Overcoming Liabilities of Foreignness by Modes of Structural Coordination: Regional Headquarters and their Role in TNCs

Abstract

In our chapter, we show how internationalisation-based performance outcomes can be amended by using a Regional Headquarters (RHQ) structure. We assume that ‘transnational corporations’ (TNCs) act restrained by a so-called GLOCAL dilemma caused by a coeval need for realising standardisation advantages and ‘location-specific advantages’ (LSA). Thereby, we believe that these opportunities are not necessarily linked to the same level of geographical aggregation. We further take into account that emerging ‘liabilities of foreignness’ (LOF) exert influence on the performance effect of cross-border transactions and highlight the important role information quality plays in this context. To back our general line of reasoning, we employ the information cost approach (Casson, 1998, 1999) as theoretical frame of our chapter. This approach enhances the common one-dimensional view on transactions costs (e.g. Williamson, 1985) by understanding these costs as two-dimensional phenomenon made up of ‘observation costs’ and ‘communication costs’. Additionally, the approach explicitly considers information quality, which is useful to our analysis. Against this background, we discuss how performance effects triggered by a use of RHQ evolve subject to basic types of organisational structures used by TNCs. We contribute to business research by providing a theoretically founded and widely new performance-based angle on the RHQ phenomenon. It combines different research streams that focus influences on cross-border business activities by relying on either the idea of LOF or the idea of LSA.

Citation

Laudien, S.M. and Freiling, J. (2011), "Overcoming Liabilities of Foreignness by Modes of Structural Coordination: Regional Headquarters and their Role in TNCs", Geisler Asmussen, C., Pedersen, T., Devinney, T.M. and Tihanyi, L. (Ed.) Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness? (Advances in International Management, Vol. 24), Emerald Group Publishing Limited, Leeds, pp. 107-125. https://doi.org/10.1108/S1571-5027(2011)0000024012