Balancing subsidiary influence in the federative MNC: a business network view

Abstract

The contest for intra-organisational power in the multinational corporation (MNC) has gradually become a prominent issue on the research agenda. As long as 25 years ago, Hedlund (1980) investigated the strategic roles of subsidiaries in MNCs, and Doz and Prahalad (1981) raised the issue of how difficult it is for headquarters to remain in control of its subsidiaries and to influence their strategies over time. Since then, several researchers have suggested that MNCs can be considered to be dispersed structures of power in which the top management’s authority does not necessarily result in hierarchical power being the ultimate control mechanism (Hedlund, 1986; Forsgren, 1989; Ghoshal and Bartlett, 1990; Doz and Prahalad, 1993; Ferner and Edwards, 1995; Kristensen and Zeitlin, 2001; Morgan and Whitley, 2003). Birkinshaw and Hood (1998) examined the evolution of capabilities at the subsidiary level and recognised that, in most corporations, there is an ‘internal competition for charter’ that implies a process of change in subsidiary roles (Birkinshaw and Hood, 1998: 782). Case research has also indicated that changes in the charters of divisions or subsidiaries in MNCs constitute a strong feature of horizontal or vertical competition in the corporate ‘marketplace’ (Galunic and Eisenhardt, 1996; Birkinshaw and Fry, 1998). The tension between the headquarters and overseas laboratories caused by the laboratories’ desire for autonomy and influence is an example of such a competition (Asaka wa, 2001).