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Forthcoming inHuman Relations, February 2012. Pre-publication draft provided
for information and private study only.
Power, institutions and the cross-national transfer of employment practices in
multinationals
Anthony Ferner, Tony Edwards and Anne Tempel
Abstract
This paper argues for the systematic incorporation of power and interests into analysis
of the cross-border transfer of practices within multinational companies (MNCs). Using
a broadly Lukesian perspective on power it is argued that the transfer of practices
involves different kinds of power capabilities through which MNC actors influence
their institutional environment both at the macro-level of host institutions and the
micro-level of the MNC itself. The incorporation of an explicit account of the way
power interacts with institutions at different levels, it is suggested, underpins a more
convincing account of transfer than is provided by the dominant neoinstitutionalist
perspective in international business, and leads to a heuristic model capable of
generating proposed patterns of transfer outcomes that may be tested empirically in
future research.
Keywords
multinationals; comparative & cross-cultural HRM; conflict; international HRM;
strategic and international management; organisational theory.
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Introduction
Much has been written about the cross-national transfer of management practices in
multinational companies (MNCs). A recent conceptual development is the neoinstitutionalist
contribution of Kostova and colleagues (Kostova, 1999; Kostova and Roth, 2002; Kostova et
al., 2008). In the international business literature, this approach shows signs of establishing a
new intellectual hegemony.1 Given this salience, critical engagement is essential.
The neoinstitutionalist approach to practice transfer in MNCs has provided fundamental
insights. It argues that MNCs or to be more precise, their subsidiaries operate under
conditions of institutional duality, facing both the institutional terrain of the international firm
itself and that of the host environment in which they operate. These institutional spheres exert
rival isomorphic pressures which come to the fore when practices are transferred from the
parent to host operations. Drawing on Scotts (2008) institutional pillars, Kostova uses the
country institutional profile tool to characterize parent- and host-country institutions. This
provides the basis for assessing institutional distance (ID), the divergence in institutional
arrangements between the parent country and host. In general, the greater the ID, the more
problematic is transfer; and the harder is the internalization of transferred practices, that is,
their full assimilation to host employees cognitive mindsets and normative frameworks
(Kostova, 1999).
However, neoinstitutionalist positions on transfer in MNCs suffer from a neglect of old
institutionalist questions about power, coalitions, interests and competing value systems (e.g.
Stinchcombe, 1997), despite increasing attention to such questions in broader neoinstitutionalist
theory (e.g. Oliver, 1991; Greenwood and Hinings, 1996; Lawrence, 2008; Lounsbury, 2003;
Tempel and Walgenbach, 2007). The key concepts of institutional duality and institutional
distance overlook the ability of actors in MNCs to shape institutions to their needs and thus
influence the transfer process. There is little sense of what is at stake for actors in the
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confrontation of cognitive, normative and regulative frameworks that arise when practices are
transferred.
This paper discusses how the analysis of power can be incorporated into an understanding of
cross-institutional practice transfer. It builds on recent work concerning MNCs as political
actors (e.g. Blanger and Edwards, 2006; Drrenbcher and Gammelgaard, 2011; Drrenbcher
and Geppert, 2011; Edwards and Blanger, 2009; Ferner and Edwards, 1995; Ferner and
Tempel, 2006; Levy, 2008; Levy and Egan, 2003). It argues that power and interests of actors
shape transfer through processes that draw on institutional resources both at the macro level of
the host business system and the micro level of the MNC. These processes in turn shape the
transformations and adaptations undergone by transferred practices. Power, it is suggested, has
to be understood in its institutional context, both in that it is deployed by powerful MNC actors
to shape, sustain and activate macro- and micro-level institutions a process that
neoinstitutionalists refer to as institutional work (Lawrence and Suddaby, 2006); and in that
institutional context provides actors with power capabilities with which to facilitate, block or
modify transfer.
The cross-national transfer of practices in MNCs is complex, with an array of possible
outcomes. Transfer has several dimensions: the degree of adaptation or hybridization of
practices; internalization; functionality; and directionality. The first of these refers to the fact
that transfer is not an either/or issue; there may be degrees of transfer. The transferred practice
may be modified in the course of implementation, or it may be hybridized, that is, combined
with host practices (e.g. Becker-Ritterspach, 2009). Internalization denotes that, even where a
practice is transferred in its original form, it may be assimilated to a greater or lesser extent to
the working assumptions, cognitive understandings and normative frameworks of subsidiary
employees and managers. Functionality refers to the degree to which transferred practices
perform the function intended for them by powerful HQ actors, or work in ways that these
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actors would consider to be unintended or dysfunctional. Finally, directionality indicates that
transfer does not occur solely from HQ to subsidiary, but also between subsidiaries themselves,
or from subsidiaries to HQ. Thus various outcomes are possible, and one of the principal aims
of this paper is to provide a conceptual framework for understanding how power relations in
MNCs influence the outcomes of practice transfer between different institutional domains.
The paper illustrates the argument with empirical examples drawn from human resource and
employment practices (HR&EP) in MNCs. The rationale is twofold. First, the cross-national
dissemination of such practices is increasingly seen in a knowledge-based global economy as
key for international competitive advantage (e.g. Lado and Wilson, 1994). Second, however,
HR&EP are particularly subject to host institutional influence (e.g. Rosenzweig and Nohria,
1994). Moreover, relations between employers and workforces are characterized by a
structured antagonism (Edwards, 1986) providing the basis for the ongoing exercise of power
and resistance in relation to HR&EP; this structured antagonism is carried into the international
sphere, on to the contested terrain of the MNC (Blanger and Edwards, 2009).
The paper first discusses a conceptualization of power in relation to MNCs. Second, it examines
power capabilities and interests of different groups of actors within the MNC, in particular at
HQ and subsidiary level. Finally, it marshals the arguments on power, interests and institutions
to explore different transfer outcomes.
Power and MNCs
MNCs are powerful actors, driving economic activity in many sectors and one of the motive
forces of globalization. They are also complex organizations, marked by the dispersion of
power among groups, functions and operating units (e.g. Blanger and Edwards, 2009;
Drrenbcher and Geppert, 2011; Ferner and Tempel, 2006). In particular, the respective power
of HQ and subsidiaries makes for the negotiation of relationships within the MNC (Ferner and
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Edwards, 1995). MNC actors manoeuvre among institutional contradictions that leave
considerable scope for praxis (Geppert and Drrenbcher, 2011). Transfer can be viewed as a
specific instance of HQsubsidiary relations, in which the power capabilities of actors at each
level influence outcomes. How are such capabilities to be conceptualized?
This paper builds on a Lukesian perspective (Lukes, 1975; 2005) that identifies three
dimensions of power. Each may be related to the behaviour of MNC actors in the realm of
practice transfer. The first concerns the nature of decisions that are made, and the deployment
of resources to affect them. The second relates to conflicts around non-decisions, reflecting
the ability of powerful actors to shape the agenda, exclude or include issues, and determine the
processes and rules by which decisions are arrived at. The third concerns the way in which
powerful actors exercise domination over others by influencing, shaping or determining [their]
very wants (Lukes, 1975: 27).
As Lukes admits (2005: ch3), the notion of power as domination over other actors who may
consentto domination requires the imputation of real interests to actors (i.e. interests that are
masked by the third dimension of power). Given the difficulties of the undertaking, he argues
(p148) that what count as real interests [is] a function of ones explanatory purpose,
framework and methods. Without wishing to get enmeshed in this debate, we would note that
the paper is premised on the notion that interests are constructedby MNC actors in ways that
are variable and issue-specific, and the process gives rise to bundles of interests that are
complex and not necessarily internally coherent (cf. Lukes, 2005: ch3). There may be a
hierarchy of interests, with economic security or survival, for example, being a primary and
persisting interest for most actors. Beyond that, interests may be more changeable and context-
dependent. Such interests may be collective, emerging, for example, around a particular model
of teamworking in a subsidiary that allocates particular roles to different groups of employees,
supervisors and managers; orindividual, deriving notably from personal and biographical
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considerations to do with career paths and aspirations within the MNC, rather than from
organizational or group affiliations (see e.g. Drrenbcher and Geppert, 2009a).
Hardy (1996) has applied a Lukesian model to a business context, and her terminology is
adopted here. She labels the first dimension the power of resources, which concerns power
derived from the control of scarce resources, such as hiring and firing, rewards and sanctions,
and expertise, in order to influence behaviour in the face of opposition. The second, the power
of processes, resides in organizational decision making processes which incorporate a variety
of procedures and political routines that can be invoked by dominant groups to influence
outcomes by preventing subordinates from participating fully in decision making (p7); equally,
new groups may be brought, or force their way, into decision-making processes. The third
dimension is labelled the power of meaning; Hardy explores the way in which organizational
groups legitimize their own demands and delegitimize those of others through the
management of meaning and the deployment of symbolic actions. As a result, actors may be
impeded from exercising agency. As Levy argues (2008; also Levy and Egan, 2003), the control
of meaning has important linkages with the Gramscian concept of hegemony (Gramsci, 1971),
emphasizing that the control of meaning, or the discursive realm, relates to power relations in
the real economic and technological realms. In other words, in the case of MNCs, the power of
meaning is built upon the resource power that derives from the primary economic activity of the
firm and its constituent parts. This third dimension of power also provides a crucial link with
neoinstitutionalist analysis, by illuminating in particular how the cognitive and normative
pillars (Scott, 2008) of institutional arrangements embody power relations and serve the
interests of powerful actors, and how such pillars may be susceptible to contestation rather than
being seen as external givens.
While all three dimensions of power are important for an understanding of cross-institutional
transfer, the power of meaning is especially crucial. When institutionalized practices are
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transferred cross-nationally, this hidden dimension is rendered visible (Ferner et al., 2005) by
the collision of two sets of institutional rationalities. Transfer thus creates an important
condition for the exercise of agency: that actors become conscious of taken-for-granted
institutional processes (e.g. Clemens and Cook, 1999; Seo and Creed, 2002). In short, transfer
leads to potential conflicts of institutional rationality that are resolved through the deployment
of power capabilities. For example, individual performance appraisal and reward is a norm
taken for granted and generally regarded as legitimate in liberal market economies. Even if
disliked, it can only be legitimately challenged on grounds of its failure to achieve its
performance-enhancing functions. But cross-institutional transfer allows the shared norms to be
laid bare and challenged on grounds of alternative normative frameworks, emphasizing (for
example) social equity, solidarity and fairness (e.g. Liberman and Torbiorn, 2000).
MNC actors in situations of transfer: Power capabilities and organizational interests
To understand transfer outcomes in the context of power relations, two questions must be
addressed. First, what power capabilities do actors in MNCs possess? As an initial
approximation, we explore the power capabilities of actors at HQ compared with those of the
subsidiary. This reflects the thrust of arguments (e.g. Geppert and Drrenbcher, 2011;
Kristensen and Zeitlin, 2005; Morgan and Kristensen, 2006) that the relationship between the
HQ and subsidiary constitute a primary axis of power relations within MNCs.
Second, what interests are constructed or present in relation to transferred practices? The
answer to this question requires a more nuanced analysis of actors at HQ and subsidiary level. It
determines whether, given respective power capabilities, the subsidiary acts as part of a
monolithic MNC bloc vis--vis host institutions, seeking ways of overcoming institutional
constraints; or opposes HQs efforts to transfer. Also possible is some complex configuration of
interests where some groups in the subsidiary support transfer, while others oppose it (and the
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same may be true of HQ actors). In other words, interests determine how power capabilities are
deployed in relation to transfer.
We first explore the power capabilities of MNCs as unitary entities with common
organizational interests (Morgan, 2011) vis--vis the macro-institutional settings in which they
operate. We then relax the assumption of unity and analyse separately the capabilities of HQ
and subsidiary actors. Finally we examine the array of interests that are likely to be constructed
around HR&EP practice transfer.
The power of MNCs to shape macro-institutional settings
The Kostovian approach to transfer neglects the power of MNCs to shape macro-institutional
settings on two key counts. The first concerns the broader systemic context within which
institutional duality is played out. Smith and Meiksins (1995) argue that the underlying global
dynamics of capitalist development create system effects that may be distinguished from
institutional variations, or societal effects.
The global economic system, and the associated concepts of globalization, the world market,
competition, and so on, are themselves the highly institutionalized outcome of the active agency
(e.g. Campbell, 2004: ch.5) of powerful actors, including states, supranational bodies and
MNCs (e.g. Djelic and Quack, 2003; Levy and Egan, 2003). As Morgan (2011; also Sklair,
2001) argues, an emerging global managerial elite has assumed an important role in
international standard-setting and transnational institution building. MNCs have played an
important role in building this context. Sell (2000), for example, shows the role of US
multinationals in shaping the rules of international commerce on TRIPS (Trade-related aspects
of intellectual property rights) and GATS (General Agreement on Trade in Services) (see also
Djelic and Quack, 2003).
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The interrelationship between the global system and national institutional spaces has
implications for transfer. In particular, the world economic system is hierarchically structured
by the power of national actors (Smith and Meiksins, 1995). Dominance effects allude to the
influence of practices developed in leading economies, sectors or firms. They influence all three
dimensions of power. MNCs from dominant business systems have greater resource power by
virtue of their economic success. They have power over processes that facilitates transfer. Such
power can be at a systemic level through their ability to shape the decision-making rules
governing international economic activity. It can also be more immediate, for example through
the concentrated presence of MNCs from a dominant economy in a host country, as in the case
of the dense networks of US subsidiaries in the UK or Ireland. This presence creates a stratum
of organizations familiar with parent-country practices, and a pool of employees and managers
with appropriate cognitive and normative expertise.
Dominance also shapes systems of meaning as the dominant power becomes hegemonic. On
the one hand, it creates a presumption by actors from dominant countries and firms that their
practices have superior efficacy, providing a motive for transfer. On the other, this view may be
shared by actors in the host, including policy-makers, subsidiary managers and workforces, and
hence increase receptiveness to transfer. Thus transfer is smoothed because practices are
accorded legitimacy by a wide range of MNC actors and are regarded as global best practices
(e.g. Pudelko and Harzing, 2007). One may therefore expect that where the transferred practice
derives from a parent country that is dominant vis--vis the host, the inhibiting effect of ID on
transfer will be reduced.
Dominance effects evolve. One illustration of this is that the dominant position of US
carmakers in the period immediately after the Second World War had been lost by the 1970s
and 1980s, with Japanese firms assuming dominant status. Indeed, the Japanese economy as a
whole achieved a dominant position in the 1980s, albeit briefly; with Japans Lost Decade and
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major corporate bankruptcies, the US regained a position of dominance, although the conditions
that underpinned this renewed dominance, such as easy access to cheap capital, also proved
transient (Schwartz, 2009), illustrating the dynamic nature of dominance effects.
Dominance, moreover, is felt at sectoral level as well as at the level of business systems as a
whole. As the above discussion implies, American MNCs should not be seen as dominant
across all sectors. The point that national institutional configurations provide conducive
conditions for firms to flourish in some sectors but not in others is central to the varieties of
capitalism literature (Hall and Soskice, 2001) and also has a long history in economics through
the theory of comparative advantage. The success of US MNCs in sectors like IT and
pharmaceuticals, together with the relative decline of American firms in sectors like consumer
durables and automotives, confirms this. In short, dominance effects, even of the hegemonic
economic power, are likely to be particularly strong in the sectors in which it has a competitive
advantage, and weaker or absent in others.
Secondly, Kostova and colleagues neglect that MNCs as powerful organizations commonly act
as rule-makers as well as rule-takers (Streeck and Thelen, 2005) vis--vis host institutional
contexts. Rule-makers are actors involved in setting and modifying in conflict and
competition, the rules with which [rule-takers] are expected to comply (p13). MNCs routinely
engage in what Oliver (1991) calls manipulation of institutional settings, exerting direct
pressures on the sphere of policy-making (e.g. DeVos, 1981, on attempts by US MNCs in
Germany to influence reform of codetermination legislation). Sometimes such pressure and
rule-making is passive: in other words, host actors adapt institutional rules to what they see as
the preferences of MNCs, without active intervention by the latter. An example is the move by
the Irish authorities in the 1980s away from the previous policy of encouraging incoming
MNCs to adopt post-entry closed shop union agreements and to bargain collectively; the change
reflected the desire of policy-makers to promote rules they considered attractive to a new wave
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of largely US direct investors in sectors such as pharmaceuticals, electronics and IT where such
provisions were seen as hampering investment (Gunnigle et al., 2006).
Moreover, MNCs may shape institutions in more bottom-up fashion through their distinctive
practice (e.g. Djelic and Quack, 2003). Thus the scope for macro-institutional manoeuvre may
exist even in highly-regulated institutional settings such as Germany. MNCs have been able to
find space (e.g. Singe and Croucher, 2005; Tempel et al., 2006) by exploiting weaknesses in
formal institutions such as works councils that are quite heterogeneous in their operations
(Kotthoff, 1994); and as Streeck and Thelen (2005: 14) argue, there is always a gap between
the ideal pattern of a rule and the real pattern of life under it; thus the rules of codetermination
in Germany are characterized by deep ambiguities reflecting the conditions under which they
had been drawn up. MNCs power to shape processes and structures through which decisions
are made is seen in their ability to engage in what Streeck and Thelen (2005) call institutional
layering and conversion, whereby existing structures are bypassed, or subtly changed in
function. Singe and Croucher (2005) in their synthesis of research on US firms in Germany
suggest these firms adopted a dichotomous approach of formal compliance combined with
content avoidance towards codetermination institutions, deploying power resources to
colonize works councils and exert high levels of pressure on works councillors to divorce
themselves from unions (p134). US subsidiaries have moved between bargaining jurisdictions
to leverage distinctions in how these operate; in one such firm, the German subsidiarys deft
institutional manoeuvring allowed it to be the first subsidiary in Europe to implement the
MNCs global variable pay model (Tempel et al., 2006).
Even where regulative systems potentially constrain action, regulations need to be invoked and
enforced. In Germany or Spain, works-council-style representation has to be triggered by the
workforce. There is thus a terrain of action for management to deploy power to avoid macro-
institutional coercive pressures. Managers can use power over resources to raise the costs for
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the workforce of invoking statutory rights; thus the Spanish subsidiary of a US MNC threatened
to offer only minimum statutory redundancy pay if the workforce activated its right to union
representation during the redundancy process (Colling et al., 2006). Therefore, actors are
involved in a process of deploying power capabilities more or less creatively on a particular
institutional terrain.
MNCs are able to engage in institutional arbitrage (Morgan et al., 2003), manoeuvring
between institutional variations within a given host setting, assembling and reassembling
institutional elements in a process of bricolage to create new variants. In sectors most exposed
to global competition, such as finance and business services (Morgan, 2009), or in periods of
institutional instability, MNCs may have greater freedom to create innovative institutional
arrangements within the dominant host framework, leading to what Thelen (2009) calls the
segmentation of business systems.
The ability of powerful institutional entrepreneurs, including MNCs, to shape institutional
settings is a key factor in a current strand of comparative institutionalism that questions the
monolithic character of national-institutional configurations and emphasizes internal
heterogeneity (e.g. Almond, 2011; Crouch et al., 2009; Lane and Wood, 2009; Saka, 2002). For
Crouch (2005; Crouch et al., 2009) intra-model variety is the norm rather than an anomaly,
hence firms may be less bound by national constraints than much theory suggests. In practice,
institutional elements are more loose-coupled, and the national model less determinant.
Heterogeneity has substantial implications for the Kostovian concepts of institutional distance
and country institutional profile. While multiplicity in institutional settings has been discussed
by neoinstitutionalists (e.g. Clemens and Cook, 1999; Delmestri, 2009; Oliver, 1991) and is
acknowledged by Kostova et al. (2008: 997), the implications for transfer have not been
thoroughly assimilated (cf. Phillips et al., 2009). Chief among them is that MNCs rule-making
capacity within institutional configurations may facilitate the transfer of practices even to
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institutionally distant hosts. The overall country institutional profile may not be the
appropriate level of analysis, and more fine-grained examination of local host arrangements
may be needed. An alternative instrument, based on constructing the institutional profile of the
subnational variant, would seem to offer a conceptual way forward, although practical problems
may be foreseen of access to adequate subnational data on institutional arrangements.
Power capabilities of MNC actors
Turning now to classify the power capabilities2 of MNC actors in situations of transfer, these
capabilities may be derived from the micro-institutionaldomain of the MNC itself, or from
macro-institutional arrangements in the host (and beyond). Crucially, MNCs may use power to
shape macro-level institutions, affecting the processes whereby they are established, maintained
over time, revised in function or scope, or replaced by other arrangements (e.g. Knight, 1992;
Lawrence, 2008; Lawrence and Suddaby, 2006).
Agency is not confined to HQ policy-makers. Actors in the subsidiary have their own sources of
power. Where power capabilities of different kinds are disseminated across organizational
levels, groups and individuals within a MNC, pressures to adopt transferred practices are
susceptible to deflection, avoidance, negotiation or challenge by subordinate actors (cf. Oliver,
1991). In order to predict transfer outcomes, it is therefore necessary to assess the balance of
capabilities between the centre and the subsidiary (Drrenbcher and Geppert, 2009b).
However, while there has been much discussion of the decentred or networked nature of
contemporary MNCs (e.g. Andersson and Holm, 2010) an authoritative central HQ remains the
norm. As Egelhoff (2010) argues, network structures provide inadequate vertical
specialization, which is required to perform functions such as providing accountability to
shareholders and imposing tight-coupled coordination on units where careful synchronization
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of operations is required. Thus, the overall power of HQ positions it as a field dominant (e.g.
Levy, 2008) in relation to the organizational field constituted by the MNC.
The power capabilities of headquarters actors. HQ actors have specific capabilities relating
to each of the dimensions of power. The first aspect of HQ micro-institutional power is control
of the allocation among subsidiaries of key organizational resources, such as finance,
investment, and knowledge and expertise, through budgeting and management control
processes. Decisions over resource allocation have critical impacts on the economic security
and survival of subsidiaries. HQ also controls career opportunities and rewards of key
subsidiary actors; recalcitrance may jeopardize remuneration or career advancement,
particularly where aspirations are international (e.g. Drrenbcher and Geppert, 2009a).
However, as discussed below, power resources are unlikely to be monopolized by HQ.
Moreover, the big guns at HQs disposal, such as the threat of closure or investment
allocation, may be disproportionate weapons for resolving downstream conflicts over the
transfer of HR practices; and the threat of closure may be unavailable if an MNCs investment
is market-seeking or resource-seeking, rather than efficiency-seeking. If a subsidiary is
performing well economically, it is less likely to be penalized for not adopting transferred HR
practices. Conversely, poorly-performing subsidiaries are more vulnerable to pressure from HQ
to conform (e.g. Tempel et al., 2006). Thus there is considerable scope for HQsubsidiary
negotiation (cf. Ferner and Edwards, 1995).
Turning, second, to power of processes, within the MNC there is a transnational authority
structure that legitimates the exercise of power by hierarchically senior actors (units, groups,
individuals, etc.). Formal hierarchical authority shapes the way decisions are made and
resources allocated within the firm (cf. Hardy, 1996). HQs role as apex of the authority
structure gives it the power to determine mechanisms for transferring practices to subsidiaries
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abroad. In particular, it can specify which actors at which level are able to intervene in
decisions, for example on the introduction of a new global HR policy. Decision-making rules
frame how practices are codified into policy and transferred to subsidiaries. Generally, HQ can
define formal policies for subsidiaries with a prima facie expectation that subsidiaries comply.
It can impose enforcement and monitoring mechanisms and benchmark practice across
subsidiaries, facilitating transfer.
Finally, HQ has power over meaning. It can influence cognitive and normative aspects of the
micro-institutional frame of action by shaping corporate cultures, codes of practice and standard
operating procedures, which then become institutionalized. This third face of power helps
shape the mindsets of those in subsidiaries whose job it is to implement transferred policy.
Research suggests that formal policies need shared understandings in order to function
effectively (Ferner, 2000). HQ actors control the creation of legitimatory rhetorics (Suddaby
and Greenwood, 2005) concerning, for instance, competitive advantage, profitability, or site
closures (Erkama and Vaara, 2010). This is important where there is causal ambiguity about
the impact of a transferred practice in the subsidiary (Szulanski, 1996), which may be the case
particularly for downstream activities such as HR (Boxall and Purcell, 2011). HQ actors can
also shape meaning systems in subsidiaries by, for example, recruiting key host individuals
whose mindsets are less typical of host norms and more in tune with organizational norms
(Evans and Lorange, 1989); this allows them to bypass barriers to internalization and helps
create alternative micro-institutional settings within the host institutional context.
The power capabilities of subsidiary actors Subsidiary actors have the capacity to challenge
transfer and protect host institutional arrangements. There has been much work in recent years
conceptualizing subsidiaries as active strategizers within the wider MNC (e.g. Blanger et al.,
1999; Bouquet and Birkinshaw, 2008; Drrenbcher and Geppert, 2009b; Drrenbcher and
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Gammelgaard, 2011; Kristensen and Zeitlin, 2005; Morgan and Kristensen, 2006), rather than
passive transmission belts for HQ policies and practices. The ability to strategize depends on
power capabilities stemming from both the micro-level of the MNC and the macro-level of the
host institutional environment.
Considering first the micro-political power of subsidiary actors, subsidiaries may achieve power
over resources from the competent performance of their productive activities (e.g. Andersson
and Forsgren, 1996). For example, they may generate a substantial proportion of the MNCs
profit,3 offer access to key markets, create competitively significant knowledge or expertise, or
perform functions that are critical to the success of the firms value chain (Drrenbcher and
Gammelgaard, 2011). Possession of resources allows subsidiaries to negotiate to some degree
its relationship with HQ.
Power over processes is primarily the province of HQ and the hierarchical authority structure,
but not exclusively so. Subsidiaries may use their bargaining power deriving from control of
resources to achieve a modification of decision-making processes, with an impact on transfers.
For example, in a US engineering firm, HR managers from subsidiaries generating a large
proportion of global revenue won a revision of the policy-making process that accorded them a
greater role in the definition of global HR policies (Edwards, T. et al., 2007). In terms of
transfer, the exercise of process power is likely to result in policies that are more sensitive to
host institutions, and hence more easily transferable.
HQ is also likely to dominate power over meaning, yet subsidiaries again may have some
influence at least to contestdominant systems of meaning within the organization. The transfer
of practices and their associated meaning systems across institutional spaces makes visible
taken-for-granted normative and cognitive frameworks and hence renders them susceptible to
purposive action. One example is the transfer of workforce diversity policies to the UK
subsidiaries of US MNCs. Transfer exposed underlying discourses concerning the business
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case and equal employment opportunities, through the collision of very different diversity
rationalities in the US and the UK (Ferner et al., 2005). Another instance is an attempt by an
American business services firm to implement a global performance-related pay scheme for
professional consultant staff in the German subsidiary. These employees strongly opposed the
new system which clashed with normative frameworks of fairness and was seen as leading to
culturally unacceptable pay differentials (Almond et al., 2006: 138-9).
MNCs micro-institutions are beset with ambiguities, complexities and inconsistencies,
particularly when applied to real choices in a complex business world. These give actors room
for idiosyncratic interpretation of norms and rules. Even if subsidiaries do not have the power to
shape micro-institutional frameworks of meaning, they can selectively respond to different parts
of a complex configuration. In short, rival micro-institutional norms provide alternative
rhetorics legitimating or de-legitimating particular courses of action (Suddaby and
Greenwood, 2005).
Within the HR function, whose activities are largely downstream, one source of ambiguity is
that they may be only partially nested within upstream strategic objectives related to
competition, profitability and growth. In other words, they may have relative autonomy.
HR&EP norms may be at odds with upstream norms concerning economic performance, and
can be deflected on that basis. Where transferred HR practices are seen as disrupting existing
relationships or practices regarded as functional for subsidiary performance, subsidiary actors
may deploy what Suddaby and Greenwood (2005) term ontological rhetorics asserting the
existential incompatibility of economic goals and transferred HR practices. Even within the HR
domain, there may be contradictions within highly complex normative frameworks; for
example, between principles of pay determination and approaches to union recognition. Thus
UK subsidiary managers in one US MNC resisted a global pay freeze on the grounds that it
conflicted with a competing corporate norm of favouring non-union employee relations
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(Almond and Ferner, 2006). In short, subsidiary actors can exploit rival appeals to legitimacy
within the MNC, and are likely to do so when they oppose transfer.
Turning to macro-institutional resources, subsidiary actors derive power capabilities from their
status as skilled negotiators of the host institutional context, both of the overarching national-
institutional framework, and the subnational niches and variants in which they are located.
Where the subsidiary operates essentially as the willing local agent of the wider MNC, these
powers may be used to promote transfer. However, where conflicts of interest exist between
subsidiary and HQ, the same capacities may be used to block or amend transferred practices.
First, subsidiaries derive power resources from the institutional complementarities (Hall and
Soskice, 2001) of the host business system that generate certain competitive advantages. Given
the increasing importance of intra-model variants, subsidiaries local embeddedness is often
crucial for the generation of resources such as scarce knowledge and expertise of value to the
economic activity of the MNC, and that the MNC cannot otherwise access (Andersson and
Forsgren, 1996; Drrenbcher, and Gammelgaard, 2010; Sorge and Rothe, 2011). Almond
(2011) points to the significance of locally embedded flexible high-skills ecosystems that
drive innovation and provide actors with power resources for shaping practice transfer.
Second, the regulatory framework of the host gives subsidiary actors some purchase over the
power of process by exerting coercive isomorphic pressures, for example in employment
relations and the workings of the labour market. Thus German codetermination legislation gives
employees rights to representation on company supervisory boards, and to set up works
councils with statutory rights over a range of work-related issues. Changes to payment systems
resulting from transferred pay and performance practices are subject to codetermination. Even
where the MNC deploys resources to mitigate this loss of process control (see above), it
nonetheless increases the costs for MNCs of shaping decisions, and necessitates some degree of
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negotiation with local actors and/or the application of power resources. Thus the power of
process provides subsidiary actors with a capability to resist practice transfer.
Third, subsidiary actors are able to exploit host institutional settings to challenge dominant
actors power of meaning in the MNC. In particular, significant macro-institutional capabilities
derive from subsidiary actors competence as skilled interpreters of the host institutional frame.
In other words, they can shape the normative and cognitive understandings of what is possible,
desirable and contextually rational. Even the most highly regulated and juridified systems leave
spaces for interpretation based on expert institutional knowledge. More subtle and tacit
cognitive and normative elements of institutional frameworks are even more subject to insider
exegesis. While subsidiary actors may use such institutional expertise to further transfer, in
situations of interest conflict with HQ, they may equally draw on such capabilities to construct a
rhetoric legitimating opposition to transfer.
Naturally, subsidiary actors interpretations of the viability of transfer are liable to challenge
and counter-interpretation, notably by expatriate managers, and sceptical HQ actors may
demand that local managers claims be thoroughly tested. This may especially be the case
where dominance effects are present, notably in US MNCs which may have a strong
presumption of the efficacy of HQ practices (e.g. Almond et al., 2006; Tempel et al., 2006).
Again, therefore, the host institutional context provides a contested terrain (cf. Edwards and
Blanger, 2009; also Geppert and Drrenbcher, 2011), in which interest groups at different
levels within the MNC struggle to further their agendas.
A final point concerning the power capabilities of subsidiary actors is that their issue-scope of
power (Lukes, 2005: 74-5) - the range of issues over which an actor can determine outcomes -
is likely to be limited because of the overall power of HQ. As a result subsidiaries are likely to
have to prioritize the issues over which they expend capabilities that are scarce relative to those
of HQ actors. Moreover, their power is likely (again using Lukes terminology) to have a lower
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contextual range, to be largely restricted to the specific institutional setting in which they
operate; whereas that of HQ is likely to be more context-transcending, deployable under a
wider range of circumstances, especially where dominance effects come into play. A possible
exception to this is where the subsidiary is located in a host that is more dominant in the
global economy than is the MNCs country of origin. This may provide greater context-
transcending capacity to the subsidiary, leading for example to additional possible transfer
outcomes such as reverse diffusion (Edwards and Ferner, 2004) in which practices are
transferred from subsidiary to HQ.
These arguments are summarized in Table 1.
[Table 1 about here]
MNC actors and interests in the context of HR&EP transfer
We are now in a position to examine HQ and subsidiary interests in relation to transfer.
Together with the power capacities of HQ and subsidiary explored above, the constellation of
interests will determine the stance of subsidiary actors towards transferred practices.
Who are the relevant MNC actors in situations of institutional duality and transfer? A first
approximation is to divide actors into those associated with the headquarters perspective and
those in the subsidiary. In reality, finer-grained distinctions may become necessary to include
for example actors at regional or business-unit headquarters with interests and power
capabilities distinguishable both from those of corporate headquarters and national subsidiaries.
Moreover, HQ is not a homogeneous block but comprises different groupings (e.g. by
management function and level) with potentially different interests in relation to transfer.
At subsidiary level, a core distinction is between managers and workforce (Edwards and
Blanger, 2009). There may be both common and divergent interests. Managers and workforce
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may both have an interest in the sites survival, for example. In contrast, particularly where the
impact of a transferred practice on the sites performance is ambiguous or contested, interests
may diverge. Depending on the practice, further disaggregation may be appropriate; for
example, subsidiary operations managers may see the transfer of practices such as teamworking
as useful for efficiency while HR managers may oppose transfer on the grounds that they
disrupt existing accommodation with employees. An important distinction is between managers
whose career ambit lies within the host country and those whose careers trajectories and
aspirations are international in scope (Drrenbcher and Geppert, 2009a; Morgan and
Kristensen, 2006). The former may engage in subversive strategizing (Kristensen and Zeitlin,
2005), acting counter to HQ norms and prescriptions in order to strengthen the effectiveness of
the subsidiary; while the latter may have less stake in the sites survival, and see it as in their
career interest to overcome local obstacles to transfer. Nor is the subsidiary workforce
necessarily homogeneous. There may be differences of interest between high-skilled workers
with core competences and lower-skilled workers with more generic competences, and
transferred practices may differentially impact on such interests.
Whether subsidiary actors deploy capabilities to resist or promote transfer will depend on how
the practices affect existing interests. Resistance or contestation is likely to emerge under
conditions of criticality, that is where the issue is seen as critical to the interests of actors in
the subsidiary. For example, resistance may be expected where a transferred practice embodies
institutional norms or requirements that disrupt accommodations seen as vital to the effective
conduct of the economic function of the subsidiary, and hence to the economic security,
rewards and career interests of groups and individual actors in the subsidiary.
Where a transferred practice disrupts workforce interests but not those of managers (or vice
versa), there is likely to be an internalization of the clash of rationalities within the host. In the
area of HR&EP, it is more likely that interests in the subsidiary will be differentiated, with say
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employees and their representatives resisting transfer, while managers promote it. This may be
manifested in managementworkforce conflict, or as Tempel et al. (2006) suggest, subsidiary
managers may function as a Trojan horse for imported practices such as global performance
management systems, working to neutralize institutional obstacles. Transferred practices may
selectively disrupt interests of particular management groups, or particular workforce groups, or
both. In such cases coalitions of support for and opposition to transfer may be complex and cut
across the managementworkforce divide. However, where transfer disrupts a wide range of
subsidiary interests, a subsidiary-wide oppositional coalition may emerge.
Power, institutions and transfer outcomes
These arguments are now synthesized into a model of transfer outcomes, in which
constellations of institutional distance, macro- and micro-level power capabilities, and actors
interests determine the fate of transferred practices.
We argue, first, that there is a need to revise the Kostovian idea (e.g. Kostova, 1999) that MNCs
operate between fairly fixed institutional entities, as implied by the notion of institutional
distance. The impact of ID upon transfer is modified by the power of MNCs in two ways. In
the first place, dominance effects, where they exist, smooth transfer by providing MNCs with
abundant power over resources, power of process over the rules of the game, and power to
manage meaning by reducing normative opposition to dominant-country practices in the host.
In the second place, the power of MNCs as active rule-makers, engaging in institutional work
to construct institutional variants or niches within the host setting, mitigates the constraining
impact of institutional distance. In order to incorporate these considerations, we therefore
propose that Kostovas notion of institutional distance, which we refer to as raw ID, be
replaced by the concept of modified ID, (mID). Here, the predictions of our framework are
significantly different from those of Kostovas.
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Second, transfer outcomes depend on the specific configuration of power capabilities and
interests of actors at different levels of the MNC. Where interests of subsidiary and HQ actors
are broadly concordant, the power capabilities of the subsidiary are likely to be deployed in a
mannersupportive of transfer, for example by removing or circumventing host institutional
obstacles to transfer. However, where there are strong interests within the subsidiary in conflict
with those of HQ, the outcome is likely to be an oppositionalstance. This does not necessarily
entail overt resistance (cf. Oliver, 1991). Power capabilities may be deployed to resist, modify,
neutralize, or quarantine the transferred practice through ritual observance that does not affect
real practice. Which of these oppositional outcomes occurs is likely to depend on the
homogeneity of interests within the subsidiary, and the power capabilities of the subsidiary (or
at least of oppositional actors) relative to those of HQ.
An outcome of ceremonial compliance in which nonconformity is masked by a faade of
acquiescence (Oliver, 1991: 154) is likely where opposition is high due to a collision of
normative/cognitive frameworks (e.g. concerning what will promote unit profitability in the
subsidiary), but where subsidiary actors control of resources and/or processes is relatively low,
precluding overt resistance.
Alternatively, opposition may lead to adaptation or hybridization (e.g. Becker-Ritterspach,
2009; Szulanski and Jensen, 2006) in which the practice acquires elements characteristic of the
host setting. In some cases, this may make a practice more effective within the host, or allow it
to be internalized by subsidiary employees. Survey evidence suggests that it is common for
MNCs to disseminate practices by means of broad framework policies, with local adaptation
being expected in HR&EP areas such as performance management, variable pay, and employee
involvement (Edwards, P. et al., 2007). This may be termed functional hybridization.
In other cases hybridization may divert a practice from its normal function and hence subvert
HQs intention. For example, a supposedly standardized employee performance appraisal
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system in a US MNC operated with major variations in practice: thus in the German subsidiary
the works council was able to reject individual assessment, minimize quantification, and reduce
the scheme to occasional informal, unrecorded evaluations (Liberman and Torbiorn, 2000).
Such resistive hybridization is likely where transfer disrupts internal accommodations and/or
is seen as dysfunctional for subsidiary performance, and where subsidiary actors have sufficient
power capabilities, such as interpretive control of local meaning frames.
Third, the three dimensions of power are likely to affect transfer outcomes in different ways,
other things being equal. Where a subsidiary has significantpower of resources, this is likely to
facilitate a bargaining process in which the terms of entry of a transferred practice are
negotiated between subsidiary and HQ. Where a subsidiary has significantpower of process, it
may use it to influence how global policies or practices are designed within the MNC, for
example by contributing to central policy-making bodies. This provides it with the opportunity
to ensure that the transferred practice is from the start compatible with the cognitive/normative
(or indeed regulatory) frames of the host. Finally, a subsidiary may be skilled in the
management of meaning, whether in highlighting or concealing normative/cognitive
discrepancies provoked by the transfer of a practice, or by mobilizing appropriate legitimatory
discourses within the micro-institutional sphere of the MNC. This power may affect transfer
outcomes in different ways. Where the subsidiarys stance is oppositional, it may evoke host
macro-institutional impediments, drawing on its skilled interpretation of institutions-in-
practice. Equally, where its other power capabilities are relatively weak, it may use its skills in
managing meaning to construct the ceremonial aspects of the practice without impinging on
the subsidiarys core activity. Where the subsidiarys stance is supportive of transfer, the power
of meaning may be brought to bear to secure the internalization (Kostova, 1999) of transferred
practices.
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Returning to the outcome parameters outlined in the introduction, we can synthesize the above
arguments (see table 2) in terms of typical scenarios, based on differentiation of functionality,
internalization, adaptation and directionality. The table indicates that the conditions most
conducive for successful transfer in which functional practices are internalized are where: HQ
actively wants to transfer practices, ID is low, dominance effects are high, institutional space is
high, HQs power capabilities are relatively strong, HQ and subsidiary interests are concordant
and the interests of subsidiary actors are homogeneous (model 1). To take a stylized example, a
US business services firm i.e. an MNC from the hegemonic business system, in a sector in
which that business system is internationally dominant transfers a performance appraisal
system to its professional employees in its non-unionized Irish subsidiary as part of the global
dissemination of standardized HR policies. Many of the employees have worked for American
firms before US MNCs predominate among foreign employers in Ireland and have studied
or worked in the US. Their cognitive/normative frames are attuned to American performance-
management systems, especially since there is a strong values-based corporate culture, and
there are unlikely to be discordant interests with regards to the policy, so the practice is likely to
be easily internalized. There are few macro-institutional constraints to the introduction of such
policies and few variant constraints stemming e.g. from the presence of trade unions.
This can be contrasted with five other scenarios. As ID increases and capabilities, particularly
resources, controlled by the subsidiary grow, the prospect of transfer taking the form of
functional hybridization increases (model 2). To illustrate, a US electronics MNC attempts to
transfer a performance-related pay system to the more constrained and institutionally distant
context of Germany.4 There is a perceived disjunction between the policy and
cognitive/normative frames of employees, i.e. the cross-institutional transfer reveals the
cognitive/normative underpinnings of the system. The subsidiary is large, successful and
powerful, giving it power over resources with which to negotiate with HQ a modification of the
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practice for example, by reducing the amount of pay at risk, to make it more acceptable within
the host context (e.g. Tempel et al., 2006).
Where dominance effects weaken, institutional space is more constrained, the subsidiary
possesses significant power of resources and process relative to HQ, and has divergent interests
from HQ, then the likelihood of resistive hybridization and low internalization rises (model 3).
For example, Lindholm et al. (1999) show how performance appraisal systems in Nordic MNCs
in China were subverted because the systems provoked extensive clashes with
cognitive/normative frames, e.g. with regards to the priority given to performance rather than
seniority, and issues around loss of face and around managerial authority in setting targets.
If dominance effects are absent, ID is high, and subsidiary interests clash with HQs, transfer
may fail altogether (model 4). To illustrate, a British MNC seeks to internationalize a policy of
outsourcing support functions to reduce labour costs. It pressurizes foreign subsidiaries where
the ratio of outsourced workers to internal employees is significantly lower than in UK
domestic operations. This is the case in the German subsidiary, one of the largest in the
company and with important production facilities for key products. Subsidiary managers are
sceptical as to the efficiency of outsourcing and the HR manager uses his detailed knowledge of
German employment law to circumvent the need to outsource functions (e.g. Tempel, 2002).
Where institutional space is moderate, the subsidiary is not particularly powerful (in resource or
process terms) in relation to HQ, and has quite different interests to actors at HQ, the prospects
for ceremonial adoption are at their highest (model 5). To take a stylized example, a British
MNC attempts to internationalize its comprehensive diversity management practices. In its
medium-sized production facilities in Germany, there is considerable scepticism among
managers and primarily male employees as to the business case for diversity management.
Lacking power of resources or process to openly block HQ practices, managers go through the
motions of introducing diversity management measures, for example by organizing social
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events under the label of diversity management, but do not implement real changes in
recruitment processes to encourage more female applicants or introduce diversity awareness
training for employees.
Finally, where interests are concordant and where the subsidiarys power capabilities are
considerable - especially when its institutional embeddedness allows it to develop scarce
resources of value to the wider MNC - conditions exist for reverse transfer (model 6). That is
to say, practices operating in the subsidiary are transferred to headquarters (Edwards and
Ferner, 2004). These conditions are heightened in situations of reverse dominance, that is
where the subsidiarys host system is more dominant than the MNCs parent system. For
example, a German chemical company developed a global system of bonus pay for executives
that was modelled closely on schemes already developed in the US subsidiary of the company
(Ferner and Varul, 2000).
These models are not, of course, exhaustive: other outcomes are possible; and the same transfer
outcome may be obtained through different combinations of variables. But they illustrate the
heuristic value of the approach. It should be noted that a certain degree of interaction of
explanatory variables is likely. For example, MNCs from dominant parent countries are likely
to be able to influence subnational variety because of their greater capacity for rule-making
rather than mere rule-taking behaviour.
[Table 2 about here]
Conclusion
This paper has argued for a revision of the Kostovian approach to practice transfer in MNCs in
two key respects: systematically incorporating actors power capabilities, and taking account of
how power problematizes ID by rendering it more susceptible to the purposive action of MNC
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actors. We have argued for an analysis of power that incorporates both macro-institutional and
micro-institutional capabilities of MNC actors in which these are able to a greater or lesser
extent to manipulate and construct elements of the institutional settings in which they operate.
The implications of the argument are methodological as well as conceptual. First, there is a
need to develop credible measures of the variables in the model. The concept of mID implies
the need to assess dominance effects, for example, and these will vary according to the pairs of
parent and host business systems in play; dominance may also vary e.g. by sector. Much work
needs to be done on measuring notions such as institutional space, and to map the dimensions
that characterize institutional variants. This has to be accomplished at a disaggregated level:
notions of country institutional profile may be too crude where MNCs power allows them to
construct niche institutional micro-climates. One of the most difficult tasks is to operationalize
actors power capabilities and to empirically assess different levels of capabilities in relation to
resource, process and meaning. Moreover, empirical tools capable of identifying and
distinguishing interests are needed, a task complicated by the fact that while some underlying
interests may be long-term and durable for example, around organizational survival others
may well be issue-specific, constructed anew around each instance of transfer.
These points suggest a critical role for in-depth case studies. They allow deeper exploration
both of the process of transfer and of how transferred practices are implemented in the routine
life of the subsidiary. They are more suited than surveys to developing nuanced
operationalizations and unpicking the complexities of power, how different kinds of power
capabilities are deployed by different actors in the transfer process, and how configurations of
interests are constructed around different transfer cases. They are more appropriate for
exploring in depth the way transferred practices operate in reality.
Finally, there is the question of the generalizability of these arguments to other areas of
management activity. Inasmuch as transfer provokes challenges to existing modes of action and
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to institutional frameworks, much of the same processes of power are likely to be observed in
other areas. The cross-national transfer of technical know-how, for example, exposes
underlying cognitive assumptions about how the production of knowledge and development of
products should be organized (e.g. Lam, 1997; Szulanski and Jensen, 2006). It is also likely to
create conflicts of interest over control of knowledge as a resource, or concerns about the
impact of transferred knowledge on the structuring of activities and actors roles in the recipient
unit. Beyond that, however, HR&EP may have distinctive characteristics, relating partly to the
structured antagonisms between capital and labour (Edwards, 1986). More immediately, as a
downstream business activity, HR&EP is particularly prone to the normative principles that
may be at odds with the prescriptions of upstream strategy, increasing the space for actors to
exploit micro-institutional ambiguities between, for instance, directives on growth, profitability
or efficiency on the one hand, and principles of employee management on the other.
Funding statement
This research was supported by funding from the Economic & Social Research Council, grant
numbers R000-23-8350 and RES-000-230305.
Notes
According to Scopus, the number of citations for three of Kostovas articles concerning
transfer (as at 15th September 2011) are as follows: Kostova, 1999: 321; Kostova and Zaheer,
1999: 329; Kostova and Roth, 2002: 281.
2 The term capabilities is preferred to resources since power over resources constitutes only
one dimension of power (one that is the focus of resource-based views of power that
predominate in the business literature).
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3 Perceptions of profitability in an MNC can be shaped by how costs are allocated and internal
pricing systems are designed by HQ actors.
4 We do not wish to imply that US MNCs invariably exhibit dominance. Although there may be
a general dominance effect deriving from the status of US firms in the world economy, more
specific aspects of dominance may depend on sectoral factors.
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Table 1a.Power capabilities of HQ actors
Level Kind of power capability
Power of resources Power of processes Power of meaning
Macro-institutional -global
Dominance effects (Smith and Meiksins, 1995) Influence over systemic decision-making rules (e.g.Levy and Egan, 2003; Sell, 2000)
Notions of globalization, competitiveness,markets etc. provide a legitimizing frame
(Campbell, 2004) for HQ actions
Macro-institutional -
national
Lobbying capabilities (e.g. DeVos, 1981)
Ability to influence sovereign states through
investment choices (direct, indirect)
Involvement in regulatory and normative bodies e.g.
employers associations
Mobilization of alternative cognitive/normative
frameworks
Macro-institutional
subnational
Influence over subnational governance actors such as
local authorities and development agencies
(decisions to invest and reinvest in locality) leading
to sub-national variants within host spaces
Embeddedness in local governance networks e.g. for
skills generation (e.g. Almond, 2011)
Creation of variant cognitive and normative frames,
e.g. concerning the role of skills within the local
labour market (e.g. Crouch et al., 2009)
Micro-institutional Material resources:
Control of sanctions and rewards for subsidiaries investment, know-how
Control of individuals recruitment, career andrewards (e.g. Drrenbcher and Geppert, 2009a)
Formal authority to define decision-making
structures and rules; power to determine which actorsare involved in rule-making
Control of cognitive frames e.g. through mission,
vision and value statements
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Table 1b. Power capabilities of subsidiary actors
Level Kind of power capability
Power of resources Power of processes Power of meaning
Macro-institutional -global
-- -- --
Macro-institutional -
national
Rights deriving from host regulatory framework, e.g.
consultation and codetermination
Privileged access to institutional decision-makers
(Drrenbcher and Gammelgaard, 2010)
Interpretative claims with regards to regulatory,
cognitive and normative frames
Macro-institutional
subnational
Mobilization of action networks to enhance
performance/ resist HQ impositions regional tradeunion bodies
Including resources derived from embeddedness in
local production networks
Embeddedness links with subnational governance
actors
Links into knowledge and skills networks (e.g.
Kristensen and Zeitlin, 2005) that shape local
institutional arrangements
Micro-institutional Material resources:
Leverage from economic performance (e.g.
profitability, % of global output/revenue/profits)
Delegated formal authority e.g. stemming from
corporate mandates
Challenges to HQ agendas
Manipulation of rival claims to legitimacy
Capacity to challenge on basis of macro-institutional
interpretations of institutions-in-practice
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TABLE 2 Predicted outcomes of power and institutional configurations
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
HQ desire to transfer H H H H H H
mID (modified institutional distance)
raw institutional distance L-M H L-H H L-H L-M
dominance effects H-M H M-L L L-H rev H-Minstitutional space (subnational variety) H H L L M L-H
subsidiary power capabilities M-Hr, p Hr, p, m Hr, m Hr Lr, pHm Hr
ratio of HQ:subsidiary power resources
macro-institutional H H-M M-L M-L H M-L
micro-institutional H H-M M-L M-L H M-L
Interest divergence HQ/subsidiary L L H H H L
Interest homogeneity in subsidiary H H L L H H
TRANSFER OUTCOME Successfultransfer, high
internalization
Functional
hybridization,
highinternalization
Resistive
hybridization,
lowinternalization
Failed transfer Ceremonial or
ritual
compliance,low
internalization
Reverse
transfer
H = high, M = medium, L = low; note: where a range of values is given (e.g. L-H) the specific outcome is insensitive to variations in the input.
rev = reverse dominance effects, i.e. the host business system is dominant in relation to the parent system
r= resource power; p = process power; m = meaning power
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Corresponding author:
Anthony Ferner
Leicester Business School
De Montfort University
Leicester
LE1 9BH
United Kingdom
Other authors
Tony Edwards
Department of Management
King's College LondonLondon
United Kingdom
Anne Tempel
Faculty of Business Studies and Economics
University of Dsseldorf
Universittsstrasse 1
D-40225 Dsseldorf
Germany