Organizational Architecture and the Realization of Competitive Advantages from Multinationality

187 Pages·2013·1.95 MB·English

by  Maximilian Palmié

Organizational Architecture and the Realization of Competitive Advantages
from Multinationality

D I S S E R T A T I O N
of the University of St. Gallen,
School of Management,
Economics, Law, Social Sciences
and International Affairs
to obtain the title of
Doctor of Philosophy in Management

submitted by

Maximilian Felix Palmié

from

Germany

Approved on the application of

Prof. Dr. Oliver Gassmann
and
Prof. Dr. Christoph Lechner

Dissertation no. 4100

Difo-Druck, Bamberg
The University of St. Gallen, School of Management, Economics, Law, Social
Sciences and International Affairs hereby consents to the printing of the present
dissertation, without hereby expressing any opinion on the views herein expressed.

St. Gallen, October 29, 2012

The President:

Prof. Dr. Thomas Bieger
Foreword
If I had not met many wonderful and committed people, I might not have been able to
write this dissertation. I am indebted to all of them. Unfortunately, it is impossible to
address everyone here. I shall therefore restrict this foreword to those that were most
directly involved in my doctoral dissertation.

First of all, I would like to thank my supervisor Prof. Dr. Oliver Gassmann for giving
me the opportunity to work on this subject. I also thank Prof. Dr. Christoph Lechner
for his interest in my work and for assuming the co-supervision. I am grateful to both
of my supervisors for the time and effort they have invested to help me improve my
manuscripts.
Second, my thanks go to Dr. Marcus Matthias Keupp for letting me use this database,
for the many fruitful discussions we had over the years, and for his advice on how to
present my results and how to phrase my findings.
Third, I would like to thank Naomi Haefner for her excellent and dedicated research
assistance that made my task so much easier.
Last, but not least, I have to express my gratitude to my family which has supported
me my entire life.

I hope that the many other people who are not mentioned here explicitly nevertheless
know how grateful I am to them.

I would be happy if all of you came to the conclusion that supporting me was worth
the effort.

St. Gallen, October 2012 Maximilian Palmié

Table of Contents
Table of Contents .............................................................................................................. I
Summary ......................................................................................................................... IV
Zusammenfassung............................................................................................................ V
1. Introduction: Organizational Architecture and the Realization of Competitive
Advantages from Multinationality .............................................................................. 1
1.1. Multinational Corporations and Competitive Advantages from Multinationality .. 4
1.2. Research Gaps: By Which Means – Especially: By which Organizational
Architecture – Can MNCs Realize These Advantages? .......................................... 5
1.3. Contributions and Relevance of Closing These Research Gaps .............................. 6
1.4. Aim and Overview of My Dissertation .................................................................... 7
1.5. Overall Conclusion ................................................................................................ 11
1.6. References .............................................................................................................. 12
2. Achieving Subsidiary Integration in International Innovation by Managerial
“Tools” ......................................................................................................................... 17
2.1. Introduction ............................................................................................................ 20
2.2. Theoretical Framework and Hypotheses ............................................................... 22
2.2.1. Hypothesis 1: Association between Knowledge Asset Transfer and
Subsidiary Performance .................................................................................. 24
2.2.2. Hypothesis 2: Association between Mandate Status and Subsidiary
Performance .................................................................................................... 24
2.2.3. Hypotheses 3a and 3b: Association between Autonomy and Subsidiary
Performance .................................................................................................... 25
2.3. Data and Methods .................................................................................................. 28
2.3.1. Population and Sampling Frame .................................................................... 28
2.3.2. Item Development ............................................................................................ 29
2.3.3. Measurement ................................................................................................... 30
2.3.3.1. Dependent Variable .................................................................................. 30
2.3.3.2. Independent Variables .............................................................................. 30
2.3.3.3. Control Variables ..................................................................................... 31
2.3.4. Questionnaire, Data Collection Procedure and Post-Hoc Tests .................... 31
2.3.5. Assessment of Reliability and Validity of Measures ........................................ 32
2.4. Results .................................................................................................................... 34
2.4.1. Descriptive Statistics and Results of Hypothesis Testing ................................ 34
2.4.2. Sensitivity Tests and Alternative Specifications .............................................. 37
2.5. Discussion .............................................................................................................. 38
2.6. References .............................................................................................................. 43
2.7. Appendix to Chapter 2: Questionnaire Items ........................................................ 50
I
3. Organizational Architecture and Knowledge Transfer Success in
Multinational Firms: An Agency Theory Perspective ............................................ 53
3.1. Introduction ............................................................................................................ 56
3.2. Theoretical Framework and Hypotheses ............................................................... 59
3.2.1. Hypothesis 1: Subsidiary Autonomy and Knowledge Transfer Success ......... 60
3.2.2. Hypothesis 2: Subsidiary Mandate Status and Knowledge Transfer
Success ............................................................................................................. 62
3.2.3. Hypothesis 3: Cross-unit Interfaces and Knowledge Transfer Success .......... 63
3.2.4. Hypothesis 4: Interfaces with the Local Environment and Knowledge
Transfer Success .............................................................................................. 64
3.3. Data and Methods .................................................................................................. 65
3.3.1. Population and Sampling Frame .................................................................... 65
3.3.2. Item Development ............................................................................................ 66
3.3.3. Measurement ................................................................................................... 67
3.3.3.1. Endogenous Variable ................................................................................ 67
3.3.3.2. Exogenous Variables ................................................................................ 67
3.3.4. Questionnaire and Data Collection Procedure .............................................. 68
3.3.5. Post-hoc Tests, Validation Surveys, Single Respondent Bias and Common
Method Variance, Reliability and Validity of Our Measures.......................... 68
3.4. Analyses and Results ............................................................................................. 70
3.4.1. Results for Hypotheses .................................................................................... 70
3.4.2. Robustness Test: Regression Analysis ............................................................. 72
3.5. Discussion .............................................................................................................. 72
3.6. References .............................................................................................................. 78
3.7. Appendices to Chapter 3 ........................................................................................ 86
3.7.1. Appendix A: Detailed Account of the Study’s Measures ................................. 86
3.7.2. Appendix B: Technical Appendix .................................................................... 88
3.7.2.1. Post-hoc Tests, Validation Surveys, Single Respondent Bias, and
Common Method Variance ....................................................................... 88
3.7.2.2. Assessment of Reliability and Validity of Measures ................................. 89
3.7.2.3. Anderson and Gerbing’s (1988) Two-step Approach to Structural
Equation Modeling (SEM) ........................................................................ 92
3.7.2.4. Robustness Test for the SEM Results: Regression Analysis ..................... 93
4. Realizing Reverse Knowledge Transfer: Channeling Attention towards a
Focal Subsidiary by Organizational Architecture .................................................. 97
4.1. Introduction .......................................................................................................... 100
4.2. Theoretical Framework and Propositions ............................................................ 104
4.2.1. Proposition 1: Autonomy and Parent Firm Attention ................................... 107
4.2.2. Proposition 2: Subsidiary Mandate Status and Parent Firm Attention ........ 109
4.2.3. Proposition 3: Home-base Augmenting Mission and Parent Firm
Attention ........................................................................................................ 110
4.2.4. Proposition 4: Parent Firm Attention and Reverse Knowledge Transfers ... 111
II
4.2.5. Propositions 5–7: Attention as a Mediator between the Antecedents of
Propositions 1–3 and Reverse Knowledge Transfers ................................... 113
4.3. Discussion ............................................................................................................ 114
4.4. References ............................................................................................................ 121
5. Pull the Right Levers: Creating Useful Subsidiary Competence by
Appropriate Organizational Architecture ............................................................. 129
5.1. Introduction .......................................................................................................... 132
5.2. Theoretical Framework and Hypotheses ............................................................. 136
5.2.1. H1: Home-base augmenting mission ............................................................ 138
5.2.2. H2: Cross-unit interfaces .............................................................................. 140
5.2.3. H3: Autonomy ................................................................................................ 141
5.3. Data and Methods ................................................................................................ 143
5.3.1. Population and Sampling Frame .................................................................. 143
5.3.2. Item Development .......................................................................................... 144
5.3.3. Measurement ................................................................................................. 145
5.3.3.1. Dependent Variable ................................................................................ 145
5.3.3.2. Independent Variables ............................................................................ 145
5.3.3.3. Control Variables ................................................................................... 146
5.3.4. Questionnaire and Data Collection Procedure ............................................ 146
5.3.5. Post-hoc Tests, Validation Surveys, Single Respondent Bias and
Common Method Variance, Reliability and Validity of Our Measures ........ 147
5.4. Results .................................................................................................................. 147
5.4.1. Descriptive Statistics and Results of Hypothesis Testing .............................. 147
5.4.2. Sensitivity Tests and Alternative Specifications ............................................ 150
5.5. Discussion ............................................................................................................ 150
5.6. References ............................................................................................................ 158
5.7. Appendices to Chapter 5 ...................................................................................... 167
5.7.1. Appendix A: Detailed Account of the Study’s Measures ............................... 167
5.7.2. Appendix B: Technical Appendix .................................................................. 168
5.7.2.1. Post-hoc Tests, Validation Surveys, Single Respondent Bias, and
Common Method Variance ..................................................................... 168
5.7.2.2. Assessment of Reliability and Validity of Measures ............................... 169
5.7.2.3. Robustness Test for Our Regression Results: Structural Equation
Modeling (SEM) ...................................................................................... 173
Curriculum Vitae of Maximilian Felix Palmié........................................................... 177
III
Summary
Today, multinational corporations (MNCs) account for a substantial share of economic
activity in most industries and countries. The appeal of a multinational organization
can be explained by the associated competitive advantages, which entail prospects of
superior performance: MNCs can create knowledge and competence in geographically
dispersed subsidiaries, transfer knowledge from a focal subsidiary to other subsidiaries
and to the parent firm, and integrate subsidiaries into their intrafirm network. While
these advantages from multinationality have been highlighted frequently, many
scholars also observed that we know little about the means by which MNCs can
actually realize them. This cumulative dissertation addresses these knowledge gaps.
To this end, it focuses on the effects that organizational architecture (OA) exerts on the
above advantages. By adopting this focus, it responds to the calls which have
identified OA as an important, yet neglected area in this context. Parent firm
executives can set elements of OA, especially formal OA (such as subsidiary
autonomy and mandates), to realize their intentions.
Besides an introductory chapter, this thesis consists of four manuscripts that examine
the influence of selected elements of formal OA on (a) a focal subsidiary’s integration
into the MNC’s intrafirm network, (b) the extent to which its knowledge is
successfully transferred to other subsidiaries, (c) the extent to which a focal subsidiary
transfers knowledge to the parent firm, and (d) the extent to which it creates
competence that can be leveraged internationally. Three of these manuscripts test their
theoretical predictions empirically by applying both regression analyses and structural
equation modeling (SEM) to a sample of 287 subsidiaries. The results strongly support
the arguments of this thesis.
Overall, this dissertation suggests that MNCs can realize the competitive advantages
from multinationality when an appropriate OA is implemented. Further, by setting the
OA appropriately, MNCs should be able to realize several of these advantages
simultaneously. These insights do not only help close important gaps in our theoretical
understanding. Rather, they can also yield beneficial advice to management practice
because so far, many MNCs struggle with realizing these advantages.

IV
Zusammenfassung
Multinationale Unternehmen (MNUs) sind ein wesentlicher Teil der wirtschaftlichen
Aktivität in vielen Industrien und Ländern. Eine multinationale Organisation ist
attraktiv, da sie einige Wettbewerbsvorteile bietet, die eine Steigerung des
Unternehmenserfolgs in Aussicht stellen: MNUs können Wissen und Kompetenzen in
ausländischen Tochtergesellschaften erzeugen, dieses Wissen zu anderen
Tochtergesellschaften und zur Unternehmenszentrale transferieren, und die
Tochtergesellschaften in ein firmeninternes Netzwerk integrieren. Während diese
Vorteile der Multinationalität häufig betont werden, wissen wir wenig über die Mittel,
die es MNUs erlauben, diese Vorteile zu realisieren. Die vorliegende kumulative
Dissertation adressiert diese Lücken.
Zu diesem Zweck konzentriert sie sich auf die Effekte, die die organisationale
Architektur (OA) auf jeden der genannten Vorteile ausübt. Mit diesem Fokus reagiert
sie darauf, dass die OA in diesem Kontext als wichtige, jedoch vernachlässigte
Forschungsrichtung identifiziert worden ist. Manager in der Unternehmenszentrale
können Elemente der OA, insbesondere der formalen OA (z.B. Autonomie oder
Mandate), vorgeben, um ihre Intentionen zu realisieren.
Neben einem Einleitungskapitel umfasst diese Arbeit vier Manuskripte. Diese
untersuchen den Einfluss ausgewählter Elemente der formalen OA auf (a) die
Integration einer fokalen Tochtergesellschaft in das interne MNU-Netzwerk, (b) das
Ausmass, zu dem ihr Wissen erfolgreich zu anderen Tochtergesellschaften transferiert
wird, (c) das Ausmass, zu dem sie Wissen zur Unternehmenszentrale transferiert, und
(d) das Ausmass, zu dem sie international nützliche Kompetenzen erzeugt. Drei dieser
Manuskripte überprüfen die theoretischen Vorhersagen mittels Regressionsanalysen
und Strukturgleichungsmodellen an 287 Tochtergesellschaften empirisch. Die
Ergebnisse unterstützen die vorgebrachten Argumente deutlich.
Insgesamt kommt diese Dissertation zu dem Schluss, dass MNUs die Vorteile der
Multinationalität realisieren können, wenn sie eine angemessene OA implementieren.
Ausserdem sollten MNUs dank einer angemessenen OA in der Lage sein, mehrere
dieser Vorteile gleichzeitig zu erreichen. Diese Erkenntnisse tragen nicht nur dazu bei,
wichtige Lücken in unserem theoretischen Verständnis zu schliessen. Vielmehr
können sich aus ihnen auch nützliche Ratschläge für die Managementpraxis ergeben,
denn viele Unternehmen haben derzeit Probleme, diese Vorteile zu realisieren.
V