IBUS 412:Special Topic

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IBUS 412 Special Topic
Topic 9 Reading Westney, D.E.
Institutionalisation theory and the
multinational corporation
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IBUS 412 Special Topic

• Organisation theory in the study of MNCs
• Little integration of theory in the study of
  MNCs
• Study of MNCs remained in strategy-structure
  tradition (formal or process)
• Macro-organisation theory focused on structural
  aspects (forms, institutions, networks)
• Contribution of institutionalisation theory to
  MNC research
• structures of subsidiaries, learning across
  border, state/MNC

3
IBUS 412 Special Topic

• Organisations are social and technical
  phenomena
• IT looks at social mechanisms
• Isomorphism organisations adopt patterns that
  are externally defined as appropriate and
  reinforced in interactions
• Organisations need resources, legitimacy and
  thus have to fulfil expectations of social
  environment of what are appropriate structures
  and behaviour
• Environment provides building blocks for
  organisation

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IBUS 412 Special Topic

• Forms of isomorphism coercive, normative,
  mimetic
• Isomorphic processes imposition, acquisition,
  authorisation, inducement, incorporation,
  bypassing, imprinting
• 2 streams of IT emphasis on institutional
  agencies (imposition, authorisation,
  inducement)
• emphasis on adoption by organisation
  (acquisition, incorporation, bypassing)
• Interpenetration of organisation and social
  environment (cognitive)

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IBUS 412 Special Topic

• Links to other theories
• Population ecology (organisational inertia,
  selection of successful organisational forms)
• Resource dependency (resource linkages between
  organisations)

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IBUS 412 Special Topic

• IT and MNCs
• MNC operate in different institutional
  environments
• MNCs are subject to variety o different and
  contradictory isomorphic pulls
• Organisations respond to inconsistent
  isomorphic pulls by setting up formal structures
• When internal differentiation becomes
  inconsistent loose coupling
• When loose coupling impossible conflict
  resolution by informal structures (individuals,
  intermediate-level mechanisms)

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IBUS 412 Special Topic

• Change of field boundaries
• Emergence of global industries, regional
  integration
• Global benchmarking, emulation of strategies
• Global diffusion of management concepts

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IBUS 412 Special Topic

• Innovation
• Focus on diffusion rather than emergence of
  innovations
• Two types of innovation
• Innovations produced when an organisational
  pattern is transferred from one field into
  another
• Innovations that emerge from conflicting
  isomorphic pulls
• In research neglect of mimetic isomorphism

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IBUS 412 Special Topic

• Standardisation vs. local tailoring of
  organisation
• Global standardisation of practices and
  structures vs. localisation
• Murky conceptual terrain localisation of
  what, who, how
• Few systematic analyses of adoption of local
  vs. standardised organisational patterns in MNC
  subsidiaries
• Approaches - cultural (bridging home and
  host country cultures)
• - political (conflict between subs and HQ)
• Both approaches focus on coercive isomorphism
• ? Competing isomorphic pulls MNC strong source
  of similarity (mirror effect), local environment
  pulls towards adaptation

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IBUS 412 Special Topic

• Standardisation vs. local tailoring of
  organisation
• Separation of issue of standardising
  organisational patterns across MNC system and
  the imposition of parent company patterns
• MNCs may counter both home and host country
  pulls through socialisation, training,
  evaluation and reward structures
• Local isomorphism stronger in multidomestic
  industries, standardisation stronger in global
  industries
• Resource exchange between organisations
  generates isomorphic pulls
• Cross-border isomorphic pulls within the MNC
  increase with density of interactions across
  subunits

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IBUS 412 Special Topic

• Learning across borders
• The greater the similarity of contexts, the
  easier is transfer
• FDI in regions with low levels of
  institutionalisation facilitates transfer of
  global practices (e.g., Japanese transplants)
• Major ways to reinforce processes of learning
  across borders
• re-creation of home-country organisation-set
• counterveiling legitimation
• Challenge and de-legitimation

12
IBUS 412 Special Topic

• State and MNE
• IM generally stresses constraints on MNEs by
  state policies, e.g.
• Which activities are legitimate
• Influence on ownership strategy
• ? State-induced isomorphic pulls (mimetic or
  coercive)
• Pulls toward isomorphism with state
  structures
• Pulls towards structures approved by the
  state
• Second-order normative isomorphism
• Response by MNE resistance, differentiation,
  ritual conformity
• Impact of MNE on societies role in (de-)
  institutionalisation