DEVELOPMENT, RECOGNITION, AND INTEGRATION OF COMPETENCE OF SUBSIDIARIES IN THE MULTINATIONAL CORPORATION

 

MARIA ANDERSSON
Department of Business Studies
Uppsala University
P.O. Box 513, SE-751 20 Uppsala,
Sweden

Tel: +46-18-471 1618
Fax: +46-18-471 7301

E-mail: maria.andersson@fek.uu.se

 

PATRICK FURU
(Corresponding author)
Department of Management & Organization
Swedish School of Economics and Business Administration
P.O. Box 479, FIN-00101 Helsinki,
Finland

Tel: +358-9-431 33245
Fax: +46-9-431 33275

E-mail: furu@shh.fi

 

CHRISTINE HOLMSTRÖM
Department of Business Studies
Uppsala University

P.O. Box 513, SE-751 20 Uppsala,
Sweden

Tel: +46-18-471 1618
Fax: +46-18-471 7301

E-mail: christine.holmstrom@fek.uu.se

 

 

DEVELOPMENT, RECOGNITION, AND INTEGRATION OF COMPETENCE OF SUBSIDIARIES IN THE MULTINATIONAL CORPORATION

 

Abstract

Research on multinational corporations (MNCs) has emphasized the need for integration of the operations. From a resource-based view, integration implies utilizing the competencies of the organization. For the MNC, then, it is essential to coordinate the competencies of its subsidiaries in order to achieve efficient integration. This paper examines the question of how the way the subsidiary’s competence has been developed influences the integration of that competence. The results show that the more other corporate units had contributed to developing the subsidiary’s competence, the more integrated the competence was.

 

 

DEVELOPMENT, RECOGNITION, AND INTEGRATION OF COMPETENCE OF SUBSIDIARIES IN THE MULTINATIONAL CORPORATION


Recent studies on multinational corporations (MNCs) have focused on the complex structures of the globally dispersed organization (e.g. Ghoshal & Bartlett, 1990, 1997; Hedlund, 1986, 1994, Taggart, 1997a, 1998). In this growing body of research, there is a vast new interest in how to develop and utilize the knowledge-based assets of the global operations (Gupta & Govindarajan, 1991, 1994; Kogut & Zander, 1993, 1995; Mascarenhas, Baveja & Jamil, 1998; Zander & Kogut 1996). Assuming that firms compete on the basis of their competencies (Barney, 1986, 1991; Prahalad & Hamel, 1990; Grant, 1991; Madhok, 1997), it can be argued that the competence-base of the subsidiary will determine its role in the MNC (Bartlett & Ghoshal, 1989).

The traditional view on MNCs (e.g. Caves, 1971; Dunning, 1980 Hymer, 1960) suggests that the competencies of subsidiaries originate from the parent company. In contrast, we adopt a view that perceives subsidiaries as distinct capability units that to a large extent develop their own competence. We argue that the degree to which subsidiaries in the MNC contribute to the development of the corporate competitive advantage can partly be explained by the differences in the competence development of those subsidiaries. Consequently, each MNC subsidiary is seen as unique, as it possesses some subsidiary-specific competence (Madhok, 1997).

Instead of perceiving the MNC as an entity managed from the top, in which subsidiaries replicate the organizational structure of the parent (Nelson & Winter, 1982; Yamin, 1997) and execute centrally created strategies, a stream of research on the MNC emphasizes that many national affiliates are able to develop exceptional competence. This type of affiliate may be characterized by, for instance, high knowledge outflows to and inflows from the MNC (Gupta & Govindarajan, 1994), a strategically important, competitive market position (Bartlett & Ghoshal, 1986), a high product, market and value-added scope (White & Poynter, 1984; Birkinshaw & Morrison, 1995), autonomy (Taggart, 1997a) and influence on the MNC (Surlemont, 1998).

Although this stream of research suggests that subsidiaries play important roles in the MNC by contributing to the overall corporate competencies, there is still a lack of understanding of how subsidiary competence is integrated within the MNC. The objective of this paper is to examine conditions that enhance the integration of the subsidiary’s competence in the MNC. Thus, the research question is how competence is integrated due to differences in the ways the subsidiary competence evolve. Hypotheses were tested on 391 highly competent foreign-owned subsidiaries in five countries, i.e. Sweden, Finland, Denmark, Norway, and the UK.

The findings suggest that competent subsidiaries have developed their competencies primarily through interactions in their local environment. What influences the possibilities to transfer these competencies to the rest of the MNC, however, is the extent to which these subsidiaries have adapted their competencies to the needs of other corporate units. These adaptations influenced how other corporate units recognize the subsidiary’s competencies, and the recognition led to the integration of those competencies. The results diverge from the traditional theory of the MNC (e.g. Hymer 1960), where the competencies of the subsidiaries are seen to originate at the headquarters, not in the local market.

This paper is organized into five sections. First, the theoretical foundations are mapped out, based mainly on the evolutionary theory of organizational change (Nelson & Winter, 1982). Through an evolutionary perspective a subsidiary can be viewed as an organic entity with the likelihood of developing competence over time (Taggart, 1997b). In the second section, the literature on subsidiary roles is reviewed, and on the basis of the theories four hypotheses are derived. After a presentation of research method in the third section, the empirical findings are presented, focusing on MNC recognition of subsidiary competence and the implications in terms of integration of the competence. Finally, the results are discussed and issues for future research are proposed.

Background

The development and growth of the firm are often discussed in terms of organizational structure, competencies, and behavior (Coase, 1937; Penrose, 1959; Williamson, 1975). From an evolutionary theory of the firm (Nelson & Winter, 1982), an organization is structured around routines. Routines are the basic constituents of an organization (Cyert & March, 1963; Levitt & March, 1988; Nelson & Winter, 1982) and may be described as regular behavioral patterns of the organizational members. Changes in the organization’s environment result in the adaptation of organizational routines to the new conditions, thus changing behavioral patterns of the organizational members. Such adaptation of routines results in competence development, as organizational competence is embedded in these routines (Forsgren, Johanson, & Sharma, 1999; Nelson & Winter, 1982). Firm-specific routines such as decision-making techniques or management systems are vital means for integrating competence in organizations (Grant, 1996). Organizational routines become the key in the process of transferring and communicating competence among organizational members and units (Spender, 1996). In line with these arguments, it is here assumed that organizational routines serve as repositories of competence, and adaptation of routines results in competence development of organizations. Below we will present these arguments in more depth.

Organizational Routines as Competence

Organizations remember by doing and accumulate competence through their activities. This competence is manifested in organizational routines, which serve to direct organizational behavior (Nelson & Winter, 1982; Dosi, Teece & Winter 1992). Nelson and Winter (1982) use the term routine for describing "all regular and predictable behavioral patterns" (p.14) comprising for example business and technical routines, policies regarding research and development as well as business and investment policies. Szulanski (1996) discusses best practice as the organization’s routine use of knowledge, and that the transfer of best practice is to be regarded as exchange of organizational knowledge. In this respect, transfers of best practice are replications of organizational routines, thus enabling integration of competence in different organizational units, e.g. subsidiaries. Competence thus becomes stored in the routines, processes and decision procedures of the organization (Forsgren, Johanson & Sharma, 1999). Consistent with these authors, we claim that competence is manifested in the organizational routines, which thus form the competence-base of the organization.

Adaptation

As the organization is an open system (Boulding, 1956), ongoing changes in the environment necessitates modifications in organizational routines (Nelson & Winter, 1982). Viewing the firm as an adaptive institution (Cyert & March 1963) implies that the firm adapts in accordance with its experiences and behaviors. Firms change their behavior, i.e. adapt their routines, in accordance with changes in and feedback from the environment (Nelson & Winter, 1982). Therefore, adaptation is to a large extent a question of knowledge about the environment (Johanson & Vahlne, 1977). The less the organization knows about the environment, the more difficult it becomes to carry out existing routines successfully. This means that the only way to carry out organizational routines with the desired outcomes is to be knowledgeable about and adapt them to the changing conditions. It is through the adaptations of routines that an organization develops competence.

Changes in routines evolve as a result of trial and error experimentation. The likelihood of a routine to be used increases with its success in meeting the target (Cyert & March, 1963), but also as an outcome of search processes, in which new routines are evaluated in comparison with existing ones (Levitt & March, 1988). This evolution will result in an incremental process, in which routines are modified after approval not only by the organizational members, but also by market actors (Nelson & Winter, 1982). Due to uncertainty limiting the firm’s ability to make long term decisions, changes and modifications are done on the basis of past and recent experiences, thus resulting in a path dependent process (Cyert & March, 1963). Thus, competence development could be viewed as an incremental and path-dependent process (Rosenzweig & Singh, 1991; Cohen & Levinthal, 1990; Kogut & Zander, 1993).

Organizational routines emanate from successful sequential patterns of interaction between and within organizations (Dosi, Teece and Winter 1992). As two firms share neither the same history nor the same environment, their behavior will differ. Due to differences in how firms interpret the environment (Penrose, 1959), they will accumulate heterogeneous resources (Barney, 1986) and develop heterogeneous routines. Given this heterogeneity, the relevance of one organization’s competence for other organizations or organizational units, and hence the possibility to transfer and integrate that competence, depends on how well the organization can adapt its routines to the conditions of the recipient unit and its resources. Through use of knowledge, a shared history of jointly performed activities emerges and common understanding of behavior is formed, facilitating future coming interactions (Nelson & Winter, 1992; March & Simon, 1958; Sandberg, 1994). According to Grant (1996), routines serve as essential means for integrating competence in the organization. The competence, by virtue of its evolution in the context of a particular environment and organization, is likely to differentiate firms from each other and provide the basis for differential performance vis-a-vis competitors (Dosi, Teece and Winter 1992).

Competence Development in the Subsidiary

Adaptations in a business context consist of intentional modifications of existing routines and practices to meet the requirement of specific business counterparts. If we consider the MNC as an interorganizational network (Ghoshal & Bartlett, 1990) in which the subsidiary is embedded in a set of direct and indirect exchange relationships, it is argued that the higher this embeddedness, the more likely the subsidiary’s competence development is dependent on its counterparts. Viewing the MNC as evolving networks, an emphasis is put on the different units, i.e. subsidiaries, and their embeddedness in intersecting networks, both external and internal. According to Håkansson and Nobel (1998), this embeddedness has an impact on subsidiary innovation. Based on arguments that development activities to a great extent are influenced by important counterparts in a business network, competence development can be considered as a result of ongoing activities between actors in the local environment (Andersson & Johanson 1997).

Competence development in a subsidiary could from this network perspective be traced back to pressures of adaptations to the local business counterparts’ conditions. According to the network approach, it is the relationships in the firm’s business networks that are important for this development (Håkansson & Snehota 1990). In this view, competencies develop as two firms in an exchange relationship adapt their resources to meet the requirements in that relationship. Due to the heterogeneity of resources, firms need to adapt their resources to counterparts’ requirements as a way of ensuring future exchanges (Hallén, Johanson and Seyed-Mohamed, 1991). In other words, adaptation is seen as a concrete investment in a particular business relationship (Andersson & Johanson 1997).

On the other hand, research on MNCs has also shown that traditionally a significant part of the subsidiary’s competencies seem to have its origin in some invention or technological advantage originating from the home country (Anderson & Pahlberg, 1997; Dunning, 1980; Porter 1986). However, from an evolutionary perspective (Kogut & Zander, 1993; Nelson & Winter, 1982), the national subsidiary will adapt and develop these replicated routines further according to the requirements that local business counterparts place on the subsidiary. This development of the different national affiliates will lead to a greater diversity of the MNC as a whole, and it will demand mechanisms to create internal coherence. Therefore, Hedlund (1986) suggests that development behavior of a complex organization, e.g. a multinational corporation, is to a great extent based on its common set of norms, values and routines within the organization. One of the main questions in this stream of research has been how these common values and routines evolve and how they may be created (Forsgren 1997). In other words, how does the MNC create normative integration (Nohria & Ghoshal, 1994)?

Integration of Competence in the MNC

The dilemma of simultaneously achieving global integration and local adaptation has emphasized the need for the corporate headquarters to integrate globally the worldwide operations of the different subsidiaries (Prahalad & Doz, 1987, Bartlett & Ghoshal, 1989). Research on the management of MNCs suggests that the main task for the MNC is the efficient coordination/integration of its operations located in different countries. The focus is thus put on the increased need for integration within the internal networks of the MNC (Ghoshal & Bartlett, 1990). However, this integration is done from a corporate strategic perspective, i.e. it is the headquarters that allocates roles to the different subsidiaries according to an overall corporate strategy. In other words, this type of integration is of a normative character (Nohria & Ghoshal, 1994; Ouchi, 1980), and different management approaches are being suggested focusing especially on the coordination of globally dispersed resources (Bartlett & Ghoshal, 1986), and activities (Porter, 1986; Prahalad & Doz, 1987; Martinez & Jarillo, 1991). Within this literature different integration mechanisms are mentioned such as centralization of decision-making (Simon, 1976), formalization and standardization of rules and management processes (Lawrence & Lorsch, 1967; Galbraith, 1973), and cross-unit communication (Ghoshal & Bartlett, 1988; Ghoshal, Korine, & Szulanski, 1994). According to Bartlett and Ghoshal (1989), the coordination of competencies and innovations, e.g. R&D and technology, which are dispersed in the different MNC units, has become of great importance for the global competitiveness of the MNC. Ways of achieving this are, for example, the pooling for resources for a worldwide solution; e.g. arranging local plats into international production centers and innovative labs into worldwide centers of excellence.

As argued by Grant (1996:376) "…under dynamic competition, superior profitability is likely to be associated with resource and capability-based advantages" which are derived mainly from access to and integration of specialized knowledge (Grant, 1996; Forsgren, Johanson, & Sharma, 1999). In line with the resource- and knowledge based views of the firm (Grant, 1996; Spender, 1996), we claim that integration in terms of the MNC is based on the ability of the MNC to integrate the competencies located in different parts of the organization. If the MNC fails to make use of the competencies located in different parts of the corporation, it loses much of its potential competitive advantage, (Forsgren, 1997). Accordingly, if the most important resource of a firm is knowledge (Grant, 1996) then integration of this knowledge is the source of sustainable competitive advantage (Spender, 1996) of the MNC.

The top-down approach has so far not paid much attention to the utilization and development of competence within the peripheral units of the complex organization (Chew, Bresnan, & Clark, 1990). It can, however, be argued that for the competence generated at the subsidiary level to become important for the corporation, i.e. a competitive advantage resulting in economies of scale, the competence need to be applicable, i.e. of use to the rest of the corporation. According to Grant (1996), organizational routines are recognized as important mechanisms for integrating competence within firms. Therefore, the applicability of the competence developed in one subsidiary thus implies that it meets the expectations and standards of other units within the MNC.

There is so far no clear understanding of what factors facilitate the integration of competence within any business firm. By viewing the organization as a body of knowledge (Nelson & Winter, 1982; Grant, 1996), we argue that integration of competence is to be viewed as the use of competence and the mechanism behind this integration lies in the adaptation of routines. Furthermore, research has suggested that the recognition of an organization’s competence is a precondition for integration (Birkinshaw, 1996; Etemad & Dulude, 1986; Grant, 1996).

Recognition of Subsidiary Competence

Whereas the possibilities for integrating subsidiary competencies have traditionally been considered the parent company’s task (Prahalad & Doz, 1987), more recently it has been recognized that the subsidiary’s role in making itself known for its strengths is perhaps even more essential (Birkinshaw, 1997). The subsidiary’s own actions in making itself known for its competencies is important both for the corporation, in terms of monitoring what competitive advantages exist in the corporation, and more importantly for the subsidiary itself, in terms of developing a more central position in the MNC. If units within the MNC are not aware of or understand the purpose of a specific subsidiary’s competence, the possibilities for transferring and integrating the competence are greatly diminished. In other words, a prerequisite for successful integration of competence is that the actors are aware of each other’s knowledge (Grant, 1996). Therefore, recognition of the subsidiary’s competencies is critical for integrating them in the MNC.

The world product mandate literature (D’Cruz, 1986; Roth & Morrison, 1992; Birkinshaw, 1996) emphasizes the importance of capabilities and their impact on innovation at the subsidiary level, which leads to the subsidiary gaining responsibility to produce a product for the whole corporation and not just its local market. According to this view, the subsidiary becomes recognized by the headquarters for its resources and competencies, and is consequently given a formal role on the basis of these competencies. Consequently, while it is true that the world product mandate role is earned by the subsidiary on the basis of superior competence, rather than being a granted gift from the headquarters (D’Cruz, 1986), it is still the headquarters that assigns this role as they recognize the specific competencies of the subsidiary.

Another way of understanding how recognition of competence evolves is to consider adaptation processes. When a subsidiary adapts its routines to its customers and other business partners, the outcome is twofold. Firstly, through the modifications, the subsidiary develops valuable competence that it can draw upon in its operations. Secondly, the customers and other organizations to which the subsidiary adapts become aware of the subsidiary’s specific abilities. In the same way, a subsidiary that adapts its routines to meet the expectations of other corporate units within the same MNC becomes recognized by these units for its competencies. Thus, adapting the subsidiary’s routines to the contexts of other corporate units will lead to these others recognizing the subsidiary’s routines, i.e. competence.

The applicability of the competence developed in one subsidiary is to a great extent dependent on the adaptation to the corporate context, which in this case implies the applicability of the competence of one unit to the routines and standards of other units within the MNC.

Hypotheses

The theory presented in the previous sections implies that the competence development processes in the MNC are affected by adapting organizational routines to the conditions in the external business environment as well as to the corporate circumstances. The differences in the competence development processes of a specific subsidiary will in turn influence the degree to which its competencies are recognized by and relevant for other affiliates in the multinational corporation. This will also have an impact on the extent to which the subsidiary's competencies are integrated into the rest of the corporation. Below, we develop hypotheses on how corporate and external market conditions affect subsidiary competence development, how the subsidiary's competence development process affects the corporate recognition of the subsidiary's competencies, and how the recognition of subsidiary competence influences the integration of the competence.

Competence Development

In the above discussion leading to the hypotheses there is an implicit dilemma, which concerns the conditions influencing subsidiary competence development. On the one hand, it is possible to argue from a top-down management approach that the greatest impact on a subsidiary's competitive advantage originates from the corporation, or the headquarters, itself (Andersson & Pahlberg 1997). Even from an evolutionary perspective (Nelson & Winter, 1982; Kogut & Zander, 1993), subsidiary evolution is seen as development of the organizational capital (Prescott & Visscher, 1980) inherited from the parent (Yamin, 1997). On the other hand, subsidiary competence is also seen as the outcome of operating and interacting within the market environment. In other words, responding to customer needs, cooperating with suppliers to improve the performance of existing products, and competing with competitors whom the subsidiary monitors closely will give the subsidiary necessary input to develop and adapt its competencies. Therefore, we can pose two contradicting hypotheses claiming that either corporate or market organizations have had the greatest influence on the subsidiary's competence development.

Hypothesis 1a: Corporate units have influenced subsidiary competence development to a greater extent than have organizations in the local market.

Hypothesis 1b: Market organizations have influenced subsidiary competence development to a greater extent than have units in the MNC.

Recognition of Subsidiary Competence

Through internal processes of cooperating with other corporate units, the subsidiary develops competencies relative to those other units. As the subsidiary interacts with those units, they come to influence the adaptation of the subsidiary's routines. And as suggested earlier in this paper, this adaptation implies a process of competence development. At the same time as the subsidiary modifies its competencies according to the perceived requirements of other units within the corporation, these will acknowledge the improved performance of the subsidiary. In other words, other corporate units are more likely to recognize the subsidiary's competence when they have contributed to the development of that competence.

A subsidiary that draws upon the experiences from cooperating with other corporate units will adapt and refine its organizational routines. The more a specific corporate unit is involved in the adaptation and refinement process, the more it will influence the subsidiary's competence development. As the subsidiary develops its competence with the conditions of the specific corporate unit in mind, the resulting competence is relevant for that unit. As the competence is relevant, it is likely that the specific corporate unit will recognize the subsidiary's competence. Thus, the more other corporate units have influenced the development of the subsidiary's competence, the more recognized will the subsidiary be for its competencies.

Hypothesis 2a: There is a positive relationship between the extent to which units in the MNC have influenced subsidiary competence development and the degree of recognition of subsidiary competence.

On the other hand, a subsidiary that has adapted its resources and routines to the demands of the local market environment has developed competence that is important in its own operations. According to the evolutionary theory (Nelson & Winter, 1982), firms develop new competence through operating in the local environment and adapting its organization to that context. Consequently, subsidiaries become competent through the adaptation of their resources and routines to local business actors (Andersson & Johanson, 1997; Forsgren, Johanson & Sharma, 1999).

Furthermore, subsidiaries of the multinational corporation that have developed superior competence often gain a mandate for producing or developing products that are in the scope of that competence (Birkinshaw, 1996; Etemad & Dulude, 1986; Surlemont, 1998). Examples of this type of behavior is the internal transfer of best practices (Kostova, 1996; Martin & Beaumont, 1998; Szulanski 1996), the above-mentioned World Product Mandate stream (e.g. D'Cruz, 1986), and the divisional charter-phenomenon (Galunic & Eisenhardt, 1996). The common point of these is that the competence of firm units is identified, for example through benchmarking (Rolstadås, 1995), and then diffused throughout the whole organization. Given that these firms develop their competence in relation to the local business actors, we hypothesize that the more local business actors have influenced the competence development of the subsidiary, the higher will be the recognition of the subsidiary's competence in the corporation.

Hypothesis 2b: There is a positive relationship between the extent to which organizations in the subsidiary’s local market have influenced subsidiary competence development and the degree of recognition of subsidiary competence.

Integration of Competence

If we understand competence development as a process of adapting routines to fit other organizations' needs, and if we furthermore apprehend that through this adaptation process these other organizations become aware, approve and acknowledge (Birkinshaw, 1997) the resulting competence, then it becomes a necessary condition to recognize a subsidiary's competence if other units are to use it. And the more recognition one subsidiary receives, the higher the potential that other units within the same corporation use its competence. Thus, it can be expected that recognition of subsidiary competence leads to the integration of that competence within the rest of the MNC

Hypothesis 3: There is a positive correlation between the degree of recognition of subsidiary competence and the integration of competence.

METHODS

Data and Sample

The sample in this study contains data on 1541 foreign-owned subsidiaries located in Sweden, Finland, Denmark, Norway and the UK. These subsidiaries are active in different industries and their scope of activities varies from sales to full-fledged operations including R&D, manufacturing and sales. The data was collected in 1996-97 by research teams responsible for the data collection in each of the five countries. For the purpose of obtaining comparable data, a common standardized questionnaire in English was developed on the basis of a pre-tested questionnaire sent out to 850 foreign-owned subsidiaries in Sweden (response rate 53%). The questionnaire developed for this study underwent several revisions, after which it was tested on 6 Swedish managers, who gave explicit comments on the functionality of the questionnaire. It was then revised and sent out to each country’s research teams. The questionnaire was then translated into each country’s native language, and back translated to check for possible inconsistencies.

The questionnaire was sent out in a two-step procedure, which resulted in responses from 1541 foreign-owned subsidiaries, out of which 530 were from Sweden, 238 from Finland, 310 from Denmark, 261 from Norway, and 202 from the UK. Approximately 70% of the respondents were subsidiary executive officers while the remaining respondents were financial directors, vice presidents, marketing managers, information managers, or controllers. As the current paper focuses on national subsidiaries as competence units, the total sample was reduced to include only those subsidiaries that have full-fledged operations, i.e. carry out their own development, production, and sales activities. In addition, we chose to focus on those subsidiaries that perceive their competence in these functions to be high. This further restriction, along with the removal of 12 outlier observations, resulted in a final sample of 391 observations. The median respondent company has been a subsidiary of its foreign parent for almost 15 years, has 570 employees, and annual sales of 153 million USD of which 33.5% is from exports.

Variables

The following section explains how the concepts used in this paper were operationalized.

Competence. In this particular study, we focus on subsidiary competence in the following three functions: product or process development, production of goods and services, and marketing/sales. The respondents were asked to indicate a value for their subsidiary’s competence in those functions on a 7-point Likert-type scale. According to several behavioral models (e.g. Kelly & Thibaut, 1978; Penrose, 1959; Zucker, 1991), the behavior of firms can be explained by perceptions, as these direct how firms and individuals respond to problems and opportunities in the environment. Accordingly, competence was operationalized and measured here in terms of perceptions and attitudes held by the respondents.

Adaptation. The subsidiary was considered to have adapted its organizational routines when it reported that specific organizations had had an impact on its competence development. In other words, if a specific customer had influenced the subsidiary’s competence, it then follows that, by definition, the subsidiary has adapted its routines to meet that customer’s needs and context. We asked the subsidiaries to indicate to what extent seven different organizations had influenced the development of their competencies on a 7-point Likert type scale. These seven organizations were corporate headquarters, corporate customer, corporate supplier, corporate R&D unit, market customer, market supplier, and competitor.

Recognition. Recognition of the subsidiary’s distinct competencies was measured by six items. On the one hand, the respondents were asked to indicate whether their competencies in development, production, and marketing/sales were recognized by the foreign headquarters or not. On the other hand, the respondents assessed whether other corporate units recognized their competencies in the above-mentioned functions. All of these items are dichotomous variables with value 1 if competence is recognized, and 0 if not.

Integration. Integration of the subsidiary’s competence was measured by three items on a 7-point Likert-type scale. The questions asked to what extent other units within the multinational corporation used the subsidiary’s distinctive competence in the three competence functions mentioned above.

Control variables. In order to control for the possibility that the variation in the data was attributable to other variables that those introduced above, a number of control variables were employed. These were subsidiary size, its share of exports to total sales, the mode of its establishment, and its age within the corporation. Size was measured by both the total number of employees and the subsidiary’s total annual sales. Export share was calculated as a percentage of exports to total sales. Mode of establishment was a dichotomous variable with start-up companies versus acquisitions as the two alternatives. Finally, subsidiary age was measured as the number of years the subsidiary had been a part of the MNC.

Data Analysis

The analysis was carried out in two phases. In the first phase, only the competent subsidiaries were selected from the total sample. We selected those subsidiaries which perceived their competence as strong (6 or 7 on a 7-point scale), in at least two of the three functions (development, production and marketing), and moderate (4 or higher) in no more than one function. Furthermore, the six items measuring the recognition of subsidiary competence were combined to produce two dimensions, i.e. headquarters’ and other corporate units’ recognition. The first dimension, headquarters’ recognition of competencies, was considered to exist when the headquarters recognized the subsidiary’s competencies in two or more of the functions (development, production and marketing). Similarly, other corporate units’ recognition was seen to be realized when other corporate units recognized the subsidiary’s competencies in two or more of the functions. If competence was recognized in only one function out of three, recognition was not counted as having taken place. The result of this first phase was a matrix with the two types of recognition as the two dimensions (see Figure 1).

In the second stage of the analysis, we examined how the characteristics of adaptation and integration fit into the matrix. This was done using ANOVAs and T-tests to see whether there were significant differences between the groups concerning the expected variables. These were primarily integration of subsidiary competence and variables dealing with the development of the subsidiary’s competencies. The aim of this second step was to determine how meaningful the distinction between headquarters’ and other units’ recognition of subsidiary competence is on the one hand, and to examine whether differences in the competence development characteristics can explain variation in the two types of recognition.

RESULTS

The analysis of headquarters’ and other units’ recognition resulted in a 2x2 matrix with the 391 observations in four groups of unequal size, as shown in Figure 1. The two recognition dimensions, which consisted of three items each, were subjected to a factor analysis to check whether they are independent of each other. The variables loaded on their respective factors (dimensions) as expected in both an unrotated and a rotated factor analysis. In the rotated solution, factor loadings ranged from 0.87 to 0.74 for the other units’ recognition dimension and from 0.80 to 0.73 for the headquarters’ recognition dimension. In other words, being recognized by the other units within the corporation is distinctly different from being recognized by the headquarters. Thus, we can proceed with the analysis.

There were 90 companies (23%) that were recognized both by the headquarters and by other corporate units (MNC recognition), 180 (46.5%) that were recognized only by the headquarters, 77 (19.7%) that were only recognized by other corporate units, and 42 companies (10.7%) that were not recognized at all for their competence. We can therefore conclude that over 2/3 of the full-fledged subsidiaries that perceived themselves as highly competent were recognized by the corporate headquarters. In addition, nearly 2/5 of the companies were recognized by other corporate units for their competence. Perhaps somewhat surprisingly, over 10% of the competent subsidiaries were not recognized at all, which implies that it may be difficult for MNCs to make full use of the competencies developed in different parts of the organization.

The four-group solution was subjected to comparisons of means (T-test and ANOVA) and least significant difference tests to detect significant differences between the groups of subsidiaries. The results of these analyses are shown in Tables 1-3. Table 2 presents an analysis of variance (ANOVA) in which means of the four groups (see Figure 1) are compared with each other. Each row in the table represents one analysis of how different organizations have influenced competence development in the four different groups of subsidiaries. The last three columns to the right present tests of whether the observed differences between the group means are significant.

Competence development. The conflicting hypotheses 1a and 1b presented claims about the forces for the development of the subsidiary’s competence. We tested whether corporate units or market organizations have had a greater influence on the subsidiary’s competence. This was done by firstly forming a composite measure, which indicated the importance that four corporate units had had on the subsidiary’s competence development. These units were the corporate headquarters, a specific corporate customer, a specific corporate supplier, and a specific corporate R&D unit. Secondly, a same kind of measure was formed from three market organization variables, i.e. a specific external customer, a specific external supplier, and a specific competitor. Finally, to test for the difference between "Corporate" and "Market" in each of the four groups, we conducted T-tests.

 

In Table 1, each column represents one T-test. As can be seen in the table, the values for "Market" were larger than the values for "Corporate" in each of the four columns, and these differences were all significant at the 0.1% level. The values of "Market" being significantly larger than those of "Corporate" indicates that for all groups, the impact of external market relationships has been significantly greater than the impact of internal corporate relationships. This result suggests that adaptation to the local environment in terms of local market organizations is a more important driver of competence development than the internal corporate environment. An additional T-test was carried out to compare the most important variables contributing to subsidiary competence development, i.e. corporate headquarters and market customer. The T-test only confirmed the results in Table 1. In other words, interactions in the local market had a greater impact on subsidiary competence development than interactions within the corporation. Thus, this provided support for Hypothesis 1b, while Hypothesis 1a was not supported.

Table 2 presents evidence of how important the different intra-corporate and market relationships have been for the development of the subsidiary competence. As the mean values of "corporate" variables show a general descending trend from group 1 to group 4, there seems to be a clear positive relationship between recognition of competence and the extent to which other corporate units have influenced the development of that competence. In particular, those units that were recognized by the MNC for their competence had also developed their competence in cooperation with the headquarters, a specific internal customer, and a specific internal R&D unit to a greater extent than those subsidiaries whose competence was not recognized by the corporation. Thus, Hypothesis 2a was supported.

It can also be seen in Table 2 that there were no differences between the four groups of firms concerning the extent to which external organizations had influenced competence development in the subsidiary. Subsidiaries in all of the four groups are units with strong competencies in several areas. Table 2 shows that all of the subsidiary groups were dependent on their market customers, suppliers and competitors in developing competence. This implies that adaptation to the local environment is a precondition for subsidiary competence development, regardless of their role within the MNC. In brief, being locally embedded has been a key to the subsidiaries’ competence development, but this was not related to the degree to which other corporate units recognize their competencies. In other words, Hypothesis 2b was not supported.

Integration. The final step in the empirical analysis was to test the hypothesis of whether the awareness and recognition of subsidiary competencies is positively related to other corporate units using those competencies. This was done in a one-way ANOVA, which is presented in Table 3. In the table, each of the three rows represents a separate analysis of comparing the means of the four groups of subsidiaries. The last column shows which differences in the observed means were significant.

As can be seen from Table 3, the mean values of integration of competence were highest in the "MNC recognition"-group, and lowest in the "no recognition"-group. Furthermore, these observed differences are significant, as showed by the p-values in the second to last column in Table 3. This means that both headquarters’ and other units’ recognition of subsidiary competence are positively related to the integration of the subsidiary’s distinctive competencies. Hence, Hypotheses 3 was supported. Headquarters’ recognition of subsidiary competence seems to be a stronger predictor of subsidiary integration than recognition by other corporate units. However, those competent subsidiaries whose competence was not recognized at all were significantly less integrated on all dimensions in comparison to the recognized subsidiaries. Thus the degree of recognition seems to be meaningful in explaining the level of integration of the subsidiary’s competence in the MNC.

It seems reasonable to say that the higher the recognition of the subsidiary’s competencies, the more integrated the subsidiary is with the rest of the corporation. This appears to be particularly true in the negative sense, meaning that if there is no recognition of the subsidiary’s competence, it is likely that the subsidiary is not integrated in the corporation, its distinctive competence notwithstanding.

It is also interesting to note that there are some differences in the degree of integration in the different functions. Competence in the innovative up-stream function, development, which provides a high added value, was more integrated than competence in marketing, a down-stream function reliant on local adaptation, whereas competence in production falls between these two. These results mainly corroborate previous research that has indicated that high value-adding functions are more integrated in the MNC (Birkinshaw, 1996; Roth & Morrison, 1992).

Control variables. To check whether the differences in the results were attributable to variables such as size, a number of control variables were included. These control variables did not show any significant differences between the four groups of firms, with one exception. The subsidiaries recognized by both the headquarters and other corporate units were significantly larger than the other groups of subsidiaries. This is a reasonable finding given the importance of these subsidiaries in terms of contributing to other corporate units’ competence development. However, as the non-recognized subsidiaries were the second largest in terms of number of employees and third largest in terms of sales, one cannot draw the conclusion that the larger the subsidiary, the higher the recognition.

discussion

The results reported in this paper provide support for the hypothesis that recognition of subsidiary competence has a positive effect on the integration of that subsidiary’s competence to other units within the same MNC. Furthermore, the findings indicate that the headquarters’ recognition plays an important part in determining the position of the subsidiary within the multinational organization. However, this paper suggests that while necessary, the headquarters’ recognition is still not a sufficient factor to fully explain the corporate role of a national subsidiary. In addition, there needs to be a discussion of the subsidiary’s lateral relationships and of other units’ recognition of the subsidiary’s competencies, if we are to understand the "real" role and position of the subsidiary.

A subsidiary becomes recognized for its distinctive competence through the adaptation of its organizational routines to the conditions of another subsidiary or the headquarters. In other words, when for example a customer within the same MNC asks the subsidiary to modify a product or customize a service, it forces the subsidiary to alter its existing routines. As these adapted routines produce improved outcomes, new competence is created. This new competence is then the result of the interaction between the corporate customer and the subsidiary, and this makes the competence useful for the customer. The usefulness of the competence consequently leads to the customer’s recognition.

Adaptations of organizational routines serve as a means for others to use the routines in their own settings. What this means is that, by modifying its routines to fit into the context of other corporate units, the subsidiary can integrate its competencies into those of other corporate units. Consequently, adaptation is also a mechanism for integrating competence within the MNC. In other words, organizational competence travels through adaptations to the recipient’s specific conditions.

Viewing adaptations of routines, or competencies, as integration mechanisms is another way of saying that meeting the demands of the customer delivers value to that customer. If adapting organizational competencies to the needs of customers will result in selling more of the company’s products or services, then adapting the competencies to the needs of the corporate units will lead to those other units’ using those competencies, or their outcomes. Taken to another level of analysis, a subsidiary in the MNC must adapt to the local environment in order to survive in the competition. At the same time, the subsidiary must adapt to the corporate environment in order to be eligible for corporate investments and other strategic decisions. Therefore, both adaptations to the external market and the internal corporate adaptations are necessary.

The dual adaptations of the subsidiary imply an inherent dilemma. On the one hand, to succeed in the local market, the subsidiary must adapt locally. But on the other hand, the subsidiary has to adapt to the corporate conditions in order to retain and enhance its position within the MNC network. This leads to the subsidiary being forced to balance between internal and external conditions, with the likelihood of prioritizing external adaptations in order to survive.

Links with Other Literature

Being part of the same corporation does not in itself constitute sufficiently common characteristics to enable integration. Kogut and Zander (1993) suggest that subsidiaries in the MNC share enough common characteristics that facilitate transfer for the simple reason that the organizations are part of the same MNC. However, our findings suggest that there are differences in competence integration between different subsidiaries in a multinational corporation and that the question is therefore more complex. Consequently, it is necessary to look for more common characteristics than merely membership of the same MNC in order to study successful transfer of competence. In addition, it is to be expected that there are differences between MNCs regarding their internal coherence, and this is likely to affect competence integration.

Our view of integrating competence in a complex organization differs from the conventional view. Nonaka and Takeuchi (1995) as well as others (Kogut & Zander, 1993, 1995; Zander & Kogut 1996; Spender 1996; Grant 1996) view the main problem in transferring competencies as one of objectifying competence and of making tacit knowledge more explicit. According to these researchers, behavioral patterns cannot be transferred as such. Instead, they have to be defined and transcribed so that they can be communicated to others. In contrast, we claim that successful transfer of competencies is not so much a question of attributes of the competence itself, but it is rather a question of the organizational characteristics common to both the competence provider and the recipient. The more the two organizations share these common characteristics, the more the integration process seems to be facilitated.

Our research sheds light on the question of how multinational corporations can solve the dilemma of integrating its global activities while remaining locally responsive. Prahalad and Doz (1987) came to the conclusion that the MNC must balance the need to simultaneously be locally responsive and globally integrated. However, they did not address the question of how specific firms achieve this, as they concentrated on the level of the industry. Many others have subsequently further developed their framework (see for example Roth & Morrison, 1992; Johnson 1995). Bartlett and Ghoshal (1986, 1989) and Ghoshal and Bartlett (1990) proposed that one solution to the global-local dilemma is a transnational organizational structure, which allocates differentiated roles for the national subsidiaries. Apart from arguing that there has to be normative integration (Bartlett & Ghoshal, 1988; Nohria & Ghoshal, 1994), this stream of literature does not present clear mechanisms for integrating competencies. By extending the arguments from the evolutionary theory (Nelson & Winter, 1982), we suggest that one such integration mechanism is the adaptation of organizational routines, which is the result of interaction and cooperation.

Interaction results in adaptations of current competencies, and can thus be seen as a mechanism for integrating and transferring organizational competencies. This view is related to the argument that collective competence is developed through socialization (Cook & Yanow, 1993). As individuals come to understand and accept the values, abilities, and expected behavior (Louis, 1980), as well as the meaning of the task, they acquire the competencies required for the task. At the same time, the organization itself engages in confirming and maintaining the competence that the organization possesses (Cook & Yanow, 1993). Accordingly, as an organization within the MNC becomes acquainted with the routines and values of a competent subsidiary, it gains insight into the competencies of that subsidiary and learns from it.

Limitations and Suggestions for Future Research

This paper showed that there is a positive relationship between recognition and integration of subsidiary competence. However, the causal direction of this relationship is not certain. It is possible to argue that as subsidiaries within one MNC cooperate to create new resources and competencies, whether due to coordination pressures from the headquarters or mutual interests between the firms, they learn about each other’s situations and therefore come to recognize each other’s strengths. On the other hand, it is also conceivable that a subsidiary facing problems in its local market turns to other corporate units to find possible solutions. As the subsidiary realizes that there are units which have the required resources, it recognizes these units and accordingly starts utilizing those resources. In the same way, the corporate headquarters may discover that its subsidiary has developed a distinct competence that is valuable beyond the subsidiary’s local market. By recognizing this subsidiary’s competence the headquarters will try to promote the diffusion of it. Meanwhile, headquarters’ recognition of a subsidiary’s distinct competence can also be a ratification of something that is already there. In other words, subsidiaries can have established relationships with each other to enhance the integration of competence, and the headquarters merely acknowledges this by recognizing this situation. Thus, on the basis of our material, we cannot determine the causal relationships between the different variables.

Future research in this area should try to triangulate qualitative and quantitative data. Qualitative methods such as case studies would provide insights into the integration of competence in an intra-organizational perspective. Another issue for future research would be to develop theoretical models to incorporate this study’s interesting findings concerning the relevance of the subsidiaries’ competencies. The question is what makes some competencies more relevant than others, given that the competencies have been developed in different contexts.

It is clearly a potential advantage for the MNC to have operations in several different types of environments. The MNC has thus many various sources of creating new capabilities through adaptation and response to different environments and demands. The essential question is, consequently, how can the MNC turn these opportunities into concrete competencies that can be exploited on a global scale? Not only does the problem involve the creation and adoption of innovations in several parts of the multinational organization, but it also means that attention be paid to the different local environments of the national units. An innovation created by one subsidiary may be adopted by another, but it makes little sense if the local environments of these two units are so divergent that the receiving unit cannot use of the innovation because of its local content. This discussion is closely related to Forsgren (1997), who contends that the "advantage paradox" is caused by the fact that the greater the variation in the different subsidiaries’ business contexts, the higher the possibility to create new competence within the MNC. On the other hand, the greater the variation in the business contexts, the more difficult it is to exploit this new competence on a general basis. He also claims that the possibilities for integration of the activities of the MNC on a global scale have been greatly exaggerated (Forsgren 1992). Therefore, there is a clear need to examine what factors determine the integration of corporate activities and consequently the use of subsidiary competence beyond its local context.

References

Andersson, U. & Johanson, J. 1997. International business enterprise. In I. Björkman & M. Forsgren (Eds.) The nature of the international firm: Nordic contributions to international business research: 33-49. Copenhagen: Copenhagen Business School Press.

Andersson, U. & Pahlberg, C. 1997. Subsidiary influence on strategic behavior in MNCs: An empirical study. International Business Review, 6(3): 319-334.

Barney, J. B. 1986. Strategic market factors: Expectations, luck, and business strategy. Management Science, 42: 1231-1241.

Barney, J. B. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17: 99-120.

Bartlett, C. A. & Ghoshal, S. 1986. Tap your subsidiaries for global reach. Harvard Business Review, 64(4): 87-94.

Bartlett, C. A. & Ghoshal, S. 1989. Managing Across Borders: The Transnational Solution. Boston: Harvard Business School Press.

Birkinshaw, J. M & Morrison, A. J. 1995. Configurations of strategy and structure in subsidiaries of multinational corporations. Journal of International Business Studies, 26(4): 729-53.

Birkinshaw, J. M. 1996. How multinational subsidiary mandates are gained and lost. Journal of International Business Studies, 27(3): 467-95.

Birkinshaw, J. 1997 Entrepreneurship in multinational corporations: The characteristics of subsidiary initiatives. Strategic Management Journal, 18(3): 207-229.

Boulding, Kenneth E. 1956. General systems theory: The skeleton of science. Management Science, 2: 197-208.

Caves, R. E. 1971. International corporations: The industrial economics of foreign investment. Economica, 38: 1-27.

Chew, W. B., Bresnan, T. F., & Clark, K. B. 1990. Measurement, coordination and learning in a multinational network. In R. S. Kaplan (Ed.) Measures for Manufacturing Excellence. Boston: Harvard Business School Press.

Coase, R. H. 1937. The nature of the firm. Economica, New Series, November: 386-405.

Cohen, Wesley M. & Daniel A. Levinthal. 1990. Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35(1): 128-52.

Cook, S., & Yanow, D. 1993. Culture and organizational learning. Journal of Management Inquiry, 2: 373-390.

Cyert, R. M., & March, J. G. 1963. A behavioral theory of the firm. Cambridge, MA: Blackwell.

D’Cruz, J. R. 1986. Strategic management of subsidiaries. In H. Etemad & L.S. Dulude (Eds.) Managing the multinational subsidiary – Responses to environmental changes and to host nation R&D policies. London: Croom Helm.

Dosi, G., Teece, D. J., & Winter, S. G. 1992. Toward a theory of corporate coherence: Preliminary remarks. In G. Dosi, R. Giannetti & P.-A. Toninelli (Eds.) Technology and enterprise in historical perspective. Oxford: Oxford University Press.

Dunning, J. H. 1980. Toward an eclectic theory of international production: some empirical tests. Journal of International Business Studies, 11(1): 9-31.

Etemad, H., & Dulude, L.S. (Eds.). 1986. Managing the multinational subsidiary – Responses to environmental changes and to host nation R&D policies. London: Croom Helm.

Forsgren, M., Johanson, J., & Sharma, D. 1999, forthcoming. In search of MNC centres of excellence. In U. Holm & T. Pedersen (Eds.) The emergence and impact of MNC centres of excellence. London: Macmillan.

Forsgren, M. 1992. Book review: C.A. Bartlett, Y. Doz and G. Hedlund (Eds.): Managing the global firm. Organization Studies, 13(3): 477-480.

Forsgren, M. 1997. The advantage paradox. In I. Björkman & M. Forsgren (Eds.) The nature of the international firm Nordic contributions to international business. Copenhagen: Copenhagen Business School Press.

Galbraith, J. R. 1973. Designing complex organizations. Reading, MA: Addison-Wesley.

Galunic, D. C., & Eisenhardt, K. M. 1996. The evolution of intracorporate domains: Divisional charter losses in high-technology, multidivisional corporations. Organization Science, 7(3): 255-282.

Ghoshal, S., & Bartlett, C. A. 1988. Creation, adoption, and diffusion of innovations by subsidiaries of multinational corporations. Journal of International Business Studies, 19(3): 365-388.

Ghoshal, S., & Bartlett, C. A. 1990. The multinational corporation as an interorganizational network. Academy of Management Review, 15(4): 603-25.

Ghoshal, S., & Bartlett, C. A. 1997. The individualized corporation: A fundamentally new approach to management. London: HarperCollins.

Ghoshal, S., Korine, H., & Szulanski, G. 1994. Interunit communication in multinational corporations. Management Science, 40(1): 96-110.

Grant, R. M. 1991. The resource-based theory of competitive advantage: Implications for strategy formulation. California Management Review, 33(3): 114-135.

Grant, R. M. 1996. Prospering in dynamically-competitive environments: Organizational capability as knowledge integration. Organization Science, 7(4): 375-387.

Gupta, Anil & Vijay Govindarajan. 1991. Knowledge flows and the structure of control within multinational corporations. Academy of Management Review, 16: 768-792.

Gupta, A., & Govindarajan, V. 1994. Organizing for knowledge flows within MNCs. International Business Review, 3(4): 443-457.

Hallén, L., Johanson, J., & Seyed-Mohamed, N. 1991. Interfirm adaptation in business relationships. Journal of Marketing, 55(2): 29-37.

Hedlund, G. 1986. The hypermodern MNC: A heterarchy? Human Resource Management, 25 (1): 9-25.

Hymer, S. H. 1960. The international operations of national firms: a study of foreign direct investment. Cambridge, MA: MIT Press.

Håkansson, L., & Nobel, R. 1998. Technology characteristics and reverse technology transfer. Paper presented at the annual meeting of Academy of International Business, Vienna.

Håkansson, H., & Snehota, I. (Eds.). 1990. Developing relationships in business networks. London: Routledge.

Johanson, J. & Vahlne, J.-E. 1977. The internationalization process of the firm – A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1): 23-32.

Johnson, J. H. 1995. An empirical analysis of the integration-responsiveness framework: U.S. construction equipment industry firms in global competition. Journal of International Business Studies, 26(3): 621-635.

Kogut, B., & Zander, U. 1993. Knowledge of the firm and the evolutionary theory of the multinational corporation. Journal of International Business Studies, 24(4):625-645.

Kogut, B., & Zander, U. 1995. Knowledge and the speed of the transfer and imitation of organizational capabilities: An empirical test. Organization Science, 6(1): 76-92.

Kostova, T. 1996. Success of the transnational transfer of organizational practices within multinational companies. Unpublished doctoral dissertation, University of Minnesota, Morris.

Lawrence, P. R. & Lorsch, J. W. 1967. Organization and Environment. Boston: Harvard Graduate School of Business Administration.

Levitt, B., & March, J. G. 1988. Organizational learning. Annual Review of Sociology, 14: 319-340.

Louis, M. R. 1980. Surprise and sense making: What newcomers experience in entering unfamiliar organizational settings. Administrative Science Quarterly, 25: 226-251.

Madhok, A. 1997. Cost, value and foreign market entry mode: the transaction and the firm. Strategic Management Journal, 18(1): 39-61.

March, J. G., & Simon, H. A. 1958. Organizations. New York: Wiley.

Martin, G., & Beaumont, P. 1998. Diffusing 'best practice' in multinational firms: Prospects, practice and contestation. The International Journal of Human Resource Management, 9 (4): 671-695.

Martinez, J. I., & Jarillo, J. C. 1991. Coordination demands of international strategies. Journal of International Business Studies, 22(3): 429-444.

Mascarenhas, Briance, Alok Baveja & Mamnoon Jamil. 1998. Dynamics of core competencies in leading multinational companies. California Management Review, 40(4): 117-132.

Nelson, R. R., & Winter, S. G. 1982. An evolutionary theory of economic change. Boston: Harvard Business School Press.

Nohria, N., & Ghoshal, S. 1994. Differentiated fit and shared values. Strategic Management Journal, 15: 491-502.

Nonaka, I., & Takeuchi, H. 1995. The knowledge-creating company – How Japanese companies create the dynamics of innovation. New York: Oxford University Press.

Ouchi, W. G. 1980. Markets, Bureaucracies and Clans. Administrative Science Quarterly, 25(1): 121-141.

Porter, Michael E. 1986. Competition in global industries: A conceptual framework. In: Porter, M. E. (Ed.) Competition in global industries. Boston: Harvard Business School Press.

Penrose, E. T. 1959. The theory of the growth of the firm. Oxford: Basil Blackwell

Prahalad, C.K., & Doz, Y. L. 1987. The Multinational Mission - Balancing local demands and global vision. New York: Free Press.

Prahalad, C.K., & Hamel, G. 1990. The core competence of the corporation. Harvard Business Review, 68(3): 79-91.

Prescott, E. V., & Visscher, M. 1980. Organizational capital. Journal of Political Economy, 88 (3): 446-461.

Rolstadås, A. (Ed.). 1995. Benchmarking: Theory and practice. London: Chapman & Hall.

Rosenzweig, P. M., & Singh, J. V. 1991. Organizational environments and the multinational enterprise. Academy of Management Review, 340-61.

Roth, K., & Morrison, A. J. 1992. Implementing global strategy: Characteristics of global subsidiary mandates. Journal of International Business Studies, 23(4): 715-736.

Sandberg, J. 1994. Human competence at work. Gothenburg.

Simon, H. A. 1976. Administrative Behavior. (3rd ed.). New York: Free Press.

Spender, J.-C. 1996. Making knowledge the basis of a dynamic theory of the firm. Strategic Management Journal, 17(Winter special issue): 45-62.

Surlemont, B. 1998. A typology of centers within multinational corporations: An empirical investigation. In J. Birkinshaw & N. Hood (Eds.) Multinational corporate evolution and subsidiary development. 162-188. London: Macmillan.

Szulanski, G. 1996. Exploring internal stickiness: Impediments to the transfer of best practice within the firm. Strategic Management Journal, 17(Winter special issue): 27-43.

Taggart, J. H. 1997a. Autonomy and procedural justice: A framework for evaluating subsidiary strategy. Journal of International Business Studies, 28 (1): 51-76.

Taggart, J. H. 1997b. Behavioural Aspects of Subsidiary Strategy. In K. Macharzina, M.-J. Oesterle & J. Wolf (Eds.) Global business in the information age, Proceedings of the 23rd annual EIBA conference, Stuttgart: University of Hohenheim.

Taggart, J. H. 1998. Strategy shifts in MNC subsidiaries. Strategic Management Journal, 19(7): 663-681.

White, R. A., & Poynter, T. A. 1984. Strategies for foreign-owned subsidiaries in Canada. Business Quarterly, Summer: 59-69.

Williamson, O. E. 1975. Markets and hierarchies – Analysis and anti-trust implications. New York: Free Press.

Yamin, M. 1997. An evolutionary analysis of subsidiary innovation and ‘reverse’ transfer in multinational corporations. In K. Macharzina, M.-J. Oesterle & J. Wolf (Eds.) Global business in the information age, Proceedings of the 23rd annual EIBA conference, Stuttgart: University of Hohenheim.

Zander, U., & Kogut, B. 1996. What firms do? Coordination, identity, and learning. Organization Science, 7(5): 502-518.

Zucker, L. G. 1991. The role institutionalization in cultural persistence. In W.W. Powell & P.J. DiMaggio (Eds.) The new institutionalism in organizational analysis. Chicago: The University of Chicago Press.