The Multinational Corporation as an Interorganisational Network - Example

JOURNAL ARTICLE REVIEW By Name Course Instructor Institution City/State Date The Multinational Corporation as an Interorganisational Network – Review Objectives Ghoshal and Bartlett (1990) posit that a multinational corporation (MNC) has a group of organisations that are goal-disparate and geographically dispersed, which includes its head office and the various subsidiaries at the national level. This entity according to Ghoshal and Bartlett can be theorised as an interorganisational network, which is rooted in a peripheral network having all other organizations like regulators, suppliers, customers, and the like, through which the diverse multinational units have to interact. Rooted in this assumption, Ghoshal and Bartlett draw on interorganisation theory so as to create a paradigm of the MNC as an interorganisational network that is internally differentiated. In this case, the authors propose hypotheses, which relate particular characteristics of the multinational, like power internal distribution and resource configuration, to particular external network’s structural properties. Ghoshal and Bartlett’s study concentrates on new methodological, conceptual, and theoretical anchors, and they advocate a comparable espousal of interorganisational theory for future research related to MNC, although with a number of amendments so as to reveal the ownership-based interorganisational connections existing between the MNC diverse foreign subsidiaries and its headquarters. Ghoshal and Bartlett deem that if the interorganisational theory is, correctly tailored, it can offer new perceptions concerning a complex as well as geographically dispersed system of the organisation such as the MNC. So the authors’ key objective is to propose a primary design concerning how the tools and concepts of interorganisational analysis may be used to fit this somewhat distinct but analogous circumstance. In order to structure the context of their discussions, Ghoshal and Bartlett used an illustration of N. V. Philips, an MNC whose head office is in the Netherlands. The MNC has numerous subsidiaries in more than 60 countries, particularly in U.S., Japan, France, and Nigeria. A number of these units according to the authors are big companies that are fully integrated engaging in creating, producing, as well as promoting various products from defence systems to light bulbs. Theory Evidently there is an explicit theoretical framework in Ghoshal and Bartlett paper, which have been rooted in interorganisational theory. As mentioned by the authors, most of the present theory as well as a greater part of interorganisational networks’ empirical analyses have concentrated on interorganisational groupings, which are yet to connect through ownership ties. Therefore, prior to using any of the empirical findings or concepts from these studies for MNCs’ analyses, the authors make a clear-cut argument that the ownership ties existing in the multinational do not certainly prevent the whole array of unrestricted behaviours possible amongst unconnected organizations that are interacting. Citing numerous scholars, Ghoshal and Bartlett claim that the connection between ownership as well as hierarchical power in organizations that are complex is exceedingly feebler than frequently presumed. The authors deem that this connection is mainly feeble in MNCs’ case due to the large cultural and physical distances between the owning and owned units. Besides that, Ghoshal and Bartlett use case histories of extreme autonomy of subsidiary that have been documented in various multinationals’ literature to support the interorganisational theory: for instance, as evidenced in the article the North American Philips refused to sell the Dutch parent’s developed V2000 video cassette recorder, rather choosing to buy from a Japanese competitor. Such instances are quite more prevalent for MNCs that are headquartered in insignificant countries, scores of subsidiaries in foreign countries which every so often contribute more revenues and control more resources as compared to the parent company. Still, as stated by reference lots of these cases as well have been seen in corporations like Unilever and ITT, even if the parents were headquartered in most developed countries like the UK and US. In this case, the effectiveness of fiat is mainly restricted in multinationals’ case not just because a number of their units are resource-rich and very distant but, for the reason that they control vital connection with main actors in their domestic settings, especially the host government. Citing Ericsson, the Australian subsidiary whose parent company is a Swedish company in telecommunication industry, accrued an exceedingly high level of research and development (R&D) resources mainly due to an alliance between the Australian Post and Telegraph authorities as well as the local management whose main objective was the creation of a key research and development centre in Australia. Moreover, subsidiary company ties with local investors, suppliers, and customers as well result in the autonomy of local management. Ghoshal and Bartlett provide an example to support this assertion; after U.S. telecommunications industry deregulation, the power of the NEC, an American subsidiary grew considerably in the company, in spite of its moderately short organizational life as well as small size. This occurred due to its participation in building the relationships of the company with companies operating the Bell, which NEC saw not just as key potential clients but as well as its key connections for new products’ joint development. The authors categorically state that the relationships amongst the national subsidiaries and the parent company in an MNC are not same to those amongst a relating group of regulatory agencies, social service organizations or universities. The authors suggest that the presence of this hierarchical authority do not essentially result in fiat as the prevailing control mechanism. Characteristically, in large, interdependent, and dispersed organizations, hierarchical authority exists with momentous local independence and this situation, according to Ghoshal and Bartlett is not unsuitable for the use of interorganisational theories. Evidently, Ghoshal and Bartlett’s theoretical arguments are somewhat not easy to comprehend because they mainly focus on subsidiaries more than the parent company; thus, making it hard to understand the basic premise of interorganisational theory. Concepts In this article, interorganisational network perspective is the central concept, and is clearly defined. As stated by the authors, the effort to properly use the interorganisational network perspective in the MNCs study has somewhat been new, but still, its conceptual foundation still subsist in the literature of international management. The authors’ evidence this argument by citing Perlmutter's (1969) system of categorising MNCs as geocentric, polycentric, and ethnocentric organizations is perceptibly in line with a network theoretic view. Correspondingly, the conventional paradigms of MNC organizations created by Hedlund (1986) and Bartlett (1986), the coordinated multinational system concept advocated by Kogut (1983), as well as the use of Herbert’s (1984) resource dependency model y for expounding configurations of strategy structure in MNCs have all been explicitly or implicitly grounded in the MNCs conceptualization as interorganisational systems. Ghoshal and Bartlett claim that even though their paper builds on this basis, it varies from the previous pieces in two vital ways. Their explanation concentrates rather on the institutional and social structure of the environments wherein the multinational companies operates. As argued by institutional theorists, in the institutional environment, the relational networks play a crucial part in influencing the behaviour as well as structure of organizations. The exclusivity of the multinational company as a form of organisation as mentioned by Ghoshal and Bartlett ascends from the verity that its diverse fundamental units are rooted in diverse national environments wherein these relational networks’ structures may be and frequently are exceedingly different. Argument and Literature Reference has presented a number of arguments, which they support with a critical literature previous studies assumed the internal consistency in these companies. This according to Ghoshal and Bartlett led to conclusions that were generalized at the overall company level rooted in empirical research that have concentrated on a specific dyadic connection or individual actors. The authors’ present an example of American MNCs that have been surmised as being more centralized as compared to their European and Japanese counterparts founded on the analysis of relationships with of the parent companies with their subsidiaries situated in one region. Still, as argued the authors, relations between headquarters and subsidiaries in an MNC may widely vary from one subsidiary to another. So, the conceptualization of the interorganisational network may offer new concepts like hierarchy or graph centrality, which as stated by Ghoshal and Bartlett seem to be more theoretically suitable for these macrostructural contrasts amongst organizational systems that are heterogeneous and internally differentiated such as MNCs. Another argument is that macro-structural and heterogeneity analysis single-handedly cannot be adequate and may have to be supplemented with the internal differences’ micro-structural analyses in order to develop a more closely far-reaching theoretical comprehensions of the ways through which a multinational company operates. As stated by Ghoshal and Bartlett, the network perspective is predominantly appropriate for analysis of these differences in internal relations, roles, as well as tasks of distinct subsidiaries and of how mechanisms for internal coordination can be distinguished to match the various subunit contexts. Thoughts on business- and company-level generic strategies as well as how they fit various generic forms of competitive structures are excessively far detached from the actuality of highly distinguished strategic models that may be anticipated in various parts of the organization with differentiated network. Rather, the authors suggests that it can be so beneficial to analyse the genuine strategy content in these complex organizational systems: So, citing a number of studies such as Walker (1985), Burt (1987), and Carley (1986), reference posits that analysis of network theory of internal flows of information, products, resources, and people may be more pertinent to creating middle-range theories on strategic control, , decision making, resource commitment normative assimilation, as well as formation and dissemination of innovations in these companies. Method Ghoshal and Bartlett have used literature review to collect data for their research. They cite previous work such as Chandler (1986), Bower (1987), Kogut (1988), Granovetter (1973), and many others in their literature review, the authors critically analyse the past studies that are considerable to their project, so they evaluated what had previously been done. Furthermore, the authors exhibited relationships between various work, and how they related with their project. So, in this case it is not a summary of other scholars’ work. Their study is written in an academic and formal style, and they writing are concise and clear and there are no personal language and colloquialisms use in the study. In their study, Ghoshal and Bartlett utilise different Interorganisational Interactions contexts; unitary federative, social choice, and coalitional. The dimensions analysed include; units’ relations to an inclusive goal, inclusive decision making locus, structural provision for labour division, authority locus, leadership subsystem commitment, and units prescribed collectivity orientation. Evidence The key proposition in Ghoshal and Bartlett paper is that various MNC attributes may be expounded based on particular attributes of the external network wherein it is entrenched. Citing arguments presented in Benson (1975) study, Ghoshal and Bartlett claim that the interactions in the different MNC’s organizational units are well clarified at the resource exchange level. Ghoshal and Bartlett suggest numerous MNC attributes that are predominantly pertinent to their analysis: they include resources distribution amongst its different subsidiaries and the structural attributes that facilitate internal exchange relationships in the MNC and persistently reform the resource configuration. The above mentioned attributes of the MNC as well as how they associate across and within densities offered the focus of the authors’ attention for most part of the article. Limitations Admittedly, the arguments as well as concepts presented in Ghoshal and Bartlett’s article have numerous shortcomings that must be solved so that the network conceptualization may produce a testable and valuable MNC theory. The authors admit that there is the need for extension and improvement in their preliminary ideas through deductive theory building. To begin with, their constructs’ definitions like across and within densities are extremely coarse be-cause, as indicated in their concluding section; such densities vary for various parts of the whole company’s external network. These differences may be anticipated along both functional and geographic, and so need further empirical evaluations. So, the value positions presented in this article are clear, but they are not implicit. Conclusion In conclusion, Ghoshal and Bartlett paper have explicitly advanced the knowledge about the interorganisational network. They have successfully proposed the MNC reconceptualisation as an interorganisational system instead of as an organization. Evidently, this reconceptualisation generates the likelihood of using network methodologies as well as exchange theory to MNCs’ studies and has a number of crucial implications for further research on issues related to MNC. To sum up, Ghoshal and Bartlett paper expression, style, and language is clear, and the study objective has been realised. Reference Ghoshal, S. & Bartlett, C.A., 1990. The Multinational Corporation as an Interorganizational Network. The Academy of Management Review, vol. 15, no. 4, pp.603-25. Read More