PhD Thesis Andreas Birnik.pdf - Cranfield University

285 Pages·2007·1.66 MB·English

by  Andreas Birnik

CRANFIELD UNIVERSITY

ANDREAS BIRNIK

CROSS-BORDER INTEGRATION IN THE
MULTINATIONAL CORPORATION:
THE SUBSIDIARY MANAGEMENT PERSPECTIVE

SCHOOL OF MANAGEMENT

PhD THESIS
CRANFIELD UNIVERSITY

SCHOOL OF MANAGEMENT

PhD THESIS

Academic Year 2006-2007

ANDREAS BIRNIK

Cross-border Integration in the
Multinational Corporation:
The Subsidiary Management Perspective

Supervisor: Professor Cliff Bowman

July 2007

Degree sought is based solely on examination of the thesis.

© Cranfield University, 2007. All rights reserved. No part of this publication may be
reproduced without the written permission of the copyright holder.

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ABSTRACT

A substantial amount of prior research has focused on the conflicting demands put on
managers in multinational corporations (MNCs) as a result of simultaneous pressures
for local responsiveness and global integration. However, despite this research we do
not really understand how managers in subsidiaries balance pressures for integration and
responsiveness. To address this issue, the research focused on how subsidiary managers
interpret and respond to cross-border integration efforts originating from the corporate
headquarters when also confronted with substantial pressures for local responsiveness.
In relation to extant research, which tends to focus on integration from a macro
perspective, this research makes a contribution to knowledge about integration from a
micro-strategy and micro-politics perspective by going inside the multinational
subsidiary.

The empirical material consists of five case studies of mobile operators in China (1),
Denmark (2), Romania (1) and Sweden (1). The research uses a constructivist grounded
theory approach to understand the causes of local-global tensions at the subsidiary level
and how managers respond to integration efforts. Identified causes of tension were
perceptions of misfit, lack of procedural justice, weak execution, loss of personal
control and cultural misunderstanding. Following from this, the research uncovered
factors that led to subsidiary managers following either a rules-based logic of
complying with headquarters, or shifting to a task-based logic of practical action to
negotiate/challenge, manipulate or ignore headquarters‟ integration efforts.

The core thesis in this research is that subsidiary managers‟ perceptions and responses
are central to the outcome of corporate integration efforts. Given this, managers at
headquarters have critical roles to play as sensegivers and change deployers in order to
influence the sensemaking and actions of subsidiary managers.

KEY WORDS

Content: integration; responsiveness; global strategy; international strategy;
transnational; subsidiary managers; subsidiary management; sensemaking; sensegiving;
practical action; practical drift; strategic drift; procedural justice; execution; strategic
change; managerial tensions; competing demands; ceremonial adoption; autonomous
strategic behaviour; subsidiary initiative; micro strategy; micro politics; strategy as
practice

Research approach: grounded theory; retroductive research; case study research

Industry context: telecommunications; mobile communications; mobile operators

Country context: China; Denmark; Romania; Sweden

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ACKNOWLEDGEMENTS

The doctoral journey can at times be long, arduous and lonely. Along the path, I have
had the great fortune of meeting many inspiring people who have encouraged me to
struggle on when I have grappled with despair, to push myself further when I have been
satisfied, to open new windows when I have become narrow-minded and to bring me
back onto the track when I have strayed too far into the academic jungle.

First of all, I would like to thank my lead supervisor, Cliff Bowman, for all his time and
support throughout the doctoral process. Cliff knows how to walk the razor‟s edge of
providing critical and constructive guidance along the path while ensuring that
ownership remains with his PhD students. Cliff was also a great coach in terms of trying
to teach me the rules of the academic publishing game. In addition, I would like to
thank Véronique Ambrosini, David Partington and Val Singh who have all served on
my extended supervisory panel during my studies. They have contributed greatly to
resolving methodological issues and to provide valuable checkpoints throughout the
journey.

A special mention goes to Julian Birkinshaw, Jean-Pierre Lehmann and Johny
Johansson whom I met while being a student at the Stockholm School of Economics
(SSE). At that time, Julian Birkinshaw had recently completed his PhD at the University
of Western Ontario and taken up his first position at the SSE. It was Julian‟s passion for
MNC subsidiary management in the mid-1990s that eventually led me to my research
topic. I visited Julian at London Business School during the scoping of this dissertation
to receive valuable support regarding how to position the research in relation to existing
knowledge. Julian also offered developmental feedback on a draft version of this
dissertation. Jean-Pierre Lehmann supervised my Master‟s dissertation and provided a
very different role model for what an academic career could be like. While originally an
Oxford educated economic historian, he had spent many years as a consultant in East
Asia. He was also much more oriented towards influencing policy and contributing to
the current debate than most of his colleagues. Jean-Pierre inspired me to focus on the
central issues of our time and to engage with policy and practice. Johny Johansson came
to his old alma mater as a visiting professor in international marketing during a
sabbatical from Georgetown University. Without having attended his international
marketing class, I would probably never have explored avenues to integrate literature on
marketing standardisation into the dissertation. I have stayed in touch with Julian, Jean-
Pierre and Johny since completion of my studies at SSE. Without having met these three
inspiring academics, I doubt that I would ever have embarked on doctoral studies.

The doctoral community at Cranfield was a great inspiration to me. Siri Terjesen
deserves special recognition in this dissertation. Siri was invaluable in that she read
numerous drafts of research proposals and papers. She acted as a first-line of defence
sparing my supervisor the pain of reading some of my earliest drafts. Her enthusiastic
support continued after she graduated and moved to Queensland University of
Technology. A number of other students also offered their friendship and support
including Chris Bailey, Mariano Garrido-Lopez, John Holmes, Sara Holmes, Thoranna
Jonsdottir, Yi Mien Koh, Yassar Nasser, Ian Osborne, Bill Patterson, Halla Tomasdottir
and Roman Ukhov.
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Silviya Svejenova provided useful initial reading suggestions regarding my topic during
my first contact with Cranfield. Thanks, especially for pointing me in the direction of
Scott Snook‟s (2000) „Friendly Fire‟ which has proved to be very useful. Silviya also
provided useful feedback during the initial scoping of the research programme.

Special thanks go to Anita Beal and Heather Woodfield at Cranfield‟s library. Anita has
chased sources all over Britain and abroad and provided support well beyond what
could be expected as part of her library duties. Heather has provided library training,
customized countless ProCite forms and supported the printing and binding of this
dissertation. Barbara Birtles and Wendy Habgood also facilitated the doctoral journey
by offering administrative support.

David Denyer provided valuable instructions regarding systematic literature reviews.
This provided a new perspective regarding how to map out a field and position research
in relation to extant literature. Richard Schoenberg provided an orientation to relevant
sources on corporate parenting and mergers and acquisitions (M&A). This greatly
helped to provide connections between these fields and literature on MNC cross-border
integration.

I was fortunate to spend the latter part of my doctoral studies as a visiting scholar in the
Business Policy department at the Business School at the National University of
Singapore. Thanks go to Andrew Delios for sponsoring my visit and for providing
opportunities to interact with faculty and students including following his seminar in
International Business. Andrew also provided useful feedback on a draft version of this
dissertation. Singapore offers a great academic environment given the inter-island
strategy seminar series with participants from the National University of Singapore,
INSEAD, Singapore Management University and Nanyang Technological University.
This allowed me to take part in seminars and doctoral workshops with prominent
scholars like Kathleen Eisenhardt, Richard Scott, Brian Silverman and Gabriel
Szulanski. I also followed a doctoral course on qualitative research taught by RueyLin
Hsiao. RueyLin became a great mentor during my time at NUS and offered useful
insights into various aspects of academic life. Thanks also go to the doctoral student
community at NUS and especially to Ajai Gaur, with whom I shared a room, and to
Scott Valentine for challenging discussions about the future of management education
and research.

I have also greatly benefited from helpful comments by anonymous reviewers at
Academy of Management and Academy of International Business. I have followed the
strategy of spinning off sections of the emerging PhD dissertation into papers in order to
receive feedback from members of the wider academic community. This has allowed
me to progressively incorporate new ideas and improve the dissertation.

The dissertation would also not have been possible without the 35 managers who
generously gave both their time and shared their experiences of cross-border integration
with me.

Finally, thanks goes to my lovely and supporting wife, Anna-Karin Birnik, for always
being there. To her this dissertation belongs.
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TABLE OF CONTENTS

1 INTRODUCTION ................................................................................................ 12
1.1 Purpose of the research ................................................................................... 12
1.2 Personal statement .......................................................................................... 14
1.3 Introduction to the research context ............................................................... 14
1.3.1 Mobile industry characteristics ............................................................... 15
1.3.2 Review of mobile operator annual reports ............................................. 18
1.4 Overview of the chapters ................................................................................ 20
2 LITERATURE REVIEW .................................................................................... 21
22.1 Defining and un-bundling integration ............................................................ 22
2.1.1 Value chain configuration and coordination .......................................... 25
2.1.2 Marketing standardisation ...................................................................... 26
2.1.3 Defining integration ................................................................................ 26
2.2 Integration rationale ........................................................................................ 28
2.2.1 Environmental contingency perspective ................................................. 29
2.2.2 Strategic choice perspective ................................................................... 34
2.3 Integration challenges ..................................................................................... 37
2.3.1 Headquarters related challenges ............................................................. 37
2.3.2 Subsidiary related challenges ................................................................. 40
2.4 Integration capabilities ................................................................................... 42
2.4.1 Managing decision-making and implementation ................................... 42
2.4.2 Managing structure ................................................................................. 43
2.4.3 Control and coordination mechanisms ................................................... 44
2.4.4 Managing strategic change ..................................................................... 46
2.5 Subsidiary management…………………………………………………… 49
2.6 Outlining the knowledge gap .......................................................................... 52
2.7 Sensemaking perspective ................................................................................ 54
2.8 Micro perspectives on strategy and politics ................................................... 57
3 METHODOLOGY ............................................................................................... 60
3.1 Philosophical perspective ............................................................................... 60
3.2 Possible critique from philosophical standpoints ........................................... 63
3.3 Selection of cases............................................................................................ 65
3.4 Data collection ................................................................................................ 68
3.5 Data analysis ................................................................................................... 70
3.6 Interplay of literature and data ....................................................................... 73
3.7 Summary ......................................................................................................... 73
4 ORANGE DENMARK CASE ............................................................................. 74
4.1 Introduction .................................................................................................... 74
4.2 Case context .................................................................................................... 74
4.3 Data collection ................................................................................................ 75
4.4 Tension findings ............................................................................................. 76
4.4.1 Frequency of tensions ............................................................................. 76
4.4.2 Areas affected by tensions ...................................................................... 76
4.4.3 Causes of tensions .................................................................................. 77
4.4.4 Consequences of tensions ....................................................................... 82
4.4.5 Managing tensions .................................................................................. 84
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4.5 Integration findings ........................................................................................ 90
4.5.1 How to make integration decisions ........................................................ 90
4.5.2 How to implement integration ................................................................ 92
4.5.3 Context factors affecting integration ...................................................... 94
4.5.4 Learning and implications for next stage ............................................... 96
5 ORANGE ROMANIA CASE .............................................................................. 98
5.1 Introduction .................................................................................................... 98
5.2 Case context .................................................................................................... 98
5.3 Data collection ................................................................................................ 99
5.4 Tension findings ........................................................................................... 100
5.4.1 Frequency of tensions ........................................................................... 100
5.4.2 Areas affected by tensions .................................................................... 100
5.4.3 Causes of tensions ................................................................................ 101
5.4.4 Consequences of tensions ..................................................................... 110
5.4.5 Managing tensions ................................................................................ 113
5.5 Integration findings ...................................................................................... 115
5.5.1 How to make integration decisions ...................................................... 115
5.5.2 How to implement integration .............................................................. 120
5.5.3 Context factors affecting integration .................................................... 124
5.5.4 Learning and implications for next stage ............................................. 125
6 3 DENMARK CASE .......................................................................................... 128
6.1 Introduction .................................................................................................. 128
6.2 Case context .................................................................................................. 128
6.3 Data collection .............................................................................................. 129
6.4 Tension findings ........................................................................................... 130
6.4.1 Frequency of tensions ........................................................................... 130
6.4.2 Areas affected by tensions .................................................................... 130
6.4.3 Causes of tensions ................................................................................ 130
6.4.4 Consequences of tensions ..................................................................... 134
6.4.5 Managing tensions ................................................................................ 135
6.5 Integration findings ...................................................................................... 137
6.5.1 How to make integration decisions ...................................................... 137
6.5.2 How to implement integration .............................................................. 141
6.5.3 Context factors affecting integration .................................................... 145
6.5.4 Learning and implications for next stage ............................................. 145
7 3 SWEDEN CASE .............................................................................................. 147
7.1 Introduction .................................................................................................. 147
7.2 Case context .................................................................................................. 147
7.3 Data collection .............................................................................................. 147
7.4 Tension findings ........................................................................................... 148
7.4.1 Frequency of tensions ........................................................................... 148
7.4.2 Areas affected by tensions .................................................................... 149
7.4.3 Causes of tensions ................................................................................ 149
7.4.4 Consequences of tensions ..................................................................... 152
7.4.5 Managing tensions ................................................................................ 153
7.5 Integration findings ...................................................................................... 153
7.5.1 How to make integration decisions ...................................................... 153
7.5.2 How to implement integration .............................................................. 156
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7.5.3 Context factors affecting integration .................................................... 161
7.6 Learning and implications for next stage ..................................................... 162
8 VODAFONE CHINA CASE ............................................................................. 163
8.1 Introduction .................................................................................................. 163
8.2 Case context .................................................................................................. 163
8.3 Data collection .............................................................................................. 164
8.4 Tension findings ........................................................................................... 165
8.4.1 Frequency of tensions and areas affected by tension ........................... 165
8.4.2 Causes of tensions ................................................................................ 165
8.4.3 Managing tensions ................................................................................ 168
8.5 Integration findings ...................................................................................... 169
8.5.1 How to make integration decisions ...................................................... 169
8.5.2 How to implement integration .............................................................. 171
8.5.3 Context factors affecting integration .................................................... 174
8.6 Feedback from Vodafone China ................................................................... 174
8.7 Learning ........................................................................................................ 177
9 SECOND-ORDER ANALYSIS ........................................................................ 178
9.1 Managerial tensions at the subsidiary level .................................................. 178
9.1.1 Perceived misfit of initiatives ............................................................... 179
9.1.2 Perceived unfair process ....................................................................... 179
9.1.3 Perceived weak execution .................................................................... 180
9.1.4 Perceived loss of autonomy .................................................................. 181
9.1.5 Perceived cultural misunderstanding .................................................... 182
9.2 Managerial responses at the subsidiary level ............................................... 183
9.2.1 Comply ................................................................................................. 183
9.2.2 Negotiate or Challenge ......................................................................... 184
9.2.3 Manipulate ............................................................................................ 186
9.2.4 Ignore .................................................................................................... 186
9.2.5 Re-connecting with literature ............................................................... 187
10 MANAGERIAL IMPLICATIONS ................................................................... 195
10.1 Managing integration at headquarters .......................................................... 195
10.1.1 Integration decision making ................................................................. 196
10.1.2 Integration execution ............................................................................ 197
10.2 Managing integration in the multinational subsidiary .................................. 200
10.2.1 Manage subsidiary priorities ................................................................ 200
10.2.2 Manage subsidiary structure ................................................................. 202
10.2.3 Managing interaction with headquarters .............................................. 202
10.2.4 Self-Management ................................................................................. 202
11 CONTRIBUTION AND LIMITATIONS ........................................................ 203
11.1 Scholarship of discovery .............................................................................. 203
11.2 Scholarship of integration ............................................................................. 208
11.3 Scholarship of application ............................................................................ 208
11.4 Scholarship of teaching ................................................................................ 209
11.5 Limitations and suggestions for further research ......................................... 209
11.6 Dissemination of research findings .............................................................. 211
12 PERSONAL REFLECTIONS ........................................................................... 213
13 REFERENCES ................................................................................................... 215

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14 APPENDIX ......................................................................................................... 233
14.1 Comparison of different integration models ................................................. 233
14.2 Comparison of individual case studies ......................................................... 234
14.3 Coding tables ................................................................................................ 235
14.4 Interview guide: Orange Denmark ............................................................... 247
14.5 Interview guide: Orange Romania ................................................................ 248
14.6 Interview guide: 3 Denmark, 3 Sweden, Vodafone China ........................... 252
14.7 Original Danish node structure ..................................................................... 255
14.8 Romanian node structure .............................................................................. 262
14.9 Re-coded Danish node structure ................................................................... 269
14.10 Combined node structure for all five cases .................................................. 275
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LIST OF TABLES

Table 1-1 Industry analysis...................................................................................... 16
Table 1-2 Mobile operators ..................................................................................... 18
Table 2-1 Theoretical framework and research question ........................................ 21
Table 2-2 An organising framework of MNC typologies ....................................... 32
Table 2-3 Four perspectives on change ................................................................... 49
Table 2-4 Two perspectives on managing strategic change .................................... 49
Table 2-5 Conceptualisations of subsidiary managers ............................................ 50
Table 3-1 Summary of different philosophical perspectives .................................. 60
Table 3-2 Positioning of the dissertation ................................................................. 73
Table 4-1 Orange Denmark respondents ................................................................. 75
Table 4-2 Comparison of Orange Denmark and Orange Romania ......................... 97
Table 5-1 Orange Romania respondents ................................................................. 99
Table 6-1 3 Denmark respondents ......................................................................... 129
Table 7-1 3 Sweden respondents ........................................................................... 148
Table 8-1 Vodafone China respondents ................................................................ 165
Table 9-1 Difference between headquarters and subsidiaries ............................... 192
Table 11-1 Conference papers and journal articles ................................................. 211
Table 14-1 Integration rationale .............................................................................. 235
Table 14-2 Causes of tensions.. ............................................................................... 236
Table 14-3 Consequences of tensions ..................................................................... 238
Table 14-4 Managing tensions: Gamesmanship ...................................................... 239
Table 14-5 Managing tensions: Group/HQ interaction ........................................... 240
Table 14-6 Managing tensions: Structure local organisation .................................. 240
Table 14-7 Managing tensions: Get your priorities straight .................................... 241
Table 14-8 Managing tensions: Personal approach ................................................. 241
Table 14-9 How integration decisions should be made ........................................... 242
Table 14-10 How integration decisions should be implemented .............................. 244
Table 14-11 Contextual variables affecting integration ............................................ 246

LIST OF FIGURES

Figure 1-1 Structural changes ................................................................................... 17
Figure 2-1 Theoretical framwork ............................................................................. 21
Figure 2-2 Different forms of integration ................................................................. 27
Figure 2-3 Levels of analysis of literature ................................................................ 52
Figure 2-4 The research focus .................................................................................. 57
Figure 3-1 Case studies ............................................................................................ 69
Figure 9-1 Summary of causes and consequences of tensions ............................... 187
Figure 9-2 Managing dissonance/tension ............................................................... 188
Figure 10-1 Managing integration at headquarters .................................................. 195
Figure 10-2 Managing integration in the subsidiary ................................................ 200
Figure 11-1 Contribution by level of analysis .......................................................... 204
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