HEC MONTRÃAL Ãcole affiliÃ©e Ã l`UniversitÃ© de MontrÃ©al Essays on

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HEC MONTRÉAL
École affiliée à l'Université de Montréal
Essays on the Dominant Logics of Strategizing within
the Multinational Enterprise: A Regional Perspective
par
Ali Taleb
Service de l'enseignement du Management
Thèse présentée à la Faculté des études supérieures et postdoctorales en vue de
l'obtention du grade de Philosophiae Doctor (Ph.D.) en Administration des Affaires.
Spécialisation en Management
Septembre 2012
© Ali Taleb, 2012
HEC MONTRÉAL
École affiliée à l'Université de Montréal
Cette thèse intitulée :
Essays on the Dominant Logics of Strategizing within
the Multinational Enterprise: A Regional Perspective
Présentée par :
Ali Taleb
a été évaluée par un jury composé des personnes suivantes :
Professeur Louis Hébert
HEC Montréal
Président du comité de surveillance
Professeur Ari Van Assche
HEC Montréal
Président-rapporteur
Professeur Rick Molz
Concordia University – John Molson School of Business
Membre du jury
Professeur Zhan Su
Université Laval
Examinateur externe
Professeure Sophie Marmousez
HEC Montréal
Représentante du directeur de HEC Montréal.
© Ali Taleb
iii
Résumé
Cette thèse se compose de trois essais complémentaires dont l'objectif commun est
d'explorer les logiques dominantes des activités d’élaboration des stratégies au sein
des entreprises multinationales. Le premier essai est théorique. Nous y proposons un
cadre conceptuel qui contraste et intègre les rationalités économique, institutionnelle
et politique qui façonnent les décisions stratégiques. Nous mettons ainsi en évidence
le fait que la mobilisation conjointe de ces trois lentilles analytiques renforce leurs
capacités explicatives individuelles. Le modèle proposé permet de décortiquer
davantage la « boîte noire » des activités d’élaboration de stratégies et de faire le lien
entre les aspects « marché » et « non marché » de la stratégie. En plus d’apporter des
contributions spécifiques à la littérature, cet article sert d'introduction conceptuelle
aux deux études empiriques incluses dans cette thèse.
Le second essai est sous forme d’une étude qualitative exploratoire. On y examine
comment six pratiques stratégiques développées par la filiale canadienne d'une
multinationale pharmaceutique ont été diffusées aux autres filiales de la firme. Nous
avons adopté l’approche de réplication d’études de cas pour examiner les processus
de diffusion. En focalisant sur la dimension régionale des processus intraorganisationnels, cette étude apporte une contribution unique au débat actuel sur
l’aspect régional des stratégies internationales des entreprises. Nous avons également
mis en avant cinq propositions qui pourront être testées empiriquement.
Le troisième essai propose une analyse quantitative des logiques dominantes des
choix de localisation par les multinationales originaires des pays émergents. En effet,
iv
les études ancrées dans la rationalité économique expliquent les choix des pays hôtes
des multinationales par la tendance de ces dernières à concentrer leurs activités dans
des pays qui sont géographiquement proches de leurs pays d’origine. Ainsi, leur
objectif est d’assurer l'efficacité économique de leurs opérations. D’autres études, plus
récentes, suggèrent que
les multinationales des pays émergents en particulier
préfèrent s’installer dans des marchés dont les caractéristiques institutionnelles sont
proches de celles de leurs pays d’origine. De ce fait, leur comportement est plutôt
guidé par leur besoin de légitimité. Dans cette étude, nous avons examiné les effets
respectifs des logiques d'efficacité économique et de légitimité institutionnelle sur les
choix de localisation. Pour ce faire, nous avons analysé les configurations des réseaux
des filiales de 203 multinationales des pays émergents. Les données empiriques
confortent nos prédictions théoriques. Plus précisément, les choix des locations de ces
firmes dans leurs régions d’origine sont guidés par la logique économique. Dans
d'autres régions, elles arbitrent les deux logiques selon leurs degrés d’expérience
internationale. Ces résultats contribuent de façon significative aux débats actuels sur
le processus d'internationalisation des multinationales des pays émergents et sur la
nature régionale des stratégies internationales des multinationales en général.
Mots clés : Entreprise multinationale, logiques dominantes, diffusion de pratiques,
choix de locations, logiques de formation des stratégies, stratégie régionale, stratégie
globale, pays émergents.
v
Summary
This thesis consists of three complementary essays whose common goal is to explore
the dominant logics of strategizing activities within the multinational enterprise. The
first paper is conceptual. It provides an analytical framework that contrasts and
integrates the economic, institutional, and political rationalities of strategic decision
making. We thereby highlight the increased explanatory power of the three logics
when they are used as an integrated set of analytical lenses. The proposed framework
helps unravel the “black box” of strategizing activities and bridges the gap between
the market and non-market aspects of global strategy. In addition to making specific
contributions to the literature, this essay serves as a conceptual introduction to the
two empirical papers.
The second essay consists of an exploratory qualitative study. We investigate how six
strategizing practices developed by the Canadian subsidiary of a global
pharmaceutical company diffused to sister subsidiaries. We followed a case-based
replication approach and paid particular attention to the regional dimension of the
diffusion mechanisms. This study makes a unique contribution to the current debate
on the regional aspect of international strategy by examining its relevance to practice
diffusion within the organization. We also put forward five propositions that can be
tested empirically.
In the third essay, we use quantitative data to analyze the dominant logics underlying
location choices by multinational enterprises from emerging markets. The existing
literature suggests that MNEs in general tend to focus their activities in nearby
vi
countries for economic efficiency reasons. More recent studies have found that
emerging market multinationals, in particular, tend to seek legitimacy and thereby
base their activities in markets with institutional conditions that are similar to or
worse than those in their home countries. We examine the respective effects of
economic efficiency and institutional legitimacy logics on location choices. To this end,
we analyzed the configurations of the location networks of 203 emerging market
multinationals and found general empirical support for our predictions. In particular,
these firms tend to follow economizing logic in their home regions and a mix of both
logics in other regions. The arbitration of the two logics in host regions is partly
moderated by the firm’s degree of international experience. Our findings make
important contributions to the current efforts to understand the internationalization
process of emerging market multinationals and the regional aspects of international
strategy.
Keywords: Multinational enterprise, dominant logics, practice transfer, location
choice, strategizing logics, regional strategy, global strategy, emerging markets
vii
Table des matières
Résumé .................................................................................................................................. iii
Summary ................................................................................................................................ v
Table des matières ................................................................................................................ vii
Liste des tableaux .................................................................................................................. ix
Liste des figures ..................................................................................................................... x
Liste des sigles et des abréviations........................................................................................ xi
Dédicace ............................................................................................................................... xii
Remerciements .................................................................................................................... xiii
Introduction générale ............................................................................................................. 1
Chapter 1 – The Logics of Strategizing within Multinational Enterprises:
Economic Efficiency, Social Legitimacy, and Political Power
Abstract .................................................................................................................................. 4
1.1 Introduction ...................................................................................................................... 5
1.2 Studying Emergent Global Strategy within MNEs .......................................................... 6
1.2.1 The Time Dimension of Global Strategy .................................................................. 7
1.2.2 The Space Dimension of Global Strategy ................................................................. 8
1.2.3 Strategizing within the MNE .................................................................................. 10
1.3 Three Tales of Global Strategy ...................................................................................... 10
1.3.1 The Competitive Strategy Perspective .................................................................... 11
1.3.2 The Institutional Strategy Perspective .................................................................... 12
1.3.3 The Political Strategy Perspective .......................................................................... 14
1.4 The Logics of Strategizing within Multinationals ......................................................... 17
1.5 Conclusion ..................................................................................................................... 19
References ............................................................................................................................ 23
Appendices ........................................................................................................................... 27
Chapter 2 – Successful Diffusion of Local Strategic Practices within Multinational
Enterprises: An Exploratory Study of Organizational and Institutional Factors in a
Regional Context
Abstract ................................................................................................................................ 28
2.1 Introduction .................................................................................................................... 29
2.2 Intra-MNE Isomorphism and the Diffusion of Local Practices ..................................... 31
viii
2.2.1 Multidimensional Nature of Practice Diffusion within Multinationals .................. 32
2.2.2 Institutional Perspective of Practice Diffusion within Multinationals .................... 35
2.3 Research Methods .......................................................................................................... 37
2.3.1 Research Setting and Design ................................................................................... 38
2.3.2 Sampling Strategy ................................................................................................... 40
2.3.3 Data Collection........................................................................................................ 41
2.3.4 Data Analysis .......................................................................................................... 45
2.4 Results: Isomorphic Drivers of Practice Adoption Across Regions .............................. 46
2.4.1 Role of the Regional Head Office and Subsidiaries in the Diffusion Process ........ 47
2.4.2 The Regional Dimension of Practice Diffusion ...................................................... 55
2.4.3 Vetting the Findings Through Theoretical Replication .......................................... 58
2.5 Discussion and Conclusions........................................................................................... 60
References ............................................................................................................................ 65
Appendices ........................................................................................................................... 68
Chapter 3 – Location Choices by Multinational Enterprises From Emerging Markets:
Legitimizing versus Economizing Logic
Abstract ................................................................................................................................ 70
3.1 Introduction .................................................................................................................... 71
3.2 Theoretical Foundations and Predictions ....................................................................... 73
3.2.1 Relatedness of Location Networks: Geography versus Institutions ....................... 74
3.2.2 The Logics of Location Arbitrage: Economizing versus Legitimizing .................. 77
3.2.3 Moderating Effects of the International Experience in Host Regions .................... 81
3.3 Research Methods .......................................................................................................... 82
3.3.1 Data Sample ............................................................................................................ 82
3.3.2 Variables and Measures .......................................................................................... 84
3.4 Analyses ......................................................................................................................... 89
3.5 Discussion ...................................................................................................................... 94
3.6 Conclusion ..................................................................................................................... 97
References .......................................................................................................................... 101
Appendices ......................................................................................................................... 105
Conclusion générale ............................................................................................................ xiv
ix
Liste des tableaux
Table I
Intégration conceptuelle des trois articles………………………………………..... 3
Table II
The Logics of Strategizing within the MNE………………………….…………..... 27
Table III
Characteristics of Practices……………………………….……………………..………. 68
Table IV
Home Countries of the 203 EM-MNEs in the Sample……………………….. 105
Table V
Variables, Measures and Data Sources………………………………………........ 106
Table VI
Descriptive Statistics and Correlation Matrix………………………………….. 107
Table VII Statistics on Geographic Prevalence……………………………………………….. 107
Table VIII Results of Regression Analyses………………………………………………………. 108
x
Liste des figures
Figure 1
Liens logiques entre les trois articles……………………………………………… 2
Figure 2
The Three Dimensions of Global Strategy of the MNE……………………… 27
Figure 3
Tri-dimensional Transfer Flows of Practices with the MNE……………... 69
Figure 4
Moderating Effects of Experience on the Relationship Between
Economizing Logic and Geographic Prevalence in Host Regions…….. 109
xi
Liste des sigles et des abréviations
CEPII
CIP
DM
DM-MNE
DOI
EDI
EM
EMAC
EM-MNE
EU
FDI
FSA
GDP
GIP
GovInd
GP
HLM
HQ
ICC
LCD
LDC
LRJ
MNE
MSL
NAFTA
OLI
OS
RIP
RS
SEC1
SEC2
SEC3
UNCTAD
US
WHO
WTO
Centre d’études prospectives et d’informations internationales
Country integrated plan (practice)
Developed markets
Developed market multinational enterprise
Degree of internationalization of a multinational enterprise
Economic distance index
Emerging markets
Region including Europe, Middle East, Africa, and Canada
Emerging market multinational enterprise
European Union
Foreign direct investment
Firm-specific advantage
Gross domestic product
Global integrated plan (global variant of CIP)
Governance indicator
Geographic prevalence
Hierarchical linear modeling
Regional headquarters
Intra-class correlation coefficient
Least developed countries
Least-developed countries
Local research journal (practice)
Multinational enterprise
Market strategic leadership (practice)
North American Free Trade Agreement
Ownership-Location-Internalization framework (or "eclectic paradigm")
Originator subsidiary
Regional integrated plan (regional variant of CIP)
Recipient subsidiary
First secondary practice (functionally similar to CIP)
Second secondary practice (functionally similar to MSL)
Third secondary practice (functionally similar to LRJ)
Conference on Trade and Development
United States of America
World Health Organization
World Trade Organization
xii
Dédicace
A mon grand-père qui a initié la première organisation multinationale que j’ai connue :
Une famille globale qui s'étend désormais sur plusieurs continents.
A mes parents qui ont travaillé si durement et si obstinément
pour offrir à leurs enfants le meilleur cadeau qui soit : L’éducation.
xiii
Remerciements
Je n’aurais jamais pu finir cette thèse sans les encouragements et l’aide d’un certain
nombre de personnes. En premier lieu, je dois remercier mon directeur de recherche,
le professeur Louis Hébert, dont la rigueur scientifique et le souci de rendre ses
étudiants autonomes ont certainement façonné qui je suis devenu comme chercheurenseignant. Dr Hébert est l’un des rares directeurs de thèse que les étudiants soucieux
de forger leurs propres chemins scientifiques rêvent de rencontrer. Mes sincères
remerciements vont également aux membres de mon comité de thèse, le professeur
Taïeb Hafsi et le professeur Rick Molz, qui m’ont prodigué des conseils constructifs et
apporté le support moral pendant des moments de doute et d’incertitude qui
caractérisent tout parcours doctoral. Sans leur gentillesse légendaire et leur
générosité avec leurs temps si précieux, je n’aurais jamais pu finir ce travail. Je
voudrais également remercier les membres de ma chère famille – parents, frères et
sœur – qui ont toujours soutenu mon rêve de mener mes études universitaires à
terme. Incontestablement, aussi bien mes professeurs que mes étudiants m’ont appris
à relativiser l’importance de mes connaissances, à mesurer l’ampleur de ce qui nous
reste à tenter d’expliquer en tant que chercheurs, et à demeurer humble face à la
complexité du monde qui nous entoure. Enfin, je remercie l’équipe administrative de
la direction pédagogique du doctorat ainsi que mes collègues et chers amis doctorants
qui ont su rendre mon expérience montréalaise aussi agréable socialement
qu’enrichissante intellectuellement. Je ne tenterai pas de nommer toutes les
personnes qui ont contribué à la réalisation de ce rêve d’enfance par peur d’en oublier
quelques-unes. Alors, je dirais simplement à tous mes proches et à tous mes amis :
merci du fond du cœur !
Introduction générale
Cette thèse est composée de trois articles dont l’objectif commun est d’explorer les
logiques dominantes sous-jacentes aux activités de « stratégisation »1 au sein des
firmes multinationales. Comme chacun des papiers inclut sa propre introduction,
l’objectif de cette introduction générale est de répondre à la question suivante :
comment les trois articles s’intègrent-ils pour former un tout cohérent ? Pour
répondre à cette question, nous discutons tout d’abord les dimensions des activités de
stratégisation et les logiques associées. Ensuite, à la lumière de cette discussion, nous
expliquons comment les trois articles se complètent et s’intègrent sur les plans
théorique et méthodologique.
La stratégisation a été définie dans la littérature comme le processus de formation de
stratégie (Johnson, Melin et Whittington, 2003). Conceptuellement, Whittington
(2006) a suggéré que la stratégisation s’articule autour de trois éléments
interdépendants : les praticiens, les pratiques et la praxis. Les praticiens sont ceux qui
font la stratégie. Les pratiques réfèrent à comment ces derniers mobilisant des
routines et des processus pour former les stratégies. La praxis, quant à elle, désigne ce
que les praticiens font concrètement et en pratique. Dans cette thèse, nous examinons
les stratégies des multinationales comme quelque chose qu’elles font plutôt que
quelque chose qu'elles ont (Jarzabkowski, 2004). Dans les études empiriques, nous
mettons l'accent sur le contenu et le processus de stratégisation.
1 Faisant écho à l’anglicisme « strategizing », nous utilisons le terme « stratégisation » pour
designer l’ensemble des activités liées à la formation des stratégies au sein des organisations.
Par conséquent, la stratégisation consiste en une série d’actions et de décisions à
partir desquelles émergent des stratégies (Mintzberg et Waters, 1985). Il y a logique
de stratégisation quand ces actions et ces décisions suivent une tendance
comportementale constante au fil du temps. C’est pour cette raison que Bettis et
Prahalad (1995:2) ont associé le concept de « logique dominante » avec « stratégie
générique ». En nous appuyant sur les diverses conceptualisations de la stratégie
globale des firmes multinationales dans la littérature, nous suggérons que les
décideurs approchent les questions transfrontalières à travers trois lentilles
analytiques : économique, institutionnel et politique.
Le rôle du premier article est d’identifier les logiques primaires de stratégisation au
sein des firmes multinationales. En plus des contributions générales à la littérature
existante, cet article fournit un cadre analytique que nous utilisons pour structurer le
travail théorique et empirique dans les deux autres articles.
Article 2 Qualitatif
Logiques de
diffusion de pratiques
Article 1 Conceptuel
Logiques de
stratégisation
Article 3 Quantitatif
Logiques de
choix de locations
Figure 1 Liens logiques entre les trois articles
2
Les deux derniers articles peuvent être considérés comme des applications
empiriques du modèle proposé dans le premier article. Ils clarifient les conditions
contextuelles dans lesquelles une ou plusieurs des logiques identifiées dominent.
Article 1
(Logiques dominantes
de stratégisation)
Éléments de
stratégisation
Processus
Contenu
Logiques de stratégisation
Économique
Institutionnelle
Politique
Article 2 (Diffusion de pratiques)
Article 3 (Choix de locations)
Table I – Intégration conceptuelle des trois articles
Par soucis de parcimonie, nous n’avons pas inclus la logique politique dans le
troisième article. Par ailleurs, les deux articles empiriques sont complémentaires
étant donné que le premier concerne le processus de stratégisation (pratiques) alors
que le second traite du contenu des stratégies (praxis).
Références
Bettis, Richard A. et C. K. Prahalad (1995). « The Dominant Logic: Retrospective and
extension », Strategic Management Journal, vol. 16, no 1, p. 5-14.
Jarzabkowski, Paula (2004). « Strategy as Practice: Recursiveness, Adaptation, and
Practices-in-Use », Organization Studies, vol. 25, no 4, p. 529-560.
Johnson, Gerry, Leif Melin et Richard Whittington (2003). « Micro strategy and
strategizing: Towards an activity-based view », Journal of Management
Studies, vol. 40, no 1, p. 3.
Mintzberg, Henry et James A. Waters (1985). « Of Strategies, Deliberate and Emergent
», Strategic Management Journal, vol. 6, no 3, p. 257.
Whittington, Richard (2006). « Completing the practice turn in strategy research »,
Organization Studies, vol. 27, no 5, p. 613.
3
Chapter 1 – The Logics of Strategizing within Multinational
Enterprises: Economic Efficiency, Social Legitimacy, and Political
Power
Abstract
This conceptual paper examines the primary logics that shape strategy-making
activities within multinational enterprises (MNEs). We propose an analytical model
that clarifies and integrates the economic, institutional, and political dimensions of
global strategy. By doing so, we illustrate the increased explanatory power of the
underlying economizing, legitimizing, and politicizing logics as a complementary set
of analytical lenses. This manuscript makes several contributions to the extant
literature. In addition to the convenience of the proposed model in capturing the full
depth and breadth of strategy-making dynamics, a logic-based approach to the
analysis of the phenomenon allows for gaining more fine-grained insights into the
“black box” of strategizing activities. It also helps bridge the market and non-market
aspects of global strategy, which are generally viewed as distinct matters. While we
conveniently used the pluralistic settings of the multinational firm to unravel the
logics of strategizing, the proposed analytical framework can be used in various
organizational contexts.
Keywords
Competitive strategy, institutional strategy, political strategy, strategizing logic,
strategy-as-practice, corporate-subsidiary relationship.
1.1 Introduction
The study of the global strategies of Multinational Enterprises (MNEs) is a complex
and difficult task owing to the distributed disposition of their structures, the
pluralistic nature of their environments, and the versatility of strategy making as an
organizational phenomenon. While the term global implies some sort of consistency
across the organization, multinationality reflects the diversity of environments in
which MNEs – as integrated systems of local entities – operate. In line with the
contingency view of strategic management, strategies are expected to vary from one
country to another to ensure alignment with local requirements. In fact, Rumelt,
Schendel, & Teece (1994) suggested that one of the most fundamental questions that
students of strategic management must address is why strategies of firms vary across
geographic space. We suggest that the pluralistic setting of the MNE is highly suitable
for the exploration of such phenomena, especially in light of interactions between
global strategy and local contexts as they both evolve over time. We concur with
Ghemawat (2007) and assert that global strategy is not only a matter of a one-time
choice between scale economies and local responsiveness; it is also about ongoing
arbitrage of frequent conflicts that arise.
This paper explores the dynamics underlying strategy-making mechanisms with three
key assumptions in mind. First, strategy formation within MNEs is a multi-level
process where the dynamics between the head office and business units play an
instrumental role (e.g., Gupta & Govindarajan, 1984). Second, subsidiaries may engage
in proactive activities to shape the global strategies of their parents in order to
5
enhance their power of influence across the organization (Bouquet & Birkinshaw,
2008). Lastly, strategies in general can hardly be implemented as initially formulated.
Instead, the patterns of the strategies that are actually implemented emerge from the
streams of ongoing actions and decisions (Mintzberg & Waters, 1985). Building upon
these assumptions, our primary objective is to explore the fundamental logics
underlying the emergence of global strategies within MNEs.
To this end, we first discuss the concept of emergent strategy in the global context of
the MNE. Second, we explore the dimensions of global strategy from both corporate
and subsidiary perspectives. Then, we examine the primary logics underlying
strategy-making activities within the MNE. Finally, we highlight the contributions and
limitations of this paper before we conclude with possible avenues for future
research.
1.2 Studying Emergent Global Strategy within MNEs
The complexity of subsidiary corporate relationships, the variety of institutional
contexts in which affiliates are embedded, and the unpredictable nature of business
environments can only result in ongoing adjustments to the strategies of MNEs.
Consequently, a careful examination of how ongoing decisions and actions crystallize
into emergent global strategies within MNEs requires us to consider both temporal
and spatial dimensions of strategy-making activities.
6
1.2.1 The Time Dimension of Global Strategy
Formal strategies are instrumental managerial levers used by corporate leaders to
induce their business units towards particular patterns of organizational and market
behaviour. Nevertheless, such mechanisms have major limitations because the
bearing of deliberate strategies over time is subject to ongoing and unpredictable
evolutions in business environment (Eisenhardt & Brown, 1998; Mintzberg, 1987).
Indeed, formal strategies are never realized as originally planned (Mintzberg &
Waters, 1985) due to their very nature as an outcome of hypothetical forecasts and
educated guesses, at best. Subsequent to the formulation of intended strategies, some
elements may be omitted intentionally or implemented unsuccessfully (unrealized)
while some others could be added (emergent) in response to recent changes in
business environments. Thus, realized strategies are partly deliberate and partly
emergent. The strategies that are actually implemented are in fact a combination of
original strategic intents and a series of adjustments in the course of ongoing
managerial decisions and actions.
While the concept of emergent strategy is valuable in conceptualizing the nature of
strategy within a single business unit over time, it is not clear how it applies in the
pluralistic and distributed context of MNEs, especially in relation to the dynamics
underlying subsidiary corporate relationships. Indeed, the strategies of a head office
and its affiliates are not the results of two independent processes that evolve in
parallel over time or even a sequence of administrative routines by the virtue of which
subsidiary level strategies become “miniature replicas” (White & Poynter, 1984) of
corporate strategy. In fact, local and global strategies are logically interdependent and
7
technically entangled regardless of the nature and degree of integration between the
head office and its subsidiaries. Since global strategies emerge from streams of
ongoing decisions and actions (Mintzberg & Waters, 1985) and given that strategy
implementation takes place ultimately at the subsidiary level, global strategies may
not be completely insulated from the consequences of local managerial activities.
However, it is not clear from the extant literature how strategies emerge from ongoing
decisions and how actions crystallize into dominant logics over time.
1.2.2 The Space Dimension of Global Strategy
While time factor is the basis of Mintzberg's characterization of emergent strategy, the
spatial aspect of the phenomenon was only assumed in international management
research. We define the space dimension of global strategy as the focal organizational
level in which particular decisions are made and specific actions are taken with the
intention to influence an MNE’s strategy. For the purpose of this study, we identify
three conceptual levels of analysis: corporate, subsidiary, and the corporatesubsidiary relationship.
The corporate perspective assumes that the international organization of MNEs, and
thus their global strategies, evolves organically as they expand beyond their home
country. Stopford & Wells (1973), for instance, argue that MNEs undergo several
“international structural stages” as they diversify their products and markets. As a
result, their global strategies evolve along with the stages of their internationalization
process. Building upon Chandler’s (1962) work on strategy and structure and Venon’s
(1966) product cycle view of international investment and trade, Stopford & Wells
8
suggested that MNEs start with exports as their first means to enter a market and
ultimately implement global matrix structures as their organization reaches a higher
degree of complexity. Between the initial and final stages of this evolution, they may
set up global strategic business units or regional divisions depending on the extent of
their product diversification and on the proportion of international sales in the overall
turnover. Essentially, this perspective views subsidiary mandates as the key
materialization of global strategy at the local level. As such, head offices decide
subsidiary roles as a part of their global strategies implementation scheme.
The subsidiary perspective advocates that corporate strategies are essentially
collections of subsidiary mandates, which are essentially driven by local factors. In
this regard, Benito, Grogaard & Narula (2003) argued that the conditions of local
environments such as economic and regulatory policies are the real drivers behind
the scope of subsidiaries’ activities. Combined with locally developed competencies,
host country factors determine the global roles of subsidiaries. Accordingly, head
offices may only shape their global strategies by seeking to coordinate actions and
facilitate synergies among autonomous affiliates.
The corporate-subsidiary relationship perspective is based on two key assumptions.
On the one hand, headquarters must coordinate activities (Roth, 1992), integrate
value activities (Porter, 1986), and ensure knowledge sharing (Gupta & Govindarajan,
1994) across business units in order to achieve global efficiencies (Porter, 1986). On
the other hand, subsidiaries need to be responsive to local constraints and
expectations.
9
1.2.3 Strategizing within the MNE
One of the reasons why strategy formation is an elusive phenomenon is because
strategic thinking and action evolve constantly over time and space. While emergent
strategy is the culmination of ongoing decisions and actions (Mintzberg & Waters,
1985) in terms of content, strategizing is about the processes of strategy making
(Johnson, Melin, & Whittington, 2003) as strategies are made and remade
(Whittington, 2006). Indeed, strategy is something MNEs do rather than something
they have (Jarzabkowski, 2004), and there is a strategizing logic when those actions
and decisions show a consistent pattern over time. This is the reason why Bettis &
Prahalad (1995:2) associated the concept of “dominant logic” with “generic strategy”.
In this paper, we focus on three prevailing perspectives of global strategy, clarify the
associated rationalities, and discuss the underlying strategizing logics.
1.3 Three Tales of Global Strategy
In his work on the Cuban Missile Crisis, Allison (1971) masterfully illustrated the
interest of cross-analyzing complex phenomena through multiple lenses to enhance
the intelligibility and accuracy of their examination. In the same vein, we discuss
global strategy from three perspectives with reference to the multiple dualities that
characterize corporate-subsidiary relationships (Knoben & Oerlemans, 2006).
10
1.3.1 The Competitive Strategy Perspective
"Strategy is making trade-offs in competing […] Competitive strategy is about
being different. It means deliberately choosing a different set of activities to
deliver a unique mix of value." (Porter, 1996:3-4)
Competitive strategy is about attaining competitiveness through product-market
strategic positioning (Madhok, 1997:25). In the distributed context of the MNE,
competitiveness also entails effective configuration and efficient coordination of
activities globally (Porter, 1986). But, corporate efforts to achieve global synergies
may be hindered by ongoing conflicts between corporate economic imperatives,
which require global integration, and local political imperatives, which require
subsidiaries to be responsive to host country expectations (Doz, 1980). The critical
review of the existing literature shows that research on global strategy is intimately
associated with the integration-responsiveness dilemma and with the configuration of
subsidiary-parent relationships. Additionally, Ghoshal (1987:5) suggested that the
integration-responsiveness framework is essentially a “conceptual lens for visualizing
the cost advantages of global integration of certain tasks vis-à-vis the differentiation
benefits of responding to national differences in tastes, industry structures,
distribution systems, and government regulations.” Therefore, the corporate view of
global strategy is closely associated with competitive strategy.
Such conception of global strategy implies that economic efficiency is the primary
driving force behind strategy making. While the head office may assign a global role to
a subsidiary for economic reasons, organizations are also known to adopt structures,
11
procedures, or ideas for legitimacy rather than economic motives (Meyer & Rowan,
1977). Furthermore, subsidiaries must not be viewed as passive actors who
implement corporate decisions without challenging them. In fact, they may even
engage in entrepreneurial actions aimed at gaining or getting rid of a global mandate
(Birkinshaw, 1996) and thus influence the global strategy of their parents (Jarillo &
Martinez, 1990). We contend that while, on the one hand, headquarters focus on
economic efficiencies to justify their very existence through coordinated synergies
and economies of scale, on the other hand, subsidiaries exploit institutional
discrepancies between their host and home countries to justify their distinctiveness
and enhance their autonomy from the head office. In line with Lawrence’s (1999)
suggestions about the institutional strategies of firms to shape institutional structures,
we explore how the subsidiary level institutional strategies may help shed some light
on the evolution of global strategies over time and space.
1.3.2 The Institutional Strategy Perspective
"The concept of 'institutional strategy' describe[s] patterns of organizational
action that are directed toward managing the institutional structures within
which firms compete for resources, either through the reproduction or
transformation of those structures." (Lawrence, 1999:1)
MNEs are “plurality of systems” where both intended actions and unintended
consequences of social action shape institutional structures (Melin, 1992). In this
sense, they are meta-institutions (Hedlund, 1986) that create, shape, and undo
internal institutional arrangements while dealing with both internal and external
12
institutional actors. Some institutional elements have always been present in
international business studies (Dunning & Lundan, 2008), and competitive strategy
acknowledges the importance of institutional contingencies in general. However,
institutional strategies go beyond the recognition of the fact that organizations are not
just a bunch of resources and economic ratios (Scott, 2008); they imply that
organizational actors take proactive actions to manage institutional structures based
not only on the nature of institutional settings but also on the type of resources that
are available to them (Lawrence, 1999). The characteristics of resources are of
paramount importance because institutional strategies and competitive strategies
require different sets of capabilities in that “institutional strategy demands the ability
to articulate, sponsor and defend particular practices and organizational forms as
legitimate or desirable, rather than the ability to enact already legitimated
practices or leverage existing social rules…” (Lawrence, 1999:3).
Local competitive strategies are intimately shaped by the nature of subsidiary
mandates as granted by headquarters. In addition, subsidiaries deal with non-market
actors who may influence – directly or indirectly – market institutional structures. The
proactive actions taken by subsidiaries to shape internal arrangements and norms
(organizational structure, subsidiary mandate…) and external institutional settings
(market and non-market institutions…) are all part of their institutional strategies.
Unlike competitive strategies which are essentially driven by economic efficiency to
maximize performance, institutional strategies are guided by legitimacy needs to
secure organizational survival (Meyer & Rowan, 1977). In fact, legitimacy is a more
useful lever of influence than economic arguments or hierarchical power when it
13
comes to the positioning of subsidiaries within the internal markets of MNEs
(Birkinshaw, 1997).
The competitive and institutional components of global strategy are both
complementary and conflicting. In particular, competitive strategy is essentially
driven by corporate impetus while institutional strategy reflects subsidiary
distinctiveness. This is important because the content of strategic decisions emerges
from internal dynamics (Narayanan & Fahey, 1982) including conflicts that arise from
struggles for organizational power and control (Mudambi, 2011a). The arbitration of
such local-global tensions and the reconciliation of goal-obstacle conflicts (Avakian,
1999) involves significant political work and influence.
1.3.3 The Political Strategy Perspective
"The political context for viewing strategy is useful not only because it
exposes the docility in conventional management concepts of strategy, but
because it elucidates the behaviors that are most effective in the goalobstacle conflict that is at the heart of strategy." (Avakian, 1999:7)
Organizations are political entities with coalitions of interests (Mintzberg, 1985) so
the full appreciation of their strategies requires us to understand their organizational
politics (Pfeffer, 1992). Multinational firms, in particular, are “political structures”
whose role is to “organize employees, customers, suppliers, consultants, brokers,
counsellors, etc.” (Forsgren, 2008:140) in order to achieve specific objectives. Their
political actions cross over organizational boundaries and involve both internal and
external stakeholders. As independent organizations, MNEs are in the political arena
14
(Djelic & Quack, 2003) where political games take place (Anand, Gardner, & Morris,
2007). As a part of a broader ecosystem, they may be powerful political actors as they
engage in political influence processes (Aplin & Hegarty, 1980) to both respond to
external pressures (Murtha & Lenway, 1994) and promote their own goals by shaping
their political environment (Avakian, 1999; Capron & Chatain, 2008). To achieve these
objectives, they adopt proactive, defensive, anticipatory, or reactive political strategies
(Oliver & Holzinger, 2008a), or a combination of several asymmetric strategies
(Bonardi, 2004:3) for that matter. Indeed, the political dimension of global strategy
has evolved from the status of contingencies to be taken into account when
competitive strategies are being formulated (Doz, 1980; Ghoshal & Nohria, 1993) into
an opportunity set that can be leveraged by strategic leadership (2008b).
In general terms, political strategy is defined as "activities taken by organizations to
acquire, develop and use power to obtain an advantage (a particular allocation of
resources) in a situation of conflict” (Mahon, 1993:196, as cited by Capron & Chatain,
2008). It has also been rightly called “influence strategy” (Birnbaum, 1985:1) because
politics is all about “inducement and getting people to do what they were otherwise
not inclined to do through the exertion of influence” (Avakian, 1999:1).
Given the deterministic nature of the economic rationality employed by headquarters
and the formal power granted by organizational structures to corporate leadership,
local managers may have no other option but to try political influence by using
legitimating arguments and local institutional specificity to promote subsidiary
agendas. Political tensions, including those related to strategizing activities, are
particularly present within MNEs due in part to the divergence of corporate and
15
subsidiaries’ interests and to the diversity of host environments in which affiliates are
embedded.
-----------------------------------Insert Figure 2 about here.
-----------------------------------In the pluralistic context of the MNE, political action has both internal-external and
vertical-lateral dimensions (Farrell & Petersen, 1982). On the one hand, MNEs develop
political strategies to shape their external political environment (Capron & Chatain,
2008) by the means of influences that are not achievable by the pure market pursuit
of objectives to maximize economic returns (Oliver & Holzinger, 2008a). In so doing,
firms employ both offensive and defensive political strategies (Bonardi, 2004)
depending on firm characteristics, institutional factors, and levels of participation in
the public policy-making process (Hillman, Zardkoohi, & Bierman, 1999). They may be
initiated at the corporate level or by subsidiaries on behalf of their parents
(Blumentritt & Rehbein, 2008; Blumentritt, 2003). On the other hand, subsidiaries
may also engage in micro-politics, especially during strategizing activities (Narayanan
& Fahey, 1982), in an attempt to attract corporate attention (Bouquet, 2005; Bouquet
& Birkinshaw, 2008) and gain organizational power (Bower & Gilbert, 2007). The
dependency of subsidiaries on corporate resources (Pfeffer, 1981) and the proactive
efforts of subsidiaries to gain autonomy and global mandates (Birkinshaw, 1996;
Delany, 2000; Moore, 2001) are examples of the reasons why power games are
intrinsic to the management of MNEs from a subsidiary perspective (Dörrenbächer &
Geppert, 2011).
16
In short, an MNE's global strategy may be analyzed from three perspectives –
competitive, institutional, and political – each of which mobilizes a distinct rationality
(Table II). Thanks to their complementarity, they enhance the explanation power of
each other when they are integrated to analyze the logics underlying strategizing
activities within the MNE.
1.4 The Logics of Strategizing within Multinationals
Competitive strategy is about making trade-offs to deliver a unique mix of value to
customers (Madhok, 1997; Porter, 1996). By focusing on economic efficiency,
competitive strategy follows economizing logic. In addition to its position in the outer
competitive market (Porter, 1980), the MNE can be conceptualized as an internal
market (Birkinshaw, 1998) where hierarchies play a major role in the profit
maximization process. While he suggested that strategy making is no more than
economizing, Williamson (1991) also recognized that firms sometimes use
strategizing tactics to influence economizing outcomes (Madhok, 1997). This implies
that strategizing is about more than just economizing. In fact, strategy-as-practice
scholars conceptualize strategy making as a socially accomplished activity
(Jarzabkowski, Balogun, & Seidl, 2007).
Unlike economizing logic which is associated with profit maximization, legitimizing
logic seeks to establish social legitimacy that is instrumental to the very survival of
organizations (Scott, 2008). This is why firms develop strategies to ensure compliance
with external institutional requirements (Oliver, 1991) or undertake more proactive
institutional work (Lawrence & Suddaby, 2006) to shape market institutions to their
17
advantage (Williamson, 1985). MNEs manage to mitigate economic contingences
while increasing institutional legitimacy through "strategizing ploys" (Williamson,
1991). By doing so, they integrate market and non-market considerations into
strategizing activities (Hillman & Hitt, 1999) and bridge the gap between market and
social institutions. Interactions between the firm and its market environment are
governed by market or private agreements whereas the public, stakeholders,
government, the media and other public institutions are the main intermediaries in
non-market settings (Hillman & Hitt, 1999).
-----------------------------------Insert Table II about here.
------------------------------------
While some scholars (e.g., Peng, 2002) made a plausible case for complementarity
between economic and institutional views of global strategy in recent years, the
political dimension is still largely assumed, ignored, or treated as an aberration in
strategic management literature (Mudambi, 2011b). One may confound, for instance,
institutional work (Lawrence & Suddaby, 2006) with political action, but the
underlying logics are clearly distinct and the scope of political work goes beyond
shaping institutions. Politicizing activities reach out to stakeholders in the wider
community, both within and outside the organization. Contrasting with economizing
and legitimizing logics, the politicizing logic underlying micro-politics within the MNE
focuses more "on how things really work rather than on how they should work"
(Avakian, 1999:1). In addition, Mudambi (2011b) suggested that political tensions
arise from agency relationships within the MNE, on the one hand, and from resource
dependency between business units and the external environment, on the other hand.
18
Therefore, political games are closely linked to legitimacy seeking (Weber, 1968) and
competition for strategic resource acquisition (Mudambi, 2011b). In terms of resource
acquisition, firms compete in two types of markets – factor markets and political
markets (Capron & Chatain, 2008). In addition to factor markets, where they acquire
ready-for-use resources, firms manoeuvre in political markets to induce policymakers to produce policies that serve their economic interests (Keim & Zeithaml,
1986). This substantiates complementarity between economizing and legitimizing
logics as well as it asserts the role of political dynamics, and of politicizing logic, in
bridging the gap between efficiency and legitimacy rationalities. Clearly, the political
dimension of strategizing activities deserves specific attention at least for the reason
that "people sometimes manipulate the behaviour of others to accomplish their goals"
(Avakian, 1999:1).
As shown in Table II, each of the identified dimensions of global strategy mobilizes a
distinctive logic that is rooted in a different rationality. The question is not whether
they are complementary and reinforce the explanatory power of each other, but
rather how they interact and when one may prevail over the others.
1.5 Conclusion
This paper focuses on exploring the fundamental logics underlying global strategizing
activities within the MNE. We suggest that global strategy is better understood when
it is analyzed from three distinct and complementary perspectives: economic,
institutional and political. These strategic dimensions reflect the conflicting yet
legitimate logics and rationalities that are being mobilized by the head office and
19
subsidiaries while arbitrating global contingences and local preferences. We argue
that these logics must be considered both individually and jointly in order to fully
understand how strategies emerge in the pluralistic context of the MNE.
This manuscript makes several contributions to strategic management, international
business, and organizational theories literature. First, we proposed a conceptual
model that combines economic efficiency, social legitimacy, and political power
rationalities in an integrated set of lenses to analyze how strategies come about within
MNEs. Such frameworks proved to be handy in capturing the full depth and breadth of
the phenomenon and, thus, in assessing strategy contents and processes in a
systematic and comprehensive way. Second, building upon the premises of the above
model, we introduced a logic-based view of strategic analysis within organizations.
Strategy-as-practice scholars suggested that strategizing activities are conceptually at
the intersection of practices, practitioners, and praxis (Jarzabkowski et al., 2007). We
suggest that a close analysis of the logics that drive such activities would be helpful in
gaining additional insights into the “black box” of strategizing activities. While each of
the primary logics – economizing, legitimizing, and politicizing – may be associated
with one of the dimensions of global strategy, we argue that the way they interact
over time and space is a defining attribute of strategizing activity. This is in fact
instrumental to their conceptual integration and analytical complementarity. Another
contribution of this paper resides in the fact that the proposed model and underlying
logics help bridge market and non-market strategies, which are generally viewed as
distinct matters (Hillman & Hitt, 1999). Finally, while we conveniently used the
pluralistic settings of the multinational firm to unravel the logics of strategizing, our
20
findings are highly transposable to other organizational contexts. Additionally,
Prahalad & Bettis’ (1986) work on strategic dominant logics showed that the patterns
or logics of decision making may be identified at both the individual and group levels.
We expect the students of strategic management to find the conceptual division of
global strategy into three complementary dimensions (Figure 2) helpful in
operationalizing future studies. They may use the triplet of strategizing logics we
identified as analytical lenses to explore other organizational phenomena. Finally, the
use of dominant logics (Prahalad & Bettis, 1986) in the study of strategizing activities
provides scholars with a practical conceptual tool to bridge multiple levels of analysis.
Future studies of strategy-making phenomena are likely to benefit from adopting a
logic-based approach to study, for instance, interactions among the components of the
conventional strategy-as-practice framework – that is, practices, practitioners, and
praxis (Whittington, 2006).
The model should also be appealing to practitioners of management. Decision makers
are naturally receptive to integrated frameworks that enhance conceptual clarity,
simplify managerial intricacies, and help make sense of complex situations.
Furthermore, the prevalence of certain dominant logics in particular contexts,
especially economizing logic at the corporate level and legitimizing logic at the
subsidiary level, should attract the attention of managers to the special arbitration
role of politics in pluralistic settings such as the MNE, where stakeholders have
competing yet legitimate interests.
21
We suggest that future studies should explore how micro-politics affect the selective
mobilization of economizing and legitimizing arguments during strategizing activities.
The tension between economizing and legitimizing rationalities may also be further
investigated with particular focus on the mechanisms used by subsidiaries to
influence their parents. If economizing logic predominates at the corporate level and
legitimizing logic is essentially local in nature then politicizing logic might well be a
conceptual bridge between the two. One may view politicizing work as a
reconciliation mechanism between local institutional strategy and corporate
competitive strategy. Another aspect of strategizing activities that deserves particular
attention is related to how the underlying logics evolve through time and across
geography. In line with the ongoing debate on the global-regional nature of
international strategy, it would be of particular interest to explore the evolution of
strategizing logics from a regional perspective. Finally, strategy researchers have
discussed the interaction between strategy content and process in the past. It would
be helpful to explore the emergence of strategizing logics from a content-process
dichotomy perspective. The investigation of how strategizing practices and praxis
shape strategy contents would be useful in completing the practice turns in strategy
research (Whittington, 2006).
22
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26
Appendices
Figure 2 – The Three Dimensions of Global Strategy of the MNE
Table II – The Logics of Strategizing within the MNE
Strategic
Dimension
Strategizing logic
Competitive
Strategy
Economizing
Rationality of
Efficiency
action
Disciplinary anchor Economics
Institutional
Strategy
Legitimizing
Political
Strategy
Politicizing
Legitimacy
Influence
Sociology
Politics
Context shaping
Conflict
Key motivation
Profit maximization
Basis of interaction
Exchange
Organizational
survival
Conformity
Organizational
view
Sample work
Market
Community
Arena
Porter (1996)
Lawrence (1999)
Avakian (1999)
Strategic level
Global (macro)
Local (micro)
Local-Global (mezzo)
Market orientation
Market strategy
Both market strategy
(formal institutions)
and nonmarket
strategy (informal
institutions)
Nonmarket strategy
27
Chapter 2 – Successful Diffusion of Local Strategic Practices within
Multinational Enterprises: An Exploratory Study of Organizational
and Institutional Factors in a Regional Context2
Abstract
In this exploratory qualitative study, we examine how subsidiary-level strategic
practices diffuse to sister organizational units within multinational enterprises
(MNEs). We use a case-based approach to investigate the diffusion of multiple
strategic practices developed by the Canadian subsidiary of a large MNE with
particular interest in the regional dimension of the phenomenon. The results of our
fine-grained analysis of data make several contributions. Firstly, the study sheds
some light on bottom-up and peer-to-peer transfers of practices. Secondly, it unravels
the three-pillar model of isomorphism as autonomous forces and establishes the
empirical link between isomorphism and practice diffusion. Thirdly, it fosters the
current debates on the regional nature of international strategy from a practice
transfer perspective. Finally, we submit five propositions for future empirical testing.
All these findings have important theoretical and practical implications.
Keywords
Practice diffusion, organizational isomorphism, regional strategy, organizational
region, geographic region.
This paper has benefited from comments from attendees of competitive sessions at the
Academy of Management (2010) and Strategic Management Society (2011) meetings.
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2.1 Introduction
In this empirical paper we investigate how intra-organizational isomorphic forces
foster the successful diffusion of practices from a subsidiary to its peers within the
same multinational enterprise (MNE). Practice transfers are widely associated with
the efficiency and performance of MNEs (Kostova, 1999) because the diffusion of
routines and best practices are generally regarded as critical to the ability of an
organization to develop sustainable competitive advantages (Bartlett & Ghoshal,
1987).
We focus our investigation on subsidiary-level strategic practices with particular
interest in the regional dimension of transfer mechanisms. Strategic practices have
been defined by Kostova (1999:3) as those “believed to be of strategic importance for
the firm—believed to reflect the core competencies of the firm and to provide a
distinct source of competitive advantage that differentiates the firm from its
competitors.” We concur with the spirit of this characterization and define local
strategic practices as tools and processes specifically developed by subsidiaries to
formulate or implement local strategic objectives.
The extant literature on the diffusion of such practices spans a wide range of
perspectives. While comprehensive reviews on literature on knowledge transfer are
provided elsewhere (e.g., Argote, McEvily, & Reagans, 2003; Minbaeva, 2007), two
important observations are of relevance to our study. The first is related to the
external environment of the MNE and the second to its internal dynamics.
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On the one hand, the pluralistic nature of the MNE makes it an interesting laboratory
for the study of practice transfers. Practices carry institutional imprints in them, so
similarities and differences between originator and recipient subsidiaries are
instrumental to a successful transfer (Kostova, 1996). This is why a high institutional
distance between the country of origin and the country of destination may hinder
their successful transfer (Kostova & Roth, 2002). Since relative institutional proximity
has been widely assumed within geographic regions (e.g., Arregle, Beamish, & Hébert,
2009; Rugman, 2005), practice transfer between countries that belong to the same
geographic region are likely to succeed. Unlike other management phenomena such as
the geographic aggregation of a firm’s economic activity (Rugman & Dossett, 2005),
intra-organizational diffusion of practices has not been explored from a regional
perspective.
On the other hand, the motivations underlying top-down transfers of strategic
practices within organizations are essentially driven by economic efficiency logic. That
is, headquarters deploy tools and processes across the company with the primary
intention of facilitating cross-organizational synergies and creating firm-specific
competitive advantages (Kostova, 1999). From an inter-firm perspective, subsidiaries
of foreign firms tend to mimic local competitors as a means of overcoming their
liability of foreignness when they are faced with significant uncertainty in a host
country (Zaheer, 1995). While mimesis is essential to practice diffusion including
within the firm, we contend that using a full set of isomorphic pressures that also
accounts for normative and coercive forces (DiMaggio & Powell, 1983) will help
advance our understanding of the multi-dimensional diffusion mechanisms within the
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MNE. Studying isomorphic forces with the MNE network is relevant because
isomorphism is rooted in institutional fields (Glynn & Abzug, 2002) and the MNE itself
has been conceptualized as an institutional field formed of its subunits (Kostova &
Zaheer, 1999; Rosenzweig & Singh, 1991; Xu & Shenkar, 2002).
Accordingly, the central objective of this study is to unravel the isomorphic dynamics
underlying the successful transfer of local strategic practices with particular interest
in their regional dimension. To this end, we first review some fundamental concepts
relevant to the multi-dimensional diffusion of local practices within MNEs. Then, we
describe the research site, empirical design, and strategies for data collection and
analysis. Next, we discuss the results and put forward several propositions that can be
tested empirically. Finally, we discuss the implications and limitations of our
contributions before we suggest possible avenues for future research.
2.2 Intra-MNE Isomorphism and the Diffusion of Local
Practices
This study is concerned with intra-organizational flows of strategic practices from a
subsidiary perspective. We view the MNE in three different ways. First, we
conceptualize it as an interconnected network (Ghoshal & Bartlett, 1990) of
transnational social spaces (Morgan, 2011). Second, we conceptualize it as an internal
market (Birkinshaw, 1997) where affiliates engage in cross-border economic
transactions. Finally, we view it as a political arena (Djelic & Quack, 2003) in which
subsidiaries endeavour to attract corporate attention (Bouquet & Birkinshaw, 2008)
and strive to gain global mandates (Birkinshaw, 1996). Thanks to the mobilization of
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the analytical lenses that are associated with the three conceptualizations—namely
institutional, economic, and political—we are able to gain a deeper understanding of
the multidimensional phenomenon of practice diffusion within MNEs (Allison, 1971).
2.2.1 Multidimensional Nature of Practice Diffusion within Multinationals
International management literature has traditionally emphasized the central role of
the head office with regard to the dissemination of practices within its network of
subsidiaries. The key premise is that corporate leadership needs to coordinate actions
(Roth, 1992), integrate value-creating activities (Porter, 1986), and foster knowledge
sharing (Gupta & Govindarajan, 1994) in order to achieve global synergies across
business units (Porter, 1986).
Strategic organizational practices in particular constitute a subset of knowledge assets
that are valuable for dissemination across the organization (Nelson & Winter, 1982;
Szulanski, Jensen, & Lee, 2003). Their diffusion is generally associated with top-down
flows, which are typically monitored by head office. The dynamics underlying such
flows are unique in that head offices often take advantage of the power of formal
structures and control of resources to thrust the global deployment of practices such
as quality management (e.g., Kostova, 1996). Nevertheless, the structural power that
is associated with the hierarchical MNE (Hedlund, 1986) does not necessarily lead to
the actual adoption of practices by subsidiaries. In reality, business units may pretend
to comply with corporate requirements while ignoring them or even acting against
them (Meyer & Rowan, 1977). That is why other organizational and relational
elements are instrumental to the success of top-down transfers (Kostova, 1999).
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While factors such as commitment, identity and trust take into account both local and
global dimensions of corporate subsidiary relationships, they essentially consider
subsidiaries as recipients in a cascading process.
The factors identified above as drivers of practice diffusion may not be relevant to – or
at least apply differently in – situations where subsidiaries are not recipients but
originators of such practices. When the MNE is viewed as a hierarchical system, the
successful diffusion of practices involves significant political power. This is because
the degree of a subsidiary’s compliance with corporate pressures may have critical
consequences, especially in terms of resource acquisition (Anand, Gardner, & Morris,
2007). Additionally, power tensions are structurally unbalanced between the head
office of an MNE and its affiliates. As a result, corporate-subsidiary tensions may not
be experienced or perceived in the same way from the two sides of the relationship.
Therefore, the success of direct transfers between originator and recipient
subsidiaries is also dependent upon their respective weights within the MNE network
(Bouquet & Birkinshaw, 2008).
The relative importance of a subsidiary’s role in practice diffusion is particularly
evident when the MNE is viewed as an internal market (Birkinshaw, 1997) within
which subsidiaries import and export organizational practices (Birkinshaw, 1999;
Zaheer, 1995). When there is no involvement of the head office in intra-organizational
transfers, subsidiaries mobilize more persuasive means than structural power to
export their practices to their peers.
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In addition to the political power of organizational structures and to the economic
efficiency incentives of internal markets, subsidiaries may rely on legitimizing
arguments and leverage the loosely coupled nature of organizational networks
(Ghoshal & Bartlett, 1990) to diffuse their practices. Indeed, MNEs are “social
communities that specialize in the creation and internal transfer of knowledge”
(Kogut & Zander, 2003:1) and informal structures may constitute powerful
substitutes to hierarchies as a source of organizational power.
Head office does not need to be involved in all practice transfers; only specific
circumstances may call for corporate impetus to ensure fast diffusion and crossorganizational consistency and efficiency.
------------------------------------Insert Figure 3 about here.
------------------------------------Figure 3 illustrates how practices diffuse within MNEs following three directions:
bottom-up, top-down, and lateral. In line with the Scandinavian institutionalism
literature, we use the term practice borrowing when direct transfers take place
between originator and recipient subsidiaries. Diffusion may also occur through a
corporate head office in two steps. First, there will be a bottom-up practice escalation
from the original subsidiary to the head office whose role becomes the facilitation of
transfers. Then, the head office will cascade the practice to subsidiaries following a
top-down deployment approach. The existing literature on practice diffusion has
essentially assumed the head office to be the originator of practices without paying
much attention to where they were actually created in the first place. This study
attends to the three dimensions of diffusion, but focuses primarily on the roles of
subsidiaries as originators and recipients. The role of the head office may be
34
restrained to some sort of process facilitation. The distinction is essential because the
motivations and arguments of head offices may differ depending on whether they act
as originator or intermediary.
The examination of intra-organizational mechanisms requires a more fine-grained
analysis of micro-institutional dynamics than the country-level factors such as
institutional distance that are generally used to explain the diffusion phenomenon
(Kostova & Roth, 2002). In particular, we know very little about the relationship
between institutional isomorphism and practice diffusion (Boxenbaum & Jonsson,
2008), including within the MNE.
2.2.2 Institutional Perspective of Practice Diffusion within Multinationals
MNEs are meta-organizations with deep roots in multiple and often dissimilar
institutional contexts. Hence, they represent complex inter-institutional systems
(Thornton & Ocasio, 2008) where competing institutional logics shape the strategic
choices of decision makers (Peng, 2002). For at least this reason, the explicit
distinction between institutional effects and other factors is likely to be useful
(Dunning & Lundan, 2008) to the understanding of socially embedded phenomena
such as practice transfers.
The diffusion of practices is typically associated with institutionalization processes
because their internalization does not occur in a social vacuum (Kostova, 1999).
Institutions themselves have been defined as widely diffused practices (Lawrence,
Hardy, & Phillips, 2002) and institutional factors play a critical role in the successful
diffusion of practices within the MNE. For instance, Kostova & Roth (2002) suggested
35
that low institutional distances between the home and host countries of foreign
subsidiaries foster the adoption of corporate practices. This is due essentially to the
fact that institutional proximity leads to normative integration (Ghoshal & Bartlett,
1988) and consequently to efficient cross-organizational transfers (Birkinshaw, 1997;
Kostova, 1999).
Additionally, foreign subsidiaries tend to mitigate their liability of foreignness
(Zaheer, 1995) by imitating the practices of local firms (e.g., Rosenzweig & Singh,
1991) especially when they venture into unfamiliar institutional contexts. What is not
clear, however, is whether such behaviour is replicated by peer subsidiaries within an
MNE Network. This study strives to fill in this gap by considering the full spectrum of
isomorphic dynamics – including mimetic, normative, and coercive pressures
(DiMaggio & Powell, 1983) – while analyzing the diffusion mechanism. By doing so,
we give the causal relationship between isomorphism and diffusion the full attention
it deserves and yet has never received in the past (Boxenbaum & Jonsson, 2008). By
examining how proto-institutions (Lawrence et al., 2002) like strategic practices
emerge and diffuse across the MNE, we can appreciate how stakeholders advance
their respective agendas through the promotion, endorsement, adoption, and
institutionalization of strategizing routines and tools.
Lastly, several recent empirical findings suggest that organizational phenomena may
be guided by regional logics (e.g., Arregle et al., 2009; Nachum & Song, 2011). As a
result, key drivers of market behaviour such as liabilities and competitive advantages
seem to have at least a regional dimension to them. Since institutional proximity is key
to practice transferability (Kostova & Roth, 2002) and geographic regions are often
36
assumed to be relatively homogeneous from an institutional perspective (Arregle et
al., 2009; Rugman, 2003), practice transfers within geographic regions are more likely
to occur and succeed. Accordingly, it would be helpful to examine such premises in
light of actual empirical situations.
More specifically, this study aims to answer two main questions: How do intraorganizational isomorphic forces foster the diffusion of local strategic practices from a
subsidiary to another within the same MNE? And, do the region of origin and/or the
region of destination matter to the successful transfer of such practices?
2.3 Research Methods
In this qualitative study we contrast and compare the evolution of several strategic
practices within the same MNE. In line with the above research questions, we use local
strategic practices as our primary unit of analysis. The choice of strategic practices
was driven by two primary reasons. First, senior managers suggested during the
exploratory phase of this study that such practices represent a major lever that
subsidiaries use to influence the global strategies of their parents. Typically, local
strategic practices include activities, processes, and tools used by subsidiaries to form
and execute local strategies. Second, strategic practices are found to be convenient for
investigation because they are most “likely to be formalized at some point so that they
can be diffused more easily in the organization” (Kostova, 1999:3). In particular,
associated archival data are rich enough for fine-grained ex-post analysis.
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2.3.1 Research Setting and Design
The empirical investigation took place in Healthcare Canada3, the Canadian subsidiary
of a global pharmaceutical company. The setting is particularly suitable for the study
of strategic practices from a subsidiary perspective for several reasons.
First, Healthcare Inc. is a large MNE that is present in over 100 countries. Subsidiaries
are clustered into regions based on a mix of geographic, economic, institutional, and
political consideration. The Canadian subsidiary belonged to the EMAC (Europe,
Middle East, Africa, and Canada) region while the US market is so large that the
country was considered as a full region by itself. This is important because the
diffusion of practices may involve political games (Anand et al., 2007) and they are
more balanced when they take place among equals.
Second, the industry is equally attractive to the study of intra-organizational
phenomena because sales and research functions are of equal importance in researchdriven pharmaceuticals. Sales generate the much-needed cash to invest in research
and development while research outcomes feed product pipelines and hence lead to
sales. Canada is considered to be a strategic market and the subsidiary has important
sales and research mandates within its region. Accordingly, it must be both globally
integrated and locally responsive, and hence have a fairly balanced relationship with
headquarters. Research activities are highly specialized, capital intensive, and require
global arbitrage. Conversely, sales drivers are essentially local because the industry is
We have disguised the actual names of the firm, informants, and practices to preserve
confidentiality. The following pseudonyms are used: Healthcare Local (HCL) for the Canadian
subsidiary, Healthcare Regional (HCR) for the regional head office, and Healthcare Global
(HCG) for corporate head office.
3
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highly regulated by local governments. That is the reason why research functions are
generally integrated and sales operations commonly decentralized within researchdriven firms in the pharmaceutical industry.
Finally, the strategic practices we investigated in this study have all been transferred
successfully from the Canadian subsidiary to other subsidiaries of Healthcare Inc. We
focus on the medical affairs department because it is a key service provider to both
sales and research functions. This is important because the practices developed by
this department are at the crossroad of diverse organizational flows and political
games. As illustrated in Table III, we privileged diversity over homogeneity in
sampling to develop theories that are deeply rooted in fine-grained data (Harris &
Sutton, 1986; Santos & Eisenhardt, 2009). Accordingly, we developed multiple cases
to generate well-grounded theories that may not be otherwise deduced from extant
theories alone. By focusing on a single organization, we mitigate the risk of
confounding the effects of organizational characteristics (Lawrence et al., 2002).
Specifically, we adopted an abductive approach (Dubois & Gadde, 2002; Yin, 2003)
and thus alternate inductive and deductive logics to collect information, analyze data,
and generate theory. Accordingly, we used a loose framework to guide our entry to
the empirical world (Miles & Huberman, 1994) while increasing the analytical
generalizability (Yin, 2003) of resulting theories. This design is particularly suitable
for the study of the phenomenon at hand because existing theory is developed enough
to help us structure our investigative approach while taking advantage of the richness
of available data without being over-constrained by our presuppositions. Indeed,
theoretical frameworks are found to be useful as general conceptual guidelines for
39
case studies as far as they allow the investigator to preserve the richness of the data
collected and stay open to the emergence of counterintuitive findings (Miles &
Huberman, 1994; Yin, 2003).
2.3.2 Sampling Strategy
The sampling strategy is purposeful and theoretical (Pratt, 2009). We used a mix of
literal and theoretical replication design (Yin, 2003) to generate theory that is
grounded both conceptually and empirically. Literal replication helps explain the
conditions under which practice transfers occur between originator and recipient
subsidiaries while theoretical replication is meant to vet the conditions under which
such transfers may not take place. For literal replication, we conducted an in-depth
analysis of the processes leading to the transfer to three primary practices. We used
them, along with existing theories, to shape our preliminary propositions and finetune the conceptual model as theory emerged from the data. The primary practices
were created by three different individuals within the Canadian medical affairs team.
They were all successfully adopted by foreign subsidiaries yet followed different
organizational paths during their respective diffusions. The purpose of this literal
replication is to analyze variations rather than compare the three instances with one
another. The fact that these practices are not independent and take place in the same
organizational setting increases their individual contributions to the understanding of
the phenomenon (Anand et al., 2007).
Once we derived a robust theoretical framework and the associated propositions from
the initial three cases, we used a supplementary set of three confirmatory practices
for theoretical replication in order to corroborate these findings. It is expected that
40
the theoretical replication produces different yet predictable results (Yin, 2003) in
line with the theory that results from the initial literal replication. Confirmatory
practices have been suggested by our informants as potentially transferable across
the organization but did not actually diffuse as expected. While the study of multiple
incidents does not pretend any statistical validation, it is important to understand the
reasons for both successes and failures to reinforce the credibility of the findings.
Finally, the selected number of six cases is appropriate for our study since we
investigate processes that bridge multiple organizational levels within the same
organization (e.g., Burgelman, 1983; Eisenhardt, 1989). In addition, the use of three
primary practices for literal replication to develop theory and three others for
theoretical replication to probe the initial findings is consistent with qualitative
replication strategies that use multi-case design (Yin, 2003). Finally, the
characteristics of the cases used for theoretical replication evolved as the study
progressed due to the purposeful and theoretical nature of our sampling strategy
(Pratt, 2009).
2.3.3 Data Collection
The depth and extent of the data collected varied throughout the implementation of
our research strategy. Essentially, the study went through three phases, which
allowed for the incremental examination of the travel paths, organizational reaches,
and isomorphic dynamics underlying the transfers of individual practices from the
Canadian subsidiary to sister organizational units.
41
First, during the exploratory phase, we had access to the research field with no
specific organizational phenomenon to be studied in mind except for a general
interest in the means by which subsidiaries influence the global strategies of their
parents. We conducted 20 interviews of 80 to 120 minutes each with diverse
respondents within and outside of the focal team. The objective was to identify
organizational phenomena worth investigating while keeping the above general
theme of interest in mind. Accordingly, the questions were open ended and focused on
interactions between the head office and subsidiaries. This led us to the identification
of bottom-up transfers of local practices as a key instrument used by proactive
subsidiaries to improve their social capital and gain political power within the
organization. Two short lists of practices were derived from these interviews. The
first one included 20 local practices that were adopted by foreign subsidiaries. The
second had 15 practices that participants thought had the potential of being
transferred to sister business units, even though this did not actually happen for
various reasons which we will discuss afterward. Overall, the purpose of the
exploratory phase was to identify the organizational phenomenon to be studied and
determine the list of practices that are worth investigating in greater detail.
In the second phase, we adopted a literal replication approach to develop a
preliminary theoretical model and related propositions. The three primary practices
have been chosen from the above list for several reasons. First, they have all been
qualified by senior managers at the Canadian subsidiary as strategic given the key role
they played in shaping local strategy. Furthermore, the strategic nature of the selected
practices has been confirmed by respondents from the head office and recipient
42
subsidiaries alike. Second, they were all adopted by several organizational units
across Healthcare Inc. Third, they were developed within the same department but
not by the same person which minimizes the risk of confounding individual
characteristics. Finally, they provided complementary insights into the phenomenon
because they travelled through distinct organizational paths. We label these strategic
practices as “primary” due to their central role in the literal replication process and
hence in generating our initial theoretical predictions. As illustrated in Table III, the
first primary practice was mandated by the regional head office of the firm as a new
standard to be implemented across the affiliates within the region. Country Integrated
Plan (CIP) is a comprehensive analytical framework that is meant to achieve crossfunctional strategic alignment at the subsidiary level. The framework has been
developed by the Canadian subsidiary and was adopted first at the regional level and
then globally. The second primary practice involved the head office as a facilitator
rather than a driver of the diffusion process. Market Strategic Leadership (MSL) is a
relationship management model whose purpose is to help the subsidiary build lasting
relationships with its clients. This model has been developed in Canada and was
adopted by some strategic subsidiaries in Asia, Europe, and the United States. The
third and last primary practice is called Local Research Journal (LRJ). It is a Canadian
model intended to provide scientific support to marketing and sales teams and was
transferred directly from the originator subsidiary to small recipient subsidiaries in
Latin America.
The third and final phase of data collection consisted in probing the initial findings
against three more practices. These were chosen from the second list of practices that
43
participants thought had the potential of being transferred to sister business units,
even though this did not actually happen. We shall call these practices “secondary”
because we used them in the theoretical replication phase only to confirm that
different yet predictable results can be obtained if the conditions under which the
primary practices were successfully diffused are not respected. The first secondary
practice (SEC1) is functionally similar to CIP, but it didn’t diffuse due to lack of
visibility. It was developed by a non-strategic subsidiary that had little access to
corporate forums to promote the practice and get attention. The second secondary
practice (SEC2) is functionally similar to MSL. It has not been adopted, despite the fact
that some subsidiaries claimed interest in the functionality it provided, because it did
not offer sufficient legitimacy incentives to strategic subsidiaries or sufficient
efficiency incentives to non-strategic subsidiaries. The last secondary practice (SEC3)
is meant to provide similar functionally to LRJ. It was not adopted due to the fact that
the organization structure did not allow for interaction between Canadian and
Japanese teams, which would supposedly be interested.
To sum up, we have selected six practices by the end of the data collection phase.
Three primary practices were chosen from the list of the twenty practices that have
been successfully transferred across the MNE. Three secondary practices were
selected from the list of the fifteen that participants thought had the potential of being
transferred to sister business units, even though this did not actually happen.
Throughout the three phases, we collected data from various sources and
reconstructed the individual histories of the practices of interest. The data collected
on individual practices included historical data such as the organizational purpose of
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the practice, the key milestones of its diffusion, the actors involved in its creation and
transfer, and the general arguments stakeholders used to export or import it. The
primary source of data was semi-structured interviews involving informants who had
a deep understanding of the practice in terms of both history and functionality. While
the first interviews were conducted with the creators of individual practices
whenever it was possible, we particularly sought diversity among respondents based
on factors such as the level of tenure, seniority, and responsibility in order to obtain
an accurate account of each practice’s evolution and context. For each practice, the list
of informants emerged over time and we asked every person we met to provide the
names of individuals that could give additional insights into the diffusion of the
practice under study. We undertook member validation and met as many respondents
as possible until we reached saturation of information to verify the viability of
resulting theories (Anand et al., 2007; Eisenhardt, 1989; Langley, 1999). Therefore,
the lists of respondents were specific to individual practices. In addition to interviews,
we solicited artifacts from the respondents during interviews as well as from our
main contact for this study within the company.
2.3.4 Data Analysis
Our data analysis strategy is threefold. First, we developed detailed descriptions of the
three primary cases through the lens of our research questions (Eisenhardt, 1989;
Santos & Eisenhardt, 2009): How do intra-organizational isomorphic forces foster the
diffusion of local strategic practices from a subsidiary to another within the same
MNE? And, do the region of origin and/or the region of destination matter to the
successful transfer of such practices? For each case, we described the practice,
45
determined how it came about, when it happened, who was involved, and which
subsidiaries adopted it (Anand et al., 2007; Lawrence et al., 2002). Second, we
summarized the characteristics of the primary practices and the dynamics underlying
their diffusion in Table III showing both differences and similarities amongst them.
This allowed us to make some initial assumptions about theory and thus to guide our
final step of data collection and analysis. Third, we developed summary cases of
complementary practices and used caution in applying the theory that emerged from
the primary set. This was a highly iterative process (Glaser, 1998; Glaser & Strauss,
1967) as we constantly switched between existing theory, case descriptions from
interviews, and collected artifacts. By the end of this procedure, we have synthesized
all individual cases into tables and diagrams (Miles & Huberman, 1994) to show
visually how we moved from raw data to theory (Pratt, 2009). This was done while
keeping in mind isomorphic pressures and motives of key actors to adopt, diffuse, or
facilitate the transfer of practices within the organization. The interplay between data
analysis and pattern identification helped shape the theoretical framework and
associated propositions gradually (Eisenhardt, 1989).
2.4 Results: Isomorphic Drivers of Practice Adoption Across
Regions
In this section, we discuss our findings from the analysis of the six strategizing
practices we have investigated. As discussed in the research methods section, we have
used three primary practices in the literal replication and three secondary practices in
the theoretical replication.
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2.4.1 Role of the Regional Head Office and Subsidiaries in the Diffusion Process
By identifying the organizational paths of diffusion, we have determined the nature of
the respective roles of the regional headquarters (HQ) and subsidiaries in the process.
The selected primary practices have all been transferred successfully from the
Canadian originator subsidiary (OS) to recipient subsidiaries (RS) in various
countries. Our data suggested that the nature and degree of involvement of the head
office in transfers has varied from active mediator to relative moderator to passive
observer.
------------------------------------Insert Table III about here.
------------------------------------The first strategic practice provides an example of corporate-mediated diffusion. The
Country Integrated Plan (CIP) is a comprehensive and cross-functional strategic
alignment framework that has been developed by the Canadian medical department
to break down local organizational silos. One of the roles of the medical team is to
bridge and align sales and research activities in order to foster cross-functional
synergies. This practice has been diffused through the head office, which acted as an
active mediator between the originator and recipient subsidiaries (OS HQ RS). The
regional head office asked the Canadian team to present CIP as a best practice in a
regional executive meeting. Following this presentation, the regional leadership
endorsed the practice and mandated its implementation across all subsidiaries in the
region.
47
Unsurprisingly, informants cited the exposure of this practice to executives at the
corporate level as a key trigger of its diffusion. Without the involvement of a Canadian
executive in the regional executive committee, CIP would have never been noticed and
hence diffused. As a senior manager mentioned:
Certainly, if I was not part of that meeting nobody would even know about [CIP].
And, I was invited because we are part of the core group of countries within the
region […] Canada is viewed as a strategic market and we have an R&D team
here, so we are more exposed to corporate executives.
The reason why this informant was invited to the meeting is because the Canadian
subsidiary is among the seven strategic subsidiaries within the region. To reinforce
the criticality of the status of a subsidiary in making its practices visible, he went on to
add:
Subsidiaries that are not part of this committee may have interesting practices
that could be useful to other subsidiaries […] There is always something
interesting you can borrow from other countries, but how would you even know
about their existence? That's a critical question.
Accordingly, the strategic status of a subsidiary within the MNE network is
instrumental to the propensity of its local practices to diffuse across borders. More
formally, we propose:
Proposition 1 (P1): Headquarters of MNEs are more likely to co-opt and
mandate the diffusion of practices that are created by strategic subsidiaries
than those developed by non-strategic subsidiaries.
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In line with the tridimensional model (Figure 1) we discussed earlier, the corporatemediated diffusion of CIP took place in two steps – escalation and cascading. First, the
head office undertook several actions to legitimize CIP as a global practice by making
it “implementable in other countries”, according to an informant. While some tangible
adjustments were made to different templates and processes to minimize the time
necessary for local teams to use them, the legitimizing actions were essentially
symbolic. As another respondent stated, the “fine-tuning consisted more in nitpicking
on words than anything else.” An anecdotal illustration of the symbolic nature of global
legitimization is the decision to replace the word “Canadian” by “Country” and thus
maintain the original acronym of the practice (CIP) while making it country-neutral.
An informant commented in this regard:
In fact, these adaptations were essentially fine tunings rather than actual
changes. The modifications were kept minimal […] For instance, we kept the same
acronym but ‘C’ now stands for ‘Country’ instead of ‘Canadian’ originally.
These adjustments were made in collaboration with potential recipient subsidiaries
(RS) through conference calls, email communications, and electronic forums that were
created specifically to serve this purpose. While recognizing the role of the Canadian
team as the originator of CIP, the HQ positioned itself as a "proxy owner" of the
practice. The legitimizing effort changed the perception of CIP by future RS from a
subsidiary practice into an emergent institution that is embedded in both subsidiary
and head office contexts. The positioning of the HQ as a quasi-owner of the practice
allowed it to proceed to the second stage of mediated transfer – cascading. The
49
cascading process was as if CIP had been developed by the HQ. In addition to
mandating the use of the practice as the “regional platform for strategic planning”, the
regional head office reinforced the new standard by setting up support
infrastructures. The Canadian subsidiary gained the mandate of supporting all
recipient subsidiaries as they implemented the practice. The global head office also
created regional (RIP) and global (GIP) integrated plans that were essentially
consolidated variants of country-level CIPs. Consequently, the perception of the HQ’s
appropriation of the local practice has been reinforced in the eyes of recipient
subsidiaries.
In reality, the escalation and cascading processes intertwined as they both occurred
within a period of seven months. According to a head office informant, the local
practice emerged to become a global corporate standard in such short time because:
CIP was there at the right place and at the right time. It was cross-functional and
reflected the need of subsidiaries for integration and teamwork… It was consistent
with [the corporate] strategic objective to reinforce the cross-functional
integration. We thought 80% of the elements were there so you just needed to
make some adjustments and push it down the organization structure to be
implemented locally.
While the corporate office might need to coerce some subsidiaries to implement a
particular practice, some might do so voluntarily. As suggested by recent studies (e.g.,
Kennedy & Fiss, 2009), mimesis is a key driver of practice adoption. A respondent
from the originator subsidiary pointed this out:
50
Subsidiaries may adopt a practice right away […] when they see the positive
outcomes and business value they may get out of it. What 'value' means is subject
to interpretation though.
Indeed, further discussions with informants suggested that the meaning of "positive
outcomes and business value" may differ depending on the status of the recipient
subsidiary. For instance, an executive commented when asked about the success
factors of CIP:
Regional executives [who were present at the meeting where CIP was first
presented as a best practice] saw the value of the process and the platform [i.e.
outcome]. The same executives sold it to their teams. We just made some changes
to make it acceptable to other countries.
And, he went on to add:
Frankly, most of [strategic subsidiaries] already have similar processes that work
well enough for them. But, we are part of a family […] and have got to show the
example if this is going to become a global standard. I mean, as a major
subsidiary, we want to show some leadership and play a role model here. What
we do is watched and amplified. I mean it's not like a small site [i.e. subsidiary]. It
is almost a moral obligation when you are considered by corporate people as a
strategic site.
Accordingly, we propose:
Proposition 2a (P2a): Strategic subsidiaries are more likely (than non-strategic
subsidiaries) to adopt their peers' practices for legitimacy reasons.
51
On the other hand, the second primary practice we studied illustrates well the reason
why non-strategic subsidiaries might choose to adopt practices voluntarily. It
provides a compelling example of lateral diffusion (OS RS) or borrowing of practice
between subsidiaries in the absence of any head office involvement. Local Research
Journal (LRJ) is a medical publication that was initially developed by the Canadian
team. The purpose was to support the subsidiary’s marketing efforts. The articles
published in LRJ did not pretend to reveal ground breaking research. Instead, they
added value and appealed to many healthcare professionals because the articles
addressed local healthcare issues based on credible research studies. Senior managers
generally viewed LRJ as a good complement to other marketing, public relations, and
promotional tools used in Canada. The practice did not gain the attention of strategic
subsidiaries because healthcare professionals in major markets were more interested
in cutting-edge research and global studies than in local publications. In contrast,
several small subsidiaries in Latin America learned about the practice informally.
Then, they decided to adapt the concept to their local markets. According to an
informant:
These small [recipient] subsidiaries liked the idea because the studies were
acceptable to their local scientific community. The quality was good enough for
them and this kind of studies are less expensive to do than the ones we can afford
[in larger subsidiaries]. They certainly can't afford to do this for the sake of simply
attracting attention or please the head office.
52
These subsidiaries have chosen to adopt the practice despite the fact that the HQ did
not see value in mandating its global diffusion. Corporate leaders knew about the
transfer of which they were passive observers. As an informant stated:
[The head office] was not involved at all. I don’t think they care in this particular
case. The key here is the utility of the practice to them. The question of cost [to
adapt the practice to local needs] is also important. Again, these are small sites
[subsidiaries] and their budgets are really limited. I don’t think they would adopt
[LRJ] if this was not really, really relevant to their market… or if it was too
expensive to adapt.
Therefore, the subsidiaries adopted this particular practice because of its functional
utility and relative efficiency in addressing their local needs. Hence, we posit:
Proposition 2b (P2b): Non-strategic subsidiaries are more likely (than strategic
subsidiaries) to adopt their peers' practices for efficiency reasons.
The third primary practice is a good illustration of corporate-moderated diffusion
whereby the HQ acted as a facilitator (HQ [OS RS]). Market Strategic Leadership
(MSL) is a client-relationship management model that has been developed in Canada
with the intention of providing scientific support to marketing teams. The objective
was to nurture and maintain lasting relationships with healthcare professionals who
are the ultimate prescribers of the company’s products to patients. The practice was
recognized across the company as an innovative way of gaining and sustaining a
comparative advantage in the local market. However, only large subsidiaries
embraced the practice and sought help from the Canadian team to implement it. When
53
asked about the reasons why MSL is not as diffused as CIP, a Canadian informant
responded:
MSL was adopted by some countries but not all [...] because of the headcount and
because it was not mandated by the top. You know, affiliates do their [cost-benefit]
calculations so countries with small headcounts do not need to implement
something like this.
The role the HQ played in the diffusion of MSL is somewhat in between those played in
the diffusion of CIP and LRJ. It provides new insights into the lateral diffusion
phenomenon because it was adopted by a subset of both strategic and non-strategic
subsidiaries. On the one hand, the HQ did not mandate the global adoption of the
practice because it would not make sense in some countries, especially in those with
relatively small markets and limited resources. Instead, it acted as a moderator of
decisions on whether to implement it or not depending on the specifics of each
country. On the other hand, the head office played an active role in the process by
legitimizing MSL through strategic endorsement. For instance, the Canadian
subsidiary gained the global mandate to support recipient subsidiaries during the
implementation of the practice. The attention paid by the head office to MSL is
attributed by several informants to the fact that the subsidiaries that can benefit from
the practice were essentially large and based in strategic markets, mostly in Asia and
Europe. As an informant highlighted:
The head office didn't push for the diffusion of [MSL] but it was involved in it
because several important subsidiaries in Asia wanted to implement it. Japan
found it interesting when they saw it in Europe and then adopted it. I am not sure
54
it is useful in there though because their margins [of action] are relatively limited
by local market regulations. Then followed smaller countries in the region; they
found the idea of mixed marketing teams with scientific and sales people to be
effective in getting appointments with busy doctors.
This statement reiterates the effect of subsidiary status on the diffusion process by
influencing corporate attention and shaping adoption motives. It also hints of the need
to consider the mechanisms of transfer of practices across regions.
2.4.2 The Regional Dimension of Practice Diffusion
The organizational structure of Healthcare Global Inc. played an instrumental role in
the cross-border transfer of the three practices under investigation. For instance, CIP
would never have been diffused across the EMAC region without the visibility it
gained during the regional executive meeting held in Europe. The Canadian executive
was invited to this meeting because both the Canadian and West European
subsidiaries reported (in the organizational chart) to the same regional head office
located in Germany. He was given the opportunity to present CIP because Canada was
one of the "core subsidiaries" in this region. As a respondent noted:
The reporting structure is important and the organizational chart defines the
frequency of contacts with our peers in other countries. Before we were put in
this region, we had far fewer opportunities to meet our colleagues in Europe.
Now, we report to the same people, we receive the same instructions […] there
are the same expectations so it's important that we work together. My boss also
organized meetings last year so, yes, we ended up learning interesting things
when we socialized with colleagues in these meetings.
55
In this regard, another informant stated:
Sure, the way we are organized [into regions] makes it easier for a practice like
CIP to get noticed and adopted by European subsidiaries […] especially those who
are part of the [regional] executive committee because they get to talk frequently
in different meetings.
The diffusion has been linked by respondents to the way the regions are structured in
the organizational chart of the firm. The fact that Canada was a member of an
organizational region (EMAC) that included West European and African countries has
triggered its adoption across the countries that formed the region. Hence, we propose:
Proposition 3a (P3a): The transfer of a local practice is more likely to start
when both recipient and originator subsidiaries are located in the same
organizational region.
For the purpose of this study, we use the term organizational region to designate the
way the MNEs cluster their subsidiaries into regions in their organizational structure
to ease corporate governance and foster synergies amongst affiliates. For instance,
Healthcare Global Inc. put Canada in a virtual region (EMAC) that also included West
European, Middle Eastern, and African countries based on a mix of institutional (e.g.,
regulations, spoken languages), economic (e.g., geographic proximity), and political
(e.g., comparable market size) reasons. Regardless of the grouping logic underlying
organizational structures, shared reporting relationships foster cross-country
interactions and thus increase the visibility of practices.
56
However, the visibility of a particular practice through organizational structure is not
a sufficient condition for its successful transfer. Indeed, practices carry institutional
imprints from the environment in which they emerge. This is why institutional
distance between their countries of origin and destination may foster or hinder their
successful adoption (Kostova & Roth, 2002). Therefore, practice transfers between
countries that belong to the same geographic region are likely to succeed since
relative institutional proximity has been widely assumed within geographic regions
(Arregle et al., 2009; Rugman, 2005). While organizational regions are specific to
firms as they reflect their internal governance structures, geographic regions
represent a more standard concept. Scholars have used standard classifications
developed by international institutions (e.g. World Bank, UNCTAD, WTO, WHO) based
on various criteria including economic, political, and institutional conditions to group
countries into regions (Aguilera, Flores, & Vaaler, 2007; Osegowitsch & Sammartino,
2008; Peng & Pleggenkuhle-Miles, 2009). For example, the World Bank and UNCTAD
have used the traditional six continents as the basis of their classifications. On the
other hand, scholars (e.g., Arregle et al., 2009; Rugman, 2005) have used the clusters
of the Triad concept (NAFTA, Europe, and South Asia) in their groupings. That being
said, all the definitions of geographic regions share the premise of some sort of spatial
contiguity of the countries that form them. The following comment by an American
informant reflects the effect of geographic regions on diffusion of practices:
The Canadian and USA markets are quite different in terms of size and
healthcare system structure, but we have quite similar regulatory requirements.
More importantly, we are neighbors so there is no time difference compared with
57
our European or Asian colleagues. This is why we quite often work together and
share best practices even though head office didn't put us in the same region on
the organization chart.
Accordingly, we suggest:
Proposition 3b (P3b): The adoption of a local practice is more likely to succeed
when both recipient and originator subsidiaries are located in the same
geographic region.
2.4.3 Vetting the Findings Through Theoretical Replication
After using the three primary practices to generate the above hypotheses, we used a
supplementary set of three secondary practices that have been suggested by our
informants as potentially transferable across the organization but that did not actually
diffuse (Table III). The first secondary practice (SEC1) was functionally similar to CIP
but it did not diffuse for the simple reason that it did not gain exposure to head office
executive and sister subsidiaries. It was developed by the Greek subsidiary, which is a
member of the EMAC region but Greece is not viewed as a “strategic market”.
According to a respondent:
Sure, [SEC1] is similar to CIP but nobody knew about it. You simply can’t like
something if you don’t even know it exists. Small subsidiaries have very little
exposure if any to corporate folks. […] Large affiliates have more power, more
frequent opportunities to talk about what they do and how they do things. They
are engaged in the preparation of regional meetings too.
58
Therefore, SEC1 had fewer chances than CIP to get noticed and be adopted due to the
lack of visibility that resulted from the non-strategic status of its originating
subsidiary. The second practice (SEC2) did not diffuse despite its perceived utility and
exposure. Similar to the motives of adoption, the reasons for non-adoption varied
depending on the status of the subsidiary. For instance, a respondent stated:
[Large subsidiaries] thought [SEC2] was interesting but they believed it would
cost them more to adapt it to local needs than if they just develop their own
model. I think it’s worth it that they try it but it would take a boost from [a senior
executive] to see that happen. It’s not a matter of money.
And another informant commented:
Unless you show them how this will help them maximize their budget, [small
subsidiaries] won’t spend time and money in trying to get [SEC2] working there.
Otherwise, they will push back. If corporate folks ask cash-poor affiliates to run
with it then they would say: sure, this looks interesting – just give us some more
resources. We can’t blame them for that. They really have tight budgets.
The last secondary practice (SEC3) focused on the vetting of the regional dimension of
diffusion mechanisms. It showed that a practice that has been transferred successfully
within a region did not get to travel to other regions for the absence of organizational
structure that fosters cross-regional visibility. A Canadian respondent stated:
SEC3 worked well in [Canada]. It is now used in the US and they are quite happy
with it. I am pretty sure Japanese marketers will find it helpful as they have the
59
same challenges as in the US. If they knew about it, if they were part of EMAC
region for example, they would take it and make it work there. Our current
organization structure doesn’t allow for much interaction between us and Japan.
Maybe we need a kind of matrix structure so that we get some formal face-to-face
time with them? I don’t know but that would be nice.
These three secondary practices helped check the boundary conditions of our initial
findings. As expected, they did not diffuse because they did not have the benefit of the
conditions of visibility and success that are stated in our hypotheses. While the study
of multiple incidents does not pretend any statistical validation, it was important to
understand the reasons for both successes and failures to reinforce the credibility of
our findings.
2.5 Discussion and Conclusions
In the present study, we explored the relationship between organizational
isomorphism and practice diffusion with particular interest in the regional dimension
of the phenomenon. We examined the dynamics of diffusion through three theoretical
lenses – economic efficiency, social legitimacy, and political power. To this end, we
conceptualized the MNE in three different ways. We first viewed it as a constellation
of social spaces (Morgan, 2011) where legitimacy seeking is the dominant logic (Kogut
& Zander, 2003). Then, we conceptualized it as an internal market (Birkinshaw, 1997)
where subsidiaries exchange products and services based on economic rationality.
Finally, we considered it as a political arena (Djelic & Quack, 2003) where subsidiaries
pursue corporate attention (Bouquet & Birkinshaw, 2008) and global mandates
(Birkinshaw, 1996). By applying multiple analytical templates to the same
60
phenomenon, we are able to analyze the motivations of different stakeholders and
subsequently make several contributions to the existing literature. The three primary
practices allowed us to generate five propositions suggesting that the role type of a
subsidiary is instrumental to the adoption of its practices by sister subsidiaries. When
it comes to the reasons for adoption, the role of the subsidiary is also instrumental
since strategic subsidiaries tend to adopt practices for legitimacy reasons while nonstrategic subsidiaries would do so for efficiency reasons. Finally, the region to which a
subsidiary belongs may also affect the chances of its practices to be adopted. We
distinguished between organizational regions that reflect the way an MNE structures
its subsidiaries into regional clusters, and geographic regions that are defined
following publicly available classifications such as the World Bank’s. We found that
the organizational regions facilitate the visibility of practices and hence the possibility
that a sister subsidiary may be interested and initiate their transfer. On the other
hand, geographic regions offer a relative institutional homogeneity and thus increase
the likelihood of success of the transfers being initiated. As expected, the three
secondary practices failed to diffuse, despite the fact that they had the potential to do
so according to our informants, due to their lack of visibility through organizational
structure and to the lack of institutional proximity between originator and possible
recipient subsidiaries.
The study makes a contribution to the international management literature by
suggesting that there is a regional dimension to practice diffusion within MNEs. They
uphold the relative institutional homogeneity that is generally assumed within
geographic regions (Arregle et al., 2009; Rugman, 2003). More specifically, our
61
empirical exploration suggests that organizational regions (organization structure)
help ensure visibility to local practices while geographic regions (geographic
proximity) are critical to their successful transfer. Accordingly, they have
complementary effects on the adoption of practices.
Another key contribution of this paper resides in the use of isomorphic forces to
analyze intra-organizational dynamics of practice diffusion. This provides empirical
evidence of the link between intra-organizational isomorphism and practice diffusion
that has long been assumed in the literature but never verified empirically
(Boxenbaum & Jonsson, 2008). The fine-grained analysis of data helped untangle the
mimetic, normative, and coercive forces of institutional isomorphism. The three
pillars (Scott, 2008) are generally viewed in the literature as a homogenous set of
forces instead of being considered separately. Our results identify several conditions
under which these forces operate as independent factors.
These findings have practical and research implications. From a practice perspective,
managers involved in the deployment of corporate practices need to be aware of the
different logics at play. In particular, individual actors have their respective interests,
mobilize different rationalities accordingly, and expect different outcomes from the
deployment, facilitation or adoption of a given practice. In fact, the set of analytical
logics we considered (efficiency, legitimacy and power) may be helpful in analyzing
the motives of various stakeholders in any change management initiative. From a
theoretical standpoint, the corresponding analytical templates (economic efficiency,
institutional legitimacy, and political power) may be repeated in other studies. It
62
provides a comprehensive framework for strategic and organizational analysis,
especially in the pluralistic context of the MNE. The separate analysis of individual
isomorphic forces may also be reproduced in future studies as more research is
needed to understand how they interact as a set and under what kind of conditions
one becomes more relevant than others. Scholars and practitioners alike should also
find the regional dimension of practice transfer interesting as it helps explain the
dynamics of diffusion beyond the traditional dyadic involving home and host
countries.
There are several ways our findings may be developed further. First, the same study
design could be replicated in different organizational settings. We have chosen the
industry, firm, subsidiary, and originator department in order to control for important
industry and organizational effects that may influence the dynamics underlying
diffusion mechanisms. For instance, it would be useful to investigate how a
subsidiary’s position in the network (e.g. role, mandate, or weight) may affect its
ability to export or import certain practices. Second, the leadership style of
management at the originator subsidiary, recipient subsidiary and head office levels
may determine the isomorphic forces being mobilized. In particular, leaders with
certain personal characteristics may be inclined to be more coercive than others.
Third, it is not quite clear how recipient subsidiaries actually trade off efficiency and
legitimacy imperatives, especially when both are critical to their performance and
survival. This may be specifically addressed in a future study. Fourth, we focused our
analysis on one most dominant isomorphic force at a time. It would be useful to
explore how these forces interplay when more than one is involved in the process.
63
Finally, one may consider the geographic aspects of the diffusion phenomenon. For
instance, it would be useful to investigate when practices travel through informal
organizational paths rather than formal hierarchical structures. It would also be
interesting to explore practice diffusion in light of the current debate on the regional
versus global nature of international strategy. The way the CIP practice, for instance,
disseminated may indicate that there is a regional dimension to diffusion mechanisms.
Similarly, subsidiaries based in developing markets may behave differently from those
located in more advanced economies due essentially to differences in their
institutional contexts. As mentioned earlier, the LRJ practice has been adopted by
Latin American subsidiaries voluntarily. One may speculate that this may be due to
the institutional characteristics of their home region. Another aspect of the regional
phenomenon that could be explored further is the fit between organizational regions
and geographic regions. In other words, does it make a difference when an MNE
chooses to define its regions (organization structure) using different criteria than
geographic proximity as Healthcare Global Inc. did with its EMAC region that included
countries from Africa, Asia, Europe, and North America?
To conclude, this article advances our understanding of the diffusion of local practices
from a regional perspective. It explores the intricacies underlying intra-MNE
relationships using multiple theoretical lenses. It also provides a compelling example
of a fine-grained qualitative analysis that bridges multiple levels of analysis. While we
focused our investigation on practices within a single firm, the careful selection of the
overall research design and empirical setting suggests that the findings may
generalize to other MNEs in various industries.
64
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Appendices
Table III – Characteristics of Practices
STRATEGIC
PRACTICE
COUNTRY INTEGRATED
PLAN (CIP)
MARKET STRATEGIC
LEADERSHIP (MSL)
LOCAL RESEARCH
JOURNAL (LRJ)
GENERAL CHARACTERISTICS
Description /
Purpose
Diffusion
Reach
Key Dates
Full model intended to
achieve cross-functional
strategic alignment at the
subsidiary level.
All subsidiaries: Regional
then Global
Started in Canada: 2007
Deployed globally: 2009
Strategic relationship
management model aimed
at building lasting
relationship with clients.
Some strategic
subsidiaries: EU, US, Asia
Large Recipient Sub.: 2007
Full model intended to
provide scientific support to
marketing and sales teams.
Some small subsidiaries:
Latin America
Small Recipient Sub.: 2008
DIFFUSION MECHANISMS
Diffusion
Support
Process Type
HQ Role
Organization
Path
Organizational Structure
Subsidiary Network
Internal Market
Mediated diffusion
Mediator (quasi-owner)
Moderated diffusion
Moderator (facilitator)
Lateral diffusion
Observer (no direct role)
HQ
HQ
OS
RS
OS
OS HQ RS
RS Selection
Logic
HQ mandated all
subsidiaries to implement
HQ
RS
HQ [OS RS]
Self-selected large and
strategic subsidiaries with
HQ validation
OS
RS
OS RS
Self-selected subsidiaries
with no HQ intervention
ISOMORPHIC DYNAMICS
Origin of
Pressure
Dominant
Pressure
Logic of
Diffusion
Headquarters
RS-OS-HQ negotiation
Recipient Subsidiary
Mostly
Coercive
Power
Mostly
Normative
Legitimacy
Mostly
Mimetic
Efficiency
THEORETICAL REPLICATION
Secondary
Practices
(predictably
different
results)
SEC1 is functionally
similar to CIP, but it didn’t
diffuse due to lack of
visibility. It was developed
by a non-strategic
subsidiary that had no
access to corporate
forums to sell it.
SEC2 was not adopted
(despite claimed interest)
because it did not offer
sufficient legitimacy
incentives to strategic
subsidiaries or sufficient
efficiency incentives to
non-strategic subsidiaries.
68
㨁EC3 was not adopted for
lack of visibility due in part
to the organization
structure that did not allow
for interaction between
Canadian and Japanese
teams which would be
supposedly interested.
Figure 3 Tri-dimensional Transfer Flows of Organizational Practices within the MNE
Head-office as
Intermediary
(HQ)
Practice Cascading
(top-down flows)
Practice Escalation
(bottom-up flows)
Subsidiary as
Originator
(OS)
Practice Borrowing
(peer-to-peer flows)
69
Subsidiary as
Recipient
(RS)
Chapter 3 – Location Choices by Multinational Enterprises from
Emerging Markets: Legitimizing versus Economizing Logic4
Abstract
This paper investigates the dominant logics underlying foreign location choices by
multinational enterprises from emerging markets (EM-MNEs). The economic view of
host country selection suggests that MNEs in general tend to focus their activities in
nearby countries for efficiency reasons. In contrast, recent studies with institutional
view posit that EM-MNEs in particular tend to prevail in developing markets for
legitimacy imperatives. We mobilize and contrast economic efficiency and
institutional legitimacy rationalities to study the logic underlying location choices by
EM-MNEs. We analyze the configurations of the location networks of 203 EM-MNEs
and show general empirical support for our theoretical predictions. In particular, EMMNEs are found to mobilize different logics depending on whether location choices
are made within their home regions or elsewhere. Specifically, they follow
economizing logic only in their home regions. In other regions, they seem to arbitrate
legitimizing logic and economizing logic depending on the degree of their
international experience. Our findings make important contributions to the current
debates
on
the
regional
nature
of
international
strategy
and
on
the
internationalization process of EM-MNEs. They also have important theoretical and
managerial implications.
Keywords
Location choice, dominant logic, regional strategy, economic efficiency, institutional
legitimacy, MNE Network configuration, multinationals from emerging markets,
developing countries.
An earlier version of this paper has been presented at the Strategic Management Society
(2011) annual meeting.
4
3.1 Introduction
In the present paper we examine geographic diversification patterns of multinational
enterprises from emerging markets (EM-MNEs). For the benefit of simplicity, we use
the term developing markets to identify the economies of all countries except those of
developed countries as defined by the World Bank (2007). This includes firms from
emerging, developing, and least-developed countries. We analyze the configurations
of their location networks from the perspectives of economic efficiency and
institutional legitimacy.
One possible explication of international diversification patterns of MNEs in general is
best illustrated by Rugman and colleagues (Rugman, 2005; Rugman & Verbeke,
2004b, 2005, 2007, 2008b) who suggested that MNEs tend to concentrate their
activities in their home regions because they seek to maximize their Firm-Specific
Advantages (FSA) in nearby markets (Rugman, 2005). Consistent with the principles
of transaction cost economics, MNEs that focus geographically are likely to reduce
their internationalization costs and exploit local linkages and externalities (Rugman &
Verbeke, 2005). A key assumption underlying this reasoning is that the liability of
foreignness of MNEs (Hymer, 1976) is lower in their home regions than elsewhere
(Rugman & Verbeke, 2007). While relative institutional proximity is generally
assumed within a region (Arregle, Beamish, & Hébert, 2009; Rugman, 2005), all
regions are not necessarily homogeneous from an institutional perspective.
Additionally, a country may be a member of several supranational groups of countries
or regions with dissimilar levels of institutional development.
An alternative rationalization of international diversification patterns is rooted in
institutional legitimacy arguments. Zaheer (1995) suggested that liability of
foreignness arises not only from the costs directly associated with geographic
distance but also from the lack of social legitimacy, and that the two factors may not
necessarily be related. Cuervo-Cazurra & Genc (2008) for instance suggested that EMMNEs prevail in least-developed countries (LDC) not because of geographic proximity
but due to the fact that LDC’s institutional conditions are relatively similar to those of
emerging markets where EM-MNEs have grown and learned how to deal with highly
informal institutions (Dunning & Lundan, 2008; Hyman, 1993; Jütting, Drechsler,
Bartsch, & de Soysa, 2007). Peripheral countries like Mexico provide tangible
examples of the tension that exists between the needs for both economic opportunity
and institutional proximity. As a member of NAFTA and a neighbour of the US and
Canada, Mexican MNEs have economic incentives to trade with the large American
and Canadian markets. On the other hand, Mexican institutions are much more similar
to those of remote Argentina (colonial heritage, developing country, common
language) than to those of the neighbouring US or Canada (geographic proximity,
NAFTA economic incentive). The unravelling of this tension may help explain the
reasons why MNEs in general venture into geographically distant countries before
they maximize their presence in their home regions (Peng & Pleggenkuhle-Miles,
2009) and why EM-MNEs in particular seem to be neither path dependent nor
evolutionary in selecting their foreign locations (Luo & Tung, 2007).
The two perspectives provide complementary rather than contradictory explanations
of location choices. While geographic relatedness is rooted in economic efficiency and
economies of scope across borders, institutional relatedness is built upon institutional
legitimacy and the exploitation of social capital across similar institutional settings.
72
Accordingly, the purpose of this paper is to investigate how economic logic and
institutional logic interact to shape location choices by EM-MNEs and thus explain the
configuration of their location networks.
In attending to this enquiry, we organize the remaining parts of the paper as follows.
First, we further discuss the concept of geographic diversification and develop
hypotheses in relation to the logics underlying location choices. Then, we test our
hypotheses, interpret the results, and discuss their research and practical
implications. We conclude with the limitations of our study and possible avenues for
future research.
3.2 Theoretical Foundations and Predictions
Foreign location choice is a major consideration in the international strategy of MNEs
(Dunning, 1998, 2000; Mudambi, 2002), and intra-firm linkages are key determinants
of their arbitration (Chen & Chen, 1998). Consequently, these choices must be viewed
as a portfolio of decisions rather than isolated choices. While most studies focused on
individual locations as their unit of analysis in the past, some recent publications
approached the phenomenon from a broader geographic scope. For instance, Rugman
et al. (2004a) highlighted the tendency of MNEs to concentrate their sales and assets
in their home regions, Cuervo-Cazurra & Genc (2008) underlined the prevalence of
EM-MNEs in LDC markets, and Arregle et al. (2009) found that MNEs arbitrate
location choices within their home regions. In order to have a holistic appreciation of
their internationalization patterns, we conceptualize MNEs as inter-organizational
networks of subsidiaries (Ghoshal & Bartlett, 1990) and investigate how member
locations relate to each other.
73
3.2.1 Relatedness of Location Networks: Geography versus Institutions
Business relatedness has been described as similarities among organizational units
along central dimensions (Pehrsson, 2006; Stimpert & Duhaime, 1997). For instance,
Peng et al. (2005:2) defined institutional relatedness as the “degree of [its] informal
embeddedness or interconnectedness with [local] dominant institutions.” Following
the same logic, we generalize and define the location relatedness of an MNE as the
degree to which its network of subsidiaries is relatively integrated and homogeneous.
While such integration and homogeneity may be assessed in various ways
(Ghemawat, 2001), this study focuses on two dimensions – geography and
institutions.
From a geographic perspective, individual location choices may be explained by using
Dunning's (2001) OLI framework which is also known as "eclectic paradigm".
According to the model, host country decisions are driven by a combination of
ownership, location, and internalization advantages. Ownership advantages are firmspecific (FSA), location advantages are country-specific (CSA), and internalization
advantages derive from reducing or eliminating transaction costs of outsourcing
activities by setting up a subsidiary in, rather than exporting to, a foreign country, for
instance. As a complementary set of conditions, the three types of advantages shape
location choices. Nevertheless, location-specific advantages are direct drivers of
arbitration while ownership and internalization advantages provide secondary
arguments to particular location choices (Mudambi, 2002).
The primacy of location-specific advantages is illustrated by the spatial clustering of
firms; a subject that has long been the focus of researchers in economic geography
74
(See Krugman, 1995 for an extented literature review). Specifically, location decisions
may be guided by geographic proximity to facilitate the exploitation of linkages and
externalities such as technological spillovers, skilled labour, and industry-specific
input across the industry. At the organizational level, geographic proximity is also
instrumental to location arbitration (Arregle et al., 2009). For instance, Rugman and
colleagues (Rugman, 2005; Rugman & Verbeke, 2004b, 2005, 2007, 2008b) found that
the largest MNEs from the extended Triad regions (Asia-Pacific, European Union, and
NAFTA) tend to focus their sales and assets in their home regions. This is essentially
the consequence of firms trying to combine the three types of specific advantages
underlying OLI components.
[E]ach foreign location requires location-specific linking investments
to meld existing FSAs with CSAs. It is, ceteris paribus, the extent of
these adaptation costs, taking into account the redeployability of the
resulting additional knowledge in the relevant locations, that explains
why most MNEs expand first in their home region, and may face great
difficulty expanding to other regions. (Rugman & Verbeke, 2008a:13)
The regional nature of international strategies is likely driven by the willingness of
MNEs to structure their foreign subsidiary networks in such a way to optimize
transaction costs (Rugman & Verbeke, 2005) and thus boost performance (Banalieva
& Eddleston, 2011). Within their home regions, MNEs can combine their FSAs with
CSA more easily and efficiently (Rugman, 2003) while reducing the costs associated
with monitoring subsidiaries that are located in geographically distant countries
(Chu-Chia & Ivan, 2003). The underlying transaction cost argument is particularly
relevant to EM-MNEs because they are relatively smaller in size and poorer in
75
resources than DM-MNEs (Brouthers, O'Donnell, & Hadjimarcou, 2005). Thus, we
hypothesize:
Hypothesis 1a (H1a): Overall, EM-MNEs will focus their activities in their home
regions.
A key assumption underlying the economic efficiency perspective is that regions are
relatively homogeneous from an institutional perspective. For instance, Rugman &
Verbeke (2005:3) defined the region as a “limited number of participants that are
geographically close, and with a comparatively low economic and institutional
distance among them." While the validity of the institutional homogeneity assumption
is contingent upon the way the region itself is defined (Peng & Pleggenkuhle-Miles,
2009), there is a need to take institutional forces into account in a more direct way. In
fact, location choices are motivated by social capital rather than economic
opportunity. Cuervo-Cazurra & Genc (Cuervo-Cazurra & Genc, 2008) for instance
explained the prevalence of EM-MNEs in least-developed countries (LDC) by their
social ability to function in the peculiar institutional and economic conditions of LDC
markets.
Despite being smaller, having less sophisticated resources and coming
from problematic home markets with poorly developed governance
environments, developing-country MNEs can still be successful in their
internationalization. The ability to manage in a challenging governance
environment, which they have developed at home, can help them
become leading firms in LDCs by reducing their difficulties in
internationalization. (Cuervo-Cazurra & Genc, 2008:20)
76
One of the distinctive features of developing countries is the relatively high degree of
informality in social, economic and political interactions among local actors (de Soysa
& Jütting, 2007). This provides home-grown firms with a double competitive edge
over their counterparts from more advanced economies (Taleb, 2010). First, informal
settings act as incubator for EM-MNEs to learn how to mitigate or even take advantage
of such conditions (Cuervo-Cazurra & Genc, 2008). Second, high informality serves as
a psychological barrier of entry that prevents DM-MNEs from entering emerging
markets and thus reduces pressure on local firms. Therefore, we hypothesize:
Hypothesis 1b (H1b): Overall, EM-MNEs will focus their activities in emerging
markets.
Hypothesis 1a suggests that EM-MNE Networks are likely to be geographically
integrated around the head office (geographic relatedness) while hypothesis 1b
implies that EM-MNE Networks are likely to be institutionally homogenous
(institutional relatedness). However, the two views are not mutually exclusive as both
conditions may be fulfilled concurrently especially within the home regions of MNEs.
3.2.2 The Logics of Location Arbitrage: Economizing versus Legitimizing
Relatedness of location networks implies some sort of consistency in location choices
over time and space. Thus, a systematic analysis of the patterns of location choices by
a particular MNE is likely to unveil a dominant logic (Bettis & Prahalad, 1995) because
“generic strategy of diversification (how much and what kind of relatedness) is the
key to achieving performance” (Prahalad & Bettis, 1986:2). The dominant managerial
logics underlying the two types of location relatedness we discussed above are
77
economizing logic for geographic relatedness and legitimizing logic for institutional
relatedness.
For the purpose of this study, an EM-MNE is considered to follow a legitimizing logic
when its location choices are predominantly driven by institutional proximity. As a
result, MNEs that follow such logic will possess location networks with a relatively
high institutional homogeneity. In contrast, EM-MNEs are said to follow an
economizing logic when their location choices are essentially guided by market
potential rather than by institutional proximity. Therefore, EM-MNEs that adopt this
logic will have location networks with relatively high geographic concentration. From
an EM-MNE perspective, economizing and economizing logics have complementary
and divergent effects on location choices globally. This is because institutional
proximity is not necessarily correlated with economic opportunity. Thus, EM-MNEs
may not be familiar with the institutional settings of the markets that are most
interesting from an economic perspective. However, as posited in hypotheses 1a and
1b, EM-MNEs tend to venture into markets with relatively worse or similar
institutional conditions than the ones they are used to in their home countries. In
other words, EM-MNEs following a legitimizing logic in location selection will start
with developing markets where they can secure the highest level of legitimacy and
end with industrialized economies where they face significant liability of foreignness.
More formally, we hypothesize:
Hypothesis 2a (H2a): Globally, the relationship between legitimizing logic and
the geographic prevalence of an EM-MNE will be linear and negative.
78
We use the term “geographic prevalence” to indicate whether the majority of an
MNE’s subsidiaries are located in advanced economies or in developing markets. The
ratio will be positive when the majority is in advanced markets.
In the same vein, cognitive bias of decision makers has been found to play an
important role in entry decisions of EM-MNEs to developed markets (Thomas, Eden,
Hitt, & Miller, 2007). Indeed, the psychic distance paradox (O Grady & Lane, 1996)
means that managers assume similarity between countries erroneously when they
make cross-border decisions (Evans & Mavondo, 2002). Therefore, consistent with
Cuervo-Cazurra & Genc’s (2008) findings, EM-MNEs will tend to choose emerging
markets over more advanced markets with higher economic opportunity potential.
Location arbitration based on economizing logic is likely to first focus on a pool of
countries with both low institutional maturity and high economic opportunities until
it fades. Then, they will be forced to either take more institutional risks or reconsider
their appetite for highest economic opportunities. Since EM-MNEs face the liability of
foreignness when they get into unfamiliar markets, they are likely to seek more
institutional legitimacy than economic opportunity until they get acquainted with new
institutional contexts. As they gain confidence in operating in such settings, the
number of options for location choices will increase. Accordingly, they will arbitrate
location choices based on economic potential again. Hence, we hypothesize:
Hypothesis 2b (H2b): Globally, the relationship between the geographic
prevalence of an EM-MNE and economizing logic has a U-shape form.
MNEs arbitrate location choices within regions (Arregle et al., 2009) because
competitive advantages and liabilities of foreignness are regional in nature (Rugman
& Verbeke, 2007). Given the relative institutional homogeneity inside regions (Arregle
79
et al., 2009; Rugman & Verbeke, 2007, 2008c), MNEs have incentives to use a single
logic (Prahalad & Bettis, 1986) when they make location choices within their home
regions. Whether institutional homogeneity is genuine or assumed (Asmussen, 2009),
decision makers are likely to take relative institutional proximity for granted and thus
focus on economic maximization in their home regions. While location choices are
primarily driven by economizing logic within a home region, no two countries may be
considered identical from an institutional point of view. Even minor institutional
differences may still matter and the degree of international experience of an MNE will
play an important role in how serious such differences may be perceived. For the
same reasons we have discussed to justify the U-shape relationship between
economizing logic and geographic prevalence at the global level, we hypothesize the
following for a home region:
Hypothesis 3 (H3): In the home region of an EM-MNE, its geographic
prevalence has a U-shaped relationship with economizing logic.
On the other hand, venturing into other regions may carry additional institutional
risks because the ability of leadership to “manage a diversified firm is limited by the
dominant general management logic(s) that they are used to” (Prahalad & Bettis,
1986:497). Operating in several regions may require the simultaneous mobilization of
multiple logics (Prahalad & Bettis, 1986) to handle institutional heterogeneity and
complexity. This is why both economizing and legitimizing logics are likely to entwine
in host regions as they do globally. For the same reasons discussed at the global level,
we expect the relationships between location choice logics and geographic prevalence
in host regions to be similar to the ones we hypothesized worldwide:
80
Hypothesis 4a (H4a): In host regions, the relationship between legitimizing
logic and the geographic prevalence of an EM-MNE will be linear and negative.
Hypothesis 4b (H4b): In host regions, the relationship between the geographic
prevalence of an EM-MNE and economizing logic has a U-shape form.
The diversity of both economic and institutional conditions among countries in host
regions represents a significant challenge for EM-MNEs in terms of organizational
learning. Failure to understand the institutional conditions in unfamiliar markets may
be costly (Orr & Scott, 2008), but the associated overhead is expected to decline as
firms gain experience (Belderbos, Van Olffen, & Zou, 2011; Lu & Beamish, 2001;
Zaheer, 1995). Therefore, the degree of an MNE's degree of internationalization (DOI)
is likely to influence which of the economizing and legitimizing logics it will choose to
adopt in host regions.
3.2.3 Moderating Effects of the International Experience in Host Regions
An MNE's degree of internationalization affects its location choices (e.g., Buckley,
Devinney, & Louviere, 2007). The Uppsala Stage Model (Johanson & Vahlne, 1977)
underlined the incremental nature of an MNE's commitment to foreign markets. While
the time factor is intrinsic to any organizational learning process, the depth and
breadth of the required learning is essentially determined by the magnitude of
differences and similarities between home and host countries from both economic
and institutional perspectives.
Firms with low international experience typically suffer higher liability of foreignness
in unknown regions in comparison to those with relatively higher experience. They
are more likely to follow legitimizing logic rather than economizing logic when they
81
venture into unknown markets in host regions. As they acquire more experience, they
are likely to show "less preference for near, similar and familiar markets" (Buckley et
al., 2007:3). As a result, legitimizing logic, which is aimed at mitigating the liability of
foreignness, is likely to weaken and economizing logic, which is aimed at maximizing
economic opportunities, is anticipated to strengthen. In other words, the relationships
we hypothesized for host regions will be moderated by the degree of experience of the
EM-MNE. Specifically, it will strengthen the effects of the U-shaped relationship (H4a)
and will weaken the effect of the invested U-shaped relationship (H4b). Hence, we
submit:
Hypothesis 5a (H5a): In host regions, the effect of legitimizing logic on the
geographic prevalence of EM-MNEs will be weaker with an increasing degree
of their internationalization.
Hypothesis 5b (H5b): In host regions, the effect of economizing logic on the
geographic prevalence of EM-MNEs will be stronger with an increasing degree
of their internationalization.
3.3 Research Methods
3.3.1 Data Sample
Given the nature of our study, we have chosen to focus on MNEs from developing and
emerging markets (EM-MNEs). The main reason is because the economic and
institutional characteristics of their home countries allow for a better distinction
between economizing and legitimizing behaviour than those of more developed
markets (DM-MNEs). It would be more difficult to infer from publicly available data
82
which of institutional proximity and economic opportunity logic explains location
choices by DM-MNEs. This is because, from a DM-MNE perspective, developed
markets are both institutionally proximate and economically attractive. On the
contrary, EM-MNEs need to arbitrate between institutional similarities with emerging
markets and economic opportunities generally found in more developed markets.
We use a proprietary database to test the hypotheses. The original dataset was
compiled from several reliable sources: BvD ORBIS database, LexisNexis Academic
database, and publicly available data to complement them. First, we used Orbis
database (2010) and followed a similar approach to the ones used by UNCTAD (2008)
and Fortune Global 500 (2009) to identify the world's largest EM-MNEs. Our approach
is guided by the availability and reliability of data, along the lines of recent studies
that examined the internationalization patterns of EM-MNEs (e.g., Cuervo-Cazurra &
Genc, 2008). The sample is also conveniently diverse from both geographic and
institutional perspectives, which makes it particularly suitable for the testing of our
hypotheses. Given the large size of these MNEs, they are located in several countries,
in home and host regions, which is instrumental to the exploration of the dominant
logics underlying the patterns of their location choices (Arregle, Hébert, & Beamish,
2006). Second, we used ownership structures in LexisNexis (2009) and Orbis
Ownership (2010) databases to reconstruct the location networks of individual MNEs.
In line with the existing International Business (IB) literature, subsidiaries are defined
as those in which the head office holds at least a 50.1% of ownership (e.g., Arregle et
al., 2009). Finally, when the relevant data were not available in Orbis Ownership and
LexisNexis databases, or when we were uncertain about their reliability, we searched
other sources such as D&B Who Owns Whom catalogues (2009) and the annual
reports of companies. After discarding the firms with insufficient, unreliable or
83
uncertain data from an original dataset of 500 EM-MNEs, the final sample included
203 firms from 24 different countries.
-----------------------------------Insert Table IV about here.
-----------------------------------3.3.2 Variables and Measures
The unit of analysis is the MNE Network. For each MNE, we identified all majorityowned subsidiaries global and grouped them by countries and regions using the
World Bank’s classification (2007). Table V provides detailed information about the
measurement and data sources for all variables.
-----------------------------------Insert Table V about here.
-----------------------------------Dependent variable
Geographic Prevalence (GP) is the dependent variable in our model. It indicates
whether an MNE’s locations are predominantly based in emerging markets or in
developed markets. We followed a similar approach to the one used by CuervoCazurra & Genc (2008) to compute this variable:
GP =
DM # SUB − EM # SUB
TOT # SUB
where DM#SUB is the number of the MNE's subsidiaries that are based in developed
markets; EM#SUB is the number of the MNE’s subsidiaries that are located in
emerging markets; and TOT#SUB is the total number of the MNE’s subsidiaries
worldwide.
Therefore, a positive ratio would mean that the MNE prevails in
developed markets whereas a negative ratio would indicate that the majority of the
MNE’s locations are based in emerging markets.
84
Independent variables
The model includes two independent variables: Institutional Distance Index (IDI) and
Economic Distance Index (EDI). They are aggregate values of two widely used
measures but at the MNE Network level: institutional distance and economic distance.
On the one hand, IDI is a proxy for Legitimizing Logic and informs on the magnitude of
relatedness among the locations that form the MNE Network from an institutional
distance standpoint (e.g., Kostova & Zaheer, 1999; Xu & Shenkar, 2002). On the other
hand, EDI is a proxy Economizing Logic and indicates the magnitude of relatedness
among the locations that constitute the MNE Network from an economic distance
point of view (e.g., Cuervo-Cazurra & Genc, 2008; Ghemawat, 2001). Conceptually, IDI
and EDI may be likened to a centre of gravity of the MNE from institutional and
economic perspectives. They essentially convey the nature of the dominant logic
underlying a given MNE Network configuration.
To calculate IDI, we used the World Bank’s governance indicators (Kaufmann, Kraay,
& Mastruzzi, 2009) that reflect the quality of national governance systems: voice and
accountability, political stability and absence of violence, government effectiveness,
regulatory quality, rule of law, and control of corruption. These governance indicators
have been used in country-level comparative studies (e.g., Cuervo-Cazurra & Genc,
2008) because they reflect the quality of national institutions.
Governance consists of the traditions and institutions by which authority
in a country is exercised. This includes the process by which
governments are selected, monitored and replaced; the capacity of the
government to effectively formulate and implement sound policies; and
the respect of citizens and the state for the institutions that govern
economic and social interactions among them. (Kaufmann et al., 2009:5)
85
For the purpose of this study, we are interested in measuring the average institutional
distance (IDI) between the home country of individual MNEs and the host countries of
their foreign subsidiaries. It is computed in two steps. The first step consisted of
calculating a 10-year average (1999-2008) for each governance indicator. We have
chosen 10-year average because (i) that is the period for which the data is available,
(ii) institutional conditions are relatively stable over time and even dramatic changes
in public policy would take some time before they affect governance indicators, and
(iii) recent studies showed that a 10-year period is relatively sufficient to capture the
essence of ongoing location arbitrage within regions (Arregle et al., 2009), thereby
reflecting the dominant logics behind MNE Network configurations. The second step
consisted in averaging institutional distances between the head office and individual
locations to obtain a single score for each MNE. To sum up, the degree of an MNE's
legitimizing logic (IDI) is computed as follows:
IDI =
1 n 1 6
∑ ∑ GovInd [d] (HQ) - GovInd [d] (SUB[s])
n s =1 d d =1
where IDI is the mean of differences between the score of the dth governance
dimension of the head office's home country and those of the host countries of all
subsidiaries forming the MNE network; n is the total number of majority-owned
subsidiaries in the MNE Network; GovInd [d] (HQ) is the dth governance indictor of the
MNE’s home country, and GovInd [d](SUB[s]) is the dth governance indicator (1 to 6)
of the country hosting the sth subsidiary.
On the other hand, EDI reflects the logic of economic opportunity underlying an MNE
Network of locations. In International Business literature, foreign direct investments
and location choices have long been associated with economic distance (ED) between
86
home and host countries (Ghemawat, 2001). It has generally been measured in terms
of market size or market growth (Berry, Guillen, & Zhou, 2010). The largest markets
are typically located in developed countries and EM-MNEs are known to prevail in
least-developed and developing countries (Cuervo-Cazurra & Genc, 2008). As a
consequence, EM-MNEs are more likely to favour market growth over market size
when it comes to assessing economic opportunities. For this reason, we use annual
GDP growth rate rather than market size to measure economic distance between
home and host countries. The degree of the economizing logic of an MNE is reflected
by its EDI, which is calculated as follows:
EDI =
1 n
∑ GDPGrowth (HQ) - GDPGrowth (SUB[s])
n s =1
where n is the number of countries in which the MNE has majority-owned
subsidiaries, GDPGrowth (HQ) is the 10-year average growth of MNE's home country
between 1999 and 2008, GDPGrowth (SUB[s]) is the 10-year average growth rate
(1999-2008) in the host country of subsidiary s.
Control variables
Several variables have been found in the IB literature to influence location choices.
Five of them are particularly relevant to the particular phenomenon under study. At
the firm level, size, age, industry, and degree of international experience play a critical
role. At the country level, FDI potential between home and host countries is of interest
as well.
Firm size is a key determinant of foreign direct investments because large MNEs have
access to more resources and capabilities than smaller one (Yiu, ChungMing, & Bruton,
87
2007). Consistent with prior studies, we use the natural logarithm of total sales rather
than assets due to data availability.
Firm age has been found to influence the ability of a firm to internationalize because
of the experience and knowledge it can accumulate over time. It is measured using the
natural logarithm of the number of years between our year of reference (2009) and
the firm’s inception date.
Industry is also included as a control variable to ensure that its effects are taken into
account. We used the American SIC classification to code this variable (CuervoCazurra & Genc, 2008).
Degree of internationalization (DOI) reflects the experience of an MNE in foreign
economic and institutional settings. It is generally approached in terms of scale or
scope of the MNE's activities. The scale (or depth) of internationalization is generally
measured using sales, assets, or number of employees (e.g., Lu & Beamish, 2001;
Rugman, 2005; Rugman & Oh, 2009), whereas the scope (or breath) of
internationalization is generally measured in terms of the number of foreign
subsidiaries or the number of countries in which an MNE is located (e.g., CuervoCazurra & Genc, 2008; Rugman & Oh, 2009; Tallman & Li, 1996). This study is
concerned with the breadth of internationalization, and so we measure the degree of
internationalization using the ratio of foreign-to-total number of subsidiaries. By
using the number of subsidiaries rather than the number of countries (Hitt, Hoskisson,
& Kim, 1997) we factor in the weights of individual countries in the composition of
MNE Networks.
88
FDI potential between two countries has also been at the centre of international
economics and foreign direct investments. As discussed earlier, the potential of
bilateral trade and FDI can be measured in terms of market size or market growth
(Berry et al., 2010). Since we used market growth to measure the independent
variable EDI, we opt for market size to measure bilateral FDI potential. To measure
the effect of market size, we follow the gravity model that is generally used to
explicate not only bilateral trade but also FDI flows (Li & Vashchilko, 2010).
Accordingly, the GDP per capita of the home country is multiplied by the GDP per
capita of the host country and the product is divided by the geographic distance
between the two nations. Similar to the operationalization approach of geographic
distance by Bouquet & Birkinshaw (2008), we obtained data from the CEPII's distance
database (Mayer & Zignago, 2011). It used the Great Circle formula which computes
geographic distance between two countries using the latitude and longitude
coordinates of the most populous cities in these countries (Mayer & Zignago, 2011).
Home Region is used to check whether the localization (or not) of subsidiaries in the
home region of their parent's home country affects the logic of location choices. This is
important because international strategies are posited to be rather regional in nature
(Rugman & Verbeke, 2007).
3.4 Analyses
Since the phenomenon we study spans several organizational and geographic levels,
we verified the relevance of adopting a multilevel analysis approach. Specifically, we
used HLM 6.07 to check for independent effects at the local, regional, and global levels.
The analysis shows that level 3 Intraclass Correlation Coefficient (ICC) is below the
threshold of .10 which means that less than 10% of the variability in a location choice
89
could be explained by, or is related to, variables at the MNE's home country level. This
suggests that multilevel analysis is not relevant or particularly indicated for this study
(Beretvas, 2007; Bliese, 2000). Therefore, we used simple regression under STATA 9.1
to test hypotheses. We verified the relationships between alternative logics and
geographic prevalence using the following model:
Geographic Prevalence = β0 + β1 Ln(Size) + β2 Ln(Age) + β3 Degree of
Internationalization + β4 Ln(FDI Potential) + β5 Industry + β6 Institutional
Distance Index + β7 Economic Distance Index + β8 DOIxIDI + β9 DOIxEDI + ε
The hypotheses are considered supported when the coefficient of β6 and β8 are
negative (liability) and statistically significant, and the coefficients of β7 and Β9 are
positive (advantages) and statistically significant. Table VI provides the general
descriptive statics and correlations of the variables in the model.
-----------------------------------Insert Table VI about here.
-----------------------------------Table IV shows how the whole locations of the 203 EM-MNEs in our sample are
distributed geographically by comparing data of the home region and host region, on
the one hand; and those of developing markets and developed markets on the other
hand.
-----------------------------------Insert Table VII about here.
-----------------------------------These statistics indicate that subsidiaries are predominantly located within the home
regions of their parents (59%) and in emerging markets (62%). These findings offer
support for hypotheses H1a and H1b.
90
In Table VIII, we show the results of our statistical analysis. Model 1 is used as a
baseline with control variables only. There is a baseline for each geographic grouping
of locations we analyze separately: worldwide, home regions, and host regions. Model
2 incorporates two additional variables, namely IDI and EDI, which are proxies for
legitimizing logic and economizing logic allowing for the testing of Hypothesis 2. The
results provide support for H2a, since the coefficient of IDI is negative and statistically
significant (-52.96 [p<0.05]) and its quadratic term is statistically non-significant
which indicates that the relationship is linear in nature. They are also supportive of
H2b given that the coefficient of EDI is positive and statistically significant (12.13
[p<0.05]) and its quadratic term is positive and statistically significant. This implies
that the relationship between EDI and geographic prevalence has a U-shape form.
Finally, this model shows that both legitimizing and economizing logics have
significantly different effects on geographic prevalence, depending on whether a
subsidiary belongs to the same region as its parent or not (23.08 [p<0.05] and 6.11
[p<0.05] respectively).
------------------------------------Insert Table VIII about here.
------------------------------------Model 3 and Model 4 provide the testing outcomes for Hypotheses 3 and 4, which
suggest that location decisions by EM-MNEs follow distinct logics depending on
whether choices are made within or outside of their home regions. The results
presented in Model 3 support the suggestion that location choices are driven by
economizing logic only in home regions. The tests show that IDI is non-significant
while the coefficient of EDI is positive and statistically significant (7.79 [p<0.05]).
Furthermore, the quadratic term of EDI is positive and statistically significant, which
implies that the relationship between economizing logic and geographic prevalence in
91
home regions follows a U-shape trend. This is in line with the regional view of
international strategy which assumes a relative homogeneity of institutional
conditions within home regions (Rugman & Sukpanich, 2006). On the other hand,
Model 4 pertains to location choices out of home regions. The results show that the
coefficient of IDI is negative and significant (-34.56 [p<0.05]) and that of EDI is
positive and statistically significant (6.04 [p<0.05]). In addition, the quadratic term of
EDI is positive and statistically significant. These results support H4a, which predicted
a linear negative relationship between IDI and geographic prevalence, and H4b, which
posited a U-shape relationship between EDI and geographic prevalence. These
findings for host regions are fully consistent with existing theories as they emphasize
the importance of both economic and institutional distances in international context
(Ghemawat, 2001) including when it comes to location choice decisions (Belderbos et
al., 2011). In order to unravel the intertwined effects of the legitimizing and
economizing logics in host regions, we have tested for interactions between the
legitimizing logic and the degree of internationalization (Hypothesis H5a) and
between the economizing logic and the degree of internationalization (Hypothesis
H5b). Model 5 provides the results of our statistical analysis showing support for H5b
and confirms that the degree of internationalization moderates the relationship
between economizing logic and geographic prevalence (0.02 [p<0.05]). That is, the
tendency of EM-MNEs to seek economic opportunities in host regions will increase in
the early stages of their international expansion and decrease as they gain experience.
This is probably due to the fact that firms are likely to find a pool of countries with
relatively lower or similar institutional conditions they can choose from when they
start venturing outside of their home region. By selecting one of these countries, they
reduce the levels of institutional uncertainty and hence their liability of foreignness in
92
the chosen country. Consequently, economizing logic will be the dominant driver of
location arbitration in the early stage of internationalization. As the number of options
will diminish over time, this will entail either taking more institutional risk or
lessening their appetite for high economic opportunities. Given the tendency of EMMNEs to prevail in developing and emerging markets, they are expected to ease their
economic appetite rather than increase their institutional risk. This is consistent with
our findings that the degree of experience does not moderate the linear relationship
between legitimizing logic and geographic prevalence as hypothesized in H5a.
Furthermore, we focus on EM-MNEs which tend to concentrate their activities in
home regions and emerging markets. A large majority of home countries of the firms
in our sample (Table IV) are among the most mature emerging markets from an
institutional perspective. Therefore, they have the advantage of being able to
understanding other emerging markets as well as more advanced economies. As a
result, legitimacy building is indeed required as suggested by the statistical
significance of IDI in host regions (-34.59 [p<0.05]), but the learning process is
relatively linear and incremental over time.
--------------------------------------Insert Figure 4 about here.
--------------------------------------More specifically, Figure 4 shows that the degree of international experience
moderates the relationship between EDI and geographic prevalence only when the
economic growth rate of the host country is higher than the growth rate of the home
country’s economy (negative EDI). In other words, the higher the geographic
prevalence ratio of an MNE, the higher its need for international experience. This is
comprehensible since high geographic prevalence ratio implies more developed
markets than developing markets in the MNE portfolio of locations. We suggest that
93
when an EM-MNE choosing between a developed market and an emerging market of
the same market growth rate, it will likely choose the emerging market for
institutional proximity reasons unless it already has significant international
experience.
3.5 Discussion
In line with the existing literature, we found that the activities of EM-MNEs prevail in
their home regions on the one hand, and in emerging markets on the other hand. We
subsequently used a cross-sectional dataset to examine whether EM-MNEs follow
distinct logics when they choose their foreign locations within and outside of their
home regions. Our findings confirm that EM-MNEs arbitrate the need for institutional
legitimacy and the search for economic opportunity differently depending on whether
location choices take place within their home regions or not. The results of our
statistical analysis are supportive of our predictions that EM-MNEs follow
economizing logic in their home regions and a mix of legitimizing and economizing
logics in remote regions.
This empirical investigation of the dominant logics underlying location choices by EMMNEs contributes to strategic management and international business literature in
several ways. First, we take a holistic approach to the examination of the MNE's
behaviour rather than focusing on individual host country choices. We conceptualize
the MNE as a network of locations and view the underlying choices as a portfolio of
decisions reflecting strategies that emerge and crystallize over time (Mintzberg &
Waters, 1985). This approach represents a significant departure from the traditional
dyadic view of localization based on the matching of home and host countries.
94
Second, we identified the dominant logics (Bettis & Prahalad, 1995; Prahalad & Bettis,
1986) underlying the overall pattern of decisions by analyzing the configurations of
location networks. We draw upon international business literature to suggest two
alternative logics of location selection: economic efficiency and institutional
legitimacy. While scholars emphasized the importance of considering both economic
and institutional factors in explaining strategic decisions in the past (Peng, 2002), this
study goes beyond complementarity. We contrasted the two logics and suggested that
one may matter more than the other depending on organizational factors and
geographic settings.
Third, the fact that EM-MNEs mobilize different logics of location selection when they
venture out of their home regions substantiates the importance of studying the
regional dimension of cross-border phenomena in international business (Rugman &
Verbeke,
2004b).
While
home
regions
are
not
necessarily institutionally
homogeneous, they are generally assumed by decision makers to be so. This home
region bias is perhaps the reason why the logic of location arbitration within home
region is driven by economic opportunity rather than by institutional familiarity.
Consequently, the degree of the internationalization was found to influence the nature
of the relationship between economizing logic and geographic prevalence in host
regions, but has no statistically significant effect on the relationship between
legitimizing logic and geographic prevalence.
Finally, this study provides a tangible example of phenomena that are better
investigated using data on EM-MNEs rather than DM-MNEs. As their markets mature
and institutions formalize, emerging countries represent a fantastic laboratory not
only for the replication of existing theories but also for the development of new ones
95
(Taleb, 2010). It would be particularly complex to ascertain from publicly available
data whether a DM-MNE entering a developed market is driven by economizing logic
or legitimizing logic. This is because the tension between institutional imperatives and
economic needs would be lower for a DM-MNE than for an EM-MNE. That is, economic
opportunity and institutional familiarity are likely to correlate for DM-MNEs and
diverge for EM-MNEs due to the characteristics of their home countries. This also
underlines the fact that the natures of the trade-offs EM-MNEs and DM-MNEs need to
make when they arbitrate location choices are relatively different.
The findings of this study have important theoretical and practical implications. From
a research perspective, the conceptualization of location choices as a portfolio of
decisions and the identification of the dominant logics underlying MNE Network
configurations provide a holistic approach to the analysis of firm behaviour as
opposed to individual decisions. A few recent studies opted for a similar perspective
(e.g., Nachum & Song, 2011) and more scholars interested in international business,
strategic management, and organizational theories may find this approach useful in
conducting future studies. Furthermore, the fact that legitimizing and economizing
logics interact within and outside home regions in different ways helps contextualize
the decisions of MNEs. In particular, it reiterates the need for scholars to pay
particular attention to the regional dimension of the firm’s international action.
Finally, the focus on EM-MNEs helps one to understand the behaviour of an
increasingly influential group of multinational firms.
From a management practice view, decision makers may find it helpful to think about
their own strategies as well as those of their competitors from a dominant logic
perspective. In particular, managers who seek to anticipate the strategic moves of
96
their competitors will appreciate the predictive power of this concept because it
assumes relative consistency in behaviour over time. While the idea of dominant logic
may not be new to practitioners, this study provides a tangible example of its
usefulness in concrete strategic analysis. By shedding some light on the mechanisms
of location arbitration that has been found in the past to be regional in nature (Arregle
et al., 2009), it increases the awareness of senior managers about the regional logics of
strategic decision-making. In particular, decision makers should expect their
competitors to possibly change managerial logics, especially when they venture
outside their home regions.
3.6 Conclusion
The objective of this paper is to explore the logics underlying foreign location choices
by MNEs from emerging and developing markets. We began by asking how EM-MNEs
arbitrate economic aspirations and institutional contingencies when they choose the
locations of their foreign subsidiaries. Drawing upon transaction cost economics and
new institutional theories, we generated nine hypotheses and tested them using a
dataset of 203 MNEs from emerging markets. As discussed earlier, the focus on this
category of MNEs is particularly helpful in disentangling the competing – economizing
and legitimizing – logics, which would be difficult to achieve otherwise with a
population of MNEs from more advanced economies.
We conceptualized the MNE as a network of subsidiaries and the underlying location
choices as a portfolio of decisions. By analyzing MNE Network configurations, we
capture the end result of a series of location arbitrage decisions over time. This
97
allowed us to identify the dominant logics of those decisions and contextualize when
one dominates the other.
This paper has typical limitations that can be addressed in future research. For
instance, we used a cross-sectional dataset to test our hypotheses while controlling
for potential endogeneity issues. Consistent with prior empirical studies, we assumed
that an MNE Network configuration in a particular moment of time is a reflection of a
series of decisions heralding the time of observation. While our approach is valid, a
longitudinal dataset would provide further insight into the phenomenon by allowing
for a fine-grained analysis of how such configurations evolve and crystallize over time.
However, conducting such a study will require the collection of primary data on the
evolution of network configurations over time.
Another limitation of the study consists in using average economic distance as a proxy
for economizing logic and average institutional distance as a proxy for legitimizing
logic at the MNE Network level. While these choices are methodologically reliable and
empirically consistent with extant literature, we suggest that a more sophisticated
measurement of economizing and legitimizing logics can be achieved by constructing
factors with multiple indicators.
In addition, while the dataset we used is particularly suitable for the research
question we asked, it implies that our findings and their implications may be specific
to EM-MNEs. Therefore, caution should be taken when generalizing our conclusions to
other MNEs, especially those coming from more advanced economies. In the same
vein, recent studies highlighted the difficulty of finding secondary data on EM-MNEs
that can be used in studies like ours (e.g., Cuervo-Cazurra & Genc, 2008). While our
98
sample of 203 firms has been sufficiently large to test our hypotheses, a larger sample
might reveal a stronger effect of the degree of experience on the relationship between
IDI and geographic prevalence in host regions, for instance. Similarly, our statistic
assessments showed no particular conceptual interest in using HLM to test our model,
but adopting a nested analytical approach may prove stronger statistical results for
the same interaction.
Finally, the predictive power associated with the dominant logic concept may be
altered by other factors such as the characteristics of decision makers or occasional
shifts in strategy as a result of change in firm leadership or context. One of the
strengths of the dominant logic approach is to correct for these factors by focusing on
general trends rather than on individual decisions, but an empirical exploration of
various moderating factors, such as the decision maker’s bias towards emerging
markets, would be of particular interest.
The above theoretical implications and design limitations suggest that future research
may extend this study in several ways. For instance, we would welcome additional
indicators to measure legitimizing logic and economizing logic constructs.
International Business and Organization Management scholars should find more
inclusive constructs helpful in conducting future research.
Another interesting extension of this work would consist in conducting a comparative
study that contrasts location choices by EM-MNEs with those made by DM-MNEs. This
would contribute to a broader debate on whether EM-MNEs behave differently from
DM-MNEs.
99
Finally, given the growing interest in the regional dimension of international
phenomena, we suggest that additional studies using the dominant logic approach
would help explain why MNEs tend to concentrate their activities in their home
regions. This holistic approach is particularly useful in studying the phenomenon
because it helps bridge multiple levels of analysis, especially between individual and
organizational factors and between economic rationality and cognitive bias. Likewise,
the concept of "regional bias" is worth exploring further. Extant literature identified
national bias (McCallum, 1995) and intra-national bias (Wolf, 2000) as key factors to
market expansion strategies. Regional bias would provide a supra-national dimension
of the same phenomenon.
100
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World Bank. 2007. Annual World Bank Conference on Development EconomicsRegional: v. Washington, D.C.: World Bank.
World Bank. 2010. Catalog Sources World Development Indicators: World DataBank.
Xu, D., & Shenkar, O. 2002. Institutional distance and the multinational enterprise. The
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Yiu, D. W., ChungMing, L., & Bruton, G. D. 2007. International venturing by emerging
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104
Appendices
Table IV – Home-countries of the 203 EM-MNEs in the Sample
Home-country
Taiwan
South Korea
South Africa
China
India
Mexico
Brazil
Singapore
Malaysia
Thailand
Saudi Arabia
Kuwait
# MNE
45
39
23
21
20
7
6
5
5
4
4
4
105
Home-country
Cayman Islands
Hong Kong
Chile
Venezuela
Turkey
Nigeria
United Arab Emirate
Panama
Egypt
Zimbabwe
Netherlands Antilles
Colombia
# MNE
4
3
3
2
1
1
1
1
1
1
1
1
Table V - Variables, Measures and Data Sources
Type
Variable
Measure
Source
Dependent
Variable
Geographic prevalence
indicates whether the EM-MNE
prevails in developed markets
(positive sign) or in emerging
markets (negative sign)
Legitimizing logic reflects the
tendency of a multinational to
enter countries with relatively
similar institutional conditions
to their home-countries
Computed by subtracting the number of subsidiaries located in
developing markets from the number of subsidiaries located in
developed markets, and the difference is divided by the total number of
subsidiaries. It ranges from -100 (all locations in developed markets) to
+100 (all locations in emerging markets).
Legitimizing logic is assessed by averaging institutional distances in the
form of differences between the governance indictors of an MNE’s
home-country minus those of the host countries of its subsidiaries.
Institutional Distance Index (IDI) is the arithmetic mean of the five
indicators at the MNE Network level. Its value ranges from -5 to +5.
Computed using network structure
and ownership data from ORBIS
(2010), Who Owns Whom (2009)
and LexisNexis (2009) databases.
Economizing logic reflects the
general tendency of a
multinational to pursue
economic opportunities in
countries with relatively higher
economic growth than in their
home-countries
Size
Economizing logic is measured by averaging economic distances in the
form of differences between the GDP growth rates of an MNE’s homecountry minus the GDP growth rates of the host country of each location
in their network. The growth rates being used are the average of 10 years
(1999-2008) prior to the date of network configuration. A one-year lag
was also added to count for time effects.
Same as above for location
network configuration. Computed
using GDP growth ratios from the
World Bank’s database (2010).
Natural log of total sales in million $US at the end of 2009.
ORBIS database (2010).
Natural log of the number of years between 2009 and the incorporation
date.
Dummy variables based on US SIC code.
Natural log of the averaged gravity model results at the network level.
For each host foreign location, GDP per capita of home-country is
multiplied by GDP per capita of host country, and the product is divided
by the geographic distance between the two countries using the Great
Circle method.
Dummy variable indicating whether a subsidiary is located in the homeregion of its parent (1) or in another region (0).
Number of foreign subsidiaries divided by the total number of
subsidiaries of a given MNE.
Independent
Variables
Control
Variables
Age
Industry
FDI Potential
Home Region
Moderating
Variable
Degree of Internationalization
network configuration. Computed
using the UNCTAD’s six
governance indicators (Kaufmann
et al., 2009).
Computed using GDP per Capita
data from the World Bank’s
database (2010) and geographic
distance from CEPII database
(www.cepii.fr).
network configuration.
Table VI - Descriptive Statistics and Correlation Matrix
Variable
Mean
1. Size (sales in billion US$)
13.0
Std.
Dev.
21.8
1
2
3
4
5
6
7
1.00
2. Age (years)
40.4
30.7
0.04
1.00
3. FDI Potential (billion US$/km)
485.2
2296.8
-0.04
0.01
4. Geographic Prevalence (%)
-31.8
49.9
-0.003
0.10
-0.02
1.00
5. Economic Distance Index
2.17
2.1
-0.06
-0.28
-0.06
0.18
1.00
1.00
6. Institutional Distance Index
-0.3
0.5
-0.06
0.02
0.06
-0.10
-0.14
1.00
7. Degree of Internationalization (%)
56.5
27.7
0.06
0.03
0.13
0.63
0.14
0.10
1.00
Table VII Statistics on Geographic Prevalence
# (%) of
subsidiaries in...
Home Region
Host Regions
Total
Emerging
Markets
5,647 (56%)
Developed
Markets
299 (3%)
Transitional
Markets
0 (0%)
5,946 (59%)
625 (6%)
3,478 (34%)
74 (1%)
4,177 (41%)
6,272 (62%)
3,777 (37%)
74 (1%)
10,123 (100%)
107
Total
Table VIII - Results of Regression Analyses
Variables
Worldwide
110.332
Intercept
Model 1 (Baseline)
Home Region Host Regions
-94.949
-46.158
Model 2 (H2)
Worldwide
-67.047
-35.699
-77.855
Model 3 (H3)
Home Region
-117.152 -104.949
Model 4 (H4a/b)
Host Regions
-167.907 -212.278
Model 5 (H5a/b)
DOI in Host Regions
-166.847 -206.432
Control Variables
(a)
Industry
Size (Ln)
Age (Ln)
FDI Potential (Ln)
DOI
Region (inHmR)
N/R
1.454
2.890
-7.976*
-1.225*
N/R
1.782
-3.574
1.440
-0.136
N/R
-1.304
1.717
12.461*
-0.017
Main Effects
IDI
EDI
IDI^2
EDI^2
N/R
-2.297
12.239*
2.445
-0.638*
N/R
-0.610
4.559*
6.073*
0.046
-136.344*
N/R
-1.730
12.975*
2.675**
-0.621*
N/R
0.588
-0.201
2.888*
-0.121
N/R
-0.354
-0.759
2.473*
-0.084
N/R
-2.873
7.858*
19.126*
0.142
N/R
-1.112
8.699*
21.945*
0.119
N/R
-2.822
7.898*
19.118*
0.079
N/R
-1.546
8.113*
21.579*
0.169
-52.492*
12.127*
-31.021*
3.409*
-51.828*
8.675*
-0.272
0.712*
-6.232
7.793*
-7.930*
0.760
-5.842
2.366*
-34.558*
6.043*
-41.337*
1.388
-5.394
0.901*
-37.218*
4.638*
-41.895*
4.916
-3.009
0.085
0.085
0.042
0.050
-0.109
-0.055
0.024*
203
203
Interactions
inHmR x IDI
inHmR x EDI
23.079*
6.109*
DOI x IDI
DOI x EDI
DOI x IDI^2
DOI x EDI^2
# Observations
~
406
203
203
406
406
406
203
203
203
203
p< 0.1 * p < 0.05 ** p < 0.01 *** p < 0.001
N/R: The beta coefficients of the dummy variables for industry were non-significant and are not reported here for sake of brevity
(a)
Figure 4 - Moderating Effects of the Degree of Internationalization on the
Relationships between Economizing Logic and Geographic Prevalence in Host Regions
EDI-DOI Interaction in Host Regions
-10
-5
0
5
10
Geographic Prevalence
-15
Economic Distance Index
High DOI (m+1sd)
Medium DOI (mean)
109
Low DOI (m-1sd)
15
Conclusion générale
Chacun des trois articles dans cette thèse a sa propre conclusion. Par conséquent,
cette conclusion générale a pour objectif de prendre du recul et d’essayer de répondre
à la question suivante : qu'avons-nous appris de ces trois articles en tant qu’ensemble
intégré ? En répondant à cette question, nous focalisons notre attention sur les
logiques de stratégisation et synthétisons nos principaux apprentissages en quatre
grands thèmes.
Intégration des logiques : Les logiques d’efficacité économique, de légitimité
institutionnelle et de pouvoir politique doivent être vues comme un ensemble intégré
de lentilles analytiques. Chacune des rationalités sous-jacentes apporte une
perspective unique à la compréhension des phénomènes organisationnels. Les deux
articles empiriques illustrent clairement comment le pouvoir explicatif d’une logique
peut se renforcer quand elle est combinée avec les autres logiques complémentaires.
Arbitrage des logiques : Les trois logiques ne sont pas seulement complémentaires,
elles interagissent également et s’influencent mutuellement. Les décideurs utilisent
leur jugement pour privilégier l’utilisation d'une logique plutôt qu’une autre. Ils
peuvent aussi mobiliser plusieurs logiques en même temps. Faire appel au jugement
personnel implique la présence éventuelle de subjectivité et de partialité au moment
des choix. Le paradigme de distance psychique, par exemple, suggère que les
décideurs ont tendance à préjuger des similitudes entre pays alors qu’il n’y en a pas en
réalité. Dans le troisième article, nous avons souligné, par exemple, le rôle du biais
cognitif dans les décisions d'entrée des firmes des pays émergents dans les marchés
xv
des pays avancés. Ce biais cognitif pourrait favoriser la persistance et la dominance
d’une logique sur les autres même si le contexte varie à travers le temps et l’espace.
Contextualisation des logiques : Le contexte de la firme multinationale est à la fois
distribué et pluraliste. Comme discuté dans le troisième article, les logiques de
stratégisation sont foncièrement ancrées dans le psychisme des décideurs. Ces
derniers, à leur tour, sont encastrés dans des environnements multiples et souvent
différents. De plus, les parties prenantes impliquées dans les processus
organisationnels peuvent avoir des intérêts divergents – et néanmoins légitimes – en
fonction du rôle qu’elles jouent dans ces derniers. Le deuxième article a notamment
illustré l’importance de contextualiser la prédominance des logiques selon la partie
prenante concernée. Dans le transfert d’une même pratique, une petite filiale
destinatrice peut rechercher de l'efficacité économique alors que d’une grande filiale
originaire de cette même pratique peut rechercher du pouvoir politique et de la
légitimité organisationnelle. Le contexte joue donc un rôle essentiel dans l'arbitrage
des logiques. Ceci est également apparent dans le troisième article vu que nous
focalisons notre attention sur le comportement des firmes multinationales qui sont
fortement influencées par le contexte socio-économique des pays émergents.
Dimension régionale des logiques : Les deux articles empiriques de cette thèse
confirment la pertinence d’étudier la dimension régionale des phénomènes
organisationnels dans un contexte international. Ensemble, ils suggèrent que les effets
régionaux ne concernent pas seulement les choix de locations (praxis) mais aussi les
processus de stratégisation (pratiques). Le troisième article montre que les logiques
de stratégisation sont de nature régionale dans la mesure où les décideurs mobilisent
xvi
des logiques distinctes quand ils font des choix de locations selon la région cible. On y
fait notamment la différence entre la région mère de la multinationale et le reste du
monde. Quant au deuxième article, il apporte une contribution substantielle à la
littérature
en
explorant
la
dimension
régionale
d'un
phénomène
intra-
organisationnel. On y suggère notamment que la logique régionale peut s’appliquer
aux phénomènes aussi bien internes qu’externes à l’organisation. En contrastant la
vision interne des régions (structure organisationnelle) avec les regroupements des
pays en régions géographiques qui sont généralement utilisés dans la littérature
(banque mondiale), cet article soulève la question du fit entre les structures formelles
et les structures informelles, et de comment la présence ou l’absence de ce dernier
influence les processus et les actions des organisations. La question est d’une
importance capitale dans la mesure où les structures formelles représentent des
mécanismes de contrôle organisationnel alors que les structures informelles
nourrissent les représentations collectives et les biais cognitifs des décideurs.
Ces quatre thèmes couvrent d’une manière schématique nos apprentissages sur les
logiques de stratégisation au sein de la firme multinationale. De futures études
permettant de mieux comprendre les dynamiques de ces logiques seront d’une grande
utilité aussi bien scientifique que pratique. En particulier, il serait intéressant de
comprendre comment ces logiques interagissent ? Comment elles sont arbitrées par
les décideurs ? Comment le contexte peut expliquer la mobilisation d’une logique
plutôt qu’une autre ? Pourquoi les décideurs changent de logique quand ils choisissent
des locations en dehors de la région mère de la firme ? Les réponses à ces questions
seront autant plus intéressantes si elles sont explorées dans les contextes distincts des
marchés développés et des marchés émergents.

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