Multidivisional vs metanational governance of the multinational enterprise

Abstract

The effective and efficient management of diversified business firms that supply multiple products and operate in multiple, dynamic markets, especially large multinational enterprises (MNEs), builds upon a number of specific governance principles. These governance principles allow the alignment of environmental characteristics, strategy and organization. Given the rising need to “learn from the world”, Doz et al., in their influential Harvard Business School Press book entitled From Global to Metanational, have proposed a new set of governance principles described under the “metanational” umbrella concept. This paper revisits the metanational, using a comparative institutional perspective; here we contrast multidivisional and metanational governance principles. A comparative institutional analysis suggests that the metanational's application potential in terms of actually improving the effectiveness and efficiency of MNE governance may be subject to more qualification than suggested by Doz et al. Senior MNE management must therefore reflect carefully before substituting metanational governance principles for the more conventional, multidivisional ones with established contributions to managerial effectiveness and efficiency. Journal of International Business Studies (2008) 39, 940–956. doi:10.1057/palgrave.jibs.8400344

Beyond Simple Configurations: The Dual Involvement of Divisional and Corporate Headquarters in Subsidiary Innovation Activities in Multibusiness Firms

“…As such, divisional headquarters have resources and capabilities that add to the ones of the corporate headquarters to manage the multibusiness firm. We extend Verbeke and Kenworthy (2008) argument that corporate headquarters involvement is limited to crisis situations and large-scale, resource-intensive projects in two ways. First, we show that a simultaneous involvement of corporate and divisional headquarters in subsidiary innovation projects is rather common (almost 30% of the projects in our sample).…”

“…Thus, the literature suggests a clear separation between corporate headquarters activities such as performance evaluation (financial control), resource allocation, and (long-term) corporate strategy formulation and divisional/ regional headquarters activities which are more oriented towards the operational activities of their divisions. That is, there is, in principle, only selective involvement of the corporate headquarters in divisional affairs and there is relatively limited coordination of activities across divisions (Verbeke and Kenworthy 2008).…”

“…Simultaneously, these large projects are likely to attract attention at the overall firm-level, and thereby the involvement of corporate headquarters. A larger innovation network size signals that the project is important and while corporate headquarters usually restrain their involvement in business matters, they are likely to become involved in large-scale and resource-intensive projects (Verbeke and Kenworthy 2008). For large projects, corporate headquarters will try to complement the value-adding activities of the divisional headquarters.…”

“…Second, the complexity and conflicts associated with innovation projects embedded within and beyond the division are heightened when the projects are large (Verbeke and Kenworthy 2008). Thus, these projects have greater needs for coordination.…”

“…Birkinshaw et al 2006;Foss et al 2012;Galbraith 2009;Kostova et al 2016;Poppo 2003). This literature predicts that dual headquarters involvement is unlikely to occur since it is costly and draws on the scarce resources and attention of headquarters staff Nell et al 2011;Poppo 2003), since it runs counter the traditional M-form logic (Chandler 1991;Verbeke and Kenworthy 2008;Williamson 1975), and because it increases the likelihood of conflicts and coordination problems (Goold and Campbell 2002;Gong et al 2007). Yet, we highlight circumstances under which we can expect to observe overlapping headquarters' involvement.…”