Different Forms of Agency and Institutional Influences within Multinational Enterprises

Abstract

Given their exposure to diverse institutional settings, decision making in multinational enterprises (MNE) is marked by inconsistencies and conflict. Within the comparative institutional analysis (CIA) literature, such inconsistencies are seen as a source of experimentation or innovation. By contrast, in the international business (IB) literature, institutions are primarily understood as constraints on MNE activity. The latter focuses on ‘institutional effects’ taking institutions as stable and determining of social agency. As a way of addressing this limitation, we aim to understand the conditions that enable actors to engage in strategic action despite institutional pressures towards statis. The research draws on systematic comparative case studies of two large MNEs in the chemical industry, headquartered in Germany and the UK, and operating in Italy, Germany, and Poland. It focuses on one example of agency, subsidiary efforts to change product formulations that are successfully developed by the headquarters. We demonstrate that agency within MNEs is influenced by a fit between MNE coordination structures shaped by home country institutions and host country institutions’ demands for flexibility or collaboration. Institutional incompatibilities between home and host contexts are unlikely to trigger actors’ reflective capacity to change if the actors cannot draw on supportive coordination structures in the MNE. This is not just an ‘institutional distance’ argument as is commonly understood in IB. It is related to whether local institutions support the subsidiary to take advantage of specific opportunities conditioned by the home country institutions.