Academic journal article Management International Review

From "Starworks" to Networks and Heterarchies? Theoretical Rationale and Empirical Evidence of HRM Organization in Large Multinational Corporations

Academic journal article Management International Review

From "Starworks" to Networks and Heterarchies? Theoretical Rationale and Empirical Evidence of HRM Organization in Large Multinational Corporations

Article excerpt

New Models of MNC Organization

Beginning with the seventies two significant changes have caught the literature on the management and organization of MNCs. First, whilst the majority of previous writing favored hierarchical models of organizing MNCs, where headquarters and home country managers govern MNCs' decisions, during the last decades egalitarian models of MNC organization have dominated academic discussion circles. According to these new models the foreign subsidiaries as well as host and third country managers exert a substantial influence on MNCs' strategic decisions. Thus, according to these new models, the organization of MNCs is dominated by horizontal and not by vertical lines (Poynter/White 1990; Malnight 1996), and "starworks" have turned into networks. Consequently, academic interest has shifted from the dyadic headquarters-subsidiary relationship in MNCs to lateral relations between MNCs subunits (Ghoshal/Bartlett 1990). Second, since the seventies, numerous international management scholars have refrained from interpreting MNCs as monolithic, symmetric blocks with a uniform organization pattern. They (Hedlund 1986; Bartlett/Ghoshal 1989) dispute that the "miniature replica" (Crookell/Caliendo 1980; White/Poynter 1984) is the dominant model of MNCs' foreign subsidiaries. According to them, at least some foreign subsidiaries fulfill specific roles or mandates (Birkinshaw 1995) for the MNC and therefore, the structuring of the organization and the use of coordination mechanisms should vary from one subunit to the other. In the terminology of this paper, "starworks" have transformed themselves to heterarchies.

It is evident that the specific shape and the evolutionary pattern of the dominant object under study -- the MNC and its environments -- have favored the rise of these new organizational concepts. Although numerous changes challenge MNCs' organization (Macharzina 1995), four trends seem to be highly relevant: First, a growing interdependence across national markets force MNCs to decide carefully where they locate their key resources. Second, increasing transnational competition has changed the pattern of MNCs' foreign direct investments. MNCs now split their value chains and assign their elements to different foreign subsidiaries. Third, because of competitive educational standards of newly industrialized countries, highly qualified professionals are available nearly world wide. Fourth, after a period of pure globalization, in many industries, local interest groups have extended their influence on MNCs' operations. Doz and Prahalad (1991) develop a similar catalogue of significant changes and consider structural undeterminacy, internal differentiation, integrative optimization, information intensity, latent linkages, "fuzzy boundaries", and learning and continuity as emerging challenges of MNCs. Seen from a more general perspective, these trends have increased MNCs' environmental complexity, which is characterized by (1) a higher level of diversity, (2) a higher rapidity of change, and (3) a higher density of relationships inside and outside the corporation (McKern 1994). All the trends mentioned here call for MNCs' ability to respond quickly, individually, and competently; thus, a thinking in innovation potentials has taken the place of the traditional scale model of organization.

As MNCs' Human Resource Management (HRM) units are confronted with similar environmental trends, there are good reasons to apply horizontal and heterarchical modes of organization in this functional area. With respect to the first trend, the establishment of free trade zones and other liberalization plans have led to an increased interdependence of labor markets. Moreover, as a consequence of the second trend, MNCs' subunits require very different personnel qualifications. For instance, while the US subsidiary of a German MNC recruits mainly engineers, Portuguese subsidiary will hire unskilled workers. …

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