Importance of MNE Structure Models and Typologies and Empirical Evidence
2007/// Filed in: MNEs
The organization of modern MNEs is more complicated than the traditional organizational models in their pure form. As modern MNEs design and adopt new structures in order to optimize their ability to simultaneously achieve higher levels of global integration and local responsiveness, the traditional models no longer can be used accurately to characterize most MNEs. Despite this fact, the traditional models are still useful to characterize extreme/ideal (pure) cases in the global integration/local responsiveness matrix and to capture some of the most salient characteristics of MNEs during the early stages of internationalization and globalization. Additionally, empirical analysis corroborates the existence and usefulness of the multidomestic, global, and transnational models to characterize the most salient features of MNEs. For instance, Harzing (2000) studied 166 subsidiaries of 37 MNCs headquartered in 9 different countries and concluded that Barltett and Ghoshal's typology (developed based on in-depth cases studies of nine MNEs) can be confirmed in a large-scale empirical setting (Harzing.00).
There are many reasons why having a typology and models of organizational structures for MNEs is useful to academics, students, and executives (Dunning.01). Typologies provide a manageable framework that reduces complexity and enables practitioners to study, explain, and design organizational strategies for MNEs. To this end, in Table I, we propose a more general typology to model MNEs at different stages in their globalization cycle (Harzing.00), and provide representative examples for each organizational form. This typology includes the international exporter, traditional multidomestic, traditional global, modern multidomestic, modern global, transnational, and virtual.
In addition to the structures we already described in earlier posts, we add the "virtual" form in order to model a new type of MNEs emerging in the 21st as a consequence of the globalization forces. Specifically, the virtual form models ventures which focus exclusively on their core competencies and smartsource (outsourcing focused on value) to global companies optimally positioned to provide services such as R&D, manufacture, production, industrial design, marketing, localization, distribution, and information brokerage. The virtual form uses strategic alliances, external partnerships, mass collaboration, and dominant exchange strategies to achieve high levels of global integration and local responsiveness through co-operative strategies. On a first approximation, the virtual model resembles the transnational form but uses external partners, global experts, opinion leaders and collaborators instead of corporate subsidiaries. The virtual form tends to focus more on intangible assets rather than tangible/capital intensive assets. This form can be used to model some modern MNEs that do not fit the multidomestic, global, or transnational framework such as of the many recent US startups in professional services, manufacture (e.g. medical device manufactures), and dot-com firms (Porter.01).
There are many reasons why having a typology and models of organizational structures for MNEs is useful to academics, students, and executives (Dunning.01). Typologies provide a manageable framework that reduces complexity and enables practitioners to study, explain, and design organizational strategies for MNEs. To this end, in Table I, we propose a more general typology to model MNEs at different stages in their globalization cycle (Harzing.00), and provide representative examples for each organizational form. This typology includes the international exporter, traditional multidomestic, traditional global, modern multidomestic, modern global, transnational, and virtual.
In addition to the structures we already described in earlier posts, we add the "virtual" form in order to model a new type of MNEs emerging in the 21st as a consequence of the globalization forces. Specifically, the virtual form models ventures which focus exclusively on their core competencies and smartsource (outsourcing focused on value) to global companies optimally positioned to provide services such as R&D, manufacture, production, industrial design, marketing, localization, distribution, and information brokerage. The virtual form uses strategic alliances, external partnerships, mass collaboration, and dominant exchange strategies to achieve high levels of global integration and local responsiveness through co-operative strategies. On a first approximation, the virtual model resembles the transnational form but uses external partners, global experts, opinion leaders and collaborators instead of corporate subsidiaries. The virtual form tends to focus more on intangible assets rather than tangible/capital intensive assets. This form can be used to model some modern MNEs that do not fit the multidomestic, global, or transnational framework such as of the many recent US startups in professional services, manufacture (e.g. medical device manufactures), and dot-com firms (Porter.01).