"ORGANIZATIONAL DEVELOPMENT IN THE
TRANSNATIONAL ENTREPRISE"
by
Paul A.L. EVANS*
N° 88 / 42
* Paul EVANS, Professor of Organizational Behaviour, INSEAD,
Fontainebleau
Director of Publication :
Charles WYPLOSZ, Associate Dean
for Research and Development
Printed at INSEAD,
Fontainebleau, France
ORGANIZATIONAL DEVELOPMENT IN THE
TRANSNATIONAL ENTERPRISE
Paul A.L. EVANS
(INSEAD)
June 1988
ABSTRACT
Although multinational firms are increasingly the big league
players in the world business scene, they are a neglected domain
for organizational development and planned change. Yet tracing
the evolution of MNC research and practice during the last twenty
years shows that the current and future challenges lie precisely
in the domain of organizational development.
This chapter reviews research on and practice in MNCs at three
stages - the 60s and 70s, the early 80s, and the late 80s. Issues
that are reviewed underway are Perlmutter's foresighted but
simplified EPRG framework; cultural differences in the
applicability of OD; the need for contextual frameworks to guide
the field of planned change; and one such framework for assessing
how the MNC can develop an appropriate degree of corporate
integration. In particular, the discussion of the evolution of the
matrix dilemma in complex firms leads to the argument that
organizational development should be guided by a dualistic
metaphor : developing a dynamic balance between opposing
polarities. The implications in turn for the field of
organizational development are briefly assessed.
INTRODUCTION
With the internationalization of markets in the 1960s and 1970s
and the current concern with globalization, the transnational
enterprises (or multinationals as they are more generally known I shall interchange the terms) are the big league players in the
business scene. The characteristic of these firms is typically
their overwhelming complexity - often hundreds of thousands of
employees in anything from a dozen to nearly two hundred
geographic markets, with operations sometimes spanning many
related and unrelated businesses.
And yet such enterprises are all but virgin territory in terms of
organization development. Even if we define OD loosely as planned
organizational change with the objective of increasing
organizational effectiveness, most of that research has focused
upon micro-processes within organizations; the macro-issues of
organizing massive complexity and uncertainty have been left to
the scholars of organization theory, structure and corporate
strategy. Similarly, the setting for OD interventions has
typically been the business unit of the firm rather than the
entire corporation, unless this were a relatively simple firm in a
single business. It was pointed out in 1976 that "OD responses in
the past have generally fallen short of dealing with the
complexity and magnitude of multinational concerns" (Hornstein &
Tichy, 1976), and on the surface little has changed in the last
1
decade except for the disemmination of a single influential model
for developing transnational competences - that of Howard
Perlmutter (Heenan & Perlmutter, 1979)(Note 1).
At a Take-off Threshold
Or has little changed? Behind the scenes, a lot has changed. The
focus of attention in research on MNCs has gradually shifted from
a concern with structural and administrative solutions for the
challenges of managing complexity, to a concern with management
processes such as transnational communication, decision-making,
management development, and conflict resolution. There is growing
awareness in the minds of scholars and executive practitioners
alike that the future of the global corporations does not rest
with finding the appropriate strategy or structure but with their
ability to develop organizational capabilities in these process
domains. And has this not always been a deep value behind OD managing change not as a one-shot process but in such a way as to
increase organizational capabilities?
In fact, the term "organizational development" is appearing with
increasing frequency in the MNC literature in this context.
Simultaneously, executives are recognizing that the challenges in
these complex organizations are no longer the "What's" of finding
the appropriate formula but the "How's" of organizational
development and change.
2
Thus the central argument running through this chapter is that the
transnational enterprise is at a take-off stage in terras of the
relevance of organizational development : no longer in the hanger,
beyond even the parking ways, but moving down the runway. The
momentum is so rapid that it is likely that scholars will once
again learn from practice developments rather than leading them.
Three Stages in MNC Research and Practice
To understand this challenge and to review the field of OD as it
applies to MNCs, a historical or evolutionary perspective makes
most sense. This chapter is structured in terras of a review of
stages in research and practice on multinational enterprises :
Stage One is set in the 1960s and 1970s, when MNC research focused
on structural issues. Stage Two is the early-mid 1980s, when
attention shifted to management processes. Our awareness of
cultural differences in conceptions of management and organization
also developed at this time, leading to the questioning of OD
technology as being bound by its North American cultural heritage.
Stage Three is the present take-off stage mentioned above.
At each stage, I will take the opportunity to outline a model for
organizational development that characterizes the preoccupations
of the era. The Stage One model is Perlmutter's now classic EPRG
framework. The Stage Two model is my own model of the mechanisms
to achieve an appropriate degree of integration in the complex
3
transnational firm. This framework also provides a contextual
basis for thinking about OD in such firms. The Stage Three
discussion focuses on the emerging challenge of developing
organizational capabilities.
THE 1960'S AND 1970'S : THE STRATEGY-STRUCTURE ERA
In this era, when OD and planned organizational change were
emerging fields, OD was strictly limited to interventions in
multinational enterprises, and usually in localized sub-systems,
rather than on transnational organization issues. Sponsors were
typically personnel managers embued with the idealism of OD. One
of the most detailed published examples is that of the
interventions within different divisions of the British chemical
giant, ICI, analyzed by Pettigrew (1985). But Pettigrew questions
whether the impact of these interventions, which varied in their
success, had more than a marginal influence at best on the
strategic reorientation that ICI underwent in the late 70s and
early 80s. Whereas OD assumed a trouble-shooting role in some
MNCs like EXXON, most corporate headquarters were unsure how to
employ this function within the portfolio of corporate tasks.
Research on the multinational enterprise was beginning to attract
serious attention, though with a focus on understanding the
relationship between strategy and structure in these complex
firms. That research can be briefly summarized in terms of three
4
schools of interest (see Galbraith & Nathanson (1979) for a more
detailed review). The major school, associated with the the
Harvard Multinational Enterprise
study,
extended Alfred Chandler's
"structure follows strategy" thesis to the analysis of American,
European and Japanese multinationals. What happens to the
structure of a firm as it internationalizes? Much effort was
spent in developing analytic frameworks for describing the
relationship between strategy and structure (Rumelt, 1974). The
studies showed that as companies diversified, they moved to a more
complex multidivisional structural form. This is summarized in
Scott's stage model of internationalization (Scott, 1973). Stage I
is that of the entrepreneurial firm with an export department,
evolving into the Stage II functional structure with an
international division. As diversification continues, companies
adopt a Stage III multi-divisional form, with an area focus if
expansion cornes from few products in many markets, or with a
world-wide product focus if it cornes from product diversity in few
regions.
Implementing the Matrix Organization
The frontier question in terms of both theory and practice in the
mid 70s was how the structure of the MNC should respond to
simultaneous diversification in terms of foreign markets and
products. What happens as worldwide product firms increase foreign
sales, or as area divisionalized firms diversify into new product
5
areas (Stopford & Wells, 1972)? Reasoning in structural terms,
the obvious answer was that this was the realm of the matrix
organization with its dual product and geographic focus. And
indeed many diversified MNCs introduced such matrix organizations
during the 70s (e.g. Citicorp, TRW, Texas Instruments, Exxon
Chemicals).
The interest in matrix organizations and the awareness of the
problems in their design and implementation led to perhaps the
first explicit focus of organizational development on the problems
of the transnational enterprise (Galbraith, 1973; Davis &
Lawrence, 1977). There was an awareness that the effective
functioning of matrix structures requires matrix systems, matrix
management processes, even matrix attitudes and a matrix culture.
(Indeed, Galbraith and Nathanson's influential work had just
emphasized Leavitt's earlier insight on the importance of
coherence between strategy, structure and people in the process of
organizational design (Galbraith & Nathanson, 1978; Leavitt,
1965). All too often, these matrix structures failed to live up
to their expectations, seemingly because of a lack of attention to
these wider aspects of organizational development.
6
The awareness that the environment of these complex transnationals
is inherently "matrixed" was to pave the way for further
developments. This is aptly
captured l'y
Davis and Lawrence (1977)
in the preface to their book :
"Ail forms of social organization have two simultaneous needs
that are often at odds with each other : freedom and order.
Freedom springs from intuition and leads to innovation. Order
stems from intelligence and provides efficiency. Both are
essentiel, but are they compatible with each each other?
Within organizations, these requirements are translated into
structural terms with which we are rather familier. Freedom
is translated as the specialized interests of different parts
of an organization; the optimal goal of decentralization.
Order is represented as the regulation and integration of all
elements in harmonious and common action : the optimal goal
of centralization. The problem with the centralizationdecentralization debate, however, was that the more you
realized the benefits of the one, the less you got the
benefits of the other. The dilemme of organization was the
dilemme of an either-or world Eitalics added), of being
either a boss or a subordinate. The promise of a release from
the dilemme, of the flexibility of both centralization and
decentralization, specialization and integration." (Davis &
Lawrence, 1977, p.xi)
Their commentary on confronting the either-or dilemme anticipates
a key aspect of my later discussion on developing organizational
capabilities.
Thus the significant outcome of Stage One was the growing
awareness of the matrixed, "either-or" nature of the environment
of the transnational enterprises. At this time, the matrix
structure was seen as providing the solution to this
7
multi-dimensional world; more recent events suggest that the
solution may be the organizational development challenge of
creating a "matrix culture", as we shall see later.
Other Schools of Inquiry
Two other emerging schools of inquiry into multinational
enterprises should be briefly mentioned. First, research was
undertaken into the complex processes of resource allocation in
such firms (budgeting, planning and control), and into the formal
and informal administrative systems that surround these processes
(Berg, 1969; Bower, 1970). This research highlighted the
importance of the informai and political aspects of resource
allocation that had been traced earlier by Cyert and March (1963),
though the studies were largely divorced from the
strategy-structure inquiries above. Second, some researchers
began to consider the process of strategic planning as the "glue
that binds the diverse activities of a complex organization
together" (Vancil, 1976), leading to a stream of descriptive and
normative research on how corporate planning (and later strategic
management) could achieve better integration in the complex MNC
(e.g. Lorange, 1980). Overall, awareness of the complexities and
dilemmas in such firms was now leading scholars and practitioners
to turn to the investigation of management processes rather than
structures.
8
Perlmutter's Theory of Multinational
Organization Development
It was during this period that Howard Perlmutter developed the
first framework for conceptualizing organizational development in
the multinational enterprise. The concepts of this framework were
presented in a 1969 article entitled The Tortuous Evolution of the
Multinational Corporation, a paper which even in 1985 was voted as
the most influential article in international business research
(Ricks, 1985).
In trying to define "multinationalism", Perlmutter argues that
firms with a high proportion of international revenues exhibit the
properties of one of four ideal-type predispositions, labeled
ethnocentric, polycentric, regiocentric, and geocentric (see
Figure 1) :
Ethnocentric orientation : Key positions are occupied by
home-country nationals, while foreign subsidiaries are
subservient to the mother headquarters.
Polycentric orientation : Foreign subsidiaries are left to
manage their own affairs, run by local nationals, as long as
they deliver the results. Headquarters has a low profile.
9
Regiocentric orientation : Development of the corporation is
focused on clusters of countries in geographic regions such
as Europe, the America's and Asia.
Geocentric orientation : Foreign subsidiaries and regions are
integrated through a global systems approach to decision
making. Allegiance is to the worldwide firm, not to
nationality or region, and resource allocation decisions are
made on a global basis.
INSERT FIGURE 1 ABOUT HERE
On the basis of theory and anecdotal data (rather than empirical
study), Perlmutter argued that international firms, predominantly
ethnocentric or polycentric at the time, must evolve toward
regiocentric and geocentric orientations. This he viewed as the
major challenge for their organizational development. The forces
pushing in that direction are those of viability (i.e. achievement
of financial objectives in what we today would call global
competitive markets), and legitimacy in the eyes of local national
stakeholders.
10
Perlmutter's concept of multinational organization development was
elaborated in a later book (Heenan & Perlmutter, 1979), stressing
the concept of "social architecture". Traditional OD, he argues,
is of little value to the MNC since it focuses on the internai
system of the firm. OD in the multinational firm involves a wider
task, developing an orientation (or what we today would call
"culture") that is both internally "viable" and externally
"legitimate". While recognizing that prevailing ethnocentrism and
polycentrism may be appropriate for some time in the future in
many decision areas, he views global market and technological
forces as well as local stakeholder pressures as inevitably
pushing toward regiocentrism and ultimate geocentrism.
Perlmutter's framework, despite its renown, has attracted little
empirical research (see however Ondrack, 1985). Anticipating the
globalisation of markets, it remains a foresighted but sketchy
framework to guide organization development in transnational
corporations.
THE EARLY 1980'S : MANAGEMENT PROCESSES IN MNC'S
During the early 80s, the multinationals ran into a more
competitive environment. Internationalization had become a
reality, and the consequence now was that Perlmutter's
11
ethnocentric firms not only found the competition to be tougher
abroad, but sometimes even experienced major threats to their home
country markets.
For American multinationals in particular, a difficult era was
beginning. As Vernon (1979) shows, the economic power of these
firms in the previous decades had aroused a wave of national
sovereignty in bath other industrialized nations and the third
world. The "American Challenge" had mobilized reaction in Europe,
and "Japan Incorporated" had been in the making. Now mobilized
and with the awareness of the needs for attacking global markets,
these non-American firms turned to claim a stake in what was
regarded as the biggest market in the world, that of the United
States - the market where one had to be present in order to
survive. Simultaneously, statistics now showed that American
multinational activity had in fact declined during the seventies,
with a withdrawal into the home market : between 1971 and 1975,
U.S. multinationals had sold some 10% of their foreign
subsidiaries (Franko, 1978). However, the economic consequences
were not yet visible, since the influx of foreign capital into the
U.S. serviced the rising trade deficit that is exposed today.
12
During this period, there are two trends that are relevant to
understanding organizational development in transnational
enterprises. The first is the emerging awareness of cultural
differences in conceptions of management and organization, leading
to a questioning of OD values and technology outside the United
States. The second is the evolution of research on MNCs, turning
now to issues of management process that begin to raise
implications for organizational development.
Is OD culture bound?
Cultural difference do exist - that much we know both from
experience and research. Shifting from earlier multi-nation
studies on single variables (e.g. Haire, Ghiselli & Porter
(1966)) and single nation studies on multiple variables, broader
studies during this period reviewed differences in management and
work values (see reviews by Ronen & Skenkar (1985) and Adler,
Doktor & Redding (1986)).
Hofstede's landmark study of 160,000 employees working in 40
countries for an American multinational is perhaps the most
well-known (Hofstede, 1980; 1981). He identified four dimensions
on which work attitudes differed culturally : power distance,
uncertainty avoidance, individualism/collectivism, and
masculinity/femininity. For Hofstede, American approaches to
management and organization in general and OD in particular are
13
reflections of American values - and above all a belief in power
equalization that is no more than a counterculture in Latin
countries and many Asian cultures.
Indeed, Hofstede's data can be interpreted as suggesting that the
"love-truth-trust" model of OD is no more than a counterculture in
the United States itself, in that it is based on "feminine values"
in a predominantly "masculine" culture! On the one hand, OD
embodies certain mainstream values - a concern for power
equalization, and for balancing structure and risk-minimization
with tolerance for uncertainty and risk-taking. On the other
hand, OD reflects values that run against the modal current of
American culture : a concern for collectivism (teamwork and
cooperation) that runs counter to the predominantly
individualistic values of the continent, and above all a concern
for the "feminine" values of the quality of working life,
nurturance and the open expression of feelings.
If one further applies this reasoning to Hofstede's own data, one
would expect OD to have taken root in those national cultures that
are most compatible with its values, and not to have taken root in
others. The cultures that most resemble OD values are a
Scandinavian cluster of Denmark, Sweden, Norway, Finland and the
Netherlands. The modal culture in these nations is more strongly
feminine, and somewhat more collectivistic than in North America,
while sharing the concern for power equalization and tolerance of
14
uncertainty. And indeed it is in this region of the world that OD
has become most indigenous. There is almost a national consensus
between government, unions and management on the importance of
improving the work situation through participation by all
employees in decision-making, through job redesign and major
developmental programs (Cooper & Mumford, 1979). Socio-technical
thinking that is so central to OD has owed much to the
Scandinavian contributions of firms like Volvo and Norsk Hydro and
individuals like Thorsrud and Herbst; indeed the Norwegians see
themselves as going beyond socio-technical analysis (Elden, 1979).
The legal right of every individual to a "motivating job" is
encoded in Norwegian labor law, precisely as defined by the
American behavioral sciences (task variety, significance,
identity, autonomy, and feedback (Hackman & Oldham, 1980)).
In contrast, the national cultures that one would expect to reject
OD are the Latin cultures, particularly those in South America
(above all Columbia, Mexico and Venezuala), with strongly
masculine values and an acceptance of power distance - also
cultures much lower on individualism and higher on uncertainty
avoidance than the United States. Similarly, one would not expect
OD to take root in Japan, which appears in Hofstede's data as one
of the most masculine cultures with the greatest desire to avoid
uncertainty. And indeed comparative studies of the success or
failure of OD interventions appear to substantiate this. Preceding
Hofstede's work, Kobayashi and Burke (1976) discuss the distrust
15
of American OD technology in Japan and Latin America, viewed there
as manipulatory. Bourgeois and Botvinik (1981) and Jaeger (1986)
single out Latin America as a region where OD typically fails;
OD's attachment to participative approaches is seen as bewildering
in cultures with a clear preference for authoritarian paternalism.
Laurent (1983) argues that employees in Latin companies interpret
OD strategies either as a sign of weakness on the part of
management or as an attempt to manipulate the work force in subtle
ways, while Trepo (1979) shows how QWL was introduced in France
through top down legislation, largely rejected by management and
unions in ail but small and family firms. With respect to Japan,
while there has been little if any interest in OD, issues such as
improving the quality of working life have been a priority of
Japanese enterprises (Takezawa et al., 1982; Delamotte & Takezawa,
1984). while the methodology of OD seems to be largely irrelevant
to the Japanese culture, the content of OD is of concern for
instrumental reasons - based on an assumption that productivity
improvement and improvements in the quality of working life are
intimately associated and must develop hand-in-hand (as witnessed
by Japanese Quality Circles).
Latin scholars go so far as to suggest that the entire field of
American-based change theory, as well as the specific field of OD,
may be blind to its cultural context, thereby limiting its own
development. Building critically upon earlier reviews of OD and
change by Friedlander and Brown (1974) and Alderfer (1977), three
16
French researches contrasted the orientation to work in North
America and Europe (Faucheux, Amado & Laurent, 1982). The concern
for task and technology that has been at the fringe of American
concerns has been more central in Europe (Woodward, 1970; Herbst,
1962; and the work of the Tavistock Institute). The concern with
human and group processes in North America contrasts with the
stronger concern for institutional, community and collective
change in Europe. Power is a variable that is largely ignored in
North America, whereas "in the field of OD and change within Latin
countries we find power to be the key factor around which all
major research work revolves" (Faucheux, Amado & Laurent, 1982,
p.353).
In Latin cultures, if one is to seek real organizational change,
then one should attempt to change the rules of the game rather
than tinker with human processes. Crozier's school of thought,
known as "strategic analysis", is an alternative model of
organizational change based on the assumption that an organization
is typically a power structure constituted by hidden games that
can be exposed (Crozier & Friedberg, 1980). The Human Relations
and OD movements are seen as alternative approaches that are
somewhat naive. Indeed, schools of change intervention that are
indigenous to Latin countries are fringe movements in North
America - Crozier's strategic analysis based on psycho-social game
theory, the psychoanalytic approach to change (c.f. Zaleznik &
Kets de Vries, 1975), organizational change "drop-by-drop" (Mothé,
17
1981, c.f. the logical incrementalism of Quinn, 1978).
Finally, it has been clearly established that the "technology"
that is associated with OD and planned organizational change is
culture bound, or at least perceived differently in different
organizational contexts. To give a few examples, many OD
techniques are based upon providing feedback (through surveys,
process consultation, appraisals and confrontation). Such
approaches are less than successful and may even backfire in some
cultures : for example, in many Asian countries where they lead to
"loss of face" and where third-party mediation is preferred, or
even in Britain where indirect feedback is more acceptable (Cox &
Cooper, 1977). Management-by-Objectives is frequently cited as
ineffective in Latin countries or in nations accepting high power
distance (Trepo, 1973; Hofstede, 1984). Gain-sharing,
pay-for-performance, career planning and a host of techniques
associated with OD and human resource management run into cultural
problems in different regions of the world (Schneider, 1988).
Towards the Development of Contextual Frameworks
While one can say that cultural differences affecting change and
development clearly exist, the debate on cultural differences is
unlikely to be put to rest. Since webber's analysis of convergent
and divergent forces in work cultures (Webber, 1969), many
scholars and practitioners argue that these cultural differences
are of diminishing importance because of the progressive
18
homogenizing effect of technology, globalization of markets, and
organizational independencies (Negandhi, 1979; Child & Tayeb,
1983; Levitt, 1983).
However, this is a macro debate regarding future trends that is
often rendered more black-and-white than Webber's original
analysis. Even the universalists acknowledge the existence of
major cultural differences. Whereas there may be a natural
tendency for ethnocentrists to deny the troublesome (and for them
irrelevant) existence of such differences, I will show in a latex
section of this chapter that differentiation of national cultures
is theoretically and practically a potential source of competitive
advantage to the transnational corporation. Our conclusion has to
be that the field of OD as a value based movement is largely
irrelevant to transnational organizations, relevant only to
selective organizations in other regions of the world who happen
to share those values, or to counter-cultural change agents.
However, the broader field of organizational development as
planned or managed organizational change is of increasing
relevance, as we shah see in the next sections.
To be relevant both to the transnational organization or to the
majority of organizations in non-American cultures (dare one also
suggest the majority even in the American culture itself?), what
is needed is a contextual approach to change (Faucheux, Amado &
Laurent, 1982; Pettigrew, 1985). A contextual model allows one to
19
assess the appropriateness of particular levers and processes for
managing change to a particular situation.
One should bear in
mind the earlier findings in OD research that the effectiveness of
planned change has more to do with the creation of appropriate
preconditions for change than it has to do with the
"effectiveness" of either the change agent or the change
technology (Jones, 1969).
Contextual frameworks for planned organizational change are
beginning to emerge. One noteable example is that of Schein
(1985), who takes as a contextual variable the degree of maturity
of the culture of the organization. Schein sees certain "levers
of change" as being most appropriate to the development of the
young organizational culture that is still in its formative
stages, mechanisms such as building upon natural evolution
(successful deviations from prescribed behavior) and self-guided
organizational therapy. Planned change and OD are the domain of
more mature cultures at organizational midlife, as is logical
incrementalism. In older organizational cultures, stultified by
decades of past success and by emergent bureaucracies,
power-oriented change mechanisms are necessary, such as coercive
persuasion, transformational and turnaround strategies, and
induced bankruptcy. From a research perspective, such frameworks
20
open the way to learning about change from other cultural
perspectives (for example, Crozier's (1964; 1973) analysis of
power strategies in bureaucracies).
A contextual variable that is important for multinationals is the
degree of integration that is required in the transnational
organization. The importance of this variable emerges from
research on MNCs during this period in the early 80s. Let me turn
now to review these studies.
Integrating the Decentralized Multinational
As we saw earlier, the legacy of the 1970's was the growing
awareness that the reality of transnational enterprises,
especially in global industries, is inherently matrixed. Yet the
theoretical and practical search for solutions within the
structure-strategy paradigm had led at best to mixed results. More
recent research also showed that the neatly posited sequence of
steps toward internationalization did not in reality proceed in a
step-by-step fashion (Hedlund & Kverneland, 1984).
The matrix structure was found to be cumbersome and expensive,
even rejected in certain cultural regions. Bartlett (1981)
reported data on five U.S. food companies which showed that they
had successfully multinationalized with simple international
division structures, using "flexible multidimensional decision
21
making processes" to cope with the matrixed complexities of
international operations. Even more cogently, Kagono (1981) showed
in a large sample of big international Japanese firms that the top
performers had grown using simple rather than complex structures,
but with shifts in power from one function to another (production
to marketing to R&D) and the use of more complex integrative
management processes. Kagono's conclusion was that "a simple
structure with a single primary focus may work better than a
sophisticated structure with dual focus of corporate-wide level
even in a highly uncertain and complex environnent." Even where
matrix structures worked, this appeared to be because of the
effectiveness of underlying matrix management processes, such as
communication and multidimensional planning and budgeting. A
matrix culture was required, where the managers' perspectives are
multidimensional by virtue of work experience in and frequent
contact with other functions.
Similarly, strategic management processes failed to fulfill their
promise to serve alone as an integrative device for resolving the
tradeoffs between functional, geographic and product-market
imperatives. Again the lesson was that a matrix culture was
required for this to work. The short era of armies of strategic
planners at corporate headquarters ended with the recognition that
strategic management was a futile exercise unless the line
managers played bail. For example, General Electric introduced an
exceedingly complex process of consultative strategic planning,
22
not as a system but as a developmental tool to change the
attitudes of the key protagonists in the strategic management
process. A paper bureaucracy was created for a three year period
with this objective and then phased out.
Attention began to turn to the analysis of other mechanisms to
resolve the matrix dilemmas of multinational enterprises, and this
attention focused on resolving the centralizationdecentralization matrix conflict.
The research of Doz at INSEAD and Prahalad of Michigan embodies
this new wave of research (Doz & Prahalad, 1981; Prahalad & Doz,
1981; Doz, 1986). Through clinical studies of international firms
in six industries such as automobiles, telecommunications, and
microelectronics, they analyze the two opposing pressures on
multinationals that underlie the proverbial swinging of the
pendulum between centralization and decentralization. On the one
hand, there are the integrative or centralizing forces of
strategic control over subsidiaries in the face of expanding
global markets. These forces are on the increase with
international competition, while technology and market shifts lead
subsidiaries and business units to become more interdependent. Yet
on the other hand, there are the needs for local responsiveness or
decentralization to meet the pressures of host governments and the
particularities of local markets.
23
Success in managing these tradeoffs was seen as the key issue.
How can an enterprise provide for a subsidiary's integration into
a global network and its integration into a national economic and
social system? In the earlier terms of Lawrence & Lorsch (1967),
how can an organization be highly differentiated and highly
integrated at the same time?
The balance of forces by this time had shifted in favor of
decentralization. Most major multinationals had built
decentralized structures (Evans et al., 1988), and indeed some
research suggested that subsidiary autonomy was correlated with
multinational effectiveness, even in industries such as chemicals
that were widely viewed as requiring tight global coordination
(Welge, 1981). The question became that of how such a MNC could
provide the necessary degree of integration without compromising
the equally necessary local responsiveness and autonomy, that is
to say the benefits of decentralization.
The "either/or" of the centralization-decentralization pendulum
was replaced with a new "and/and" question: how to be integrated
and decentralized (differentiated) at the same time. A new way of
thinking was coming into place. The key challenge now became that
of discovering mechanisms to achieve what hitherto was regarded as
unnatural. The search for static structural solutions had been
replaced with an organizational development challenge.
24
The research of Doz and Prahalad focused on mapping out the
developmental mechanisms for achieving this balance, going beyond
the framework of Galbraith (1973) a decade before. They argued
that the vehicles for integration varied with stage in
internationalization. In the early phases of multinational
expansion, corporate headquarters have clear, substantive and
traditional means for strategic control over subsidiaries :
subsidiaries depend on headquarters for capital, technological
know-how, and skilled resources. Yet with the progressive
establishment of international activities, subsidiaries lose this
resource dependency and become more autonomous. Now we meet the
centralization-decentralization dilemma because traditional
administrative controls will compromise that autonomy. The insight
of Doz and Prahalad was that strategic control and integration
must shift qualitatively from administrative devices to subtle
means of achieving integration - "subtle" in the sense that
integration is achieved without compromising subsidiary autonomy.
The concept of integration implies use of these subtle mechanisms,
rather than the overt controls of centralization.
Other studies had shown that some MNCs use a wide range of
informal and subtle control devices, for example in Swedish
multinationals (Leksell, 1981). Doz and Prahalad mapped out the
integrative devices into three categories :
25
Data management mechanisms, such as computer information
systems facilitating on-line exchange of information and
decision-making.
Conflict resolution mechanisms, such as coordinating
committees, task-forces to resolve contentious issues, as
well as deeper organizational norms such as Digital's
"Push-Back" and IBM's contention management procedure (see
Note 2).
Manager management mechanisms, such as centralized management
training, control over the career development of key
individuals, and reward practices.
They argue that manager management represents the deepest and most
subtle form of integration in that it affects the very power
structure of the firm; yet it is also the most difficult
integrative capacity to develop. A well-known illustration is the
now-classic study by Edstrom and Galbraith (1977) on control in
four European multinationals. One of the firms in their study
appeared to have a high degree of corporate control over quite
autonomous operating companies. The source of this control was a
practice of intensive international managerial mobility - the
careful management of high potential managers with frequent
geographic, functional and divisional moues, creating a corporate
nervous system in the firm. Edstrom and Galbraith called this
26
"control through socialization", or normative-cultural control as
contrasted with administrative control (see also Baliga & Jaeger,
1984).
The subtle integrative processes that appear as the key to
organizational development in the MNC involve both "hard"
mechanisms such as data information systems and "soft" mechanisms
such as manager management. An unpublished observation from a 1987
conference on MNCs was that the hard and soft capacities seem to
go hand in hand. Without the development of soft integrative
capacities, the hard systems are unlikely to function well. This
was the case in three different industries : airlines (Cathay
Pacific), industrial products (SKF), and telecommunications (NEC).
These three firms had decentralized structures, coordinated in
part through world-wide data and decision-making systems; yet the
effective functioning of these "hard" systems depended on the
close mutual familiarity of people operating them on different
sides of the world.
Other researchers have arrived at similar conclusions to Doz and
Prahalad (Bartlett & Ghoshal, 1987; Kogut, 1985; Hedlund, 1986).
This stream of research leads on to the concept of organizational
capability. But before discussing this, let me pull together the
two strands of this review of the early 80s : the awareness of
27
cultural differences, leading to the need for a contextual
framework, and the need to map out integration mechanisms that are
appropriate to the MNC.
Developing Integration : A Contextual Model
for Multinational Organizational Development
The key developmental challenge for the transnational enterprise
is that of building the appropriate degree of global coordination
or integration, while allowing for the necessary local
responsiveness and cultural/market differentiation of
subsidiaries. The operative word is "appropriate", and this
depends on the industry or business sector. As Bartlett (1984)
has shown, the forces for integration are low in industries such
as cernent and branded packaged goods; they are strong in other
industries such as consumer electronics and telecommunications.
The necessary degree of integration thus becomes a contextual
dimension of organizational development in the international firm.
Where integrative requirements are low, as in the polycentric
firm, weak integrative mechanisms will be appropriate. Where
integrative requirements are high, as in geocentric or global
firms, stronger mechanisms will be necessary; but despite their
"strength", they need to be subtle and non-administrative
otherwise local responsiveness will be compromised.
Based on my analysis of the integrative mechanisms that
28
multinational companies use [derived from clinical studies and
observations of such firms (Evans, 1986; Evans & Lorange, 1988)],
FIGURE 2 maps out the integrative mechanisms on a scale from weak
devices to strong devices, clustered into six categories. These
mechanisms are typically cumulative, either in the sense that more
global firms will use weak as well as strong mechanisms, or in the
sense that the success of stronger mechanisms presupposes the
effective functioning of weaker devices.
INSERT FIGURE 2
1. Establishing face-to-face relationships : Exchange and
Coordination Meetings
The weakest and minimal mechanism for developing integration is
the establishment of personal relationships between key actors in
the firm (Daft & Lengel, 1987). Information does not pass in
unbureaucratic ways, the transfer of learning gets blocked by the
"not-invented-here" syndrome, and conflicts get avoided rather
than confronted unless such relationships are established. This is
an obvious point, though systematically building such
relationships may be difficuit in operations spread throughout the
world.
29
The actuel devices vary. Annuel world-wide conferences or
jamborees for a particular function are one example (academics are
often invited to present their
idées at such meetings, though one
knows that what is important is to respect the schedule and not
interfere with the socializing process!). Exchange groups are
another example, as are ad hoc project groups and coordinating
committees that cut across the worldwide organization.
No more than this degree of integration may suffice in certain
industries. Exemples of such polycentric firms are Holderbank (the
Swiss enterprise that is the world leader in the cernent industry)
and the Swedish industrial gas firm of Aga. Many rapidly growing
enterprises in the electronics components industry have developed
internationally in a polycentric fashion, for example Analog
vices and Molex. But as technologies shift and global competition
gets together, a stronger measure of integration is often needed.
2. Team-Building : Management Training
The logical next step is toward a more powerful device, that of
group or regional management training. Training serves the purpose
of building stronger personal relationships - indeed it may move
into teambuilding by working through differences, fostering common
identity, and facilitating exchange. Relationships built up at an
intensive management training program lasting several weeks are
often durable. Training also serves as an instrument for
30
confronting the language barrier; to qualify for the program, the
individual has to develop working proficiency in the language of
the corporation.
But training potentially goes further in serving as a vehicle for
developing a common understanding of challenges and a common
language for dealing with them. At INSEAD, we have noted the
appeal of training to many multinationals as a device to build a
"critical mass" of managers throughout the world who develop
personal relationships and a shared terminology.
Training is typically considered as serving the function of
developing individual competencies. Yet the integrative
organizational function of training is an explicit objective of
firms like Shell and IBM, who have major corporate and regional
training facilities. At Shell, high potential managers from
operating companies throughout the world are encouraged to attend
programs offered by central group facilities in Holland and
Britain with the explicit rationale of building "corporate glue"
in an otherwise decentralized organization. Olivetti and Ericsson
have recently invested in major management training facilities,
symbolically removed from headquarters and located in Britain, for
precisely this reason. Nestlé, the Swiss food products company,
sponsored the creation of a business school (IMEDE) for this
31
reason, as did Alcan with CEI (today renamed as IMI) in Geneva.
Many other firms today are entering into partnerships with
business schools with a similar motivation.
3. Selective Selection and Development : The Identification
and Development of Managerial Potential
A next and stronger integrative device involves a different
mechanism, focusing on corporate control over the selection and
development of individuals with the potential to occupy key
positions. This is often a logical progression from management
training into management development.
Control over selection and development is the most powerful
integrative device I can identify, applied here selectively to
those with high potential. The mechanism can best be understood
by applying the variation-selection-retention model of population
ecology (Astley & Van de Ven, 1983). The argument here is that
among the natural variation in any population, environmental
forces will favor the selection of certain types, leading them to
become models at that point in time (subsequent retention). This
model can be applied to explain how an organization may develop
internal integration within its heterogenous socio-cultural
environment. From the wide variation of potential managers and
professionals, the initial problem is to select (either at the
time of recruitment or from people within the firm) those who have
two qualities :
32
first, the qualities and motivation to occupy key positions
within the corporation latex in their careers;
second, the predisposition for a corporate rather than local
career (typically requiring geographic mobility), and a
personal value set that appears to match corporate values.
In the jargon of management development, this problem is known as
that of "identification of potential".
The two qualities go hand in hand in the sense that one without
the other is insufficient. However, in many if not most
organizations, the first set of criteria may be explicit, though
the second set may only be informal or implicit, if recognized at
all.
The next step is that of early socialization. As Pascale (1986)
notes, some organizations expose their young high potentials to
degrading assignments or experiences analogous to college hazing
so as to test their corporate loyalty. A major investment will be
made in their development, and the firm wishes to evaluate what is
after all only a probabalistic judgement. Indeed, companies like
Shell, Hewlett Packard, Philips and IBM note that turnover rates
among graduate recruits are modestly high in the first four years
after recruitment. On the other hand, if the individual remains
thereafter it is likely to be for a life-time career.
33
Then follows development. Career progression is carefully
monitored, usually involving different functional and geographic
assignments, with a spell at corporate headquarters. The duration
of expatriate assignments involves a tradeoff between cost and
practical problems on the one hand, and the importance of
corporate integration on the other hand - longer expatriate
assignments develop an extensive network of global relationships
and perspectives as well as heightened corporate identification,
but this is costly and difficult to manage. For example, IBM
limits all but a few expatriate assignments to a four year period,
whereas Philips has favored the development of third country
nationals (TCN's) who may be life-time expatriates in key
positions abroad. Citibank refers to this high potential elite as
"corporate property", and the narre is apt. The objective is to
identify and develop individuals who have more than proven
managerial, leadership and strategic ability. Wherever they are
working, be it as comptroller, head of marketing or general
manager in, say, Venezuela, they have a close identification with
the corporate interest (if only via the vested interests of their
further career progression), as well as in the local interests of
the subsidiary or function where they are currently working. Their
loyalties are matrixed.
34
International management development has become a growing priority
over the last ten years - our surveys at INSEAD have shown that
the identification and development
of
potential is by far and away
the top corporate priority for human resource management in
international firms (Evans, 1984). The major reason is of course
the recognition that the quality of middle and senior management
is a constraint on the growth (sometimes the survival) of the
enterprise. But today the development of such individual
competencies becomes interwoven with the simultaneous development
of a more integrated organization.
It is here that we return to Perlmutter's earlier observation on
ethnocentricity versus geocentricity. Historically, most firms
were and still are ethnocentric in the sense that the pool of
potentially "high potential" candidates is largely restricted to
individuals from the mother country. For example, Derr's study of
what constitutes "potential" in international firms in different
European and American countries (a study sponsored by our group at
INSEAD) showed that this is often more than ethnocentric restricted de facto to candidates from the "old school", "the
network" or some other establishment (Derr, 1987).
The significant problems of defining what is potential and
managing the development process (see Evans et al., (1988) for a
discussion) in fact represent efforts to widen the selection pool
and render the process of international management development
35
more rational and systematic, and less biased by ethnocentric
values. However, ethnocentric management development is a fair
beginning, and the firm may moue to a more "geocentric" system as
it develops the capacities. Indeed, one of the simplifications in
Perlmutter's framework is that integration and ethnocentricity get
confounded. My analysis suggests that they should be considered
as two separate developmental challenges that meet together in
what Perlmutter calls the "geocentric" concept.
4. Establishing Common Values and Goals : Building the
Corporate Charter
Management development leads on to a further device, namely
establishing common corporate values, often embodied in an
organizational charter or credo. If the organization is to select
and develop managers on a geocentric rather than ethnocentric
basis, what are the corporate values that should act as guiding
criteria?
With the often faddish recent interest in building a strong
corporate culture, programs to develop shared values have often
been launched as naively "quick-fix" solutions to the problem of
integration. Such programs are more difficult to manage and more
expensive than many believe. They corne after the implementation
of integration devices mentioned previously, not as a means to
jump several hurdles. Shared values programs are best when
36
making explicit what is already emergent. They provide
integration in particular when they become not simply espoused
theory but guiding criteria for the selection and development
processes discussed above. For example, Volvo's new CEG Per
Gyllenhammer injected new values into that Swedish firm when he
took over in the late 60's, values that are widely symbolized by
their then revolutionary Kalmar plant. But it took fifteen years
for these values to become institutionalized, occuring only as a
new generation of managers (who only knew the "new" Volvo) rose up
into positions of power (Evans et al., 1988).
Where the objective is to forge common values out of diversity and
heterogeneity, a major investment of time, effort and money is
required. Such was the conclusion of several of my own and other
studies - of such a program at Lafarge-Coppée (the French
international cernent and construction material firm), at the
British computer company ICL and at SAS in the airline business,
and at Apple Computers (Evans et al., 1988). These studies
suggested that the success of such programs depends on the deep
involvement of the managers themselves in the process of
developing a charter or corporate credo, not in the resulting
statement of values itself. In this sense, such programs can be
viewed as extending training into a wider organizational
development program.
It may be more feasible to place the emphasis on developing shared
37
"hard" values rather "soft" values, that is to say common goals.
The behavioral sciences have clearly established the unifying
function of goal-setting. Programs to align action around common
goals, such as quality at Xerox, customer service at IBM or SAS,
or globalization at General Electric, appear to act as a powerful
mechanism for world-wide integration if implemented with
appropriate focus and management commitment. For example, some
employees thought that Xerox's world-wide "Leadership to Quality"
program was getting in the way of pressing operational issues. The
chairman's response was unequivocal : "It's not getting in the
way, it is the way!"
5. Reward Systems : Executive Compensation
Common values and goals in turn lead to even stronger integration
devices, namely the reward system (Galbraith & Nathanson, 1979).
Common values and goals get reinforced when the reward system is
aligned behind them. This is particularly true for key managers.
For example, the bonus pool compensation for general managers in
some multinationals reflects a balance of the interests of
differentiation and integration. The total amount of money that is
available in the bonus pool is linked to regional or corporate
profits, thus fostering lateral collaboration. On the other hand,
38
the distribution of the bonus pool depends on individual
performance in one's own subsidiary relative to others,
simultaneously fostering differentiation.
However, changing the reward system may be seen naively as an easy
device to foster integration. As a generalization, one can say
that, it functions best when it represents a reinforcement of
previous devices and mechanisms, rather than as a tool for change
itself (Lawler, 1981).
6. Extensive Selection and Development : The Global Culture
When maximum integration is an organizational requirement for the
NNC, this can be achieved by a last mechanism, extending control
over selection and development beyond high potentials and even to
lower level professionals and employees in the firm. Examples
that more or less approximate this global culture are
Hewlett-Packard, IBM, Unilever, and many of the large Japanese
corporations, organizations that are seen as having strong
cultures.
Although there are big differences between nations in attitudes
and work values, as discussed earlier, such differences are
stereotypes. They represent statistical differences in means
between the normal distribution of attitudes and values in any
given national population. Certainly, Germans are different from
39
Americans who are different from the French. But some Germans are
very American in their attitudes, and some French are more similar
to the "average" German than to their own compatriots. when a
globally oriented company such as Hewlett-Packard is recruiting a
German professional for a career at their plant near Munich, they
are not simply seeking any technically qualified German; they are
looking for a German whose personality matches the cultural values
of Hewlett-Packard.
Recruitment in such firms is for careers, not for jobs. The values
of the organization tend to be transparent, and the reward system
is aligned with these values. Such firms also pay attention to
retention management to prevent the loss of carefully chosen and
socialized personnel, and the developmental investment that this
represents. Translated into specific devices, this mean above
average salaries, attention to welfare policies, safety valve and
monitoring procedures such as open door policies, opinion or
morale monitoring, and grievance procedures. Additionally, these
firms tend to have overt or covert non-union policies based on the
assumption that no employee can serve two masters.
As suggested earlier, global and integrated cultures may be quite
ethnocentric in their orientation. The criteria for employee
selection may reflect home country values. An example here are
some of the major Japanese concerns, with sophisticated and highly
40
integrated approaches to employee selection and development in
Japan itself. Yet such practices may run into problems when they
are applied abroad, especially when growth requirements involve
rapidly recruiting local workforces.
Hewlett Packard was cited as an example of an integrated global
organization in the United States. Some as yet unpubiished
research of my INSEAD colleague Andre Laurent shows that among his
empirical studies of cultural differences in multinationals, HP is
the firm where a shared organizational conception of management
and organization cornes closest to overriding national cultural
differences in such conceptions. In all firms studied, he finds
empirically that national differences clearly dominate over
communalities due to belonging to the same firm (Laurent, 1986) a testimony to the extent of the integration challenge - though
less so in a few enterprises such as Hewlett Packard. This is
indeed a concrete measure of the extent of integration. However,
whether this degree of integration is always desireable is a point
for discussion.
41
The Cost of Global Integration
A frequent occurence when "soft"
social
or organizational
development logic is divorced from "hard" business or economic
logic is that we find ourselves carried away by exaggerated
fashions - even though the fashion may be based on a problematic
reality. One such fashion in recent years is indeed the concern
with building strong, global organizational cultures.
Yet Bartlett (1984) reminds us that the forces for integration
vary from one industry to another, as mentioned earlier. And as
we shall see in the next section, integrative developmental
strategies may be applied to one sector of interdependent
businesses within the firm, while a polycentric strategy governs
other stand-alone businesses within the same corporation.
While strong integrative strategies have their attractions
(heightened strategic control, strong corporate loyalty, a high
priority given to human resource management), they have
significant costs. First, the overhead costs of corporate programs
and of human resource management are not insignificant, sometimes
leading to creation of major corporate bureaucracies. Second, the
importance of retention leads to salaries that may be well above
local labor market rates. Third, there is a serious risk of
cloning and inbreeding, as experienced by companies like IBM,
Exxon and Hewlett Packard. The diversity and variety that is the
42
lifeblood of innovation are lost, and integration may lead to
inward looking homogeneity. Finally, there may be some loss of
strategic flexibility. In
particular,
major strategic shifts,
joint venture partnerships, and the acquisition of companies with
inevitably different cultures may be particularly difficult. A
strong but strategically fragile organization may have been
created - the strength and fragility of cast-iron that tolerates
high pressure but ultimately cracks.
Hewlett Packard, long on the hit parade list of "excellent" firms
with strong cultures, may be such an example of the latter dangers
of over integration - cloning and strategic inflexibility. By
origin an instruments business, Hewlett Packard ventured into
computers in the 70s. This for a while led to a widespread loss
of its strong internai identity, inside confusion, and a clash
between different cultures in a firm noted for its unifying value
system. The choice was either to compromise those values or get
out of computers, and Hewlett Packard appears to have relegated
computers as a support for their core instruments business.
Laurent's data on its strongly integrated culture, mentioned
earlier in this section, was in fact interpreted by the firm not
as flattery but as evidence of an excessive degree of
integration and homogeneization. IBM, another quite integrated
firm, can be seen in a similar light.
In this section, I have sketched out successive integrating
43
mechanisms and devices, and this analysis can surely be amplified.
But the final summary point is that use of such development
strategies has to be guided by careful consideration of the
tradeoffs and the degree of global integration that is
strategically required.
THE LATE 1980'S : DEVELOPING ORGANIZATIONAL CAPABILITIES
Today, the guiding idea emerging from clinical research on
multinationals is that the source of competitive advantage for
many of these firms does not reside in their strategy or
structure, nor in their technologies or products. It lies in
their organizational capabilities to cope with the
multidimensional and complex demands of international business.
As Prahalad and Doz (1988) put it, the quality of organization
will increasingly become the prime competitive weapon.
The notion of organizational capabilities further develops
Perlmutter's foresighted concept of the geocentric organization.
It applies most immediately to transnational or global industries
such as telecommunications and medical instruments, where it is
important to achieve both global integration and local
differentiation. For these firms, their capacity to operate
effectively transnationally becomes their unique source of
strength. Strategic integration of the firm is vital,
differentiation of functions and subsidiaries is vital, but
transnationality is seen in the nature of the dominant operational
44
relationships, namely lateral linkages between interdependant
functions, business units and geographic subsidiaries spread
throughout the world. Lateral relationships and subtle
integrative controls predominate over traditional hierarchic and
administrative relationships. Indeed Hedlund (1986) suggests a new
name for this type of firm : the "heterarchy", signifying the
non-hierarchical organization of reality.
Some researchers see this firm as perhaps breaking free of
conventional thinking about strategy and structure. The structure
(or rather the culture) may lead it to look for strategic options
that follow from its cultural properties, rather than identifying
properties of the industry where it competes and then adapting its
structure (Schwartz & Davis, 1981).
Let me briefly outline four different variants on the argument,
different facets of the current challenge of complex MNCS. The
first facet is the consequence of scepticism about the utility of
long-range strategic planning. On the one hand, there is an
awareness that competitive positioning requires long-term
thinking. Yet on the other hand, there is doubt that planning can
cope with the massive environmental uncertainties. The CE0 of
Sulzer (one of Switzerland's leading industrial firms) expressed
it as follows :
"We have to tackle the task of preparing the firm for its
longer terra future in different ways. Long-range planning has
lost its credibility in an uncertain world. Will we see open
45
trade or a return to global protectionism, recession or
growth? What about inflation and exchange rates? Will the
Gorbachev revolution in Russia continue or not? What about
competitor reactions? There are too many uncertainties to
permit anything but the planning of broad scenarios.
And yet preparing SULZER for the 1990's is one of my major
responsibilities as CEO. What this implies is that its
leaders and managers and its organization must be prepared to
face whatever business and economic circumstances we turn out
to confront ten years in the future."
Preparing the business means developing the appropriate
capabilities.
To adopt a second perspective, Ouchi (1988) cornes to a similar
conclusion from an analysis of micro-economics and organization.
Ouchi has analyzed firms who consistently achieve "super-normal
returns", way above the industry average - a performance which is
impossible according to basic economic theory. He argues that
firms can only achieve this if they are capable of performing an
"unnatural act", something that cannot be readily imitated.
Technologies, products, the expertise of people, market devices,
and so forth can all be stolen, imitated, copied and improved upon
- they provide a very temporary source of advantage. The only
source of advantage that cannot be imitated and which underlies
the capacity to achieve above average returns is organizational
capabilities that are embedded in the culture of the firm. In
particular, Ouchi believes that the capacity to achieve a balance
between the opposing forces of individualism and teamwork at all
levels of the firm, from micro-groups to macro-organizations, is
46
the critical capacity. In individualistic cultures such as the
United States, this may mean developing teamwork capabilities
without compromising native individualism. In cultures with a more
collectivistic tradition such as Japan, this implies fostering a
complementary individualism.
To take a third perspective, Prahalad and Doz (1988) point out
that leading multinational competitors have today reached a state
of "resource parity", that is quasi-equality in their armoury of
traditional competitive weapons (technology, finance, geographic
spread of markets, quality of manpower). No conventional resource
will provide the firm with any significant competitive edge. That
must corne from the strategic capability of the firm, the ability
not only to keep learning about its changing environment and to
conceive effective strategies, but to mobilize its resources in
constantly shifting ways in order to execute those strategies. In
particular, this means building active but flexible non-hierarchic
linkages across interdependent but differentiated functions,
business units and geographic subsidiaries. To facilitate this,
strong "fixed pivots" will be vital, especially shared goals and
values between its managers.
A fourth perspective is that of Bartlett and Ghoshal (1987a&b).
They interviewed managers from vine companies in three industries,
showing that these industries had in the past pursued strategies
based on uni-dimensional capabilities. Successful firms in
47
consumer electronics had recognized the importance of global
economies of scale, optimizing efficiency. Strategies in consumer
packaged goods had been based on responsiveness to local market
differences, while organizational learning had been the key
strategic factor in telecommunications (the ability to adapt to
changing technologies and to transfer learning from one part of
the firm to the other). However, they argue that competitive
developments are leading firms to search for ways to build the
multidimensional capabilities of efficiency, responsiveness and
learning that Bartlett and Ghoshal view as the characteristic of
the transnational enterprise.
They make an important observation that the importance of
developing multidimensional capabilities applies not only to
industries long since labeled as global, such as
telecommunications. It applies also to sectors like consumer
products, though it is in the "global" industries where the pace
of development will be the fastest.
Let me provide one example in the telecommunications sector. Until
recently, integrated circuits for computers have been a
standardized product where the competitive edge required linking
R&D to manufacturing and developing major economies of scale already a complex task. Today, the technology is shifting, and it
is possible to customize integrated circuits to the requirements
of a particular client group. The strategy of the Japanese
48
telecommunication firm NEC is to set up local R&D centres
throughout the world, for example in Boston USA working closely
with Route 128 high technology customers. Yet the work of these
local centres has to be closely coordinated, and linked to central
R&D in Japan. High speed satellite transmission of information
can facilitate this coordination, but the "hard" technology of
coordination will not function unless the "soft" lateral
relationships and linkages have been built up. Simultaneously,
this already complex task is rendered even more difficult by the
necessity for coordination between R&D and manufacturing, a
function whose technology is also shifting, so as to maintain
necessary economies of scale in production. Ail this takes place
in one sector of NEC's business operations, itself
interdependent with other business sectors. The overall challenge
is thus one of mastering lateral interdependencies on a gigantic
global scale.
From the What's to the How's
The concept of organizational capability captures an emerging
consensus among scholars and executives in multinational firms on
the nature of the challenge, a challenge that emerges from two
decades of evolution.
But the real challenge is the
organizational development task of how to build such capabilities.
Talking of their 250 interviews with executives, Bartlett &
Ghoshal (1987a) put it like this : "Without exception, they knew
49
what they had to do; the difficulties lay in how to achieve the
necessary changes."
The new capabilities that are required can be listed under
Bartlett & Ghoshal's headings.
From Dependence/Independence to Interdependence
This is the central issue, as discussed in the previous section.
It becomes strategically more and more important to manage
multiple and changing interdependencies. Lateral relationships
become the critical relationships in the heterarchy, not simply
subsidiary to vertical or hierarchic relations. Decision making
processes must allow for multiple and conflicting perspectives.
But even when the interdependencies can be clearly analyzed, how
does one create and foster a climate of cooperation? How does one
get the "soft" aspects of interdependency to match up with the
"hard" aspects (information systems, resource allocation
processes, transfer of learning)? How does one channel the
conflict that interdependency invariably generates?
50
From Control to Coordination
Bureaucratic and administrative control mechanisms cannot handle
the complexities, so integration or coordination must corne from
other sources - above all through normative or cultural control
and through shared goals and visions. Strategic planning is no
longer the preserve of top management: general managers of
subsidiaries need to play a more strategic role, not just in the
management of their own business but in the management of the
whole organization. The global mentality needs to be pushed
further down in the organization, not just limited to the top.
From Svmmetry to Differentiation
Traditionally firms seek guiding principles so as to handle
subsidiaries, functions and product groups in similar ways. But
the interdependencies vary greatly within the overall firm strong between some business units but weak between others, strong
between some functions and businesses and weak between others. And
the strength of these interdependencies changes with the product
life cycle, technology shifts and competitive reactions.
The new challenge is to learn how to handle the interrelationship
between the constellation of businesses and functions in different
and changing ways. Stand-alone businesses need different treatment
from interdependent units. Some functions may be centralized,
51
others regionalized, others handled on a country-by-country basis.
Functions may move into the fore of influence at certain stages,
fading into the background at other stages. Geographically, the
firm may have many different centres, where different functions
and product groups may be coordinated not out of headquarters but
out of local offices in different regions of the world. But how
can one break through the barriers of the administrative heritage
of the firm to establish this vastly more complex organization?
Recognizing the Dualistic Nature of Complex
Organization
One of the deepest obstacles to the development of such
organizational capabilities is the uni-dimensional, simplistic
mindset that is embedded in the culture of most organizations. At
the heart of the notion of organizational capability are concepts
which are matrixed, oppositional or multidimensional. We have met
some of them so far in this chapter, beginning with the matrix
structure itself : balancing centralization and decentralization;
integrating the differentiated firm; combining the "hard" with the
"soft"; combining both global and local; building capacities for
teamwork and individuality.
In fact, a pervasive theme in any discussion of complex
organization is that of dualities : combining looseness and
tightness, strong formai systems with strong informel systems.
There is a need to balance specialization with generalism, for
52
balancing business logic with technical logic. Top-down management
processes must be combined with bottom-up processes. A very
partial list of some of the currently prevailing dualities is
shown in FIGURE 3.
A few organizational scholars and philosophers have recognized the
dualistic nature of complex organizations. For example, Hedberg,
Nystrom and Starbuck (1976) argued that maximization is an
inappropriate concept for organizations. Instead of trying to
"maximize" anything (decentralization, teamwork, formality,
generalism ...) an organization should seek to ensure that it
maintains at least a minimal threshold of desirable attributes. It
requires a minimal degree of consensus, but not so much as to
stifle the dissension that is the life blood of innovation. And a
minimal degree of contentment and satisfaction - sufficient to
retain key actors but not so much as to allow arrogance or
complacency. Minimal faith in plans is required, sufficient to
ensure that the planning exercise leads its members to actually
think through the future, but not so much that plans become
roadmaps that blind attention to opportunity. And minimal
attention to rationality, though not to the extent of blinding us
to the virtues of imperfection.
INSERT FIGURE 3 ABOUT HERE
53
cameron (1986) is another who argues that the reality of complex
organization is dualistic. The notion of duality differs from
other oppositional concepts such as dilemmas, ambivalence,
dialectic, or conflict. A dilemma is an either-or situation, where
one alternative must be chosen in preference to another attractive
alternative. Conflict is the perpertuation of one alternative,
while others are still seen as attractive. A dialectic is a
pattern which begins whith a thesis followed by an antithesis,
resolved by a synthesis.
But in a duality, there is no choice to be made between two
alternatives. The challenge is to achieve a state of dynamic
balance that is difficult both to develop and to maintain, for it
is not a stationary equilibrium but a balanced tension between
complementary opposites. Dynamic balance is analogous to a
see-saw on a fine fulcrum. With delicately complementary weights
on either side of the fulcrum, the seesaw is never still. There is
a gentle oscillation from side to side, delicately maintained.
Literature on historical and evolutionary change supports this
argument. For example, Toynbee's historical thesis was that the
decline of civilizations occurs when a society goes to excesses in
its success formula (Toynbee, 1946). Greiner (1972) has argued
that organizations go through successive stages of evolution and
revolution, where the properties that first led to success
eventually engender crisis, and a subsequent rebalancing that
54
facilitates further growth. Bateson (1936) points out that
without the tension that exists between simultaneous opposites in
organization, unproductive "schismogenesis" occurs, a degenerative
syndrome where an attribute in the organization perpetuates itself
until it becomes extreme and thereby dysfunctional. Thus when
turbulence, rapid change and complexity become prevailing features
of the environnent, building matrixed, dualistic capabilities into
the deep fabric or culture of the firm becomes a necessary
imperative.
Innovation as An Example of a Duality
Let me apply dualistic thinking to one area of organizational
development, namely that of innovation. We know that innovation
involves two distinct processes or capabilities (Gresov, 1984,
Kanter, 1983). First, there is the creative process of idea
generation, conception, and development which requires loose,
informel properties. Then there is the commercialization or
implementation process, which requires tight, formai properties.
Thus, the study by Lohne (1984) contrasting innovative firms with
less innovative firms in the same industries showed that the firms
with a higher percentages of revenues coming from new products
were those with both more informal/loose and more formal/tight
capabilities.
55
The dominant cultural characteristic of much of big business in
the United States is its tight, structured formalism, often
reflected in heavy bureaucracy. Thus, the natural concern today is
with developing the opposite properties - the loose, more
informai, non-segmented cultures analyzed by Kanter and others.
But if we take a world-wide perspective, the concern with this
aspect of innovation appears as a very American focus. The concern
in Italy is precisely the opposite. The indigenous Italian culture
is more loose, unstructured, informai. Behind the sometimes
authoritarian structures of companies are informai networks of
relationships that bewilder the American expatriate, who bemoans
the impossible "Latin" way of doing business. Yet these cultural
attributes are in fact associated with the strong trackrecord of
Italian firm in creative innovation. The cultural problem of the
Italians is that they have less mastery of the structured,
formalized systems that are necessary to effectively commercialize
innovations. Thus what sells today in the United States is
communication, innovation, and flexibility. There is no market
for this in Italy - what sells is systems, implementation and
structure (Note 3).
A number of multinational companies have in fact established
highly successful research and development laboratories in Italy IBM, Philips, Ciba-Geigy, Digital Equipment. All of these firms
observe that the innovative performance of these units is
56
outstanding, although they run in a uniquely Italian way. An IBM
manager commented that Italian R&D is the only part of the firm
which does not apply the IBM rulebook - yet it is so successful
that it is allowed its freedom to do so. Yet one would not locate
major manufacturing facilities in Italy. These are likely to be
situated in efficient, formalized cultural regions such as Germany
or the United States.
The Pro/Anti OD Debate in Perspective
This leads me to a side observation, returning to an earlier
discussion of OD. The challenge of OD can be interpreted as that
of building dualistic properties into organizational cultures,
and
the American origins of OD reflect a natural concern for latent
polarities that are seen as relevant to U.S. organizations. OD
interventions typically focus on developing properties that such
organizations do not have - process skills, concern for the social
dimensions of management as well as the task dimensions,
self-reflective capacities, stronger collective teamwork, more
open channels of communication, and so forth. Regrettably, such
interventions are sometimes tackled without recognizing the
dualistic nature of modern organization, leading the United States
into pendulum type fashions and fads that were the subject of apt
commentary by Business Week recently (1986).
57
In this sense, the OD movement is a counter-culture in the United
States, as argued earlier. And necessarily so, for this is
precisely its contribution. The values of the OD movement are
sufficiently compatible with the mainstream values of American
culture for the movement to be tolerated (this is not true in
other cultures); yet they are sufficiently counter to that culture
on salient dimensions for the movement to contribute to the
development of desireable dualistic properties in organizations.
The long-standing debate between its protagoniste and its
detractors is a reflection of its mission. In working toward
developing dualistic organizational capabilities, it is evident
that the advocates of the new properties will arouse protest from
the mainstream cultural establishment, guardian of the opposite
polarity. What is destructive however is when the debate becomes
an acrimonious either-or battle of acceptance or rejection simply due to the fact that neither party can understand the
nature of the organization development challenge. This challenge,
I am suggesting, is that of developing a state of dynamic balance
between dualities in an organization, dictated by the complexity
and turbulence of the environment that we have moved into.
58
Cultural Differentiation as a Transnational OD Strategy
Nevertheless, all but the most idealistic proponents of OD will
acknowledge the massive challenge of transforming the
unidimensional cultures of existing organizations, especially
large firms with long track records of success, into dualistic
"heterarchic" cultures. Furthermore, cultural anthropologists
would be sceptical, to say the least, about the extent to which
one can engineer a change in the underlying social culture of a
nation, except as the product of incremental steps over
generations. There is a widespread faith in certain quarters in
the United States in "transformational leadership", which
recognizes the extent of the challenge. But is transformational
leadership perhaps not another of those optimistic but passing
fashions ... ?
The focus of OD is on developing the attitudes and behaviors of
the people to match the task or environmental challenges, or on
transforming the context of work. But to return to the
transnational organization, it has potentially a different
developmental strategy in its armoury, a strategy which despite
its difficulty has a far higher probability of developmental
success. Rather than developing the people to match the task, the
transnational organization can move the task to the appropriate
people.
59
We tend to assume that tasks are fixed, anchored givens - people
must be selected and adapted to the fixed task. But this is not
true for the transnational enterprise. The task, be it a
developing product or a domain of expertise, can be geographically
moved to the appropriate people.
Whereas traditional OD reasoning focuses on adaptation, the
transnational organization can choose selection as its
developmental strategy on a world-wide scale - selection of
location. It can locate functions, facilities, or business sector
headquarters in the region of the world which is socio-culturally
and economically most appropriate to that activity.
This is in fact what is slowly happening as transnational
organizations emerge. We mentioned earlier the decision of some
firms to locate major R&D facilities in Italy, a culture which is
naturally propitious to innovation. Manufacturing facilities may
be located in Germany, for example.
Philips is one example of a firm using this emerging global
developmental strategy. Its important function for long-range
technology development was transfered some years ago from its
Dutch headquarters to the United States, where it was felt that
there was more technological action. Yet the experience was that
the Americans had too short a time horizon, and it was felt that
the culture in Japan was more favorable to long-range thinking.
60
The function was recently transfered to Tokyo. This logic
went
further with a recent reorganization, heralded by The Wall
Street
Journal with the title "Philips Reorganization could Become a
Model for Multinational Firms" (October 27th, 1987). With a
simplified structure, business lines cut across national borders.
One television plant was transferred from the United States to
Taiwan to Mexico in the space of three years! Integrated circuits
are developed in Holland and Germany in consultation with their
Silicon Valley plant, while future consumer electronic devices
will be
made first in Japan, but then moved to full-scale
production in Western Europe.
These selection, location and transfer decisions are obviously
guided first and foremost by economic logic : exchange rates,
local markets, costs, political risk, and so forth. But they are
also guided by socio-cultural logic - certain national cultures
are more favorable to particular activities than others.
This leads to a total change in perspective on cultural
differences in attitudes and conceptions of
management/organization. Cultural differences are no longer a
nuisance factor, an obstacle to our ethnocentric conceptions of
"effective" management. Cultural differences become an asset to
the transnational corporation, if it has the capacity to exploit
them. The ability to capitalize on cultural differences (rather
than minimize them) becomes an important source of competitive
61
advantage. In fact this aspect of the developmental strategy of
the transnational firm can be described as cultural
differentiation (Note 4).
A similar pattern underlies another current trend, that of
creating local centres of competence. Functional expertise in
technology, process engineering, or marketing used to be anchored
at headquarters. Some firms are today attributing this corporate
responsibility to subsidiaries who have developed that expertise
themselves, because of local cultural assets, talent or
challenges. This presupposes that a network of lateral relations
exists between subsidiaries, who can call upon each other's
expertise. Headquarters is no longer a centralized function, but a
coordinator of an expertise network spread throughout the world.
Summary
Summarizing the developmental task of the transnational firm in
terms of the basics, there are two major interrelated challenges
in developing transnational organizational capabilities :
First, the challenge of developing a dualistic or matrix
culture, not through structural solutions but through
developing the capacity to view the requirements of
organizaton as balancing dualities or complementary
62
polarities. Until this is worked through, differences will
continue to be seen as threatening; the pendulum of fashions
and fads will continue to oscillate; and complexity will
master us rather than be mastered. And it is no mean task
since it involves a paradigmatic shift in the mindset of at
least the leaders of our societies. One is reminded that only
two decades ago, most of us were in a mindset of
"one-best-way" thinking...
Second, the challenge of developing ways to manage lateral
independencies and develop integrative mechanisms that allow
for differentiation. The lateral interdepencies in the
transnational organization are such that they dominate over
the vertical dependencies that we know how to manage better,
and thus Hedlund's term "heterarchy" is an appropriate label
for this emerging organization.
If the opening quote that is traditional in some papers could
appear at the end of a chapter, the quote I would select would be
that of F. Scott Fitzgerald:
"The mark of intelligence is the capacity to hold two
opposing ideas in mind at the same time without losing the
ability to function."
63
A SUMMARY OF IMPLICATIONS FOR THE FIELD OF ORGANIZATION
DEVELOPMENT
Let me conclude by summarizing the implications of this analysis
in the multinational setting for the field of organizational
development and planned change in general :
1. The focus of attention in organizational development needs to
be broadened from its primary focus on simple organizations and
micro problems, however complex, to the problems of development in
complex, multi-divisional, multi-national organizations. This is a
pressing need for scholarship since the challenges in such firms
are currently not the "What's" of organization theory but the
"How's" of organizational change and development.
2. Organizational development has naturally tended to focus on
issues of process rather than issues of substance. Yet as it
tackles the analysis of complex organizational change, it will
become very difficult to separate the two. In fact, one of the
more exciting frontiers for inquiry in the organizational sciences
is the intersection of the fields of strategy, economics,
organization theory, and organizational change (Barney & Ouchi,
1986). Indeed, as Beer and Walton (1987) point out in a recent
review, OD is losing its status as a field as its change
technology becomes part of the tools of general management and
human resource management.
64
We argued above that the developmental needs of complex
organizations in today's environment are best understood with a
dualistic metaphor or perspective. Applying this perspective, the
"purist" advocates of OD reproach hard "bottom-liners" for
ignoring the social reality of organization. But similarly, OD
theorists and practitioners need to recognize and get involved in
the economic substance and the "hard" aspects of organization.
Substance and process can no longer be separated in coming to
grips with complex challenges, and consequently the boundaries of
the "field" of organizational development have become and will
become necessarily more blurred.
3. Tackling the problems of change at this level of organizational
complexity leads one to argue for the need for more contextual
thinking to guide analysis. Pettigrew's historical analysis of
complex strategic reorganization (Pettigrew, 1985), Schein's
framework based on the maturity of organizational culture (Schein,
1985), and the above framework based on needs for corporate
integration are examples. Power is clearly a change variable which
needs to be more contextually integrated into change theory.
4. A cross-cultural perspective also provides insight into the
field of OD. OD has its origins in a particular set of values, and
those values cannot be divorced from the American setting of their
birth. If we can take this meta-perspective, we see that OD is
necessarily a counter-culture in the United States, reflecting
65
the
latent side of a duality that its society must cope with.
5. This analysis raises a final question. Change can be considered
at different levels of analysis - changing and developing
individuals, groups, organizations and societies. What is the most
effective level of analysis in order to tackle the how's of
organizational development? OD has historically focused on the
individual and group level, regarding organization and society as
the context. But are individuals and groups the most effective and
malleable levers for tackling the significant development
challenges we confront?
INSERT FIGURE 4 ABOUT HERE
Laurent (1988) questions this, and my analysis supports his
observations :
"One could reasonably argue that organizations have a much
greater capacity for change than smaller organisms like the
individuals who populate them or larger entities like the
societies that constitute their environment."
66
In some caricatural way, the relative change capability of
individuals, organizations and societies could be sketched out as
in (FIGURE 4). Relationships between structural entities may be
more amenable to change than structural entities themselves. From
this point of view, it may be useful to look both at the
individual and society as fairly stable structural entities,
whereas organizations can be viewed as temporary systems or
relationships and transactions between individuals and their
environments. Whereas personality confers stability to the
individual and culture confers stability to society, social
organizations represent more of a "lieu-de-passage", transaction
fields or temporary arrangements which result from choices and
initiatives. Organizations are the privileged places where change
can occur most drastically".
In an age of divestments, acquisitions, mergers, joint-ventures,
and strategic partnerships, there is indeed a tremendous amount
of
organizational development that is taking place at a rapid pace.
But what is happenning is that this change, as Laurent suggests,
is taking place at a different level of analysis from the
traditional focus of attention in organizational development and
change theory.
The complex organization, and particularly the heterarchic
transnational firm, consists of multiple organizational sub-units.
As we suggested in the previous section, organizational
67
development is indeed increasingly taking place through
inter-organizational arrangements, not only through the
development of individuals or grnups.
The final implication is thus that organizational development
theory must become more multi-dimensional itself - spreading its
focus of attention from the individual level of analysis to the
organizational level, and developing the capacity to comprehend
the interactions between these levels of analysis.
68
NOTES
Note 1:
In this chapter, I will use the term "organization development" in
two senses. When referring to this broadly as planned
organizational change, I will use the phrase "organization
development" in full. However, I will use the term "OD" when
referring to particular values often associated with planned
change, noteably those of improving organizational effectiveness
and employee well-being.
Note 2:
"Pushback" is a norm that is embedded in the culture of Digital
Equipment, the encouragement of contributions and criticism from
each and every employee. The norm has its origins in the behavior
and values of Ken Olsen, the founder-engineer of the firm. When an
idea is presented, anyone form any level is expected to push back
if they have a different opinion, and people may even get
criticized for not pushing back.
INB's contention management procedure reflects a lateral planning
process which complements its top-down business planning. The
business plans of every unit are circulated to every other
interdependent unit. If that other unit raises objections, this
leads to a process of negotiation. Only if the conflict cannot be
resolved laterally does the issue rise through the hierarchy,
following the internai rules of contention management.
Note 3:
Teaching and discussing on innovation in different regions of the
world and with different companies, I have found it necessary to
develop two different sets of slides and handouts! I think of one
set as the "American problem", and those outline mechanisms to
loosen up the formai structure. The other is the "Italian" set,
emphasising devices to tighten up and structure the informai
culture.
Note 4:
This discussion of transnationalism, of selection strategies in
multinational development, is of course based on the premise that
we will continue to see the opening of international markets
rather than a return to protectionism. If there is a return to
worldwide protectionism, despite the consequent economic price,
then traditional adaptation strategies for development will be the
only option. The transnational organization would most likely
disappear.
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7
FIGURE 1
Perlmutter's Concepts of Multinationalism :
Four Types of Headquarters Orientation
to Subsidiaries
Company Orientation
Aspects of the
Enterprise
Ethnocentric
Polycentric
Regiocent rie
Ceocentric
Complexity of
organization
Complex in home
country, simple in
subsidiaries
Varied and
independent
Highly interdependent
on a regional basis
Increasingly complex and
highly interdependent on
a worldwide basis
Authority
High in
headquarters
Relatively low in
headquarters
High regional headquarters and/or high
collaboration among
subsidiaries
Collaboration of headquarters and subsidiaries
around the world
Evaluation and
control
Home country
standards
Determined locally
Determined regionally
Standards which.are
universal and local
Communication;
information flow
High volume of
orders, commands,
advice to sobsidiaries
Little to and from corLittle to and from
headquarters; little porate headquarters, but
may be hieh to and from
among subsidiaries
re g ional headquarters
and among countries
Between headquarters,
regions, and subsidiaries,
and among subsidiaries
around the world
Ceographical
identification
Nationality of
owmer
Nationality of
host country
Regional company
Truly worldwide company,
but identifying with
national interests
Recruiting,
staffing,
development
People of home
country developed for key
positions e • erywhere in the world
People of local
nationality developed for key
positions in their
own country
Regional people
developed for kev
positions anywhere
in the region
Best people everywhere in
the world developed for
kev positions everywhere
in the world
Source : Adapted from Heenan & Perlmutter (1979)
FIGURE 2
Subtle, non-administrative mechanisms for
developing integration within the complex MNC
Polycentric firms
(Weak mechanisms)
Establishing
face-to-face
relationships
(Exchange & meetings)
Team-building
(Management
training)
Selective
selection &
development
(Management
development)
Common goals
& values
(Building corporate
charters)
Reward system•
Global firms
(Strong mechanisms)
Extensive
selection &
development
(Global cultures)
(Executive
compensation)
FIGURE 3
Some Common Dualities in Today's Complex
Organizations
differentiation - integration
loose - tight
planned - opportunistic
formai - informai
vision - reality
decentralization - centralization
business logic - technical logic
analysis - intuition
delegation - control
individuality - teamwork
action - reflection
FIGURE 4
Change Capabilities at different Levels
of Analysis
Change capability
High
ORGANIZATIONS
INDIVIDUALS
SOCIETIES
Low
Level of Analysis
Source : Laurent (1988)
INSRAD WORKING PAPERS SERIES
1985
85/01 Jean DERMINE
"The measurement of interest rate risk by
financial interuediaries", December 1983,
Revised December 1984.
85/02
Philippe A. NAERT
and Els GIJSBRECHTS
"Diffusion modal for nev product introduction
in existing markets* .
85/03
Philippe A. NAERT
and Els GIJSBRECHTS
"Tovards a decision support system for
85/04
Philippe A. NAERT
and Marcel VEVERBERCH
85/05 Ahmet AYKAC,
Marcel CORSTJENS,
David GAUTSCHI
and Ira HOROVITZ
85/06 Kasra FERDOVS
hierarchically allocating marketing resources
arrosa and vithin product groups" .
"Market share specification, estimation and
validation: tovards reconciling seemingly
divergent vieve .
"The darker aide of entrepreneurship".
85/19 Manfred F.R. KETS DE
VRIES and Dany MILLER
"Narcissism and leadership: an object
relations perspective".
85/20 Manfred F.R. KETS DE "Interpreting organizational texte.
VRIES and Dany MILLER
85/21
Hervig M. LANCOHR
and Claude J. VIALLET
85/22
Hervig M. LANCOHR and
B. Espen ECKBO
Second draft, April 1985.
"The shifting paradigme of manufacturing:
inventory, quality and nov versatility", March
"Evolving manufacturing strategies in Europe,
Japan and North-America*
"forecasting vhen pattern changes ocrur
beyond the historical data" , April 1985.
85/09 Spyros MAKRIDAKIS
and Robert CARBONE
"Smapling distribution of post-sample
forecasting errors" , February 1985.
85/10 Jean DERMINE
'Portfolio optimisation by financial
intermediaries in an asset pricing »del°.
85/11 Antonio N. BORCES and "Marty demand in Portuguese manufacturing: a
Alfredo M. PEREIRA
tvo-stage modal".
85/12 Arnoud DE MEYER
"Defining a manufacturing strategy - a survey
of European manufacturera".
85/13 Arnoud DE MEYER
"Large European manufacturera and the
management of R L D".
85/14 Ahmet AYKAC,
"The advertising-sales relationship in the
U.S. cigarette industry: e comparison of
correlational and causality testing
approaches".
85/15 Arnoud DE MEYER and
Roland VAN DIERDONCK
"Orgenizing e technology jump or overcoming
the technologies' hurdle.
85/16 Hervig M. LANGOHR and
Antony M. SANTOMERO
"Commercial bank refinancing and economic
stability: an analysis of European (entures".
"Nationalisation, compensation and vealth
transfers: France 1981-1982" 1, Final version
July 1985.
"Estimation uncertainty and optimal
85/08 Spyros MAKRIDAKIS
and Robert CARBONE
Marcel CORSTJENS,
David GAUTSCHI and
Douglas L. MacLACHLAN
85/18 Manfred F.R. KETS
DE VRIES
advertising decisions",
1985.
85/07 Kasra FERDOVS,
Jeffrey G. MILLER,
Jinchtro NAKANE and
Thomas E.VOLLMANN.
85/17 Manfred F.R. KETS DE
"Fersonality, culture and organization".
VRIES and Danny MILLER
"Takeover premiuma, disclosure regulations,
and the market for corporate control. A
comparative analysis of public tender offers,
controlling-block trades and ■inority buyout in
France*, July 1985.
85/23 Manfred F.R. KETS DE
VRIES and Dany MILLER
"Rarriers to adaptation: personal, cultural
and organizational perspectives".
85/24 Spyros MAKRIDAKIS
"The art and science of forecasting: an
assessment and future directions".
85/25 Gabriel HAVAVINI
"Pinancial innovation and recent developuents
in the French capital markets", October 1985.
85/26 Karel O. COOL and
Dan E. SCIIENDEL
"Patterns of competition, strategic group
formation and the performance case of the US
pharmaceutical industry, 1963-1982°,
October 1985.
85/27 Arnoud DE MEYER
"European manufacturing: e comparative study
(1985)".
1986
86/01 Arnoud DE MEYER
"The R 4 D/Production interface".
86/02 Philippe A. NAERT
Marcel VEVERBERCH
and Guldo VERSVIJVEL
"Subjective estimation In Integrating
communication budget and allocation
decisions: a case study", January 1986.
86/03 Michael BRIMM
"Sponsorship and the diffusion of
organizational innovation: ■ preliminary viev".
86/04 Spyros MAKRIDAKIS
and Michèle HIBON
"Confidence intervals: an empirical
investigation for the sertes in the MCoupetition" .
86/05 Charles A. VYPLOSZ
"A note on the reduction of the vorkveek",
July 1985.
86/06 Francesco GIAVAllI,
Jeff R. SHEEN and
Charles A. VYPLOSZ
"The real exchange rate and the fiscal
aspects of a naturel resource discovery",
Revlsed version: February 1986.
86/22 Albert CORNAI,
Gabriel A. HAVAVINI
and Pierre A. MICHEL
"seasonality in the risk-return relationships
some international evidence", July 1986.
86/07 Douglas L. MacLACRLAN
and Spyros MAKRIDAKIS
*Judgmental blases in sales forecasting",
February 1986.
86/23 Arnoud DE MEYER
"An exploratory study on the integration of
information systems in manufacturing",
July 1966.
86/08 José de la TORRE and
David H. NECKAR
"Forecasting political risks for
international operations", Second Draft:
March 3, 1986.
86/24 David GAUTSCIII
and Vithala R. RAO
"A methodology for specificatIon and
aggregation in product concept testing",
July 1986.
86/25 H. Peter GRAY
and Ingo WALTER
"Protection", August 1986.
86/09 Philippe C. HASPESLAGH "Conceptualizing the strategic process in
diversified firms: the rote and nature of the
corporate influence procesa", February 1986.
86/10 R. MOENART,
Arnoud DE MEYER,
J. BARBE and
D. DESCHOOLMEESTER.
"Analysing the issues toncerning
technologicai de-uaturlty".
86/11 Philippe A. NAERT
and Alain BULTEZ
"From "Lydiametry" to "Pinkhamization":
■isspecifying advertising dynamita rarely
affects profitability".
86/12 Roger BETANCOURT
and David GAUTSCHI
86/26 Barry EICHENGREEN
and Charles VYPLOSZ
86/27 Karel COOL
and Ingemar DIERICKX
"The economics of retail firms", Revised
"The economic eonsequences of the Pranc
Poincare", September 1986.
*Negative risk-return relationahipa in
business strategy: paradox or truism?",
October 1986.
"Interpteting organizational texte.
86/28 Manfred KETS DE
VRIES and Danny MILLER
April 1986.
86/29 Manfred KETS DE VRIES
"Vhy folles the leader?".
86/13 S.P. ANDERSON
and Damien J. NEVEN
"Spatial competition à la Cournot".
86/30 Manfred KETS DE VRIES
"The succession gane: the real story.
86/31 Arnoud DE MEYER
86/14 Charles VALDMAN
"Comparaison internationale den marges brutes
du commerce", June 1985.
"FlexibIlity: the next competitive battle*,
October 1986.
86/15 Mihkel TOMBAK and
Arnoud DE MEYER
"flov the managerial attitudes of firms vith
P55 differ fron other manufacturing Urne:
survey results", June 1986.
86/16 8. Espen ECKBO and
Hervig M. LANGOHR
*Les primes des offres publiques, la note
d'information et le marché des transferts de
contrôle des sociétés".
86/17 David 8. JEMISON
"Strategic capability transfer in acquisition
integration", May 1986.
86/18 James TEBOUL
and V. MALLERET
"Tovards an operational definition of
services", 1986.
86/19 Rob R. VEITZ
"Nostradamus: a knovledge-based forecasting
advlsor".
86/35 Jean DERMINE
86/20 Albert CORNAI,
Gabriel HAVAVINI
and Pierre A. MICHEL
*The pricing of equity on the London stock
exchange: seasonality and size premium",
June 1986.
86/36 Albert CORNA! and
86/21 Albert CORNAI,
Gabriel A. HAVAVINI
and Pierre A. MICHEL
"Risk-prenia seasonality in O.S. and Buropean
equity markets", February 1986.
86/37 David GAIITSCHI and
Roger BETANCOURT
"The evolution of retailing: e suggested
economic interpretation".
86/38 Gabriel HAVAVINI
"Financial innovation and recent developments
in the French capital markets", Updated:
86/31 Arnoud DE MEYER,
Jinichiro NAKANE,
Jeffrey G. MILLER
and Kasra FERDOVS
86/32 Karel COOL
and Dan SCHENDEL
86/33 Ernst BALTENSPERGER
and Jean DERMINE
"Flexibility: the next conpetitive battle",
Revised Version: Match 1987
Performance differenees musong strategic group
menbers", October 1986.
*The role of public policy in insuring
financial stability: a cross-country,
comparative perspective", August 1986, Revised
November 1986.
86/34 Philippe HASPESLAGH
and David JEMISON
"Acquisitions: myths and realite,
July 1986.
"Measuring the market value of e bank, e
primer", November 1986.
Gabriel HAVAVINI
"Seasonality in the risk-return relationshlp:
some international evidence", July 1986.
September 1986.
86/39 Gabriel HAVAVINI
Pierre MICHEL
and Albert CORNAI
"The pricing of commun stocks on the Brussels
stock exchange: e re-examination of the
evidence", November 1986.
86/40 Charles VYPLOSZ
"Capital Hove liberalization and the EMS, e
French perspective", December 1986.
86/41
Kasra FERDOVS
and Vickham SKINNER
87/13 Sumantra GHOSHAL
and Nitin NOHRIA
"Multinational corporations as differentiated
netvorks", April 1987.
87/14 Landis GABEL
"Product Standards and Competitive Strategy: An
Analysis of the Principles", May 1987.
87/15 Spyros MAKRIDAKIS
"METAFORECASTING: Rays of improving
Porecasting. Accuracy and Usefulness",
May 1987.
"Manufacturing in a nev perspective",
July 1986.
86/42 Kasra FERDOVS
and Per LINDBERG
"MS es indicator of manufacturing strategy",
December 1986.
87/16 Susan SCHNEIDER
and Roger DUNBAR
"Takeover attempts: vhat does the language tell
us?, June 1987.
86/43 Damien NF.VEN
"On the existence of equilibrium in hotelling's
Bodel", November 1986.
87/17 André LAURENT and
Fernando BARTOLOME
"Managers' cognitive maps for upvard and
dovnvard relationships', June 1987.
"Value added tax and competition",
December 1986.
87/18 Reinhard ANGELMAR and
Christoph LIEBSCHER
"Patents and the European biotechnology lag: a
study of large European pharmaceutical tiras",
June 1987.
87/19 David BEGG and
Charles VIPLOSZ
"Vhy the EMS? Dynamic gag es and the equilibrium
policy regime, May 1987.
"Prisoners of leadership".
87/20 Spyros MAKRIDAKIS
"A nev approach to statistical forecasting",
June 1987.
87/02 Claude VIALLET
"An empirical Investigation of international
asset pricing", November 1986.
87/21 Susan SCHNEIDER
"Strategy formulation: the impact of national
culture", Revised: July 1987.
87/03 David GAUTSCHI
and Vithala RAO
"A methodology for spécification and
aggregatlon in product concept testing",
Revised Version: January 1987.
87/22
"Conflicting ideologies: structural and
motivational consequences", August 1987.
87/04 Sumantra GHOSHAL and
Christopher BARTLETT
"Organizing for innovations: case of the
multinational corporation", February 1987.
87/23 Roger BETANCOURT
David GAUTSCHI
"The de.and for teint' products and the
household production Bodel: mev vievs on
complementarity and substitutabilite.
87/05 Arnoud DE MEYER
and Kasra FERDOVS
"Managerial focal points in manufacturing
atrategy", February 1987.
87/24 C.B. DERR and
André LAURENT
87/06 Arun K. JAIN,
Christian PINSON and
Naresh K. MALHOTRA
"Customer loyalty as e eonstruct In the
marketing of banking services", July 1986.
"The internai and externat careers: e
theoretical and cross-cultural perspective",
Spring 1987.
87/07 Polf RANZ and
Gabriel HAVAVINI
*Equity pricing and stock market anomalies*,
February 1987.
87/08 Manfred KETS DE VRIES
"Leaders vho can't manage', February 1987.
87/09 Lister VICKERY,
Mark PILKINCTON
and Paul READ
"Entrepreneurial activities of European MBAs",
Match 1987.
87/10 André LAURENT
"A cultural viev of organlzational change",
March 1987
87/11
"Porecasting and loss fonctions", March 1987.
86/44
Ingemar DIERICKX
Carmen MATUTES
and Damien NEVEN
1987
87/01
Manfred KETS DE VRIES
Robert PILDES and
Spyros MAKRIDAKIS
87/12 Fernando BARTOLOME
and André LAURENT
"The Janus Read: learning from the soperior
and subordinate faces of the ahnager's job",
April 1987.
87/25
Susan SCHNEIDER
A. K. JAIN,
N. K. MALHOTRA and
Christian PINSON
"The robustness of MDS configurations In the
face of incomplete data", March 1987, Revised:
July 1987.
87/26 Roger BETANCOURT
and David GAUTSCHI
"Demand complementarities, household production
and retail assortaents", July 1987.
87/27 Michael BURDA
"fa there e capital shortage in Europe?",
August 1987.
87/28 Gabriel HAVAVINI
"Controlling the interest-rate risk of bonds:
an introduction to dotation analysis and
immunisation strategies", September 1987.
87/29 Susan SCHNEIDER and
Paul SHRIVASTAVA
"Interpreting strategic behavior: basic
assomptions themes in organisations", September
1987
"Spatial competition and the Core", August
87/30 Jonathan 8AMIITDN
V. Bentley MACLEOD and 1987.
Jacques-François TRISSE
01/31
"On the optimality of central place:",
Martine 08114211 and
Jacques-François TIIISSE September 1987.
87/32
Arnoud DE MEYER
"German, French and British manufacturiug
strategles less different than one thinke,
September 1987.
87/33 Yves 002 and
Amy MEN
"A process framevork for analyzing cooperation
betveen firme, September 1987.
07/34 Kasra FERDOVS and
Arnoud DE MEYER
"European ■anufacturerst the dangers of
complacency. Insights from the 1907 European
manufacturing futures survey, October 1987.
"Competitive location on netvorks under
discriminatory pricing", September 1907.
87/35
P. J. LEDERER and
J. F. TIIISSE
07/36
Manfred RETS DE VRIES "Prisoners of leadership", Revlsed version
October 1987.
87/37 Landis GABEL
87/78
Susan SCHNEIDER
81/39 Manfred KETS DE VRIES
"Privatization: its motives and likely
consequencee, October 1907.
"Strategy formulation: the impact of national
culture", October 1981.
"The dark aide of CEO succession", November
1987
81./40 Carmen MATUTES and
Pierre REGIDEAU
"Product compatibility and the scope of entre,
November 1987
87/41 Cavriel HAVAVINI and
Claude VIALLET
"Seasonality, size premium and the relationship
betveen the risk and the return of French
comaon stocks", November 1987
87/42 Damien NEVEN and
Jacques-F. TIIISSE
"Combining horizontal and vertical
differentiation: the principle of max-min
differentiation", December 1987
87/43 Jean CABSZEVICZ and
Jacques.F. THISSE
"Location", December 1987
87/44 Jonathan HAMILTON,
Jacques-F. TIIISSE
and Anita VESKAMP
"Spatial discriminations Bertrand vs. Cournot
in a model of location cholce", December 1987
87/45 Karel COOL,
David JEHISON and
Ingemar DIERICKX
"Business strategy, market structure and tiskreturn relatlonships: a causal interpretation",
December 1981.
87/46 Ingemar DIERICKX
and Karel COOL
"Asset stock accumulation and sustainability
of competitive advantage", December 1907.
88/01 Michael LAVRENCE and
Spyros MAKRIDAKIS
"Factors affecting judgemental forecasts and
confidence Intervale, January 1988.
88/02 Spyros MAKRIDAKIS
"Predicting recessions and other turning
points", January 1988.
88/03 James TEBOUL
"De-industrialize service for quality", January
1988.
88/04 Susan SCHNEIDER
"National vs. corporate culture: implications
for human resource management", January 1988.
88/05 Charles VYPLOSZ
"The svinging dollar: is Europe out of step?",
January 1988.
88/06 Reinhard ANGELMAR
"Les conflits dans les canaux de distribution",
January 1988.
88/07 Ingemar DIERICKX
and Karel COOL
"Competitive advantage: e resource based
perspective", January 1988.
88/08 Reinhard ANGELMAR
and Susan SCHNEIDER
"Issues in the study of organizational
cognition", February 1988.
88/09 Bernard SINCLAIRDESGAGNé
"Price formation and product design through
bidding", February 1988.
88/10 Bernard SINCLAIRDESGAGNé
"The robustness of some standard auction game
forms", February 1988.
88/11 Bernard SINCLAIRDESGAGNé
"Vhen stationary strategies are equilibrium
bidding strategy: The single-crossing
property", February 1988.
88/12 Spyros MAKRIDAKIS
"Business firms and managers in the 21st
century", February 1988
88/13 Manfred KETS DE VRIES
"Alexithymia in organizational life: the
organization man revisited", February 1988.
88/14 Alain NOEL
"The interpretation of strategies: a study of
the impact of CEOs on the corporation",
March 1988.
88/15 Anil DEOLALIKAR and
Lars-Hendrik ROLLER
"The production of and returns from industrial
innovation: an econometric analysis for a
developing country", December 1987.
88/16 Gabriel HAVAVINI
"Market efficiency and equity pricing:
international evidence and implications for
global investing", March 1988.
88/17 Michael BURDA
"Monopolistic competition, costs of adjustment
and the behavior of European employmrnt",
88/18
Michael BORDA
"Reflections on "Vait Unemployment" in
Europe", November 1987, revised February 1988.
UUIfl
88/19
M.J. LAVRENCE and
"Individuel bina In judgements of confidence",
March 1988.
88/36
Vikas TIBREWALA and
Bruce BUCHANAN
"A Predictive Test of the NBD Model that
Controls for Non-stationarity", June 1988.
88/37
Murugappa KRISHNAN
Lars-Hendrik RÔLLER
"Regulating Price-Liability Competition To
Improve Welfare", July 1988.
88/38
Manfred KETS DE VRIES
"The Motivating Role of Envy : A Forgotten
Factor in Management, April 88.
88/39
Manfred KETS DE VRIES
"The Leader as Mirror : Clinical Reflections",
July 1988.
88/40
Josef LAKONISHOK and
Theo VERMAELEN
"Anomalous price behavior around repurchase
tender offers", August 1988.
88/41
Charles WYPLOSZ
"Assymetry in the EMS: intentional or
systemic7", Atigust 1988.
Spyros MAKRIDAKIS
88/20
Jean DERMINE,
Damien NEVEN and
J.F. THISSE
"Portfolio selection by mutuel funds, an
equilibrium Bodel", March 1988.
88/21
James TEBOUL
"De-industrialize service for quality",
March 1988 (88/03 Revised).
88/22
Lars-Hendrik RÔLLER
"Proper Ouadratic Functions vith an Application
to AT&T", May 1987 (Revised March 1988).
88/23
Sjur Didrik FLAM
and Georges ZACCOUR
"Equilibres de Nash-Cournot dans le marché
européen du gaz: un cas où les solutions en
boucle ouverte et en feedback colncident",
Mars 1988
88/24
B. Espen ECKBO and
Hervig LANGOHR
"Information disclosure, means of payment, and
takeover premia. Public and Private tender
offers in France", July 1985, Sixth revision,
April 1988.
88/25
Everette S. CARDNER
and Spyros MAKRIDAKIS
"The future of forecasting", April 1988.
88/26
Sjur Didrik FLAM
and Georges ZACCOUR
"Serai-competitive Cournot equilibrium in
multistage oligopolies", April 1988.
88/27
Murugappa KRISHNAN
Lars-Hendrik ROLLER
"Entry gag e vith resalable capacity",
April 1988.
88/28
Sumantra CHOSHAL and
C. A. BARTLETT
"The multinational corporation as e netvork:
perspectives from interorganizational theory",
May 1988.
88/29
Naresh K. MALHOTRA,
Christian PINSON and
Arun K. JAIN
"Consumer cognitive complexity and the
dimensionality of multidimensional scaling
configurations", May 1988.
88/30
Catherine C. ECKEL
and Theo VERMAELEN
"The financial fallout from Chernobyl: risk
perceptions and regulatory response", May 1988.
88/31
Sumantra CHOSHAL and
Christopher BARTLETT
'Creation, adoption, and diffusion of
Innovations by subsidiaries of multinational
•corporations", June 1988.
88/32
Kasre FERDOVS and
David SACKRIDER
"International manufacturing: positioning
planta for success", June 1988.
88/33
Mihkel M. TOMBAI(
•"The importance of flexibility in
m anufacturing", June 1988.
88/34
Mihkel M. TOMBAI(
"Flexibility: an important dimension in
aanufacturing", June 1988.
M1MKel M.
it.MIOme.
-A
screlegre anarysxa
or
à
LI ..11..1
..... vaq
zunresLment àn
manufacturing systems", July 1988.