The Responsive Global Organization

The global business context is turbulent and becoming a dynamic complex system where small events can trigger large outcomes that are difficult to predict. This gives urgency to the search for responsive global organizations that are able to adapt the multinational corporate strategy so it provides a better fit with the changing demands of the environment. An important key to this challenge is to activate the responsive potential of the many individuals in the multinational corporation and use them to inform strategic decisions and gain updated insights from the field and instill an organizational culture with supportive structures that will release the entrepreneurial human potential throughout the global organization. The eight chapters presented in this book provide useful insights to fuel these considerations.

This chapter contends that the international business (IB) and strategic management (SM) fields have many commonalities that should be considered in a turbulent globalized business context. IB studies refer to the need for local integration and local adaptation whereas empirics in SM pinpoint the complementary effects of central planning and decentralized decision-making. We present and synthesize these rather field specific perspectives and try to synthesize insights from both fields in an adaptive strategy-making model including the effects of autonomous subsidiary initiatives and intended mandates from corporate headquarters. The model considers local subsidiary actions of both operational and strategic nature and we argue that it may be futile to distinguish between these effects as incremental operational responses can cumulate into more substantial changes over time with dimensions of strategic adaptation. The model provides a foundation for further considerations about how to combine central intent and direction with decentralization and autonomous initiatives in the multinational corporation.

As multinational corporations are becoming larger and more complex, it becomes increasingly difficult to balance between the need for overall standardization in the multinational corporation (MNC) and the need for local responsiveness. In order to allow subsidiaries to react on challenges and opportunities within their local markets, they should be granted with a certain level of decision-making autonomy. However, this freedom can facilitate a misalignment of activities among the headquarters and its subsidiaries.

This study suggests that subsidiaries should be granted with the autonomy to pursue own activities. There should, however, be limits to their independence, which should be aligned through a dialogue between the headquarters and the subsidiary. This study finds a positive correlation between strategic and operational autonomy and subsidiary performance when these are combined with a strong intra-organizational network relationship. Furthermore, the study argues that within operational autonomy it is important to distinguish between everyday activities that do not need approval from headquarters, and activities that should be decided in collaboration between the headquarters and the subsidiary. Subsidiaries that are operating in technological complex markets should be granted with the autonomy to take advantage of inter-organizational network relationships in order to exploit local knowledge and capabilities. However, this poses the risk of the subsidiaries losing connectivity to the MNC. In order to reduce this risk, the headquarters should combine such initiatives with a strong collaboration with its subsidiaries.

By establishing a strong intra-organizational network relationship, autonomy can have a positive effect on subsidiary performance.

Contemporary organizations with multinational business activities must strive to achieve strategic responsiveness to thrive and survive as they operate across a highly dynamic and complex global business environment. Here we emphasize the importance of combining the slow analytical strategy processes at headquarters with the fast autonomous responses taken by frontline agents in the subsidiaries in view of the changing conditions. New business developments are observed first in the fast activities around the multinational periphery where updated experiences from ongoing responses create useful insights that can be used strategically if management at headquarters is cognizant about its existence and able to collect this information. We introduce the notion of democratizing the strategic engagement of managers and employees at all levels and locations of the multinational corporation (MNC) as an essential leadership paradigm. The implied interaction between slow central analytical reasoning at headquarters and updated insights from fast decentralized initiatives in local subsidiaries constitutes an effective dynamic responsive mechanism. This dynamic interaction implies that critical strategic decisions made in the MNC must be informed by the diverse updated insights of managers and employees operating on the corporate frontlines tapping into the crowd wisdom readily available in and around the organization.

In this chapter, we analyzed the effects of internationalization on innovation, productivity, and firm performance among multinational pharmaceutical companies as representatives of a global knowledge-based industry. The empirical analysis used multiple stepwise regressions based on a sample of 149 firms headquartered in Europe and the US. The results indicate that innovation outcomes are positively correlated to the number of foreign subsidiaries (scope internationalization), whereas surprisingly, formal research and development (R&D) does not seem to directly influence innovation. This suggests that the firms benefit from local overseas subsidiaries to create and implement new innovative offerings. The number of foreign subsidiaries has a U-shaped relationship to patent productivity suggesting that firms can gain advantages by locating cost-intensive activities in low-cost countries and critical tasks in advanced market locations. Firm performance has a U-shaped relationship to sales abroad (scale internationalization) and the relationship is further enhanced by a high focus on R&D. This suggests that sales abroad enable scale economies, where R&D improves quality and relevance of products and thereby boosts performance. Finally, to validate the findings we conducted two semi-structured interviews with representative industry experts and gained further insights for an extended interpretation of results.

When analyzing modes of navigating a multi-cultural environment in a multinational corporation (MNC), most studies employ an etic approach that delineates how, for example, multi-cultural companies thrive and maneuver in a likewise multi-cultural business contexts. This approach implies the use of theoretical models and empirical observations that from a methodological view identify an employee as either an objectified agent or as an anonymous “other,” indicating that such approaches are rooted in an ethnocentric academic tradition. Acknowledging the merits of this tradition, we take the methodological approach a step further and introduce an emic or contextualized approach that makes employees themselves provide the bulk of data on how and why they position themselves in a multi-cultural organization the way they do. The main objective of this chapter is thus to discuss how employees develop personal strategies to navigate in a complex multi-cultural organization. The study takes off by developing a theoretical model for how to approach emic studies and then proceeds to suggest a methodological approach that is capable of providing empirical data for a model based on a combination of both etic and emic approaches. This constitutes a first step towards developing a generic model of how to deal with context. In order to test the model, the empirical focus will be on the relationship between the headquarter of the Danish MNC, Maersk Line, in Denmark and its subsidiaries in Asia. This relationship is analyzed on the basis of interviews in the Danish headquarter and in the local offices in Tokyo, Kuala Lumpur, and Penang.

This chapter outlines the philosophic underpinnings of the self-management paradigm developed over the past three decades by China’s Haier Group, a global leader in white goods. The successful transformation of Haier from a small resource-poor firm to a dominant global giant is often attributed to the self-management culture established in the company by its legendary leader Zhang Ruimin. This management paradigm is a function of the humbleness displayed by Mr. Zhang Ruimin and rooted in his strong belief in the traditional Chinese philosophy of I-Ching and Daoism. We show how the hexagram of Qian (“qian”: humbleness, modesty) from I-Ching is linked to Mr. Zhang’s humble approach and analyze how the six parts of the hexagram of Qian are related to the six development stages of the Haier Group. These insights are used to give some thoughts to the leadership challenge associated with the creation of a dynamic and responsive global organization.

Crisis management (CM) has gained prominence in the last decades, as the complex global business environment has forced executives to pay attention to practices that may safeguard organizations against potential crises. However, despite the fact that various scholars point to the need for autonomy and delegation of authority when responding to crises, it appears that the overarching rationale in the crisis literature is geared toward a centralized approach. This suggests that preventive actions and response to crises lie mainly with the leader of the organization and with designated crises teams. It is also apparent that this literature places too much weight on contingency plans and classification schemes. Although behavioral factors have been discussed by some authors as a fundamental element in dealing with crises, it is not clear how to develop these traits. It is our contention then that these conventional perspectives, although valuable to CM, are insufficient to deal with the uncertainty that characterizes global business today where firms must be prepared for the unexpected. We discuss the limitations of this traditional approach and argue for a combination of central control with decentralized execution when responding to unexpected crises situations. This enables management to better comprehend the complexity embedded in any crisis and allows adaptive practices to emerge throughout the organization. An analysis of two cases paired with empirical field studies support our proposition.

The purpose of this study is to contribute to existing financial literature within a less researched area through a systematic, organized, and holistic approach. This study advances the notion of considering terrorist attacks as a heterogeneous group of events by employing a multidimensional approach. The event study methodology was used to investigate the impact of 46 terrorist attacks occurring on the soil of OECD countries since 1990 on stock markets in US, UK, Spain, and Denmark. Thereby, terrorist attacks are considered as events conveying information to financial markets, which is processed by investors and subsequently reflected in security prices. This chapter is the first contribution within financial literature to distinguish and categorize terrorist attacks through several dimensions and investigate the effect of various characteristics on stock markets. The multidimensional analytical approach consisted of six dimensions, which included an examination of the national stock markets, differences across industries, the underlying threat characteristics, the size of the attack, and the development over time and geospatial aspects. It is concluded that terrorist attacks exhibiting international threat characteristics result in significantly larger and boundary spanning negative abnormal returns, which impact stock markets beyond the country in which the attack occurred. Additionally, the size of the terrorist attack amplifies the negative impact on stock markets. However, while the impact on stock markets was found to be immediate indicating that stock markets are quick and efficient in absorbing new information, the negative impact is likely to evaporate within five trading days.