This paper, using a sample of 122 Spanish EMN, studies a non-explored area in the Spanish research: co-ordination and control of international activities. From previous literature, the established hypotheses try to validate the relationships between the mechanisms of co-ordination and control and some contingency (size, complexity, experience) and strategic variables (global, multinational and transnational focuses). A positive relationship between centralisation of decisions in the head office and the adoption of a global strategic focus has been demonstrated. Moreover, a high use of formalisation and output control are associated with higher levels of firm size; a high use of output control and low use of socialisation are associated with higher levels of complexity and, finally, a high use of socialisation and formalisation are associated with higher levels of experience.
Key words: co-ordination, control, multinational enterprise, internationalisation, strategic focuses.
Although the internationalisation of enterprises in Spain can be qualified as a late and rather passive process, a renewed interest in the research of this phenomenon has emerged in last years. Thus, we can find papers from a macro-economics approach (Maté, 1996) or others based on the analysis of secondary data that have been published in previous empirical papers (Campa & Guillem, 1996) or in financial press (Suárez-Zuloaga, 1995; Rialp & Rialp, 1996; López y García, 1997). However, the obtaining of data directly through enterprises has been employed in a smaller proportion and sometimes with a limited extent to particular geographical areas (Cazorla, 1997; Durán & Úbeda, 1997), to certain sectors of activity (Maza, 1991; Durán & Lamothe, 1991; Durán & Maza, 1995; Camisón, Gil & Martínez, 1997) or to very specific aspects of the implementation of the strategy (Barroso, Casillas and Galán, 1999; Rialp & Schmidt, 1994). Despite this, the research of Alonso and Donoso (1994) and Rialp (1999), using the analysis of the survey that was accomplished by the ICEX, and the papers of Durán ( 1996; 1997) and Martínez (1997) observing different cases, provide us with a broader and more modern vision of the international reality of Spanish enterprises. However, there is no empirical evidence in these papers to show how Spanish enterprises, once they have developed some physic presence abroad, organise their international activities.
This paper aims at filling the mentioned gap regarding the research of international enterprises in the Spanish area. In this sense, our research, using a sample of 122 Spanish EMN, studies the mechanisms of co-ordination and control employed by these enterprises in their processes of internationalisation and also the relationships established between these mechanisms of co-ordination and control, and a set of contingency and strategic variables. These organisational processes make possible the correct implementation of the international strategy by means of the established formal structure.
In a first section, the basic existing literature has been reviewed with the aim of determining the most relevant characteristics of each of the organisational processes and proposing testing hypotheses. In the following section, we describe the methodology employed in the empirical analysis, as well as the statistical treatment of data. The third section focuses on the contrast of the hypotheses and the discussion of results. The principal conclusions that have been obtained are provided in the last section of the paper.
The integration of several subsidiaries in a "whole" is one of the main problems to be solved by executives in multinational enterprises due to communication difficulties and the distinct conceptions of the business world in each country (Stopford, 1985). Such integration depends basically on the interaction of two processes, co-ordination and control. These mechanisms are important because they help to reduce uncertainty and ensure that behaviours that are developed in the different parts of the enterprise are compatible and follow common organisational aims (Egelhoff, 1984). Although both are indistinctly considered as co-ordinating mechanisms (Martínez and Jarillo, 1989; 1991), control refers to the fulfilment of certain objectives through the enforcement of power and authority, whereas co-ordination would be the process which supplies with the adequate bonds or links between the different units or tasks of the organisation. Cray (1984) points out, transferring these concepts to the international area, how control is a more direct participation in the management of the affiliated companies, more specific and more expensive due to the need of direct communication. On the contrary, co-ordination would be a less precise method, but more economical, and it would enjoy a long-term horizon.
The most frequent mechanisms of co-ordination are the centralisation of authority, the formalisation and the socialisation of the members of the organisation (Ghoshal & Nohria, 1989, 1993; Nohria & Ghoshal, 1994). On the other hand, control can be usually distinguished between control of behaviour and output control (Ouchi and Maguire, 1975; Ouchi, 1977; Egelhoff, 1984). Next, we analyse the most significant aspects of these organisational processes, and we establish the corresponding hypotheses to be validated in the case of Spanish multinational companies.
The level in the hierarchy of authority in which a decision must be approved before being implemented determines the rate of centralisation (highest levels of hierarchy) or decentralisation (lower levels of hierarchy) that is being applied by an organisation in the process of decision-taking (Pugh et al.,1968; Galbraith, 1973; Brooke and Remmers, 1978; Mintzberg,1979). On an international wide basis, Garnier (1982) defines centralisation as the division of authority for taking decisions between the central headquarters and the several operative units. This fact implies the analysis of the functions both in the head office and in the international units. If the central office has the power to decide most of the strategic actions developed in the organisation, it is assumed that this enterprise is centralised; on the contrary, if the affiliates can decide a whole of important aspects without having to consult the central headquarters, we are facing an organisation whose process of decision-making is highly decentralised.
From the theoreticians’ point of view on organisation, it is considered that centralisation bears an inverse relation to size (Pugh et al, 1968; Child, 1973), and to complexity (Hage and Aiken, 1967; Thompson, 1967; Lawrence and Lorsch, 1967). When transferring all these investigations to the international area, a whole range of studies emerge that measure the effect of these contingency variables on the rate of centralisation when taking decisions.
If we analyse the variable complexity, the different papers on the international area agree on the same results. Aspects such as a major diversification of the product, the heterogeneousness in the basic product lines, the growth by means of purchases, the production abroad, etc. introduce the enterprise into a new environment (customers, distribution systems, local competitors, new cultures, etc.) which hinder the co-ordination from the central headquarters so that a larger decentralisation is required for the decision-taking because the subsidiaries have a better knowledge of the local settings (Hedlung,1981; Garnier,1982; Gates and Egelhoff, 1986). The hypothesis of contrast is defined as follows:
H1. As the complexity of international transactions increases, multinational enterprises tend to decentralise the strategic decision-taking.
On the other hand, the relation with negative sign between size and centralisation that has been determined by theoreticians on organisation is not so clear in the international area. Some studies point out that growing importance of those big subsidiaries requires developing a type of policy that centralises decisions. Otherwise, a wrong functioning of any of the subsidiaries could affect the whole company (Garnier,1982; Gates and Egelhoff, 1986). However, other researchers (Hedlund, 1981; Doz and Prahalad, 1981, 1984; Prahalad and Doz, 1981) demonstrate that enterprises deal with a greater centralisation when the international units are smaller and do not have much international experience ( because these units do not own enough capacity to develop transactions accurately). Consequently, as affiliates mature and become more autonomous with regard to certain strategic assets (technology, capital, management, etc.) the influence of the central headquarters on the decision-taking of its international units diminishes. Moreover, depending on the country of origin of the head office certain divergence is detected. Thus, European multinational companies prefer a major decentralisation as the relative size of their international transactions increases. Nevertheless, the opposite of this evidence usually takes place in the American multinational companies that show a tendency towards centralisation of their policies especially regarding marketing and finances (Brooke and Remmers, 1978; Gates and Egelhoff, 1986; Rugman and Hoddgets, 1996). In accordance with these approaches, we find more adequate for the Spanish context to propose the relationship in the negative way,
H2. As the size and experience of international transactions increase, multinational enterprises tend to decentralise the strategic decision-taking.
The strategic approach used by firms is another possible factor to influence on the rate of centralisation. On the one hand, the growing world-wide extension of the market demands, as strategic requirement, integrating the different activities developed by the different units which constitute a multinational company. Therefore, the international management is streamlined and a larger efficiency is obtained by means of co-ordination and centralised control. On the other hand, the sensibility towards the particular characteristics of markets where it is managed seems to be, at the same time, a strategic and necessary requirement to face with the increasing demands of governments and customers.
Taking into account this double strategic dimension, investigators have categorised multinational companies into 3 basic models (global, multinational, transnational) according to their predisposition to look for any of both requirements or both of them at a time (Bartlett,1986; Barlett and Ghosal,1989; 1992; Porter,1986; Prahalad and Doz,1987).
In this sense, those enterprises that compete with a global strategic approach show a higher rate of centralisation and consequently, most of the strategic decisions will be taken in the central headquarters. On the contrary, those enterprises with a multinational or transnational strategic approach decentralise the decision-taking, to a greater extent, towards the performance area of the executives of the affiliated companies.
H3. Those enterprises
with a global approach will show a larger rate of centralisation than those
with a multinational or transnational strategic approach.
Formalisation
Formalisation would be the level in which the rules of the organisation are explicitly defined. Pugh et al. (1968) distinguish between formalisation in relation to the rules written in manuals or other documents, and the standardisation that would imply the establishment of organisational routines. Anyway, the consequence for the organisation of both variables is the same one, the use of rules and processes which specify the allowed behaviours and define criteria when taking decisions, so that the need to communicate between the different interdependent sides is erased (Galbraith, 1973). In this sense, formalisation reduces ambiguity because it guides behaviours. Therefore, formalisation gains importance in the international area where the affiliates are more distant from the head office and enjoy greater autonomy (Ghoshal and Nohria, 1989, 1993). As the size of the enterprise increases, the control and the co-ordination of the activities on the side of the executives of the central office becomes more difficult. For this reason, formalisation makes easier, to a certain extent, to supply such need. In the same way, it is expected that an enterprise, through the years increases its level of formalisation since in the course of time workers learn to solve co-ordination problems; consequently, they try to perpetuate the results of this learning through formalisation (Thompson, 1967; Pugh, 1973; Mintzberg, 1979).
H4. As the size and the experience with international management increases, multinational companies tend to increase the use of formalisation.
On the other side, according to Martínez and Jarillo (1989), the strategic approach will exert certain influence too. Those enterprises that are looking for global efficiency through rationalisation of costs and standardisation of policies will require a major level of formalisation than those enterprises which are more concerned on local needs. However, it is also true that more conflicts of authority can originate between the executives of the affiliated companies and those of the central office if a multinational approach is embraced. As a result, the central office may tend to establish higher rates of formalisation with the aim of avoiding such disputes. In this sense, as no clear sign can be determined in such relationship, a simple hypothesis of association is proposed until the empirical evidence can show any result.
H5. The strategic approach adopted by the enterprise and the rate of formalisation are closely related.
Socialisation
As the organisational tasks become more complex, a whole sequence of exceptions are going to appear. These exceptions can be hardly resolved through formalisation or the execution of authority. Consequently, a more informal mechanism is required to facilitate the solution of these problems without having to turn to the authority of the head office. From this point of view, socialisation makes possible to find the answer to such exceptions. Socialisation implies that the members of the organisation learn and internalise the rules that determine behaviours so that the need for organisational routines, for communication between the different levels and the vigilance of such behaviours are restricted. When facing any anomaly, the members of the organisation behave in the same way as the authority would have prescribed or ordered respecting the established processes. This co-ordination method allows a major adaptation to local conditions and a higher degree of decentralisation, but it maintains at the same time the integration of the organisation (Edstrom and Galbraith, 1977; Ouchi, 1980; Doz and Prahalad, 1984; Hennart, 1993). The socialisation of the executives in the affiliates acquires more importance in the international area because the distance regarding the central office and the higher rate of complexity of the transactions involve the adoption of a large quantity of important decisions without having to be reviewed by the central office. The executives of the subsidiaries, as they have internalised the philosophy and the aims of the organisation, can find the most adequate behaviour for each situation according to the approaches of the enterprise. In this way, the cost of vigilance and control are economised and, at the same time, the organisation is endowed with more flexibility. Therefore:
H6. As the complexity of international transactions increases, multinational companies tend to employ a major rate of socialisation.
Besides, it seems that the size of the enterprise will not have any relation with the level of socialisation; the opposite will occur with the experience of the enterprise. In time to come, the enterprise tries to transfer the results of the learning process through socialisation to the members of the organisation.
H7. As the esperience of international transactions increases, international companies tend to utilise to a great extent socialisation.
Finally, some authors (Martínez and Jarillo, 1989; White and Poynter, 1990; Egelhoff, 1993; Harzing, 1998) propose a greater use of socialisation in those enterprises which obey a transnational or multinational strategic approach, as this co-ordination method preserves the flexibility required by those approaches. For this reason:
H8. The enterprises with a multinational or transnational approach will show a higher level of socialisation than those with a global strategic approach.
Control processes
Besides the mechanisms that have been analysed previously, it is necessary to note that the working of the enterprise and the obtained output are within the bounds of the established plans, so that if this would not occur, the appropriate correcting attitudes could be adopted (Mintzberg, 1979). According to this perspective, control not only increases predictability but also promotes the integration of the units because it determines specific norms to consider in case of deviations.
The scheme developed by Ouchi (1977, 1979) and Ouchi and Maguire (1975) is one of the models mostly used in the organisational analysis of control. The mentioned authors propose two different types of control, the control focused on the evaluation of output, and the control based on the direct observation of behaviour. Egelhoff (1984) points out that although both procedures are "cybernetic" mechanisms of control, they differ in an important number of aspects. Firstly, the analysis of the affiliated companies tends to watch over the final output, whereas the appointment of executives or the visits of executives of the central office involve the supervision of the activity in the affiliate that precedes the achievement of such output. Secondly, the required standards are a bit different; the reports need, first of all, plans and precise budgets as the direct evaluation of behaviour requires a general understanding of what is considered as an adequate behaviour and of how such behaviour promotes the achievement of the general aims of the enterprise. Finally, the evaluation and the feedback take place usually at different levels of the organisation. The system based on the analysis of reports grants that this occurs in the central office and also in the affiliates; besides, the system based on the direct observation of behaviour involves that all the phases of the control process –vigilance, evaluation, feedback- occur in the core of the affiliate company. Ouchi and Maguire (1975) consider that the output control is an important method to communicate the working of subunits in big and complex organisations, whereas such functioning could be simply controlled in smaller organisation through the direct observation of behaviours. In fact, the Aston group’s papers (Pugh et al,1968; Child, 1972, 1973) corroborate certain tendency in big organisation towards the withdrawal of personal mechanisms of control. Despite the established differences between both kinds of control, big multinational companies normally employ a combination of both methods, so that the differences when using these methods are just of magnitude rather than exclusive. The analysis of output will be useful, in a greater extent, to control the organisation as a whole; whereas, on the other hand, the direct observation of behaviour will facilitate to control the special features of the different affiliates (Galbraith, 1973; Edstrom and Galbraith, 1977; Hennart, 1993).
H9. As the complexity and the size of international transactions increases, multinational companies tend to use more often the output control.
Finally, with regard to the strategic approach, lower levels of control are expected in those enterprises that follow a multinational approach than in those which adopt a global or transnational approach because in the latter ones appear high relations of dependence. However, if some kind of control is practised, those enterprise with a multinational approach will tend to use indirect forms of control such as the output control or even socialisation. Besides, those enterprises with a global approach will opt for the most direct mechanisms of control. In transnational companies, due to their greater complexity, the employment of both kinds of control is to be found (Harzing,1998).
H.10. The multidomestic strategic approach will be more often associated with the output control, the global approach with the direct control of behaviour, whereas the transnational approach will be associated with both types of control.
The next table, derived from the arguments that have been used along the theoretical revision, specifies graphically the relationships established in the formulated hypotheses.
TABLE 1: HYPOTHESES
Contingency variables |
Strategic approaches |
||||||||||||
Size |
Complexity |
Experience |
Global |
Multidomestic |
Transnational |
||||||||
Centralization |
- |
- |
- |
+ |
- |
- |
|||||||
Formalisation |
+ |
+ |
? |
? |
? |
||||||||
Socialisation |
+ |
+ |
- |
+ |
+ |
||||||||
Output Control |
+ |
+ |
- |
+ |
+ |
||||||||
Behaviour Control |
- |
- |
+ |
- |
+ |
This paper is part of a broader research on the internationalisation of the Spanish enterprise in which exporting enterprises and multinational companies have taken part. In this case, we refer only to the sub-sample of multinational enterprises. These organisations were chosen using the international files from a database that was prepared by Dun & Brastreet. 498 multinational enterprises were selected as their capital was 100% of Spanish nationality. These companies could be considered as the most active Spanish companies in the international markets.
The postal survey was the instrument that was used to pick up information; questionnaires were sent to the main executives of the selected enterprises. The questions introduced in the questionnaires were subjected to a pre-test with academic experts so that any mistake could be rectified. Afterwards the questionnaires were tested in ten enterprises, which belong to different sectors, to check their suitability and the possible divergence between sectors. In June 1997 we carried out a first sending that covered all multinational enterprises. After three months, we received 74 answers; therefore, we repeated the sending with those enterprises that had not answered. The process of data collection was concluded with 122 valid answers.
Mechanisms of co-ordination and control
A range of variables that had been derived from the previous bibliographic revision were introduced in the questionnaire. These variables were measured in a five point Likert scale. A large scenery regarding the use of the mechanisms of co-ordination and control were shown. Table 2 particularises the mean and the standard deviation of such variables.
TABLE 2: MECHANISM OF CO-ORDINATION AND CONTROL
Variables |
Mean |
SD |
1. Rate of centralisation of strategic decisions in the area of marketing |
3,65 |
1,05 |
2. Rate of centralisation of strategic decisions in the area of financing |
4,16 |
1,09 |
3. Rate of centralisation of strategic decision in the area of production |
4,24 |
1,14 |
4. Those responsible for the international units have worked for a period of time in the central office |
3,38 |
1,34 |
5. Those responsible for the international units visit the central office every so often |
4,33 |
0,82 |
6. The executives of the different international units maintain informal and personal relations (conferences, visits, travels, etc.) |
4 |
1,07 |
7. The importance of the policies, rules and norms that the central office transfer to the international units. |
3,78 |
0,97 |
8. To which extent people entrust executives of international units |
4,14 |
0,80 |
9. Frequency with regard to the arrival of reports in the head office about the working and the results obtained by each one of the international units |
4,50 |
0,77 |
10. Frequency of the visits in the international units of executives coming from the central office |
3,63 |
0,95 |
11. % of Spanish executives who are in charge of international units. |
73,8 |
34,67 |
Source: own data base
Several semantic constructs that had been adapted from Ghoshal and Nohria’s papers (1989), were used to avoid problems regarding the appreciation of the variables. Thus, variables 1, 2, and 3 were measured using the following scale, (1) the executives of international units decide by themselves, (2) the executives of international units can decide, whereas the executives of the head office can give their opinions, (3) both types of executives have the same influence, (4) the executives of the head office can decide and the executives of the international units can express suggestions, (5) the executives of the head office decide by themselves. The frequency pointed out in variables 5, 9, and 10 was measured as follows, (1) every year or longer, (2) between 6 and 12 months, (3) between 3 and 6 months, (4) between 1 and 3 months, and (5) every month or less time. Variable 11 has been directly measured through the percentage of expatriates in the senior management of the international units.
In order to classify the enterprises in accordance with the strategic approach, we introduced in two groups, following the study of Leong and Tan (1993), a sequence of sentences which summarised plainly the nature of each one of the styles that were proposed by Bartlett and Ghoshal (1989). The executives chose a sentence in each group according to the notion they have regarding the role played by international units in the whole organisation. In principle we expected certain coherence between the enterprise that chose an option in a group and the corresponding option in the second group. The proposed sentences are/were the next ones,
Group 1
Group 2
The size was associated with the variables sales and number of employees. We connected the complexity with the percentage of foreign production and the number of product lines. Finally, the experience was measured with the variable number of years since the foundation of the enterprise.
Two phases of analysis were conducted. In the first phase, factorial and cluster analysis were used to note the mechanisms of co-ordination and control and to classify the enterprises depending on the strategic approach. In the second phase, we focused on the analysis of the variance and the analysis of simple correlation with the aim of checking the relationships between the mechanisms of co-ordination and control, the strategic approaches and the contingency variables.
Considering table 2, since the variables are, to a greater or lesser extent, correlated to another, we applied the principal components analysis that facilitates to observe a new set of variables. These variables have the advantage of being non-correlated and they can be also ordered according to the information they contain (Ferrán,1996, Uriel,1995). As each principal component is function of different original variables, the information is explained by a set of less elements. In addition to this, if the components are capable of interpretation, we would be achieving a good approximation to reality. There are several techniques to determine the number of factors to be analysed. In this case we have preferred not to consider the factors whose own value is under one. Table 3 shows the number of factors that have been taken into account and the explained variance. In order to facilitate the interpretation of the factors, a varimax rotation has been done. This fact does not affect the developed analyses, neither the goodness of adjustment of the factorial solution. Table 4 shows the contributions of each variables to the respective factors and it serves as base for their interpretation.
TABLE 3: FACTORS AND % OF EXPLAINED VARIANCE
Factor |
eigenvalue |
% explained variance |
% accumulated variance |
1 |
2,209 |
20,07 |
20,07 |
2 |
1,687 |
15,34 |
35,41 |
3 |
1,487 |
13,51 |
48,93 |
4 |
1,378 |
12,52 |
61,45 |
5 |
1,242 |
11,29 |
72,75 |
Source: own data base
TABLE4: ROTATED COMPONENTS MATRIX
Variable |
Factor 1 |
Factor 2 |
Factor 3 |
Factor 4 |
Factor 5 |
1 |
0,866 |
||||
2 |
0,894 |
||||
3 |
0,739 |
||||
4 |
0,773 |
||||
5 |
0,522 |
||||
6 |
0,839 |
||||
7 |
0,821 |
||||
8 |
0,793 |
||||
9 |
0,849 |
||||
10 |
-0,855 |
||||
11 |
0,679 |
Source: own data base
The five obtained factors, which explain the 72,75% of the variance, can be interpreted in the following way:
As it can be observed, through the analysis of the main components, without losing too much information, the eleven initial variables have been reduced to five factors that coincide, taking into account some nuances, with the established theoretical approaches. We obtain, on the one hand, the three basic mechanisms of co-ordination, centralisation, standardisation/formalisation and socialisation; and on the other hand, both systems of control that have been defined extensively as direct control of behaviours and output control .
With the aim of classifying enterprises according to the strategic approach, we apply the cluster analysis to the results obtained in table 3. This technique permits to gather the enterprises of the sample with regard to the distribution of the value of the variables, so that each group is as homogeneous and different as possible from the rest of the groups. In this case, we have employed the k-means method; the solution that has been introduced is the obtaining of three conglomerates (Ferrán, 1996). The next table reveals the obtained results.
TABLE 5: CLUSTER ANALYSIS
Cluster 1 |
Cluster 2 |
Cluster 3 |
|
N |
42 |
60 |
12 |
Centres of clusters
|
.
2 3 |
.
1 1 |
.
3 3 |
Means of variables
|
.
1,52 2,90 |
.
1,27
1,05 |
. 3 3 |
Source: Own data base
The analyses considers 3 groups of enterprises. In the first group, which is made up of 42 enterprises, the centre of the conglomerate regarding the variable of dependence is placed in value 2. This fact indicates a rather independent working of the international units, whereas regarding the variable innovation the centre of the conglomerates is placed in value 3; this implies the creation and exchange of innovation in every unit of the enterprise. Although it might not make any sense to analyse means of nominal variables, we can see how enterprises that belong to this group are placed nearer to the intermediate value 2. The characteristics of these enterprises (independence of the international units and exploitation of innovations by the units that have created them) defined the multinational organisational approach which considered the international units as "city-states".
The second group has as centre of both variables value 1. This value indicated a whole dependence on the head office and the creation and use of innovation in the central office. The means of both variables are around value 1; therefore, this group of enterprises could be classified as part of the global approach, in which a centralisation in the head office of assets and responsibilities takes place, and the international units are considered as simple "satellites" of the central office.
Finally, there is a small number of enterprises (12) in which not only the centres of the cluster but also the means of the variables locate in value 3. This reveals, on the one hand, that the international units is given the same strategic importance as the central office, and on the other hand, that innovations take place in every centre of the enterprise; therefore, they are exchanged between the different units of the organisation. In accordance with these characteristics, this group of enterprises could be framed as part of the transnational organisational approach.
Phase 2
(a) In a first analysis, our aim has been to determine the possible relations that can be established between the adopted strategic approach and the mechanisms of co-ordination and control that have been employed. For this reason, we have carried out an analysis of the variance between the three clusters of enterprises (global, multinational, and transnational) and the mean of the factors that have been extracted as representative for the mechanisms of co-ordination and control. The test of Kolmogorov-Smirnov has been utilised to check if the variables that are representative for the mechanisms of co-ordination and control followed a normal distribution (null hypothesis). The p-value associated to the statistic of contrast is higher that 0,05 in all variables; for this reason, at the level 0,5 of significance, the null hypotheses can not be refused; therefore, the distribution of the variables is normal. According to these results, the analysis of the variance and the post-hoc test of Scheffe have been applied. The following table shows the obtained results.
TABLE 6: ANOVA
Centralisation |
Socialisation |
Formalisation |
Behaviour control |
Output control |
|
Test F |
13,413*** |
0,485 |
0,295 |
0,324 |
0,918 |
Test Sheffe |
(2,1); (2,3) |
||||
***p<0,001 |
Source: Own data base
(b) In a second analysis we have tried to establish the existing relationship between the different mechanisms of co-ordination and control, and the contingency variables that have been specified such as size, complexity and experience. The next table indicates the correlation coefficient of Pearson between both groups of variables.
TABLE 7: MECHANISMS OF CO-ORDINATION AND CONTROL AND CONTINGENCY VARIABLES
Centralisation |
Socialisation |
Formalisation |
Behaviour control |
Output control |
|
Employees |
-0,43 |
0,045 |
0,305*** |
-0,028 |
0,157* |
Sales |
-0,70 |
0,045 |
0,276*** |
0,019 |
0,169* |
% foreign production |
-0,135 |
-0,040 |
0,059 |
-0,321*** |
0,126 |
Lines of products |
-0,072 |
-0,241** |
0,085 |
-0,061 |
0,264*** |
Year of foundation |
-0,027 |
0,174* |
0,276*** |
0,018 |
-0,019 |
***p<0,001; **p<0,05; *p<0,1 |
Source: Own data base
Hypotheses 3,5,8, and 10 established a range of relations between the adopted strategic approaches and the use of certain mechanisms of co-ordination and control. As it can be observed in table 6, it is just significant the difference of means regarding the factor centralisation. In this sense, the relations appear congruent with the expected sign that had been described by hypothesis 3. Those enterprises that adopt a global approach, according to which the affiliated companies depend on the head office and the innovations that originate there, develop processes of decision highly centralised and the executives of the affiliates hardly participate in the strategic decision-taking. On the contrary, those enterprises that adopt a multidomestic or transnational approach, introduce a larger decentralisation when taking decisions. Consequently, they achieve the flexibility they need to adapt themselves to local markets. However, the rest of relations derived using the theoretical analysis did not appear significant (hypotheses 5, 8, and 10). According to our results, there are no differences in relation to the use of the rest of mechanisms of co-ordination an control depending on the adopted strategic approach.
Moreover, the rest of hypotheses connected the mechanisms of co-ordination and control with complexity, size, and experience. In table 7, just the opposite of what happened in the previous analyses, centralisation does not show any significant relation with such contingency variables, whereas in the other procedures does some type of association appear. For this reason hypotheses 1 and 2 can not be validated, although the sign corresponds with the expected one. Therefore, it seems that there is not a clear association between a higher decentralisation regarding the decision-taking and the increase of size, complexity and experience.
On the other side, hypothesis 4 has been validated. The increment of size and experience involves a more frequent use of formalisation. In these international enterprises, if the size of the company augments, it turns much more complex for the executives of the head office to control personally the subsidiaries. The formalisation, as it establishes particular guidelines to follow, makes unnecessary direct communication between both parts. Moreover, as the enterprise gains in experience, it tends to formalise its "know-how" regarding management, so that improvements in co-ordination can be appreciated over the years.
Hypotheses 6 and 7 determined a positive association between socialisation and the variables complexity and experience. In accordance with these results, a greater complexity, which involves the development of several product lines, is associated with a lesser use of socialisation. Therefore, the obtained sign is the opposite of the expected one according to hypothesis 6. In our opinion, this fact can be explained if the relation between diversification of product and output control is analysed. In this enterprises that are more diversified, the basis of management and co-ordination of the international units lies mostly in the reception of periodical reports about the functioning of the affiliates rather than in aspects such as the visits in the head office, the informal contact or the personal confidence. The type of growth may have had some influence on this because it is frequently said that the most diversified enterprises usually grow by means of acquisition or joint ventures. This kind of strategies are of the type in which other enterprises take part and in which it is more difficult to assimilate or transfer the culture of the head office. In addition, hypothesis 7, which establishes a positive relation between experience and socialisation, has been validated. In this case, Spanish enterprises try to improve, over the years, the co-ordination of activities by the socialisation of the members of the organisation.
Finally, the greater complexity of international transaction and the bigger size involve a larger use of output control (hypothesis 9). In such big and quite diversified organisations is not operative for the executives of the head office to travel frequently to each one of the affiliates. For this reason , they often make use of the reception of reports. Moreover, in such big enterprises, there are normally more qualified specialists who develop a whole range of plans and programmes to facilitate the adoption of systems of control that are based on the evaluation of results. In addition, we can notice how the percentage of foreign production is negatively correlated with the factor that represents behaviour control (explained by two variables with the opposite sign). Consequently, as the amount of production abroad increases, the visits of the executives in the head office are more frequent. This is why expatriates, as a mechanism of direct control, tend to be less utilised.
In conclusion, we can draw the attention, on the one hand, to the existence of a clear relationship between the rate of centralisation when taking decisions and the adopted strategic approach, and, on the other hand, to a more frequent use of impersonal methods as the size and the complexity of international transactions augments. However, it can not be stated that personal methods are not used any more. The correlation matrix extracts the most significant association. Therefore, if this substitution would have been complete, the relations would have shown opposite and statistically significant signs.
The research of the organisational processes that allow the co-ordination an the control of international activities has turned into one of the crucial aspects to be considered in order to implement the international strategy. In principle, the enterprise has to decide in which parts of the organisation the strategic decisions (centralisation, decentralisation) will be taken, to establish the rules, norms and procedures to be followed (formalisation) and finally, to consider a whole of mechanisms that facilitate the identification of the workers with the values and objectives of the enterprise (socialisation). Moreover, it must be questioned if the development of the activities in the subsidiaries will be controlled personally and directly by the executives of the head office (behaviour control) or, on the contrary, if it will be established any procedure to confirm the results derived from these actions (output control). Obviously, many aspects influence on the mentioned process of analysis and decision, not only the adopted strategic approach but also a whole range of contingency variables such as size, experience or complexity of the environment.
The previous theoretical frame has been applied to the Spanish multinational enterprises; in this way a model that shows the relationships between the different mechanisms of co-ordination and control, and a range of strategic and contingency variables has been evaluated.
Firstly, it has been demonstrated a total association between, on the one side, the centralisation of the strategic decision in the central office and the adoption of a global strategic approach, and, on the other side between the highest rates of decentralisation and the enterprises that adopt a transnational or multinational approach. In addition, it is conclusive that there is no relation between the adopted strategic approaches and the other mechanisms of co-ordination and control. The centralisation of the decision-taking appears to be a determinant mechanism to identify a strategic approach, whereas the rest of mechanisms are indistinctly employed by enterprises with independence of the strategic approach they have adopted.
Secondly, it has been proved a greater use of formalisation and output control in those organisations of major size; a lesser use of socialisation and a larger importance of the output control when complexity increases; finally, a more frequent use of socialisation and formalisation as the experience of the enterprise rises.
Finally, despite these significant relation, it can be observed an accumulative process according to which the enterprises of the sample do not abandon the most personal and direct mechanisms of co-ordination and control (centralisation and behaviour control) as size, complexity, and experience augment, but they adopt more impersonal and direct mechanisms (formalisation, output control, socialisation) for those decisions that are part of the routine. In this way, when facing "exceptions" or "new events" the most direct and personal mechanisms will go on operating.
As it can be observed, the established theoretical model corresponds with the reality in the case of the Spanish enterprises; therefore, some questions that have been demonstrated in other national contexts can verified in the case of the Spanish enterprises. This advance in the understanding of the internationalisation of the Spanish enterprise could be completed with research of cases of enterprises; in this way, some of the aspects that have been analysed in this paper, which are certainly difficult to measure through questionnaires, could contribute with a higher number of implications, than the ones that can be glimpse by the simple statistical analysis.
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