Organization in American MNCs: The Perspective of the European Regional Headquarters

Daniel Sullivan, Assistant Professor of International Business, A.B. Freeman School of Business, Tulane University, New Orleans, LA, U.S.A. In the MNC, perceiving opportunities for integration requires a multicountry view of company, competitive, and political conditions. As such, home office managers typically champion multinational integration and a mechanistic organization (Doz 1986). Conversely, proximity to local conditions prompts subsidiary managers to advocate national responsiveness and an organic design (Bartlett/Ghoshal 1989). So predictable are these predispositions that Doz and Prahalad (1984, p. 57) conclude "needs for responsiveness typically enter the MNC via subsidiary managers, whereas needs for integration are more acutely perceived by headquarters executives. " Predictable too is the division of research of organization in the MNC. One group sets headquarters as the point of reference (Heenan/Perlmutter 1979, Bartlett 1981, Bartlett/Ghosal 1989, Daniels et al. 1984, Doz 1986, Edstrom/Galbraith 1977, Egelhoff 1989, Roth/Morrison 1990) while another sets subsidiary characteristics as the principal research variables (Goehle 1980, Cray 1984, Garnier 1982, Hulbert/Brandt 1980). Child (1972) suggests something may be amiss. He cautioned that the definition of the sample in terms of its organizational status can lead to different findings. Systematic error arises, Hambrick (1981) added, because of the differing perceptions of senior executives and subordinates. Taking heed of these warnings, we study organization in American MNCs from the perspective of managers of the European regional headquarters (RHQ). The view from the RHQ is theoretically ideal because its mission is to manage the tension between headquarters' call for global efficiency and local subsidiaries' push for national effectiveness (Heenan/Perlmutter 1979). Executing this mandate requires the regional executive maintain a matrix of sensitivities, alert to the imperative of pooling resources, gaining synergies, promoting standardization, and managing product cycles while simultaneously safeguarding the benefits of subsidiaries' responsiveness to local employees, competitors, markets, and governments (Daniels 1987). Research Themes Three themes guide this research. The first marks the relationship between the co-called "science" and "art" of business that delineates the firm's formal structure versus its informal substructure (Pascale 1977). (1) Traditionally, study of organization in the MNC has emphasized the technical elements of an MNC's organization under the presumption that managers objectively prescribe the "idealized rationality" of the desired structure by impartially allocating roles, rules, and responsibilities among managers, units, and divisions (Stopford/Wells 1972; Egelhoff 1989). Recent work has highlighted the social elements of organization, emphasizing the influence of the "dialectical rationality" that is enacted by the informal substructure and that sanctions patterns of decision making that do not singly respect the standards of efficiency (Benson 1977, Ranson et al. 1980, Greenwood/Hinings 1988, Prahalad 1983). Cases studies that address this issue report that organization in the MNCs is a self-sustaining merger of formal and informal processes configured to meditate political and economic imperatives (Bower 1970, Bartlett 1981, Prahalad/Doz 1987, Bartlett/Ghosal 1989). However, scant research has empirically analyzed the interdependence of the prescribed framework and substructure perspectives, especially with respect to organization in the MNC. Therefore, we take the position that integrated study of the formal structure and informal substructure explains how managers develop the modes of interpretation, rules of action, and provinces of meaning that enact an organization (Ranson et al. 1980). The second theme is that the coordination and control tasks of Doz's (1986) generic global strategies reveal characteristics of the organization of an MNC. …