimensions do affect project quality and work effort for offshore projects. Research article Celebrating the past, looking to the futureJournal of World Business, Volume 50, Issue 1, 2015, pp. 1-2 Research article Strictly limited choice or agency? Institutional duality, legitimacy, and subsidiaries’ political strategiesJournal of World Business, Volume 50, Issue 2, 2015, pp. 302-311 Show abstractNavigate Down This article analyzes political strategies of MNC subsidiaries in emerging markets. We find that institutional pressures from public and private non-market actors in the emerging market lead to increased political activism. Furthermore, we find that these relationships become stronger, when the external pressures are joined by strong firm-internal pressures. Our findings contribute to the scarce literature on firms’ political strategies in emerging markets. They also support recent criticism of institutional theory's strong focus on isomorphism as the most important legitimacy-conveying mechanism. We argue that the isomorphism-based either-or logic gives way to stronger agency of the subsidiary and to a logic of active negotiation and social construction of the subsidiary's legitimacy in the emerging market. Our findings show support for this idea as political activism is one such way how the subsidiary's legitimacy can be built and nurtured. Research article Outcomes of learning through JVs for local parent firms in transition economies: Evidence from RussiaJournal of World Business, Volume 50, Issue 1, 2015, pp. 220-233 Show abstractNavigate Down The outcomes of learning for JV performance have been studied extensively. However, benefits of learning for JV parent firms in transition economies are not well understood. In this paper I develop a two-phase approach for the assessment of learning outcomes for local JV parent firms by integrating concepts from innovation and strategy studies. I argue that at the first phase learning outcomes should be evaluated at operational level as changes in functional types of technological capabilities and managerial capabilities. At the second phase these changes have to be linked to strategic level outcomes for the modernization, restructuring and long-term competitiveness. I illustrate the applicability of these measurements in an explorative case study of Russian JV parent firms. Research article The decline of global market leadersJournal of World Business, Volume 50, Issue 1, 2015, pp. 15-25 Show abstractNavigate Down Integrating capability-based and institution-based views in a multilevel framework, we argue that managerial capability to acquire loans to finance business expansion has an inverted U-shaped relationship with global market leadership. The negative effect on global market leadership of excessive loan-acquiring capability is amplified under business-friendly market institutions that ease access to credit. Managerial capability to utilize resources productively positively moderates the relationship between loan-acquiring capability and global market leadership. The role of resource-utilizing capability is attenuated under business-friendly market institutions that facilitate overinvestment. The study helps explain recent decline of global market leaders in advanced market economies. What are four global strategic position based on the integration responsiveness framework?Local responsiveness is the degree to which the company must customize their products and methods to meet conditions in other countries. The two dimensions result in four basic global business strategies: export, standardization, multidomestic, and transnational.
What is the integration responsiveness framework?The integration-responsiveness framework is one of the most widely used frameworks to explain the strategies and organizational settings of multinational corporations (MNCs) (Ferreira, 2001; Rugman, 2002).
What are the 4 global strategies?Four main global strategies form the basis for global firms' organizational structure. These are domestic exporter, multinational, franchiser, and transnational. Each of these strategies is pursued with a specific business organizational structure (see Table 16-3).
What are the 4 types of business strategies?What are the Types of Business Strategy?. Organizational (Corporate) Strategy.. Business (Competitive) Strategy.. Functional Strategy.. Operating Strategy.. |
