infonet-economy

Our current understanding of MNC organization has traditionally focused on the hierarchical interdependence between headquarters and subsidiaries. Yet, the pressure caused by globalizing markets and the rise of emerging market MNCs has forced all MNCs to escalate their search for ways to add value and to reduce costs. This effort has pushed firms to go beyond headquarter subsidiary integration, aligning multiple business functions and their typically interdependent activities through cross-functional integration along business processes. In this paper, we argue that the horizontal process organization is a distinct key component of any MNC's organizational structure, requiring equal consideration beyond the hierarchical structural organization perspective established in the integration responsiveness (IR) framework used to create typologies of MNCs' international strategy and structure (Bartlett and Ghoshal, 1987; Prahalad and Doz, 1987). To describe MNCs in a more meaningful way, one should consider not only the hierarchical interdependence between headquarters and subsidiaries but also the cross functional integration along business processes. We combine the literature on MNC's organizational structure in international business with the operations management literature on process organization to develop an extended integration framework. We then hypothesize eight typologies of MNCs and discuss respective examples from business practice. We conclude that the traditional focus on headquarter-subsidiary integration in the IR framework ignores a substantial variance among MNCs that could be better accounted for by considering MNCs' integration of business functions along their business processes.