"ORGANIZATIONAL DEVELOPMENT IN THETRANSNATIONAL ENTREPRISE"

byPaul A.L. EVANS*

N° 88 / 42

* Paul EVANS, Professor of Organizational Behaviour, INSEAD,Fontainebleau

Director of Publication :

Charles WYPLOSZ, Associate Deanfor Research and Development

Printed at INSEAD,Fontainebleau, France

ORGANIZATIONAL DEVELOPMENT IN THE

TRANSNATIONAL ENTERPRISE

Paul A.L. EVANS

(INSEAD)

June 1988

ABSTRACT

Although multinational firms are increasingly the big leagueplayers in the world business scene, they are a neglected domainfor organizational development and planned change. Yet tracingthe evolution of MNC research and practice during the last twentyyears shows that the current and future challenges lie preciselyin the domain of organizational development.

This chapter reviews research on and practice in MNCs at threestages - the 60s and 70s, the early 80s, and the late 80s. Issuesthat are reviewed underway are Perlmutter's foresighted butsimplified EPRG framework; cultural differences in theapplicability of OD; the need for contextual frameworks to guidethe field of planned change; and one such framework for assessinghow the MNC can develop an appropriate degree of corporateintegration. In particular, the discussion of the evolution of thematrix dilemma in complex firms leads to the argument thatorganizational development should be guided by a dualisticmetaphor : developing a dynamic balance between opposingpolarities. The implications in turn for the field oforganizational development are briefly assessed.

INTRODUCTION

With the internationalization of markets in the 1960s and 1970s

and the current concern with globalization, the transnational

enterprises (or multinationals as they are more generally known -

I shall interchange the terms) are the big league players in the

business scene. The characteristic of these firms is typically

their overwhelming complexity - often hundreds of thousands of

employees in anything from a dozen to nearly two hundred

geographic markets, with operations sometimes spanning many

related and unrelated businesses.

And yet such enterprises are all but virgin territory in terms of

organization development. Even if we define OD loosely as planned

organizational change with the objective of increasing

organizational effectiveness, most of that research has focused

upon micro-processes within organizations; the macro-issues of

organizing massive complexity and uncertainty have been left to

the scholars of organization theory, structure and corporate

strategy. Similarly, the setting for OD interventions has

typically been the business unit of the firm rather than the

entire corporation, unless this were a relatively simple firm in a

single business. It was pointed out in 1976 that "OD responses in

the past have generally fallen short of dealing with the

complexity and magnitude of multinational concerns" (Hornstein &

Tichy, 1976), and on the surface little has changed in the last

1

decade except for the disemmination of a single influential model

for developing transnational competences - that of Howard

Perlmutter (Heenan & Perlmutter, 1979)(Note 1).

At a Take-off Threshold

Or has little changed? Behind the scenes, a lot has changed. The

focus of attention in research on MNCs has gradually shifted from

a concern with structural and administrative solutions for the

challenges of managing complexity, to a concern with management

processes such as transnational communication, decision-making,

management development, and conflict resolution. There is growing

awareness in the minds of scholars and executive practitioners

alike that the future of the global corporations does not rest

with finding the appropriate strategy or structure but with their

ability to develop organizational capabilities in these process

domains. And has this not always been a deep value behind OD -

managing change not as a one-shot process but in such a way as to

increase organizational capabilities?

In fact, the term "organizational development" is appearing with

increasing frequency in the MNC literature in this context.

Simultaneously, executives are recognizing that the challenges in

these complex organizations are no longer the "What's" of finding

the appropriate formula but the "How's" of organizational

development and change.

2

Thus the central argument running through this chapter is that the

transnational enterprise is at a take-off stage in terras of the

relevance of organizational development : no longer in the hanger,

beyond even the parking ways, but moving down the runway. The

momentum is so rapid that it is likely that scholars will once

again learn from practice developments rather than leading them.

Three Stages in MNC Research and Practice

To understand this challenge and to review the field of OD as it

applies to MNCs, a historical or evolutionary perspective makes

most sense. This chapter is structured in terras of a review of

stages in research and practice on multinational enterprises :

Stage One is set in the 1960s and 1970s, when MNC research focused

on structural issues. Stage Two is the early-mid 1980s, when

attention shifted to management processes. Our awareness of

cultural differences in conceptions of management and organization

also developed at this time, leading to the questioning of OD

technology as being bound by its North American cultural heritage.

Stage Three is the present take-off stage mentioned above.

At each stage, I will take the opportunity to outline a model for

organizational development that characterizes the preoccupations

of the era. The Stage One model is Perlmutter's now classic EPRG

framework. The Stage Two model is my own model of the mechanisms

to achieve an appropriate degree of integration in the complex

3

transnational firm. This framework also provides a contextual

basis for thinking about OD in such firms. The Stage Three

discussion focuses on the emerging challenge of developing

organizational capabilities.

THE 1960'S AND 1970'S : THE STRATEGY-STRUCTURE ERA

In this era, when OD and planned organizational change were

emerging fields, OD was strictly limited to interventions in

multinational enterprises, and usually in localized sub-systems,

rather than on transnational organization issues. Sponsors were

typically personnel managers embued with the idealism of OD. One

of the most detailed published examples is that of the

interventions within different divisions of the British chemical

giant, ICI, analyzed by Pettigrew (1985). But Pettigrew questions

whether the impact of these interventions, which varied in their

success, had more than a marginal influence at best on the

strategic reorientation that ICI underwent in the late 70s and

early 80s. Whereas OD assumed a trouble-shooting role in some

MNCs like EXXON, most corporate headquarters were unsure how to

employ this function within the portfolio of corporate tasks.

Research on the multinational enterprise was beginning to attract

serious attention, though with a focus on understanding the

relationship between strategy and structure in these complex

firms. That research can be briefly summarized in terms of three

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schools of interest (see Galbraith & Nathanson (1979) for a more

detailed review). The major school, associated with the the

Harvard Multinational Enterprise study, extended Alfred Chandler's

"structure follows strategy" thesis to the analysis of American,

European and Japanese multinationals. What happens to the

structure of a firm as it internationalizes? Much effort was

spent in developing analytic frameworks for describing the

relationship between strategy and structure (Rumelt, 1974). The

studies showed that as companies diversified, they moved to a more

complex multidivisional structural form. This is summarized in

Scott's stage model of internationalization (Scott, 1973). Stage I

is that of the entrepreneurial firm with an export department,

evolving into the Stage II functional structure with an

international division. As diversification continues, companies

adopt a Stage III multi-divisional form, with an area focus if

expansion cornes from few products in many markets, or with a

world-wide product focus if it cornes from product diversity in few

regions.

Implementing the Matrix Organization

The frontier question in terms of both theory and practice in the

mid 70s was how the structure of the MNC should respond to

simultaneous diversification in terms of foreign markets and

products. What happens as worldwide product firms increase foreign

sales, or as area divisionalized firms diversify into new product

5

areas (Stopford & Wells, 1972)? Reasoning in structural terms,

the obvious answer was that this was the realm of the matrix

organization with its dual product and geographic focus. And

indeed many diversified MNCs introduced such matrix organizations

during the 70s (e.g. Citicorp, TRW, Texas Instruments, Exxon

Chemicals).

The interest in matrix organizations and the awareness of the

problems in their design and implementation led to perhaps the

first explicit focus of organizational development on the problems

of the transnational enterprise (Galbraith, 1973; Davis &

Lawrence, 1977). There was an awareness that the effective

functioning of matrix structures requires matrix systems, matrix

management processes, even matrix attitudes and a matrix culture.

(Indeed, Galbraith and Nathanson's influential work had just

emphasized Leavitt's earlier insight on the importance of

coherence between strategy, structure and people in the process of

organizational design (Galbraith & Nathanson, 1978; Leavitt,

1965). All too often, these matrix structures failed to live up

to their expectations, seemingly because of a lack of attention to

these wider aspects of organizational development.

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The awareness that the environment of these complex transnationals

is inherently "matrixed" was to pave the way for further

developments. This is aptly captured l'y Davis and Lawrence (1977)

in the preface to their book :

"Ail forms of social organization have two simultaneous needsthat are often at odds with each other : freedom and order.Freedom springs from intuition and leads to innovation. Orderstems from intelligence and provides efficiency. Both areessentiel, but are they compatible with each each other?Within organizations, these requirements are translated intostructural terms with which we are rather familier. Freedomis translated as the specialized interests of different partsof an organization; the optimal goal of decentralization.Order is represented as the regulation and integration of allelements in harmonious and common action : the optimal goalof centralization. The problem with the centralization-decentralization debate, however, was that the more yourealized the benefits of the one, the less you got thebenefits of the other. The dilemme of organization was thedilemme of an either-or world Eitalics added), of beingeither a boss or a subordinate. The promise of a release fromthe dilemme, of the flexibility of both centralization anddecentralization, specialization and integration." (Davis &Lawrence, 1977, p.xi)

Their commentary on confronting the either-or dilemme anticipates

a key aspect of my later discussion on developing organizational

capabilities.

Thus the significant outcome of Stage One was the growing

awareness of the matrixed, "either-or" nature of the environment

of the transnational enterprises. At this time, the matrix

structure was seen as providing the solution to this

7

multi-dimensional world; more recent events suggest that the

solution may be the organizational development challenge of

creating a "matrix culture", as we shall see later.

Other Schools of Inquiry

Two other emerging schools of inquiry into multinational

enterprises should be briefly mentioned. First, research was

undertaken into the complex processes of resource allocation in

such firms (budgeting, planning and control), and into the formal

and informal administrative systems that surround these processes

(Berg, 1969; Bower, 1970). This research highlighted the

importance of the informai and political aspects of resource

allocation that had been traced earlier by Cyert and March (1963),

though the studies were largely divorced from the

strategy-structure inquiries above. Second, some researchers

began to consider the process of strategic planning as the "glue

that binds the diverse activities of a complex organization

together" (Vancil, 1976), leading to a stream of descriptive and

normative research on how corporate planning (and later strategic

management) could achieve better integration in the complex MNC

(e.g. Lorange, 1980). Overall, awareness of the complexities and

dilemmas in such firms was now leading scholars and practitioners

to turn to the investigation of management processes rather than

structures.

8

Perlmutter's Theory of MultinationalOrganization Development

It was during this period that Howard Perlmutter developed the

first framework for conceptualizing organizational development in

the multinational enterprise. The concepts of this framework were

presented in a 1969 article entitled The Tortuous Evolution of the

Multinational Corporation, a paper which even in 1985 was voted as

the most influential article in international business research

(Ricks, 1985).

In trying to define "multinationalism", Perlmutter argues that

firms with a high proportion of international revenues exhibit the

properties of one of four ideal-type predispositions, labeled

ethnocentric, polycentric, regiocentric, and geocentric (see

Figure 1) :

Ethnocentric orientation : Key positions are occupied by

home-country nationals, while foreign subsidiaries are

subservient to the mother headquarters.

Polycentric orientation : Foreign subsidiaries are left to

manage their own affairs, run by local nationals, as long as

they deliver the results. Headquarters has a low profile.

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Regiocentric orientation : Development of the corporation is

focused on clusters of countries in geographic regions such

as Europe, the America's and Asia.

Geocentric orientation : Foreign subsidiaries and regions are

integrated through a global systems approach to decision

making. Allegiance is to the worldwide firm, not to

nationality or region, and resource allocation decisions are

made on a global basis.

INSERT FIGURE 1 ABOUT HERE

On the basis of theory and anecdotal data (rather than empirical

study), Perlmutter argued that international firms, predominantly

ethnocentric or polycentric at the time, must evolve toward

regiocentric and geocentric orientations. This he viewed as the

major challenge for their organizational development. The forces

pushing in that direction are those of viability (i.e. achievement

of financial objectives in what we today would call global

competitive markets), and legitimacy in the eyes of local national

stakeholders.

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Perlmutter's concept of multinational organization development was

elaborated in a later book (Heenan & Perlmutter, 1979), stressing

the concept of "social architecture". Traditional OD, he argues,

is of little value to the MNC since it focuses on the internai

system of the firm. OD in the multinational firm involves a wider

task, developing an orientation (or what we today would call

"culture") that is both internally "viable" and externally

"legitimate". While recognizing that prevailing ethnocentrism and

polycentrism may be appropriate for some time in the future in

many decision areas, he views global market and technological

forces as well as local stakeholder pressures as inevitably

pushing toward regiocentrism and ultimate geocentrism.

Perlmutter's framework, despite its renown, has attracted little

empirical research (see however Ondrack, 1985). Anticipating the

globalisation of markets, it remains a foresighted but sketchy

framework to guide organization development in transnational

corporations.

THE EARLY 1980'S : MANAGEMENT PROCESSES IN MNC'S

During the early 80s, the multinationals ran into a more

competitive environment. Internationalization had become a

reality, and the consequence now was that Perlmutter's

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ethnocentric firms not only found the competition to be tougher

abroad, but sometimes even experienced major threats to their home

country markets.

For American multinationals in particular, a difficult era was

beginning. As Vernon (1979) shows, the economic power of these

firms in the previous decades had aroused a wave of national

sovereignty in bath other industrialized nations and the third

world. The "American Challenge" had mobilized reaction in Europe,

and "Japan Incorporated" had been in the making. Now mobilized

and with the awareness of the needs for attacking global markets,

these non-American firms turned to claim a stake in what was

regarded as the biggest market in the world, that of the United

States - the market where one had to be present in order to

survive. Simultaneously, statistics now showed that American

multinational activity had in fact declined during the seventies,

with a withdrawal into the home market : between 1971 and 1975,

U.S. multinationals had sold some 10% of their foreign

subsidiaries (Franko, 1978). However, the economic consequences

were not yet visible, since the influx of foreign capital into the

U.S. serviced the rising trade deficit that is exposed today.

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During this period, there are two trends that are relevant to

understanding organizational development in transnational

enterprises. The first is the emerging awareness of cultural

differences in conceptions of management and organization, leading

to a questioning of OD values and technology outside the United

States. The second is the evolution of research on MNCs, turning

now to issues of management process that begin to raise

implications for organizational development.

Is OD culture bound?

Cultural difference do exist - that much we know both from

experience and research. Shifting from earlier multi-nation

studies on single variables (e.g. Haire, Ghiselli & Porter

(1966)) and single nation studies on multiple variables, broader

studies during this period reviewed differences in management and

work values (see reviews by Ronen & Skenkar (1985) and Adler,

Doktor & Redding (1986)).

Hofstede's landmark study of 160,000 employees working in 40

countries for an American multinational is perhaps the most

well-known (Hofstede, 1980; 1981). He identified four dimensions

on which work attitudes differed culturally : power distance,

uncertainty avoidance, individualism/collectivism, and

masculinity/femininity. For Hofstede, American approaches to

management and organization in general and OD in particular are

13

reflections of American values - and above all a belief in power

equalization that is no more than a counterculture in Latin

countries and many Asian cultures.

Indeed, Hofstede's data can be interpreted as suggesting that the

"love-truth-trust" model of OD is no more than a counterculture in

the United States itself, in that it is based on "feminine values"

in a predominantly "masculine" culture! On the one hand, OD

embodies certain mainstream values - a concern for power

equalization, and for balancing structure and risk-minimization

with tolerance for uncertainty and risk-taking. On the other

hand, OD reflects values that run against the modal current of

American culture : a concern for collectivism (teamwork and

cooperation) that runs counter to the predominantly

individualistic values of the continent, and above all a concern

for the "feminine" values of the quality of working life,

nurturance and the open expression of feelings.

If one further applies this reasoning to Hofstede's own data, one

would expect OD to have taken root in those national cultures that

are most compatible with its values, and not to have taken root in

others. The cultures that most resemble OD values are a

Scandinavian cluster of Denmark, Sweden, Norway, Finland and the

Netherlands. The modal culture in these nations is more strongly

feminine, and somewhat more collectivistic than in North America,

while sharing the concern for power equalization and tolerance of

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uncertainty. And indeed it is in this region of the world that OD

has become most indigenous. There is almost a national consensus

between government, unions and management on the importance of

improving the work situation through participation by all

employees in decision-making, through job redesign and major

developmental programs (Cooper & Mumford, 1979). Socio-technical

thinking that is so central to OD has owed much to the

Scandinavian contributions of firms like Volvo and Norsk Hydro and

individuals like Thorsrud and Herbst; indeed the Norwegians see

themselves as going beyond socio-technical analysis (Elden, 1979).

The legal right of every individual to a "motivating job" is

encoded in Norwegian labor law, precisely as defined by the

American behavioral sciences (task variety, significance,

identity, autonomy, and feedback (Hackman & Oldham, 1980)).

In contrast, the national cultures that one would expect to reject

OD are the Latin cultures, particularly those in South America

(above all Columbia, Mexico and Venezuala), with strongly

masculine values and an acceptance of power distance - also

cultures much lower on individualism and higher on uncertainty

avoidance than the United States. Similarly, one would not expect

OD to take root in Japan, which appears in Hofstede's data as one

of the most masculine cultures with the greatest desire to avoid

uncertainty. And indeed comparative studies of the success or

failure of OD interventions appear to substantiate this. Preceding

Hofstede's work, Kobayashi and Burke (1976) discuss the distrust

15

of American OD technology in Japan and Latin America, viewed there

as manipulatory. Bourgeois and Botvinik (1981) and Jaeger (1986)

single out Latin America as a region where OD typically fails;

OD's attachment to participative approaches is seen as bewildering

in cultures with a clear preference for authoritarian paternalism.

Laurent (1983) argues that employees in Latin companies interpret

OD strategies either as a sign of weakness on the part of

management or as an attempt to manipulate the work force in subtle

ways, while Trepo (1979) shows how QWL was introduced in France

through top down legislation, largely rejected by management and

unions in ail but small and family firms. With respect to Japan,

while there has been little if any interest in OD, issues such as

improving the quality of working life have been a priority of

Japanese enterprises (Takezawa et al., 1982; Delamotte & Takezawa,

1984). while the methodology of OD seems to be largely irrelevant

to the Japanese culture, the content of OD is of concern for

instrumental reasons - based on an assumption that productivity

improvement and improvements in the quality of working life are

intimately associated and must develop hand-in-hand (as witnessed

by Japanese Quality Circles).

Latin scholars go so far as to suggest that the entire field of

American-based change theory, as well as the specific field of OD,

may be blind to its cultural context, thereby limiting its own

development. Building critically upon earlier reviews of OD and

change by Friedlander and Brown (1974) and Alderfer (1977), three

16

French researches contrasted the orientation to work in North

America and Europe (Faucheux, Amado & Laurent, 1982). The concern

for task and technology that has been at the fringe of American

concerns has been more central in Europe (Woodward, 1970; Herbst,

1962; and the work of the Tavistock Institute). The concern with

human and group processes in North America contrasts with the

stronger concern for institutional, community and collective

change in Europe. Power is a variable that is largely ignored in

North America, whereas "in the field of OD and change within Latin

countries we find power to be the key factor around which all

major research work revolves" (Faucheux, Amado & Laurent, 1982,

p.353).

In Latin cultures, if one is to seek real organizational change,

then one should attempt to change the rules of the game rather

than tinker with human processes. Crozier's school of thought,

known as "strategic analysis", is an alternative model of

organizational change based on the assumption that an organization

is typically a power structure constituted by hidden games that

can be exposed (Crozier & Friedberg, 1980). The Human Relations

and OD movements are seen as alternative approaches that are

somewhat naive. Indeed, schools of change intervention that are

indigenous to Latin countries are fringe movements in North

America - Crozier's strategic analysis based on psycho-social game

theory, the psychoanalytic approach to change (c.f. Zaleznik &

Kets de Vries, 1975), organizational change "drop-by-drop" (Mothé,

17

1981, c.f. the logical incrementalism of Quinn, 1978).

Finally, it has been clearly established that the "technology"

that is associated with OD and planned organizational change is

culture bound, or at least perceived differently in different

organizational contexts. To give a few examples, many OD

techniques are based upon providing feedback (through surveys,

process consultation, appraisals and confrontation). Such

approaches are less than successful and may even backfire in some

cultures : for example, in many Asian countries where they lead to

"loss of face" and where third-party mediation is preferred, or

even in Britain where indirect feedback is more acceptable (Cox &

Cooper, 1977). Management-by-Objectives is frequently cited as

ineffective in Latin countries or in nations accepting high power

distance (Trepo, 1973; Hofstede, 1984). Gain-sharing,

pay-for-performance, career planning and a host of techniques

associated with OD and human resource management run into cultural

problems in different regions of the world (Schneider, 1988).

Towards the Development of Contextual Frameworks

While one can say that cultural differences affecting change and

development clearly exist, the debate on cultural differences is

unlikely to be put to rest. Since webber's analysis of convergent

and divergent forces in work cultures (Webber, 1969), many

scholars and practitioners argue that these cultural differences

are of diminishing importance because of the progressive

18

homogenizing effect of technology, globalization of markets, and

organizational independencies (Negandhi, 1979; Child & Tayeb,

1983; Levitt, 1983).

However, this is a macro debate regarding future trends that is

often rendered more black-and-white than Webber's original

analysis. Even the universalists acknowledge the existence of

major cultural differences. Whereas there may be a natural

tendency for ethnocentrists to deny the troublesome (and for them

irrelevant) existence of such differences, I will show in a latex

section of this chapter that differentiation of national cultures

is theoretically and practically a potential source of competitive

advantage to the transnational corporation. Our conclusion has to

be that the field of OD as a value based movement is largely

irrelevant to transnational organizations, relevant only to

selective organizations in other regions of the world who happen

to share those values, or to counter-cultural change agents.

However, the broader field of organizational development as

planned or managed organizational change is of increasing

relevance, as we shah see in the next sections.

To be relevant both to the transnational organization or to the

majority of organizations in non-American cultures (dare one also

suggest the majority even in the American culture itself?), what

is needed is a contextual approach to change (Faucheux, Amado &

Laurent, 1982; Pettigrew, 1985). A contextual model allows one to

19

assess the appropriateness of particular levers and processes for

managing change to a particular situation. One should bear in

mind the earlier findings in OD research that the effectiveness of

planned change has more to do with the creation of appropriate

preconditions for change than it has to do with the

"effectiveness" of either the change agent or the change

technology (Jones, 1969).

Contextual frameworks for planned organizational change are

beginning to emerge. One noteable example is that of Schein

(1985), who takes as a contextual variable the degree of maturity

of the culture of the organization. Schein sees certain "levers

of change" as being most appropriate to the development of the

young organizational culture that is still in its formative

stages, mechanisms such as building upon natural evolution

(successful deviations from prescribed behavior) and self-guided

organizational therapy. Planned change and OD are the domain of

more mature cultures at organizational midlife, as is logical

incrementalism. In older organizational cultures, stultified by

decades of past success and by emergent bureaucracies,

power-oriented change mechanisms are necessary, such as coercive

persuasion, transformational and turnaround strategies, and

induced bankruptcy. From a research perspective, such frameworks

20

open the way to learning about change from other cultural

perspectives (for example, Crozier's (1964; 1973) analysis of

power strategies in bureaucracies).

A contextual variable that is important for multinationals is the

degree of integration that is required in the transnational

organization. The importance of this variable emerges from

research on MNCs during this period in the early 80s. Let me turn

now to review these studies.

Integrating the Decentralized Multinational

As we saw earlier, the legacy of the 1970's was the growing

awareness that the reality of transnational enterprises,

especially in global industries, is inherently matrixed. Yet the

theoretical and practical search for solutions within the

structure-strategy paradigm had led at best to mixed results. More

recent research also showed that the neatly posited sequence of

steps toward internationalization did not in reality proceed in a

step-by-step fashion (Hedlund & Kverneland, 1984).

The matrix structure was found to be cumbersome and expensive,

even rejected in certain cultural regions. Bartlett (1981)

reported data on five U.S. food companies which showed that they

had successfully multinationalized with simple international

division structures, using "flexible multidimensional decision

21

making processes" to cope with the matrixed complexities of

international operations. Even more cogently, Kagono (1981) showed

in a large sample of big international Japanese firms that the top

performers had grown using simple rather than complex structures,

but with shifts in power from one function to another (production

to marketing to R&D) and the use of more complex integrative

management processes. Kagono's conclusion was that "a simple

structure with a single primary focus may work better than a

sophisticated structure with dual focus of corporate-wide level

even in a highly uncertain and complex environnent." Even where

matrix structures worked, this appeared to be because of the

effectiveness of underlying matrix management processes, such as

communication and multidimensional planning and budgeting. A

matrix culture was required, where the managers' perspectives are

multidimensional by virtue of work experience in and frequent

contact with other functions.

Similarly, strategic management processes failed to fulfill their

promise to serve alone as an integrative device for resolving the

tradeoffs between functional, geographic and product-market

imperatives. Again the lesson was that a matrix culture was

required for this to work. The short era of armies of strategic

planners at corporate headquarters ended with the recognition that

strategic management was a futile exercise unless the line

managers played bail. For example, General Electric introduced an

exceedingly complex process of consultative strategic planning,

22

not as a system but as a developmental tool to change the

attitudes of the key protagonists in the strategic management

process. A paper bureaucracy was created for a three year period

with this objective and then phased out.

Attention began to turn to the analysis of other mechanisms to

resolve the matrix dilemmas of multinational enterprises, and this

attention focused on resolving the centralization-

decentralization matrix conflict.

The research of Doz at INSEAD and Prahalad of Michigan embodies

this new wave of research (Doz & Prahalad, 1981; Prahalad & Doz,

1981; Doz, 1986). Through clinical studies of international firms

in six industries such as automobiles, telecommunications, and

microelectronics, they analyze the two opposing pressures on

multinationals that underlie the proverbial swinging of the

pendulum between centralization and decentralization. On the one

hand, there are the integrative or centralizing forces of

strategic control over subsidiaries in the face of expanding

global markets. These forces are on the increase with

international competition, while technology and market shifts lead

subsidiaries and business units to become more interdependent. Yet

on the other hand, there are the needs for local responsiveness or

decentralization to meet the pressures of host governments and the

particularities of local markets.

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Success in managing these tradeoffs was seen as the key issue.

How can an enterprise provide for a subsidiary's integration into

a global network and its integration into a national economic and

social system? In the earlier terms of Lawrence & Lorsch (1967),

how can an organization be highly differentiated and highly

integrated at the same time?

The balance of forces by this time had shifted in favor of

decentralization. Most major multinationals had built

decentralized structures (Evans et al., 1988), and indeed some

research suggested that subsidiary autonomy was correlated with

multinational effectiveness, even in industries such as chemicals

that were widely viewed as requiring tight global coordination

(Welge, 1981). The question became that of how such a MNC could

provide the necessary degree of integration without compromising

the equally necessary local responsiveness and autonomy, that is

to say the benefits of decentralization.

The "either/or" of the centralization-decentralization pendulum

was replaced with a new "and/and" question: how to be integrated

and decentralized (differentiated) at the same time. A new way of

thinking was coming into place. The key challenge now became that

of discovering mechanisms to achieve what hitherto was regarded as

unnatural. The search for static structural solutions had been

replaced with an organizational development challenge.

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The research of Doz and Prahalad focused on mapping out the

developmental mechanisms for achieving this balance, going beyond

the framework of Galbraith (1973) a decade before. They argued

that the vehicles for integration varied with stage in

internationalization. In the early phases of multinational

expansion, corporate headquarters have clear, substantive and

traditional means for strategic control over subsidiaries :

subsidiaries depend on headquarters for capital, technological

know-how, and skilled resources. Yet with the progressive

establishment of international activities, subsidiaries lose this

resource dependency and become more autonomous. Now we meet the

centralization-decentralization dilemma because traditional

administrative controls will compromise that autonomy. The insight

of Doz and Prahalad was that strategic control and integration

must shift qualitatively from administrative devices to subtle

means of achieving integration - "subtle" in the sense that

integration is achieved without compromising subsidiary autonomy.

The concept of integration implies use of these subtle mechanisms,

rather than the overt controls of centralization.

Other studies had shown that some MNCs use a wide range of

informal and subtle control devices, for example in Swedish

multinationals (Leksell, 1981). Doz and Prahalad mapped out the

integrative devices into three categories :

25

Data management mechanisms, such as computer information

systems facilitating on-line exchange of information and

decision-making.

Conflict resolution mechanisms, such as coordinating

committees, task-forces to resolve contentious issues, as

well as deeper organizational norms such as Digital's

"Push-Back" and IBM's contention management procedure (see

Note 2).

Manager management mechanisms, such as centralized management

training, control over the career development of key

individuals, and reward practices.

They argue that manager management represents the deepest and most

subtle form of integration in that it affects the very power

structure of the firm; yet it is also the most difficult

integrative capacity to develop. A well-known illustration is the

now-classic study by Edstrom and Galbraith (1977) on control in

four European multinationals. One of the firms in their study

appeared to have a high degree of corporate control over quite

autonomous operating companies. The source of this control was a

practice of intensive international managerial mobility - the

careful management of high potential managers with frequent

geographic, functional and divisional moues, creating a corporate

nervous system in the firm. Edstrom and Galbraith called this

26

"control through socialization", or normative-cultural control as

contrasted with administrative control (see also Baliga & Jaeger,

1984).

The subtle integrative processes that appear as the key to

organizational development in the MNC involve both "hard"

mechanisms such as data information systems and "soft" mechanisms

such as manager management. An unpublished observation from a 1987

conference on MNCs was that the hard and soft capacities seem to

go hand in hand. Without the development of soft integrative

capacities, the hard systems are unlikely to function well. This

was the case in three different industries : airlines (Cathay

Pacific), industrial products (SKF), and telecommunications (NEC).

These three firms had decentralized structures, coordinated in

part through world-wide data and decision-making systems; yet the

effective functioning of these "hard" systems depended on the

close mutual familiarity of people operating them on different

sides of the world.

Other researchers have arrived at similar conclusions to Doz and

Prahalad (Bartlett & Ghoshal, 1987; Kogut, 1985; Hedlund, 1986).

This stream of research leads on to the concept of organizational

capability. But before discussing this, let me pull together the

two strands of this review of the early 80s : the awareness of

27

cultural differences, leading to the need for a contextual

framework, and the need to map out integration mechanisms that are

appropriate to the MNC.

Developing Integration : A Contextual Modelfor Multinational Organizational Development

The key developmental challenge for the transnational enterprise

is that of building the appropriate degree of global coordination

or integration, while allowing for the necessary local

responsiveness and cultural/market differentiation of

subsidiaries. The operative word is "appropriate", and this

depends on the industry or business sector. As Bartlett (1984)

has shown, the forces for integration are low in industries such

as cernent and branded packaged goods; they are strong in other

industries such as consumer electronics and telecommunications.

The necessary degree of integration thus becomes a contextual

dimension of organizational development in the international firm.

Where integrative requirements are low, as in the polycentric

firm, weak integrative mechanisms will be appropriate. Where

integrative requirements are high, as in geocentric or global

firms, stronger mechanisms will be necessary; but despite their

"strength", they need to be subtle and non-administrative

otherwise local responsiveness will be compromised.

Based on my analysis of the integrative mechanisms that

28

multinational companies use [derived from clinical studies and

observations of such firms (Evans, 1986; Evans & Lorange, 1988)],

FIGURE 2 maps out the integrative mechanisms on a scale from weak

devices to strong devices, clustered into six categories. These

mechanisms are typically cumulative, either in the sense that more

global firms will use weak as well as strong mechanisms, or in the

sense that the success of stronger mechanisms presupposes the

effective functioning of weaker devices.

INSERT FIGURE 2

1. Establishing face-to-face relationships : Exchange andCoordination Meetings

The weakest and minimal mechanism for developing integration is

the establishment of personal relationships between key actors in

the firm (Daft & Lengel, 1987). Information does not pass in

unbureaucratic ways, the transfer of learning gets blocked by the

"not-invented-here" syndrome, and conflicts get avoided rather

than confronted unless such relationships are established. This is

an obvious point, though systematically building such

relationships may be difficuit in operations spread throughout the

world.

29

The actuel devices vary. Annuel world-wide conferences or

jamborees for a particular function are one example (academics are

often invited to present their idées at such meetings, though one

knows that what is important is to respect the schedule and not

interfere with the socializing process!). Exchange groups are

another example, as are ad hoc project groups and coordinating

committees that cut across the worldwide organization.

No more than this degree of integration may suffice in certain

industries. Exemples of such polycentric firms are Holderbank (the

Swiss enterprise that is the world leader in the cernent industry)

and the Swedish industrial gas firm of Aga. Many rapidly growing

enterprises in the electronics components industry have developed

internationally in a polycentric fashion, for example Analog

vices and Molex. But as technologies shift and global competition

gets together, a stronger measure of integration is often needed.

2. Team-Building : Management Training

The logical next step is toward a more powerful device, that of

group or regional management training. Training serves the purpose

of building stronger personal relationships - indeed it may move

into teambuilding by working through differences, fostering common

identity, and facilitating exchange. Relationships built up at an

intensive management training program lasting several weeks are

often durable. Training also serves as an instrument for

30

confronting the language barrier; to qualify for the program, the

individual has to develop working proficiency in the language of

the corporation.

But training potentially goes further in serving as a vehicle for

developing a common understanding of challenges and a common

language for dealing with them. At INSEAD, we have noted the

appeal of training to many multinationals as a device to build a

"critical mass" of managers throughout the world who develop

personal relationships and a shared terminology.

Training is typically considered as serving the function of

developing individual competencies. Yet the integrative

organizational function of training is an explicit objective of

firms like Shell and IBM, who have major corporate and regional

training facilities. At Shell, high potential managers from

operating companies throughout the world are encouraged to attend

programs offered by central group facilities in Holland and

Britain with the explicit rationale of building "corporate glue"

in an otherwise decentralized organization. Olivetti and Ericsson

have recently invested in major management training facilities,

symbolically removed from headquarters and located in Britain, for

precisely this reason. Nestlé, the Swiss food products company,

sponsored the creation of a business school (IMEDE) for this

31

reason, as did Alcan with CEI (today renamed as IMI) in Geneva.

Many other firms today are entering into partnerships with

business schools with a similar motivation.

3. Selective Selection and Development : The Identificationand Development of Managerial Potential

A next and stronger integrative device involves a different

mechanism, focusing on corporate control over the selection and

development of individuals with the potential to occupy key

positions. This is often a logical progression from management

training into management development.

Control over selection and development is the most powerful

integrative device I can identify, applied here selectively to

those with high potential. The mechanism can best be understood

by applying the variation-selection-retention model of population

ecology (Astley & Van de Ven, 1983). The argument here is that

among the natural variation in any population, environmental

forces will favor the selection of certain types, leading them to

become models at that point in time (subsequent retention). This

model can be applied to explain how an organization may develop

internal integration within its heterogenous socio-cultural

environment. From the wide variation of potential managers and

professionals, the initial problem is to select (either at the

time of recruitment or from people within the firm) those who have

two qualities :

32

first, the qualities and motivation to occupy key positions

within the corporation latex in their careers;

second, the predisposition for a corporate rather than local

career (typically requiring geographic mobility), and a

personal value set that appears to match corporate values.

In the jargon of management development, this problem is known as

that of "identification of potential".

The two qualities go hand in hand in the sense that one without

the other is insufficient. However, in many if not most

organizations, the first set of criteria may be explicit, though

the second set may only be informal or implicit, if recognized at

all.

The next step is that of early socialization. As Pascale (1986)

notes, some organizations expose their young high potentials to

degrading assignments or experiences analogous to college hazing

so as to test their corporate loyalty. A major investment will be

made in their development, and the firm wishes to evaluate what is

after all only a probabalistic judgement. Indeed, companies like

Shell, Hewlett Packard, Philips and IBM note that turnover rates

among graduate recruits are modestly high in the first four years

after recruitment. On the other hand, if the individual remains

thereafter it is likely to be for a life-time career.

33

Then follows development. Career progression is carefully

monitored, usually involving different functional and geographic

assignments, with a spell at corporate headquarters. The duration

of expatriate assignments involves a tradeoff between cost and

practical problems on the one hand, and the importance of

corporate integration on the other hand - longer expatriate

assignments develop an extensive network of global relationships

and perspectives as well as heightened corporate identification,

but this is costly and difficult to manage. For example, IBM

limits all but a few expatriate assignments to a four year period,

whereas Philips has favored the development of third country

nationals (TCN's) who may be life-time expatriates in key

positions abroad. Citibank refers to this high potential elite as

"corporate property", and the narre is apt. The objective is to

identify and develop individuals who have more than proven

managerial, leadership and strategic ability. Wherever they are

working, be it as comptroller, head of marketing or general

manager in, say, Venezuela, they have a close identification with

the corporate interest (if only via the vested interests of their

further career progression), as well as in the local interests of

the subsidiary or function where they are currently working. Their

loyalties are matrixed.

34

International management development has become a growing priority

over the last ten years - our surveys at INSEAD have shown that

the identification and development of potential is by far and away

the top corporate priority for human resource management in

international firms (Evans, 1984). The major reason is of course

the recognition that the quality of middle and senior management

is a constraint on the growth (sometimes the survival) of the

enterprise. But today the development of such individual

competencies becomes interwoven with the simultaneous development

of a more integrated organization.

It is here that we return to Perlmutter's earlier observation on

ethnocentricity versus geocentricity. Historically, most firms

were and still are ethnocentric in the sense that the pool of

potentially "high potential" candidates is largely restricted to

individuals from the mother country. For example, Derr's study of

what constitutes "potential" in international firms in different

European and American countries (a study sponsored by our group at

INSEAD) showed that this is often more than ethnocentric -

restricted de facto to candidates from the "old school", "the

network" or some other establishment (Derr, 1987).

The significant problems of defining what is potential and

managing the development process (see Evans et al., (1988) for a

discussion) in fact represent efforts to widen the selection pool

and render the process of international management development

35

more rational and systematic, and less biased by ethnocentric

values. However, ethnocentric management development is a fair

beginning, and the firm may moue to a more "geocentric" system as

it develops the capacities. Indeed, one of the simplifications in

Perlmutter's framework is that integration and ethnocentricity get

confounded. My analysis suggests that they should be considered

as two separate developmental challenges that meet together in

what Perlmutter calls the "geocentric" concept.

4. Establishing Common Values and Goals : Building the

Corporate Charter

Management development leads on to a further device, namely

establishing common corporate values, often embodied in an

organizational charter or credo. If the organization is to select

and develop managers on a geocentric rather than ethnocentric

basis, what are the corporate values that should act as guiding

criteria?

With the often faddish recent interest in building a strong

corporate culture, programs to develop shared values have often

been launched as naively "quick-fix" solutions to the problem of

integration. Such programs are more difficult to manage and more

expensive than many believe. They corne after the implementation

of integration devices mentioned previously, not as a means to

jump several hurdles. Shared values programs are best when

36

making explicit what is already emergent. They provide

integration in particular when they become not simply espoused

theory but guiding criteria for the selection and development

processes discussed above. For example, Volvo's new CEG Per

Gyllenhammer injected new values into that Swedish firm when he

took over in the late 60's, values that are widely symbolized by

their then revolutionary Kalmar plant. But it took fifteen years

for these values to become institutionalized, occuring only as a

new generation of managers (who only knew the "new" Volvo) rose up

into positions of power (Evans et al., 1988).

Where the objective is to forge common values out of diversity and

heterogeneity, a major investment of time, effort and money is

required. Such was the conclusion of several of my own and other

studies - of such a program at Lafarge-Coppée (the French

international cernent and construction material firm), at the

British computer company ICL and at SAS in the airline business,

and at Apple Computers (Evans et al., 1988). These studies

suggested that the success of such programs depends on the deep

involvement of the managers themselves in the process of

developing a charter or corporate credo, not in the resulting

statement of values itself. In this sense, such programs can be

viewed as extending training into a wider organizational

development program.

It may be more feasible to place the emphasis on developing shared

37

"hard" values rather "soft" values, that is to say common goals.

The behavioral sciences have clearly established the unifying

function of goal-setting. Programs to align action around common

goals, such as quality at Xerox, customer service at IBM or SAS,

or globalization at General Electric, appear to act as a powerful

mechanism for world-wide integration if implemented with

appropriate focus and management commitment. For example, some

employees thought that Xerox's world-wide "Leadership to Quality"

program was getting in the way of pressing operational issues. The

chairman's response was unequivocal : "It's not getting in the

way, it is the way!"

5. Reward Systems : Executive Compensation

Common values and goals in turn lead to even stronger integration

devices, namely the reward system (Galbraith & Nathanson, 1979).

Common values and goals get reinforced when the reward system is

aligned behind them. This is particularly true for key managers.

For example, the bonus pool compensation for general managers in

some multinationals reflects a balance of the interests of

differentiation and integration. The total amount of money that is

available in the bonus pool is linked to regional or corporate

profits, thus fostering lateral collaboration. On the other hand,

38

the distribution of the bonus pool depends on individual

performance in one's own subsidiary relative to others,

simultaneously fostering differentiation.

However, changing the reward system may be seen naively as an easy

device to foster integration. As a generalization, one can say

that, it functions best when it represents a reinforcement of

previous devices and mechanisms, rather than as a tool for change

itself (Lawler, 1981).

6. Extensive Selection and Development : The Global Culture

When maximum integration is an organizational requirement for the

NNC, this can be achieved by a last mechanism, extending control

over selection and development beyond high potentials and even to

lower level professionals and employees in the firm. Examples

that more or less approximate this global culture are

Hewlett-Packard, IBM, Unilever, and many of the large Japanese

corporations, organizations that are seen as having strong

cultures.

Although there are big differences between nations in attitudes

and work values, as discussed earlier, such differences are

stereotypes. They represent statistical differences in means

between the normal distribution of attitudes and values in any

given national population. Certainly, Germans are different from

39

Americans who are different from the French. But some Germans are

very American in their attitudes, and some French are more similar

to the "average" German than to their own compatriots. when a

globally oriented company such as Hewlett-Packard is recruiting a

German professional for a career at their plant near Munich, they

are not simply seeking any technically qualified German; they are

looking for a German whose personality matches the cultural values

of Hewlett-Packard.

Recruitment in such firms is for careers, not for jobs. The values

of the organization tend to be transparent, and the reward system

is aligned with these values. Such firms also pay attention to

retention management to prevent the loss of carefully chosen and

socialized personnel, and the developmental investment that this

represents. Translated into specific devices, this mean above

average salaries, attention to welfare policies, safety valve and

monitoring procedures such as open door policies, opinion or

morale monitoring, and grievance procedures. Additionally, these

firms tend to have overt or covert non-union policies based on the

assumption that no employee can serve two masters.

As suggested earlier, global and integrated cultures may be quite

ethnocentric in their orientation. The criteria for employee

selection may reflect home country values. An example here are

some of the major Japanese concerns, with sophisticated and highly

40

integrated approaches to employee selection and development in

Japan itself. Yet such practices may run into problems when they

are applied abroad, especially when growth requirements involve

rapidly recruiting local workforces.

Hewlett Packard was cited as an example of an integrated global

organization in the United States. Some as yet unpubiished

research of my INSEAD colleague Andre Laurent shows that among his

empirical studies of cultural differences in multinationals, HP is

the firm where a shared organizational conception of management

and organization cornes closest to overriding national cultural

differences in such conceptions. In all firms studied, he finds

empirically that national differences clearly dominate over

communalities due to belonging to the same firm (Laurent, 1986) -

a testimony to the extent of the integration challenge - though

less so in a few enterprises such as Hewlett Packard. This is

indeed a concrete measure of the extent of integration. However,

whether this degree of integration is always desireable is a point

for discussion.

41

The Cost of Global Integration

A frequent occurence when "soft" social or organizational

development logic is divorced from "hard" business or economic

logic is that we find ourselves carried away by exaggerated

fashions - even though the fashion may be based on a problematic

reality. One such fashion in recent years is indeed the concern

with building strong, global organizational cultures.

Yet Bartlett (1984) reminds us that the forces for integration

vary from one industry to another, as mentioned earlier. And as

we shall see in the next section, integrative developmental

strategies may be applied to one sector of interdependent

businesses within the firm, while a polycentric strategy governs

other stand-alone businesses within the same corporation.

While strong integrative strategies have their attractions

(heightened strategic control, strong corporate loyalty, a high

priority given to human resource management), they have

significant costs. First, the overhead costs of corporate programs

and of human resource management are not insignificant, sometimes

leading to creation of major corporate bureaucracies. Second, the

importance of retention leads to salaries that may be well above

local labor market rates. Third, there is a serious risk of

cloning and inbreeding, as experienced by companies like IBM,

Exxon and Hewlett Packard. The diversity and variety that is the

42

lifeblood of innovation are lost, and integration may lead to

inward looking homogeneity. Finally, there may be some loss of

strategic flexibility. In particular, major strategic shifts,

joint venture partnerships, and the acquisition of companies with

inevitably different cultures may be particularly difficult. A

strong but strategically fragile organization may have been

created - the strength and fragility of cast-iron that tolerates

high pressure but ultimately cracks.

Hewlett Packard, long on the hit parade list of "excellent" firms

with strong cultures, may be such an example of the latter dangers

of over integration - cloning and strategic inflexibility. By

origin an instruments business, Hewlett Packard ventured into

computers in the 70s. This for a while led to a widespread loss

of its strong internai identity, inside confusion, and a clash

between different cultures in a firm noted for its unifying value

system. The choice was either to compromise those values or get

out of computers, and Hewlett Packard appears to have relegated

computers as a support for their core instruments business.

Laurent's data on its strongly integrated culture, mentioned

earlier in this section, was in fact interpreted by the firm not

as flattery but as evidence of an excessive degree of

integration and homogeneization. IBM, another quite integrated

firm, can be seen in a similar light.

In this section, I have sketched out successive integrating

43

mechanisms and devices, and this analysis can surely be amplified.

But the final summary point is that use of such development

strategies has to be guided by careful consideration of the

tradeoffs and the degree of global integration that is

strategically required.

THE LATE 1980'S : DEVELOPING ORGANIZATIONAL CAPABILITIES

Today, the guiding idea emerging from clinical research on

multinationals is that the source of competitive advantage for

many of these firms does not reside in their strategy or

structure, nor in their technologies or products. It lies in

their organizational capabilities to cope with the

multidimensional and complex demands of international business.

As Prahalad and Doz (1988) put it, the quality of organization

will increasingly become the prime competitive weapon.

The notion of organizational capabilities further develops

Perlmutter's foresighted concept of the geocentric organization.

It applies most immediately to transnational or global industries

such as telecommunications and medical instruments, where it is

important to achieve both global integration and local

differentiation. For these firms, their capacity to operate

effectively transnationally becomes their unique source of

strength. Strategic integration of the firm is vital,

differentiation of functions and subsidiaries is vital, but

transnationality is seen in the nature of the dominant operational

44

relationships, namely lateral linkages between interdependant

functions, business units and geographic subsidiaries spread

throughout the world. Lateral relationships and subtle

integrative controls predominate over traditional hierarchic and

administrative relationships. Indeed Hedlund (1986) suggests a new

name for this type of firm : the "heterarchy", signifying the

non-hierarchical organization of reality.

Some researchers see this firm as perhaps breaking free of

conventional thinking about strategy and structure. The structure

(or rather the culture) may lead it to look for strategic options

that follow from its cultural properties, rather than identifying

properties of the industry where it competes and then adapting its

structure (Schwartz & Davis, 1981).

Let me briefly outline four different variants on the argument,

different facets of the current challenge of complex MNCS. The

first facet is the consequence of scepticism about the utility of

long-range strategic planning. On the one hand, there is an

awareness that competitive positioning requires long-term

thinking. Yet on the other hand, there is doubt that planning can

cope with the massive environmental uncertainties. The CE0 of

Sulzer (one of Switzerland's leading industrial firms) expressed

it as follows :

"We have to tackle the task of preparing the firm for itslonger terra future in different ways. Long-range planning haslost its credibility in an uncertain world. Will we see open

45

trade or a return to global protectionism, recession orgrowth? What about inflation and exchange rates? Will theGorbachev revolution in Russia continue or not? What aboutcompetitor reactions? There are too many uncertainties topermit anything but the planning of broad scenarios.

And yet preparing SULZER for the 1990's is one of my majorresponsibilities as CEO. What this implies is that itsleaders and managers and its organization must be prepared toface whatever business and economic circumstances we turn outto confront ten years in the future."

Preparing the business means developing the appropriate

capabilities.

To adopt a second perspective, Ouchi (1988) cornes to a similar

conclusion from an analysis of micro-economics and organization.

Ouchi has analyzed firms who consistently achieve "super-normal

returns", way above the industry average - a performance which is

impossible according to basic economic theory. He argues that

firms can only achieve this if they are capable of performing an

"unnatural act", something that cannot be readily imitated.

Technologies, products, the expertise of people, market devices,

and so forth can all be stolen, imitated, copied and improved upon

- they provide a very temporary source of advantage. The only

source of advantage that cannot be imitated and which underlies

the capacity to achieve above average returns is organizational

capabilities that are embedded in the culture of the firm. In

particular, Ouchi believes that the capacity to achieve a balance

between the opposing forces of individualism and teamwork at all

levels of the firm, from micro-groups to macro-organizations, is

46

the critical capacity. In individualistic cultures such as the

United States, this may mean developing teamwork capabilities

without compromising native individualism. In cultures with a more

collectivistic tradition such as Japan, this implies fostering a

complementary individualism.

To take a third perspective, Prahalad and Doz (1988) point out

that leading multinational competitors have today reached a state

of "resource parity", that is quasi-equality in their armoury of

traditional competitive weapons (technology, finance, geographic

spread of markets, quality of manpower). No conventional resource

will provide the firm with any significant competitive edge. That

must corne from the strategic capability of the firm, the ability

not only to keep learning about its changing environment and to

conceive effective strategies, but to mobilize its resources in

constantly shifting ways in order to execute those strategies. In

particular, this means building active but flexible non-hierarchic

linkages across interdependent but differentiated functions,

business units and geographic subsidiaries. To facilitate this,

strong "fixed pivots" will be vital, especially shared goals and

values between its managers.

A fourth perspective is that of Bartlett and Ghoshal (1987a&b).

They interviewed managers from vine companies in three industries,

showing that these industries had in the past pursued strategies

based on uni-dimensional capabilities. Successful firms in

47

consumer electronics had recognized the importance of global

economies of scale, optimizing efficiency. Strategies in consumer

packaged goods had been based on responsiveness to local market

differences, while organizational learning had been the key

strategic factor in telecommunications (the ability to adapt to

changing technologies and to transfer learning from one part of

the firm to the other). However, they argue that competitive

developments are leading firms to search for ways to build the

multidimensional capabilities of efficiency, responsiveness and

learning that Bartlett and Ghoshal view as the characteristic of

the transnational enterprise.

They make an important observation that the importance of

developing multidimensional capabilities applies not only to

industries long since labeled as global, such as

telecommunications. It applies also to sectors like consumer

products, though it is in the "global" industries where the pace

of development will be the fastest.

Let me provide one example in the telecommunications sector. Until

recently, integrated circuits for computers have been a

standardized product where the competitive edge required linking

R&D to manufacturing and developing major economies of scale -

already a complex task. Today, the technology is shifting, and it

is possible to customize integrated circuits to the requirements

of a particular client group. The strategy of the Japanese

48

telecommunication firm NEC is to set up local R&D centres

throughout the world, for example in Boston USA working closely

with Route 128 high technology customers. Yet the work of these

local centres has to be closely coordinated, and linked to central

R&D in Japan. High speed satellite transmission of information

can facilitate this coordination, but the "hard" technology of

coordination will not function unless the "soft" lateral

relationships and linkages have been built up. Simultaneously,

this already complex task is rendered even more difficult by the

necessity for coordination between R&D and manufacturing, a

function whose technology is also shifting, so as to maintain

necessary economies of scale in production. Ail this takes place

in one sector of NEC's business operations, itself

interdependent with other business sectors. The overall challenge

is thus one of mastering lateral interdependencies on a gigantic

global scale.

From the What's to the How's

The concept of organizational capability captures an emerging

consensus among scholars and executives in multinational firms on

the nature of the challenge, a challenge that emerges from two

decades of evolution. But the real challenge is the

organizational development task of how to build such capabilities.

Talking of their 250 interviews with executives, Bartlett &

Ghoshal (1987a) put it like this : "Without exception, they knew

49

what they had to do; the difficulties lay in how to achieve the

necessary changes."

The new capabilities that are required can be listed under

Bartlett & Ghoshal's headings.

From Dependence/Independence to Interdependence

This is the central issue, as discussed in the previous section.

It becomes strategically more and more important to manage

multiple and changing interdependencies. Lateral relationships

become the critical relationships in the heterarchy, not simply

subsidiary to vertical or hierarchic relations. Decision making

processes must allow for multiple and conflicting perspectives.

But even when the interdependencies can be clearly analyzed, how

does one create and foster a climate of cooperation? How does one

get the "soft" aspects of interdependency to match up with the

"hard" aspects (information systems, resource allocation

processes, transfer of learning)? How does one channel the

conflict that interdependency invariably generates?

50

From Control to Coordination

Bureaucratic and administrative control mechanisms cannot handle

the complexities, so integration or coordination must corne from

other sources - above all through normative or cultural control

and through shared goals and visions. Strategic planning is no

longer the preserve of top management: general managers of

subsidiaries need to play a more strategic role, not just in the

management of their own business but in the management of the

whole organization. The global mentality needs to be pushed

further down in the organization, not just limited to the top.

From Svmmetry to Differentiation

Traditionally firms seek guiding principles so as to handle

subsidiaries, functions and product groups in similar ways. But

the interdependencies vary greatly within the overall firm -

strong between some business units but weak between others, strong

between some functions and businesses and weak between others. And

the strength of these interdependencies changes with the product

life cycle, technology shifts and competitive reactions.

The new challenge is to learn how to handle the interrelationship

between the constellation of businesses and functions in different

and changing ways. Stand-alone businesses need different treatment

from interdependent units. Some functions may be centralized,

51

others regionalized, others handled on a country-by-country basis.

Functions may move into the fore of influence at certain stages,

fading into the background at other stages. Geographically, the

firm may have many different centres, where different functions

and product groups may be coordinated not out of headquarters but

out of local offices in different regions of the world. But how

can one break through the barriers of the administrative heritage

of the firm to establish this vastly more complex organization?

Recognizing the Dualistic Nature of ComplexOrganization

One of the deepest obstacles to the development of such

organizational capabilities is the uni-dimensional, simplistic

mindset that is embedded in the culture of most organizations. At

the heart of the notion of organizational capability are concepts

which are matrixed, oppositional or multidimensional. We have met

some of them so far in this chapter, beginning with the matrix

structure itself : balancing centralization and decentralization;

integrating the differentiated firm; combining the "hard" with the

"soft"; combining both global and local; building capacities for

teamwork and individuality.

In fact, a pervasive theme in any discussion of complex

organization is that of dualities : combining looseness and

tightness, strong formai systems with strong informel systems.

There is a need to balance specialization with generalism, for

52

balancing business logic with technical logic. Top-down management

processes must be combined with bottom-up processes. A very

partial list of some of the currently prevailing dualities is

shown in FIGURE 3.

A few organizational scholars and philosophers have recognized the

dualistic nature of complex organizations. For example, Hedberg,

Nystrom and Starbuck (1976) argued that maximization is an

inappropriate concept for organizations. Instead of trying to

"maximize" anything (decentralization, teamwork, formality,

generalism ...) an organization should seek to ensure that it

maintains at least a minimal threshold of desirable attributes. It

requires a minimal degree of consensus, but not so much as to

stifle the dissension that is the life blood of innovation. And a

minimal degree of contentment and satisfaction - sufficient to

retain key actors but not so much as to allow arrogance or

complacency. Minimal faith in plans is required, sufficient to

ensure that the planning exercise leads its members to actually

think through the future, but not so much that plans become

roadmaps that blind attention to opportunity. And minimal

attention to rationality, though not to the extent of blinding us

to the virtues of imperfection.

INSERT FIGURE 3 ABOUT HERE

53

cameron (1986) is another who argues that the reality of complex

organization is dualistic. The notion of duality differs from

other oppositional concepts such as dilemmas, ambivalence,

dialectic, or conflict. A dilemma is an either-or situation, where

one alternative must be chosen in preference to another attractive

alternative. Conflict is the perpertuation of one alternative,

while others are still seen as attractive. A dialectic is a

pattern which begins whith a thesis followed by an antithesis,

resolved by a synthesis.

But in a duality, there is no choice to be made between two

alternatives. The challenge is to achieve a state of dynamic

balance that is difficult both to develop and to maintain, for it

is not a stationary equilibrium but a balanced tension between

complementary opposites. Dynamic balance is analogous to a

see-saw on a fine fulcrum. With delicately complementary weights

on either side of the fulcrum, the seesaw is never still. There is

a gentle oscillation from side to side, delicately maintained.

Literature on historical and evolutionary change supports this

argument. For example, Toynbee's historical thesis was that the

decline of civilizations occurs when a society goes to excesses in

its success formula (Toynbee, 1946). Greiner (1972) has argued

that organizations go through successive stages of evolution and

revolution, where the properties that first led to success

eventually engender crisis, and a subsequent rebalancing that

54

facilitates further growth. Bateson (1936) points out that

without the tension that exists between simultaneous opposites in

organization, unproductive "schismogenesis" occurs, a degenerative

syndrome where an attribute in the organization perpetuates itself

until it becomes extreme and thereby dysfunctional. Thus when

turbulence, rapid change and complexity become prevailing features

of the environnent, building matrixed, dualistic capabilities into

the deep fabric or culture of the firm becomes a necessary

imperative.

Innovation as An Example of a Duality

Let me apply dualistic thinking to one area of organizational

development, namely that of innovation. We know that innovation

involves two distinct processes or capabilities (Gresov, 1984,

Kanter, 1983). First, there is the creative process of idea

generation, conception, and development which requires loose,

informel properties. Then there is the commercialization or

implementation process, which requires tight, formai properties.

Thus, the study by Lohne (1984) contrasting innovative firms with

less innovative firms in the same industries showed that the firms

with a higher percentages of revenues coming from new products

were those with both more informal/loose and more formal/tight

capabilities.

55

The dominant cultural characteristic of much of big business in

the United States is its tight, structured formalism, often

reflected in heavy bureaucracy. Thus, the natural concern today is

with developing the opposite properties - the loose, more

informai, non-segmented cultures analyzed by Kanter and others.

But if we take a world-wide perspective, the concern with this

aspect of innovation appears as a very American focus. The concern

in Italy is precisely the opposite. The indigenous Italian culture

is more loose, unstructured, informai. Behind the sometimes

authoritarian structures of companies are informai networks of

relationships that bewilder the American expatriate, who bemoans

the impossible "Latin" way of doing business. Yet these cultural

attributes are in fact associated with the strong trackrecord of

Italian firm in creative innovation. The cultural problem of the

Italians is that they have less mastery of the structured,

formalized systems that are necessary to effectively commercialize

innovations. Thus what sells today in the United States is

communication, innovation, and flexibility. There is no market

for this in Italy - what sells is systems, implementation and

structure (Note 3).

A number of multinational companies have in fact established

highly successful research and development laboratories in Italy -

IBM, Philips, Ciba-Geigy, Digital Equipment. All of these firms

observe that the innovative performance of these units is

56

outstanding, although they run in a uniquely Italian way. An IBM

manager commented that Italian R&D is the only part of the firm

which does not apply the IBM rulebook - yet it is so successful

that it is allowed its freedom to do so. Yet one would not locate

major manufacturing facilities in Italy. These are likely to be

situated in efficient, formalized cultural regions such as Germany

or the United States.

The Pro/Anti OD Debate in Perspective

This leads me to a side observation, returning to an earlier

discussion of OD. The challenge of OD can be interpreted as that

of building dualistic properties into organizational cultures, and

the American origins of OD reflect a natural concern for latent

polarities that are seen as relevant to U.S. organizations. OD

interventions typically focus on developing properties that such

organizations do not have - process skills, concern for the social

dimensions of management as well as the task dimensions,

self-reflective capacities, stronger collective teamwork, more

open channels of communication, and so forth. Regrettably, such

interventions are sometimes tackled without recognizing the

dualistic nature of modern organization, leading the United States

into pendulum type fashions and fads that were the subject of apt

commentary by Business Week recently (1986).

57

In this sense, the OD movement is a counter-culture in the United

States, as argued earlier. And necessarily so, for this is

precisely its contribution. The values of the OD movement are

sufficiently compatible with the mainstream values of American

culture for the movement to be tolerated (this is not true in

other cultures); yet they are sufficiently counter to that culture

on salient dimensions for the movement to contribute to the

development of desireable dualistic properties in organizations.

The long-standing debate between its protagoniste and its

detractors is a reflection of its mission. In working toward

developing dualistic organizational capabilities, it is evident

that the advocates of the new properties will arouse protest from

the mainstream cultural establishment, guardian of the opposite

polarity. What is destructive however is when the debate becomes

an acrimonious either-or battle of acceptance or rejection -

simply due to the fact that neither party can understand the

nature of the organization development challenge. This challenge,

I am suggesting, is that of developing a state of dynamic balance

between dualities in an organization, dictated by the complexity

and turbulence of the environment that we have moved into.

58

Cultural Differentiation as a Transnational OD Strategy

Nevertheless, all but the most idealistic proponents of OD will

acknowledge the massive challenge of transforming the

unidimensional cultures of existing organizations, especially

large firms with long track records of success, into dualistic

"heterarchic" cultures. Furthermore, cultural anthropologists

would be sceptical, to say the least, about the extent to which

one can engineer a change in the underlying social culture of a

nation, except as the product of incremental steps over

generations. There is a widespread faith in certain quarters in

the United States in "transformational leadership", which

recognizes the extent of the challenge. But is transformational

leadership perhaps not another of those optimistic but passing

fashions ... ?

The focus of OD is on developing the attitudes and behaviors of

the people to match the task or environmental challenges, or on

transforming the context of work. But to return to the

transnational organization, it has potentially a different

developmental strategy in its armoury, a strategy which despite

its difficulty has a far higher probability of developmental

success. Rather than developing the people to match the task, the

transnational organization can move the task to the appropriate

people.

59

We tend to assume that tasks are fixed, anchored givens - people

must be selected and adapted to the fixed task. But this is not

true for the transnational enterprise. The task, be it a

developing product or a domain of expertise, can be geographically

moved to the appropriate people.

Whereas traditional OD reasoning focuses on adaptation, the

transnational organization can choose selection as its

developmental strategy on a world-wide scale - selection of

location. It can locate functions, facilities, or business sector

headquarters in the region of the world which is socio-culturally

and economically most appropriate to that activity.

This is in fact what is slowly happening as transnational

organizations emerge. We mentioned earlier the decision of some

firms to locate major R&D facilities in Italy, a culture which is

naturally propitious to innovation. Manufacturing facilities may

be located in Germany, for example.

Philips is one example of a firm using this emerging global

developmental strategy. Its important function for long-range

technology development was transfered some years ago from its

Dutch headquarters to the United States, where it was felt that

there was more technological action. Yet the experience was that

the Americans had too short a time horizon, and it was felt that

the culture in Japan was more favorable to long-range thinking.

60

The function was recently transfered to Tokyo. This logic went

further with a recent reorganization, heralded by The Wall Street

Journal with the title "Philips Reorganization could Become a

Model for Multinational Firms" (October 27th, 1987). With a

simplified structure, business lines cut across national borders.

One television plant was transferred from the United States to

Taiwan to Mexico in the space of three years! Integrated circuits

are developed in Holland and Germany in consultation with their

Silicon Valley plant, while future consumer electronic devices

will be made first in Japan, but then moved to full-scaleproduction in Western Europe.

These selection, location and transfer decisions are obviously

guided first and foremost by economic logic : exchange rates,

local markets, costs, political risk, and so forth. But they are

also guided by socio-cultural logic - certain national cultures

are more favorable to particular activities than others.

This leads to a total change in perspective on cultural

differences in attitudes and conceptions of

management/organization. Cultural differences are no longer a

nuisance factor, an obstacle to our ethnocentric conceptions of

"effective" management. Cultural differences become an asset to

the transnational corporation, if it has the capacity to exploit

them. The ability to capitalize on cultural differences (rather

than minimize them) becomes an important source of competitive

61

advantage. In fact this aspect of the developmental strategy of

the transnational firm can be described as cultural

differentiation (Note 4).

A similar pattern underlies another current trend, that of

creating local centres of competence. Functional expertise in

technology, process engineering, or marketing used to be anchored

at headquarters. Some firms are today attributing this corporate

responsibility to subsidiaries who have developed that expertise

themselves, because of local cultural assets, talent or

challenges. This presupposes that a network of lateral relations

exists between subsidiaries, who can call upon each other's

expertise. Headquarters is no longer a centralized function, but a

coordinator of an expertise network spread throughout the world.

Summary

Summarizing the developmental task of the transnational firm in

terms of the basics, there are two major interrelated challenges

in developing transnational organizational capabilities :

First, the challenge of developing a dualistic or matrix

culture, not through structural solutions but through

developing the capacity to view the requirements of

organizaton as balancing dualities or complementary

62

polarities. Until this is worked through, differences will

continue to be seen as threatening; the pendulum of fashions

and fads will continue to oscillate; and complexity will

master us rather than be mastered. And it is no mean task

since it involves a paradigmatic shift in the mindset of at

least the leaders of our societies. One is reminded that only

two decades ago, most of us were in a mindset of

"one-best-way" thinking...

Second, the challenge of developing ways to manage lateral

independencies and develop integrative mechanisms that allow

for differentiation. The lateral interdepencies in the

transnational organization are such that they dominate over

the vertical dependencies that we know how to manage better,

and thus Hedlund's term "heterarchy" is an appropriate label

for this emerging organization.

If the opening quote that is traditional in some papers could

appear at the end of a chapter, the quote I would select would be

that of F. Scott Fitzgerald:

"The mark of intelligence is the capacity to hold twoopposing ideas in mind at the same time without losing theability to function."

63

A SUMMARY OF IMPLICATIONS FOR THE FIELD OF ORGANIZATIONDEVELOPMENT

Let me conclude by summarizing the implications of this analysis

in the multinational setting for the field of organizational

development and planned change in general :

1. The focus of attention in organizational development needs to

be broadened from its primary focus on simple organizations and

micro problems, however complex, to the problems of development in

complex, multi-divisional, multi-national organizations. This is a

pressing need for scholarship since the challenges in such firms

are currently not the "What's" of organization theory but the

"How's" of organizational change and development.

2. Organizational development has naturally tended to focus on

issues of process rather than issues of substance. Yet as it

tackles the analysis of complex organizational change, it will

become very difficult to separate the two. In fact, one of the

more exciting frontiers for inquiry in the organizational sciences

is the intersection of the fields of strategy, economics,

organization theory, and organizational change (Barney & Ouchi,

1986). Indeed, as Beer and Walton (1987) point out in a recent

review, OD is losing its status as a field as its change

technology becomes part of the tools of general management and

human resource management.

64

We argued above that the developmental needs of complex

organizations in today's environment are best understood with a

dualistic metaphor or perspective. Applying this perspective, the

"purist" advocates of OD reproach hard "bottom-liners" for

ignoring the social reality of organization. But similarly, OD

theorists and practitioners need to recognize and get involved in

the economic substance and the "hard" aspects of organization.

Substance and process can no longer be separated in coming to

grips with complex challenges, and consequently the boundaries of

the "field" of organizational development have become and will

become necessarily more blurred.

3. Tackling the problems of change at this level of organizational

complexity leads one to argue for the need for more contextual

thinking to guide analysis. Pettigrew's historical analysis of

complex strategic reorganization (Pettigrew, 1985), Schein's

framework based on the maturity of organizational culture (Schein,

1985), and the above framework based on needs for corporate

integration are examples. Power is clearly a change variable which

needs to be more contextually integrated into change theory.

4. A cross-cultural perspective also provides insight into the

field of OD. OD has its origins in a particular set of values, and

those values cannot be divorced from the American setting of their

birth. If we can take this meta-perspective, we see that OD is

necessarily a counter-culture in the United States, reflecting the

65

latent side of a duality that its society must cope with.

5. This analysis raises a final question. Change can be considered

at different levels of analysis - changing and developing

individuals, groups, organizations and societies. What is the most

effective level of analysis in order to tackle the how's of

organizational development? OD has historically focused on the

individual and group level, regarding organization and society as

the context. But are individuals and groups the most effective and

malleable levers for tackling the significant development

challenges we confront?

INSERT FIGURE 4 ABOUT HERE

Laurent (1988) questions this, and my analysis supports his

observations :

"One could reasonably argue that organizations have a much

greater capacity for change than smaller organisms like the

individuals who populate them or larger entities like the

societies that constitute their environment."

66

In some caricatural way, the relative change capability of

individuals, organizations and societies could be sketched out as

in (FIGURE 4). Relationships between structural entities may be

more amenable to change than structural entities themselves. From

this point of view, it may be useful to look both at the

individual and society as fairly stable structural entities,

whereas organizations can be viewed as temporary systems or

relationships and transactions between individuals and their

environments. Whereas personality confers stability to the

individual and culture confers stability to society, social

organizations represent more of a "lieu-de-passage", transaction

fields or temporary arrangements which result from choices and

initiatives. Organizations are the privileged places where change

can occur most drastically".

In an age of divestments, acquisitions, mergers, joint-ventures,

and strategic partnerships, there is indeed a tremendous amount of

organizational development that is taking place at a rapid pace.

But what is happenning is that this change, as Laurent suggests,

is taking place at a different level of analysis from the

traditional focus of attention in organizational development and

change theory.

The complex organization, and particularly the heterarchic

transnational firm, consists of multiple organizational sub-units.

As we suggested in the previous section, organizational

67

development is indeed increasingly taking place through

inter-organizational arrangements, not only through the

development of individuals or grnups.

The final implication is thus that organizational development

theory must become more multi-dimensional itself - spreading its

focus of attention from the individual level of analysis to the

organizational level, and developing the capacity to comprehend

the interactions between these levels of analysis.

68

NOTES

Note 1:

In this chapter, I will use the term "organization development" intwo senses. When referring to this broadly as plannedorganizational change, I will use the phrase "organizationdevelopment" in full. However, I will use the term "OD" whenreferring to particular values often associated with plannedchange, noteably those of improving organizational effectivenessand employee well-being.

Note 2:

"Pushback" is a norm that is embedded in the culture of DigitalEquipment, the encouragement of contributions and criticism fromeach and every employee. The norm has its origins in the behaviorand values of Ken Olsen, the founder-engineer of the firm. When anidea is presented, anyone form any level is expected to push backif they have a different opinion, and people may even getcriticized for not pushing back.

INB's contention management procedure reflects a lateral planningprocess which complements its top-down business planning. Thebusiness plans of every unit are circulated to every otherinterdependent unit. If that other unit raises objections, thisleads to a process of negotiation. Only if the conflict cannot beresolved laterally does the issue rise through the hierarchy,following the internai rules of contention management.

Note 3:

Teaching and discussing on innovation in different regions of theworld and with different companies, I have found it necessary todevelop two different sets of slides and handouts! I think of oneset as the "American problem", and those outline mechanisms toloosen up the formai structure. The other is the "Italian" set,emphasising devices to tighten up and structure the informaiculture.

Note 4:

This discussion of transnationalism, of selection strategies inmultinational development, is of course based on the premise thatwe will continue to see the opening of international marketsrather than a return to protectionism. If there is a return toworldwide protectionism, despite the consequent economic price,then traditional adaptation strategies for development will be theonly option. The transnational organization would most likelydisappear.

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6

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Woodward,J. (1970). Industrial organization. New York: OxfordUniversity Press.

7

FIGURE 1

Perlmutter's Concepts of Multinationalism :

Four Types of Headquarters Orientationto Subsidiaries

Company Orientation

Aspects of the

Enterprise Ethnocentric Polycentric

Regiocent rie

Ceocentric

Complexity of

Complex in home Varied and

Highly interdependent

Increasingly complex and

organization country, simple in independent

on a regional basis

highly interdependent on

subsidiaries a worldwide basis

Little to and from Little to and from cor-

headquarters; little porate headquarters, but

among subsidiaries may be hieh to and from

re g ional headquarters

and among countries

Authority

Evaluation and

control

Communication;

information flow

Ceographical

identification

Recruiting,

staffing,

development

High in

headquarters

Home country

standards

High volume of

orders, commands,

advice to sob-

sidiaries

Nationality of

owmer

People of home

country devel-

oped for key

positions e • ery-

where in the world

Relatively low in

headquarters

Determined locally

Nationality of

host country

People of local

nationality devel-

oped for key

positions in their

own country

High regional head-

quarters and/or high

collaboration among

subsidiaries

Determined regionally

Regional company

Regional people

developed for kev

positions anywhere

in the region

Collaboration of head-

quarters and subsidiaries

around the world

Standards which.are

universal and local

Between headquarters,

regions, and subsidiaries,

and among subsidiaries

around the world

Truly worldwide company,

but identifying with

national interests

Best people everywhere in

the world developed for

kev positions everywhere

in the world

Source : Adapted from Heenan & Perlmutter (1979)

FIGURE 2

Subtle, non-administrative mechanisms for

developing integration within the complex MNC

Establishingface-to-facerelationships(Exchange & meetings)

Team-building(Managementtraining)

Selectiveselection &development(Managementdevelopment)

Common goals& values(Building corporatecharters)

Extensiveselection &development(Global cultures)

Reward system•(Executivecompensation)

Global firms(Strong mechanisms)

Polycentric firms(Weak mechanisms)

FIGURE 3

Some Common Dualities in Today's ComplexOrganizations

differentiation - integration

loose - tight

planned - opportunistic

formai - informai

vision - reality

decentralization - centralization

business logic - technical logic

analysis - intuition

delegation - control

individuality - teamwork

action - reflection

FIGURE 4

Change Capabilities at different Levels

of Analysis

Change capability

High

Low

ORGANIZATIONS

INDIVIDUALS

SOCIETIES

Level of Analysis

Source : Laurent (1988)

85/09 Spyros MAKRIDAKIS "Smapling distribution of post-sample

and Robert CARBONE

forecasting errors" , February 1985.

85/10 Jean DERMINE

'Portfolio optimisation by financialintermediaries in an asset pricing »del°.

85/11 Antonio N. BORCES and "Marty demand in Portuguese manufacturing: aAlfredo M. PEREIRA tvo-stage modal".

85/12 Arnoud DE MEYER "Defining a manufacturing strategy - a surveyof European manufacturera".

85/13 Arnoud DE MEYER

85/14 Ahmet AYKAC,Marcel CORSTJENS,David GAUTSCHI andDouglas L. MacLACHLAN

"Large European manufacturera and themanagement of R L D".

"The advertising-sales relationship in theU.S. cigarette industry: e comparison ofcorrelational and causality testingapproaches".

85/06 Kasra FERDOVS

INSRAD WORKING PAPERS SERIES

"The measurement of interest rate risk byfinancial interuediaries", December 1983,Revised December 1984.

"Diffusion modal for nev product introductionin existing markets* .

"Tovards a decision support system forhierarchically allocating marketing resourcesarrosa and vithin product groups" ."Market share specification, estimation andvalidation: tovards reconciling seeminglydivergent vieve .

"Estimation uncertainty and optimaladvertising decisions",Second draft, April 1985.

"The shifting paradigme of manufacturing:inventory, quality and nov versatility", March1985.

85/17 Manfred F.R. KETS DEVRIES and Danny MILLER

85/18 Manfred F.R. KETSDE VRIES

85/19 Manfred F.R. KETS DEVRIES and Dany MILLER

85/21 Hervig M. LANCOHRand Claude J. VIALLET

85/22 Hervig M. LANCOHR andB. Espen ECKBO

85/23 Manfred F.R. KETS DEVRIES and Dany MILLER

85/24 Spyros MAKRIDAKIS

"Fersonality, culture and organization".

"The darker aide of entrepreneurship".

"Narcissism and leadership: an objectrelations perspective".

"Nationalisation, compensation and vealthtransfers: France 1981-1982" 1, Final versionJuly 1985.

"Takeover premiuma, disclosure regulations,and the market for corporate control. Acomparative analysis of public tender offers,controlling-block trades and ■inority buyout inFrance*, July 1985.

"Rarriers to adaptation: personal, culturaland organizational perspectives".

"The art and science of forecasting: anassessment and future directions".

1985

85/01 Jean DERMINE

85/02 Philippe A. NAERTand Els GIJSBRECHTS

85/03 Philippe A. NAERTand Els GIJSBRECHTS

85/04 Philippe A. NAERTand Marcel VEVERBERCH

85/05 Ahmet AYKAC,Marcel CORSTJENS,David GAUTSCHIand Ira HOROVITZ

85/20 Manfred F.R. KETS DE "Interpreting organizational texte.VRIES and Dany MILLER

86/05 Charles A. VYPLOSZ

85/07 Kasra FERDOVS,Jeffrey G. MILLER,Jinchtro NAKANE andThomas E.VOLLMANN.

85/08 Spyros MAKRIDAKISand Robert CARBONE

85/15 Arnoud DE MEYER andRoland VAN DIERDONCK

85/16 Hervig M. LANGOHR andAntony M. SANTOMERO

"Evolving manufacturing strategies in Europe,Japan and North-America*

"forecasting vhen pattern changes ocrurbeyond the historical data" , April 1985.

"Orgenizing e technology jump or overcomingthe technologies' hurdle.

"Commercial bank refinancing and economicstability: an analysis of European (entures".

"Pinancial innovation and recent developuentsin the French capital markets", October 1985.

"Patterns of competition, strategic groupformation and the performance case of the USpharmaceutical industry, 1963-1982°,October 1985.

"European manufacturing: e comparative study(1985)".

"The R 4 D/Production interface".

"Subjective estimation In Integratingcommunication budget and allocationdecisions: a case study", January 1986.

"Sponsorship and the diffusion oforganizational innovation: ■ preliminary viev".

"Confidence intervals: an empiricalinvestigation for the sertes in the M-Coupetition" .

"A note on the reduction of the vorkveek",July 1985.

85/25 Gabriel HAVAVINI

85/26 Karel O. COOL andDan E. SCIIENDEL

85/27 Arnoud DE MEYER

1986

86/01 Arnoud DE MEYER

86/02 Philippe A. NAERTMarcel VEVERBERCHand Guldo VERSVIJVEL

86/03 Michael BRIMM

86/04 Spyros MAKRIDAKISand Michèle HIBON

86/06 Francesco GIAVAllI,Jeff R. SHEEN andCharles A. VYPLOSZ

86/07 Douglas L. MacLACRLANand Spyros MAKRIDAKIS

86/08 José de la TORRE andDavid H. NECKAR

86/09 Philippe C. HASPESLAGH

86/10 R. MOENART,Arnoud DE MEYER,J. BARBE andD. DESCHOOLMEESTER.

86/11 Philippe A. NAERTand Alain BULTEZ

86/12 Roger BETANCOURTand David GAUTSCHI

86/13 S.P. ANDERSONand Damien J. NEVEN

86/14 Charles VALDMAN

86/15 Mihkel TOMBAK andArnoud DE MEYER

86/16 8. Espen ECKBO andHervig M. LANGOHR

86/17 David 8. JEMISON

86/18 James TEBOULand V. MALLERET

86/19 Rob R. VEITZ

86/20 Albert CORNAI,Gabriel HAVAVINIand Pierre A. MICHEL

86/21 Albert CORNAI,Gabriel A. HAVAVINIand Pierre A. MICHEL

"The real exchange rate and the fiscalaspects of a naturel resource discovery",Revlsed version: February 1986.

*Judgmental blases in sales forecasting",February 1986.

"Forecasting political risks forinternational operations", Second Draft:March 3, 1986.

"Conceptualizing the strategic process indiversified firms: the rote and nature of thecorporate influence procesa", February 1986.

"Analysing the issues toncerningtechnologicai de-uaturlty".

"From "Lydiametry" to "Pinkhamization":■isspecifying advertising dynamita rarelyaffects profitability".

"The economics of retail firms", RevisedApril 1986.

"Spatial competition à la Cournot".

"Comparaison internationale den marges brutesdu commerce", June 1985.

"flov the managerial attitudes of firms vithP55 differ fron other manufacturing Urne:survey results", June 1986.

*Les primes des offres publiques, la noted'information et le marché des transferts decontrôle des sociétés".

"Strategic capability transfer in acquisitionintegration", May 1986.

"Tovards an operational definition ofservices", 1986.

"Nostradamus: a knovledge-based forecastingadvlsor".

*The pricing of equity on the London stockexchange: seasonality and size premium",June 1986.

"Risk-prenia seasonality in O.S. and Buropeanequity markets", February 1986.

86/22 Albert CORNAI,Gabriel A. HAVAVINIand Pierre A. MICHEL

86/23 Arnoud DE MEYER

86/24 David GAUTSCIIIand Vithala R. RAO

86/25 H. Peter GRAYand Ingo WALTER

86/26 Barry EICHENGREENand Charles VYPLOSZ

86/27 Karel COOLand Ingemar DIERICKX

86/31 Arnoud DE MEYER,Jinichiro NAKANE,Jeffrey G. MILLERand Kasra FERDOVS

86/32 Karel COOLand Dan SCHENDEL

86/33 Ernst BALTENSPERGERand Jean DERMINE

86/34 Philippe HASPESLAGHand David JEMISON

86/35 Jean DERMINE

86/36 Albert CORNA! andGabriel HAVAVINI

86/37 David GAIITSCHI andRoger BETANCOURT

86/38 Gabriel HAVAVINI

"seasonality in the risk-return relationshipssome international evidence", July 1986.

"An exploratory study on the integration ofinformation systems in manufacturing",July 1966.

"A methodology for specificatIon andaggregation in product concept testing",July 1986.

"Protection", August 1986.

"The economic eonsequences of the PrancPoincare", September 1986.

*Negative risk-return relationahipa inbusiness strategy: paradox or truism?",October 1986.

"Interpteting organizational texte.

"Vhy folles the leader?".

"The succession gane: the real story.

"FlexibIlity: the next competitive battle*,October 1986.

"Flexibility: the next conpetitive battle",Revised Version: Match 1987

Performance differenees musong strategic groupmenbers", October 1986.

*The role of public policy in insuringfinancial stability: a cross-country,comparative perspective", August 1986, RevisedNovember 1986.

"Acquisitions: myths and realite,July 1986.

"Measuring the market value of e bank, eprimer", November 1986.

"Seasonality in the risk-return relationshlp:some international evidence", July 1986.

"The evolution of retailing: e suggestedeconomic interpretation".

"Financial innovation and recent developmentsin the French capital markets", Updated:September 1986.

86/28 Manfred KETS DEVRIES and Danny MILLER

86/29 Manfred KETS DE VRIES

86/30 Manfred KETS DE VRIES

86/31 Arnoud DE MEYER

86/39 Gabriel HAVAVINIPierre MICHELand Albert CORNAI

86/40 Charles VYPLOSZ

86/41 Kasra FERDOVSand Vickham SKINNER

86/42 Kasra FERDOVSand Per LINDBERG

86/43 Damien NF.VEN

86/44 Ingemar DIERICKXCarmen MATUTESand Damien NEVEN

1987

87/01 Manfred KETS DE VRIES

87/02 Claude VIALLET

87/03 David GAUTSCHIand Vithala RAO

87/04 Sumantra GHOSHAL andChristopher BARTLETT

87/05 Arnoud DE MEYERand Kasra FERDOVS

87/06 Arun K. JAIN,Christian PINSON andNaresh K. MALHOTRA

87/07 Polf RANZ andGabriel HAVAVINI

87/08 Manfred KETS DE VRIES

87/09 Lister VICKERY,Mark PILKINCTONand Paul READ

87/10 André LAURENT

87/11 Robert PILDES andSpyros MAKRIDAKIS

"The pricing of commun stocks on the Brusselsstock exchange: e re-examination of theevidence", November 1986.

"Capital Hove liberalization and the EMS, eFrench perspective", December 1986.

"Manufacturing in a nev perspective",July 1986.

"MS es indicator of manufacturing strategy",December 1986.

"On the existence of equilibrium in hotelling'sBodel", November 1986.

"Value added tax and competition",December 1986.

"Prisoners of leadership".

"An empirical Investigation of internationalasset pricing", November 1986.

"A methodology for spécification andaggregatlon in product concept testing",Revised Version: January 1987.

"Organizing for innovations: case of themultinational corporation", February 1987.

"Managerial focal points in manufacturingatrategy", February 1987.

"Customer loyalty as e eonstruct In themarketing of banking services", July 1986.

*Equity pricing and stock market anomalies*,February 1987.

"Leaders vho can't manage', February 1987.

"Entrepreneurial activities of European MBAs",Match 1987.

"A cultural viev of organlzational change",March 1987

"Porecasting and loss fonctions", March 1987.

87/13 Sumantra GHOSHALand Nitin NOHRIA

87/14 Landis GABEL

87/15 Spyros MAKRIDAKIS

87/16 Susan SCHNEIDERand Roger DUNBAR

87/17 André LAURENT andFernando BARTOLOME

87/18 Reinhard ANGELMAR andChristoph LIEBSCHER

87/19 David BEGG andCharles VIPLOSZ

87/20 Spyros MAKRIDAKIS

87/21 Susan SCHNEIDER

87/22 Susan SCHNEIDER

87/23 Roger BETANCOURTDavid GAUTSCHI

87/24 C.B. DERR andAndré LAURENT

87/25 A. K. JAIN,N. K. MALHOTRA andChristian PINSON

87/26 Roger BETANCOURTand David GAUTSCHI

87/27 Michael BURDA

87/28 Gabriel HAVAVINI

87/29 Susan SCHNEIDER andPaul SHRIVASTAVA

"Multinational corporations as differentiatednetvorks", April 1987.

"Product Standards and Competitive Strategy: AnAnalysis of the Principles", May 1987.

"METAFORECASTING: Rays of improvingPorecasting. Accuracy and Usefulness",May 1987.

"Takeover attempts: vhat does the language tellus?, June 1987.

"Managers' cognitive maps for upvard anddovnvard relationships', June 1987.

"Patents and the European biotechnology lag: astudy of large European pharmaceutical tiras",June 1987.

"Vhy the EMS? Dynamic gages and the equilibrium

policy regime, May 1987.

"A nev approach to statistical forecasting",

June 1987.

"Strategy formulation: the impact of nationalculture", Revised: July 1987.

"Conflicting ideologies: structural andmotivational consequences", August 1987.

"The de.and for teint' products and thehousehold production Bodel: mev vievs oncomplementarity and substitutabilite.

"The internai and externat careers: etheoretical and cross-cultural perspective",Spring 1987.

"The robustness of MDS configurations In theface of incomplete data", March 1987, Revised:July 1987.

"Demand complementarities, household productionand retail assortaents", July 1987.

"fa there e capital shortage in Europe?",August 1987.

"Controlling the interest-rate risk of bonds:an introduction to dotation analysis andimmunisation strategies", September 1987.

"Interpreting strategic behavior: basicassomptions themes in organisations", September1987

87/12 Fernando BARTOLOMEand André LAURENT

"The Janus Read: learning from the soperiorand subordinate faces of the ahnager's job",April 1987.

87/30 Jonathan 8AMIITDN "Spatial competition and the Core", August

V. Bentley MACLEOD and 1987.Jacques-François TRISSE

01/31 Martine 08114211 and "On the optimality of central place:",

Jacques-François TIIISSE September 1987.

87/32 Arnoud DE MEYER

87/33 Yves 002 andAmy MEN

07/34 Kasra FERDOVS andArnoud DE MEYER

87/35 P. J. LEDERER andJ. F. TIIISSE

87/37 Landis GABEL

87/78 Susan SCHNEIDER

81/39 Manfred KETS DE VRIES

81./40 Carmen MATUTES andPierre REGIDEAU

87/41 Cavriel HAVAVINI andClaude VIALLET

87/42 Damien NEVEN andJacques-F. TIIISSE

87/43 Jean CABSZEVICZ andJacques.F. THISSE

87/44 Jonathan HAMILTON,Jacques-F. TIIISSEand Anita VESKAMP

87/45 Karel COOL,

David JEHISON and

Ingemar DIERICKX

87/46 Ingemar DIERICKXand Karel COOL

"German, French and British manufacturiugstrategles less different than one thinke,September 1987.

"A process framevork for analyzing cooperationbetveen firme, September 1987.

"European ■anufacturerst the dangers ofcomplacency. Insights from the 1907 Europeanmanufacturing futures survey, October 1987.

"Competitive location on netvorks underdiscriminatory pricing", September 1907.

"Privatization: its motives and likelyconsequencee, October 1907.

"Strategy formulation: the impact of national

culture", October 1981.

"The dark aide of CEO succession", November

1987

"Product compatibility and the scope of entre,

November 1987

"Seasonality, size premium and the relationshipbetveen the risk and the return of Frenchcomaon stocks", November 1987

"Combining horizontal and verticaldifferentiation: the principle of max-mindifferentiation", December 1987

"Location", December 1987

"Spatial discriminations Bertrand vs. Cournot

in a model of location cholce", December 1987

"Business strategy, market structure and tisk-return relatlonships: a causal interpretation",

December 1981.

"Asset stock accumulation and sustainabilityof competitive advantage", December 1907.

88/01 Michael LAVRENCE andSpyros MAKRIDAKIS

88/02 Spyros MAKRIDAKIS

88/03 James TEBOUL

88/04 Susan SCHNEIDER

88/05 Charles VYPLOSZ

88/06 Reinhard ANGELMAR

88/07 Ingemar DIERICKXand Karel COOL

88/08 Reinhard ANGELMARand Susan SCHNEIDER

88/09 Bernard SINCLAIR-DESGAGNé

88/10 Bernard SINCLAIR-DESGAGNé

88/11 Bernard SINCLAIR-DESGAGNé

88/12 Spyros MAKRIDAKIS

88/13 Manfred KETS DE VRIES

88/14 Alain NOEL

88/15 Anil DEOLALIKAR and

Lars-Hendrik ROLLER

88/16 Gabriel HAVAVINI

88/17 Michael BURDA

"Factors affecting judgemental forecasts andconfidence Intervale, January 1988.

"Predicting recessions and other turningpoints", January 1988.

"De-industrialize service for quality", January1988.

"National vs. corporate culture: implicationsfor human resource management", January 1988.

"The svinging dollar: is Europe out of step?",January 1988.

"Les conflits dans les canaux de distribution",January 1988.

"Competitive advantage: e resource basedperspective", January 1988.

"Issues in the study of organizationalcognition", February 1988.

"Price formation and product design throughbidding", February 1988.

"The robustness of some standard auction gameforms", February 1988.

"Vhen stationary strategies are equilibriumbidding strategy: The single-crossingproperty", February 1988.

"Business firms and managers in the 21stcentury", February 1988

"Alexithymia in organizational life: theorganization man revisited", February 1988.

"The interpretation of strategies: a study ofthe impact of CEOs on the corporation",March 1988.

"The production of and returns from industrialinnovation: an econometric analysis for adeveloping country", December 1987.

"Market efficiency and equity pricing:international evidence and implications forglobal investing", March 1988.

"Monopolistic competition, costs of adjustmentand the behavior of European employmrnt",

07/36 Manfred RETS DE VRIES "Prisoners of leadership", Revlsed versionOctober 1987.

à LI ..11..188/18 Michael BORDA

88/19 M.J. LAVRENCE andSpyros MAKRIDAKIS

88/20 Jean DERMINE,Damien NEVEN andJ.F. THISSE

88/21 James TEBOUL

88/22 Lars-Hendrik RÔLLER

88/23 Sjur Didrik FLAMand Georges ZACCOUR

88/24 B. Espen ECKBO andHervig LANGOHR

"Reflections on "Vait Unemployment" inEurope", November 1987, revised February 1988.

"Individuel bina In judgements of confidence",March 1988.

"Portfolio selection by mutuel funds, anequilibrium Bodel", March 1988.

"De-industrialize service for quality",March 1988 (88/03 Revised).

"Proper Ouadratic Functions vith an Applicationto AT&T", May 1987 (Revised March 1988).

"Equilibres de Nash-Cournot dans le marchéeuropéen du gaz: un cas où les solutions enboucle ouverte et en feedback colncident",Mars 1988

"Information disclosure, means of payment, andtakeover premia. Public and Private tenderoffers in France", July 1985, Sixth revision,April 1988.

UUIfl M1MKel M. it.MIOme. -A screlegre anarysxa or zunresLment àn ..... vaqmanufacturing systems", July 1988.

88/36 Vikas TIBREWALA and "A Predictive Test of the NBD Model thatBruce BUCHANAN Controls for Non-stationarity", June 1988.

88/37 Murugappa KRISHNAN "Regulating Price-Liability Competition ToLars-Hendrik RÔLLER Improve Welfare", July 1988.

88/38 Manfred KETS DE VRIES "The Motivating Role of Envy : A ForgottenFactor in Management, April 88.

88/39 Manfred KETS DE VRIES "The Leader as Mirror : Clinical Reflections",July 1988.

88/40 Josef LAKONISHOK and "Anomalous price behavior around repurchaseTheo VERMAELEN tender offers", August 1988.

88/41 Charles WYPLOSZ "Assymetry in the EMS: intentional orsystemic7", Atigust 1988.

88/25 Everette S. CARDNERand Spyros MAKRIDAKIS

88/26 Sjur Didrik FLAMand Georges ZACCOUR

88/27 Murugappa KRISHNAN

Lars-Hendrik ROLLER

88/28 Sumantra CHOSHAL andC. A. BARTLETT

88/29 Naresh K. MALHOTRA,Christian PINSON andArun K. JAIN

88/30 Catherine C. ECKELand Theo VERMAELEN

88/31 Sumantra CHOSHAL andChristopher BARTLETT

88/32 Kasre FERDOVS andDavid SACKRIDER

88/33 Mihkel M. TOMBAI(

•

"The future of forecasting", April 1988.

"Serai-competitive Cournot equilibrium inmultistage oligopolies", April 1988.

"Entry gage vith resalable capacity",

April 1988.

"The multinational corporation as e netvork:perspectives from interorganizational theory",May 1988.

"Consumer cognitive complexity and thedimensionality of multidimensional scalingconfigurations", May 1988.

"The financial fallout from Chernobyl: riskperceptions and regulatory response", May 1988.

'Creation, adoption, and diffusion ofInnovations by subsidiaries of multinationalcorporations", June 1988.

"International manufacturing: positioningplanta for success", June 1988.

•"The importance of flexibility inmanufacturing", June 1988.

88/34 Mihkel M. TOMBAI( "Flexibility: an important dimension inaanufacturing", June 1988.