MNC Organizational Form and Subsidiary Motivation Problems: Controlling Intervention Hazards in the Network MNC

40 Pages Posted: 7 Dec 2011

See all articles by Kirsten Foss

Kirsten Foss

Copenhagen Business School - Department of Industrial Economics & Strategy (IVS)

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation

Phillip C. Nell

Vienna University of Economics and Business - Department of Global Business and Trade; Copenhagen Business School - Department of Strategy and Innovation

Date Written: December 6, 2011

Abstract

The MNC literature treats the (parent) HQ as entirely benevolent with respect to their perceived and actual intentions when they intervene at lower levels of the MNC. However, HQ may intervene in subsidiaries in ways that demotivate subsidiary employees and managers (and therefore harm value-creation). This may happen even if such intervention is benevolent in its intentions. We argue that the movement away from more traditional hierarchical forms of the MNC and towards network MNCs placed in more dynamic environments gives rise to more occasions for potentially harmful intervention by HQ. Network MNCs should therefore be particularly careful to anticipate and take precautions against “intervention hazards”. Following earlier research, we point to the role of normative integration and procedural justice, but argue that they also serve to control harmful HQ intervention (and not just subsidiary opportunism).

Keywords: The network MNC, headquarters, managerial opportunism, psychological contracts, procedural justice

JEL Classification: D23, F23, L14, M14

Suggested Citation

Foss, Kirsten and Foss, Nicolai J. and Nell, Phillip C., MNC Organizational Form and Subsidiary Motivation Problems: Controlling Intervention Hazards in the Network MNC (December 6, 2011). Available at SSRN: https://ssrn.com/abstract=1969402 or http://dx.doi.org/10.2139/ssrn.1969402

Kirsten Foss

Copenhagen Business School - Department of Industrial Economics & Strategy (IVS) ( email )

Howitzvej 60, 6
Frederiksberg, DK-2000
Denmark

Nicolai J. Foss (Contact Author)

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilen
Frederiksberg, 2000
Denmark

Phillip C. Nell

Vienna University of Economics and Business - Department of Global Business and Trade ( email )

Welthandelsplatz 1
Building D1
Vienna, 1020
Austria

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilevej 14
Frederiksberg, 2000
Denmark

HOME PAGE: http://www.cbs.dk/

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