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A big tent on an island — building bridges and communities in international management research
A BIG TENT ON AN I S L A N D BUILDING BRIDGES AND COMMUNITIES IN INTERNATIONAL MANAGEMENT RESEARCH Srilata Zaheer INTRODUCTION It is a pleasure and an honor to be asked to comment on the contributions of Chris Bartlett and Sumantra Ghoshal on this occasion of their receiving the AIM-IMD Distinguished Scholar Award. They have been mentors and friends, but perhaps more than anything else, they have inspired in me a deep respect and appreciation for what can be learned from the field. Bartlett and Ghoshal's most interesting contributions to international management are to be found in their book, Managing Across Borders (MAB), published in 1989 and in their 1986 Harvard Business Review and 1987 Sloan Management Review articles, and I will focus on these in my discussion. In all of these writings, we see the value of deep, systematic fieldwork and Bartlett and Ghoshal's ability to reduce the overwhelming complexity of the multinational enterprise (MNE) into a set of relatively parsimonious and powerful frameworks. In particular, their framework of the "transnational" organization, which is able to deal simultaneously with pressures for efficiency, flexibility and innovation, through an organizational model that is built on a coordinated network of differentiated subsidiaries, inspiring managers and academics alike with a vision of a new frontier for firms. This is a vision, in its ideal form, of a firm that makes no Advances in International Management, Volume 14, pages 69-81. Copyright © 2002 by Elsevier Science Ltd. All rights of reproduction in any form reserved. ISBN: 0-7623-0875-3
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compromise, draws on the best talent worldwide, and where distinctions between periphery and center fade in the pursuit of knowledge, value and excellence. Beyond the framework and this vision, the richness of their insights - subtle, nuanced, never simple - drawing from their intense engagement in studying the phenomenon of the MNE, is truly valuable to scholars and to practitioners. Like the work of Clifford Geertz, it is the "thick description" even the confusion that is evident in their stories of managers trying to manage the conflicting demands for efficiency, responsiveness and innovation placed on them, that brings MAB to fife. Whether it is in the stories of GE's failed attempts in consumer electronics, Unilever's success with transferring the brand concept in fabric softeners across markets, or ITT's efforts to create an integrated worldwide technological capability, each reading of MAB reveals fresh aspects of international organization. MAB quickly becomes the old friend who still has the ability to surprise. What Do We in International Management Learn from Their Work? The contribution of Bartlett and Ghoshal's work, the cases, the readings, and the ideas in MAB to MBA education and to management thought is indisputable. Their work stands with the work of Porter, Prahalad and Doz in the MBA and executive education classrooms, where we cannot begin to talk about international organization without drawing on the concepts in MAB. Their ideas on administrative heritage, on the limits of structure, and on the processes and mindsets that allow a complex organization to simultaneously address its efficiency, responsiveness and innovation goals resonate deeply with anyone who has worked in or observed these organizations. One of my first assignments in Sandoz (India) a few years after my MBA was to work with a team to create an organization that would balance the needs of product divisions with very different cultures and geographies within a country, across the firm's 26 sales subsidiaries. That was decades ago, and when I first came across the Coming case, I was fascinated at how classic a problem this was and wished I had had access to it when we were on the other side, trying to design a solution. While Bartlett and Ghoshal's normative contributions need no comment, we also owe them a great deal for their framing of our descriptive understanding of multinational organization, as MNEs respond to both external and internal economic pressures for efficiency, socio-political pressures for differentiation and long-term competitive pressures for innovation. While their frameworks build on the work of many others, among them Chandler (1962), Stopford and
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Wells (1972), Lawrence and Lorsch (1967), Perlmutter (1969), Prahalad (1976) and Doz (1980), and their work parallels to some extent the concurrent work on multinational strategy and organization of Hedlund (1986), Porter (1986) and Prahalad and Doz (1987), they have made many unique contributions to the literature. In a recent paper with Eleanor Westney (Westney & Zaheer, 2001), we review in some detail the evolution of this stream of work on multinational organization, with its focus on the evolution of the MNE itself toward the transnational form. Some of the most important ideas advanced in this literature by Bartlett and Ghoshal include the central role assigned to innovation in the complex firm, the idea of the MNE as a network of differentiated subsidiaries, and the parsimonious and powerful metaphor of the "transnational" itself. What Can Researchers in Organizational Studies Learn from Their Work?
Going beyond the world of international organization to the world of organization studies, Bartlett and Ghoshal's work in MAB is perhaps one of the more detailed and insightful studies of organizational processes in the complex organization at the 'meso' level in recent years. MAB came at a time when the study of organizational processes had been almost entirely abandoned by traditional organizational studies, a situation that has not changed very much as of today. Organization theorists had largely migrated to the population level, treating organizations as monolithic black boxes, at best classifying them into rather broad-brush categories, such as old or new, large or small. The micro organization behavior scholars have never been able to grasp fully the context within which the individuals and the groups they studied were embedded, despite many calls to do so and sporadic attempts to bring context into their work. Most extant work on organization at the meso level, such as the Aston studies, was already decades old and lay somewhat discredited, either as too simple (the centralization-decentralization dichotomy, for instance) or too archaic, not reflecting changes in organization that the IT revolution of the 1980s, for example, had enabled. It was in this wasteland that MAB came about, and the discussants are right on this - it is perhaps only in the 'big tent' of international management that such a study could even have been attempted at that point.
TWO QUESTIONS ON THEIR WORK In assessing the contributions of Bartlett and Ghoshal and in discussions of their work with others, I am often confronted with two questions. The first is: "Is the concept of the transnational truly a theory?", and the second is "Why
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has there been so little mainstream research following on from this work?" I will deal very briefly with the first question, and spend more of my time on the second, which is of greater concern.
Is the Transnational Model a Theory? To those who would ask this question, I have two answers - one that appeals to my positivist side, and the other to my interpretive side. In the sense that a theory is "a systematically related set of statements, including some lawlike generalizations, that is empirically testable" (Rudner, 1966, p. 10), there are certainly elements of implicit theory inherent in the concept of the transnational corporation. For instance, the transnational model does contain several lawlike cause-effect generalizations - for one, that finns that distribute and coordinate responsibilities worldwide in an "integrated network" model will be able to simultaneously maximize worldwide efficiency, responsiveness and learning. Is this empirically testable? In an ideal world of unlimited access to the world's MNCs and unlimited resources, it could be. In reality, it would obviously be very difficult, if not impossible, to do. However, the criterion of empirical testability of a theory is about possibility rather than about feasibility or practicality. So, on these grounds alone, one cannot rule out the likelihood that there are elements of theory embedded in the transnational model. However, my anti-positivist side says, "Who cares whether the transnational model is a testable theory or not!" What is important is its power as a metaphor, as a catalyst that crystallizes a vision of the modern finn as one where the periphery can become more central, where knowledge and responsibility are widely shared and where nothing is compromised in the pursuit of excellence. These ideas have power - they inspire managers, force us academics to reexamine some of our basic assumptions, and provide us with insight and understanding of this very important organizational form, and that is good enough for me.
Why Have Researchers Not Done More with the Transnational Model? The second question, however, is one that concerns me more deeply: Why have we, as a field, not even begun to integrate Bartlett and Ghoshal's frameworks on international organization into mainstream research and scholarship in significant ways, more than 10 years after the publication of MAB? This is perhaps a reflection of some failure in the field and a serious problem for all of us who like to think of ourselves as students of international organization. The discussants talk of the "low-hanging" fruit in international management as having disappeared - I say there is a ton of fruit lying on the ground to be
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picked up, in danger of rotting or being forgotten if we let it stay there much longer. We can always blame the empirical difficulties associated with extending and testing concepts of this breadth and grandeur, but that is not an acceptable excuse as there are many ideas embedded in Bartlett and Ghoshal's work that are tractable and insightful and that could inform a variety of research streams. There are several different reasons why academics have not fully drawn on this work. I will focus in this paper on a couple of these - the missing "bridges" to other theories in use, to the contexts in which the MNE operates, and the absence of a community of meso-level organizational scholars who can draw on and add to this work in their research. The Island o f the Transnational
The frameworks and concepts advanced in MAB have remained, to some extent, an island unbridged. While the "Notes" to MAB are replete with references to the theoretical streams that Bartlett and Ghoshal draw on, there have been few attempts to explicitly link the work on the transnational to other theories or frameworks, even where there are obvious connections. For instance, how does the transnational framework speak to theories of the multinational enterprise? Surely, there are complementarities and perhaps even challenges as they both examine different aspects of the same phenomenon? In all of MAB, there is an implicit competitive dimension - a belief that organizational capability is a difficult-to-imitate source of sustainable competitive advantage - but the connections from the elements of transnational organization to elements of competitive advantage have never been sufficiently articulated or tested. How does the transnational framework connect to the literature on sustainable competitive advantage and, in particular, to the resource-based view of the firm? While the idea that the multinational firm has an in-built source of knowledge creation and innovation in the requisite variety that exists across its subsidiaries is widely accepted (Kogut, 1983), there have been but a handful of studies that systematically explore exploration and exploitation of knowledge, or variation, selection and retention of organizational patterns and practices in the multinational enterprise. Apart from the missing bridges to theory, scholars have tended to treat the transnational framework as being general enough to be universal, neglecting its origins and roots in the concepts of administrative heritage and locational context. The interaction of location with organization, while a fundamental premise behind the concept of administrative heritage articulated in MAB, remains an area where efforts to achieve greater conceptual clarity and links with other literatures are urgently needed. The role of location and institutional
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context in influencing the configuration of the MNE, and its legitimacy, are burning questions that need research attention. In the following sections, I offer a few thoughts on where I feel the missing bridges are to theory and to context from Bartlett and Ghoshal's work. As is usual in such pieces, I also offer some ideas on where research efforts in these areas are needed, and hope these ideas will not remain calls in the wilderness. I will end with some thoughts on how to create the energy and excitement provided by a community of researchers.
Bridges to Theory and Context While there are many theories to which the transnational model can be linked, such as theories of market positioning or network theories of the firm, I have chosen to focus on three that I think will be particularly beneficial for researchers to examine. These are the theory of the multinational enterprise, the resource-based view of the firm, and theories of knowledge creation and sharing.
The Theory of the Multinational Enterprise The theory of the multinational enterprise (Buckley & Casson, 1976; Dunning, 1979; Hennart, 1982) has focused on why the multinational enterprise exists, given that there are costs of doing business abroad. Variants of the theory have focused on a few key explanations for the existence of the multinational enterprise, among them the presence of firm-specific advantages (also called "ownership" advantages), which enable a firm to be competitive in foreign markets, location-specific advantages that prompt resource-seeking forays into other countries and, finally, internalization advantages (owing to transaction costs and/or market failures) that prompt direct investments in other countries in order to benefit from firm or location-specific advantages (Dunning, 1979). The ideal "transnational" clearly speaks to all of these advantages. For one, efficiency, flexibility and innovation could all be sources of firm-specific advantage. The implicit assumption behind the transnational is that all of these dimensions are important in certain industries (those on the high/high/high zone of the "pressures for integration - pressures for responsiveness - pressures for innovation" grid), though finns have some choice on the specific strategic positions they might take on this grid and, for that matter, on the location of specific activities on the grid. What is perhaps missing is the implicit reference point of competitive advantage. Are efficiency, flexibility and responsiveness necessary or sufficient sources of distinctiveness or differentiation from competition for the focal finn?
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Further, how should the distribution of responsibilities across subsidiaries in terms of what activities are performed in which location, and which parts of the network will require greater or lesser coordination, reflect the need to manage, nurture and protect sources of firm-specific advantage? The differentiated c o m p e t i t i v e needs of different local and global markets are a further source of complexity to be managed in addition to environmental complexity and local resource availability (Ghoshal & Nohria, 1997), in determining how subsidiaries should be managed. I raised some of these issues in an earlier study (Zaheer, 1995) where I examined the performance implications for subsidiaries of copying local best practice versus importing a best practice from the parent corporation: one could speculate that value-adding activities that provide a multinational corporation with its firm-specitic advantage are best carded out in a globally integrated manner (whether the integration happens through centralization or through coordination or through ... systematic replication ...) but that other value-adding activities, those in which the multinational has no particular advantage over local firms (or even faces a disadvantage), are best left to the discretion of the subunit. Of course, an MNE may have different advantages over its competitors in various markets, a factor that shifts the choice from the simple one of whether a particular activity should be managed in an integrated or responsive fashion, to the more complex issue of the transnational management ... of networks of subunits (Zaheer, 1995, p. 360). •
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The question of which location gets to play the lead role for a particular activity worldwide, a key element in transnational organization, is clearly dependent both on questions of which subsidiary is most competent to carry out that activity (i.e. where firm-specific advantage is strongest) and on the locationspecific advantages discussed in the theory of the multinational enterprise. We need research that integrates and empirically validates these perspectives. If we consider the firm competitiveness issues that arise from the interaction of firmand location-specific advantage in conjunction with the organizational model of the transnational, we generate a whole new set of questions on the competitive advantage of the transnational firm. For instance, is it better to locate worldwide responsibility in a subsidiary that faces strong competitors locally or in one that faces weak competitors locally? Under what conditions is competitive advantage driven by location or by traditional resources and capabilities versus the nature of coordination within the firm? When we come to the question of internalization advantages - the transnational model of a differentiated and integrated network of subunits immediately raises a host of questions on the boundaries of the multinational corporation. With an almost infinite range of ownership and alliance modes possible for M N C activities worldwide ranging from 100% owned branches to majority-owned subsidiaries to 5 0 - 5 0 and minority-owned joint ventures or
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subsidiaries to alliances, where does the internal network end and the extended network begin (Nohria & Ghoshal, 1997), and how are they different? If a strategic alliance parmer makes major strategic decisions that affect the firm, should that partner be any less a part of the "integrated network" of the transnational than a 100% owned subsidiary playing a minor role in the value chain? Are our existing definitions of multinational enterprise adequate to account for the extended transnational network? When employees of a multinational, such as Nortel, work long-term in teams with a group of employees of an independent software firm in India who work exclusively for Nortel, how can we continue as researchers to examine internal networks independently of external networks (Westney & Zaheer, 2001)? There is a wealth of such questions linking the "integrated network" model of the transnational corporation with issues of firm, location and internalization advantages from the theory of the multinational enterprise that beg further theoretical and empirical development.
The Resource-based View of the Firm Proponents of the resource-based view of the firm (Penrose, 1959; Wemerfelt, 1984; Barney, 1991) focus on the internal resources of the firm, and suggest that organizational resources that are rare, valuable, and difficult to imitate or substitute can be a source of sustainable competitive advantage to the firm. The transnational model with its complex and, to a large extent, unique-to-eachfirm configuration of responsibilities and its focus on process and people would, at the very least, be difficult to imitate for a competing firm, as process knowledge is often tacit, and there is some causal ambiguity about the effects - the costs and benefits - of different processes. Competing firms may attempt to substitute other configurations and processes in their pursuit of a transnational model, but the particular combination of administrative heritage and processes developed by each firm is unlikely to be identically replicated and will serve to differentiate a firm from others. Thus, while there are some basic shared features across firms that attempt to implement a transnational model - such as distributed worldwide responsibility or extensive crosssubsidiary communication and coordination, it is very unlikely that two firms pursuing this type of model will in fact be organizationally identical. The question then arises, is the transnational model, as interpreted by each firm, valuable in the sense of providing it with a source of competitive advantage? Addressing the value of transnational organization as a resource would also sharpen our understanding of the "costs of transnationalism," an area that has not received much attention. Under what conditions is the transnational model more valuable than a non-transnational model? If two
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firms both pursue different versions of the transnational model, will one enjoy a sustainable competitive advantage over the other, or are all manifestations of the transnational model substitutes and therefore equally valuable? Are there conditions under which one variant - say one that focuses on communication rather than dispersed responsibility - more appropriate and valuable than another variant? Does the value of such variants depend on which of the outcomes pursued by the MNC - efficiency, responsiveness or learning - are currently most valuable, and might that change over time? Are efficiency, responsiveness and learning themselves sustainable sources of competitive advantage? These are clearly questions that need both theoretical and empirical attention, as they form the basis for many of the arguments in favor of the transnational model. Theories of Knowledge Creation and Exploitation
Theories of knowledge management or knowledge creation and sharing are perhaps some of the most closely linked theories to Bartlett and Ghoshal's transnational model and to the multinational enterprise (Kogut & Zander, 1993; Gupta & Govindarajan, 2000). After all, as Ghoshal and Nohria (1997, p. 208) suggest, " . . . a key advantage of the multinational arises from its ability to create new value through the accumulation, transfer and integration of different kinds of knowledge, resources and capabilities across its dispersed organizational units" Yet, here again, few attempts have been made to link the transnational model to extant theories of knowledge creation and retention at different levels of analysis. For example, how does the transnational model connect with theories of learning from variation-selection-retention (VSR) at the organizational level (Campbell, 1969; Burgelman, 1991; Madsen et al., 1999) or to theories of exploration and exploitation (March, 1991)? The multiple goals of flexibility (responsiveness) and efficiency clearly resonate with the concepts of variation and retention, or exploration and exploitation. Theorists who brought the VSR model into the world of organizations have typically assumed that all that is required is some requisite level of variation, and a mechanism for selection and retention for knowledge to be created and diffused within the organization. The variation itself could be accidental or intentional. In a sense, bringing a variation-retention approach to the transnational model would suggest that responsiveness (variation) and efficiency (retention) are the primary goals, and that learning or innovation should be an outcome of the balanced pursuit of responsiveness and efficiency. VSR theories or theories of exploration and exploitation typically gloss over how the balance between variation and retention is to be achieved, or even what
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the selection process is that determines which variations will get selected and how in fact they will be retained or diffused throughout the organization in the exploitation phase. It is these gaps in theory, gaps in the description of processes and mechanisms through which exploration tunas into exploitation that the transnational model can help fill. What the transnational model contributes to our understanding of VSR and exploration-exploitation theories at the organizational level is an understanding of the "hows": How does an organization balance variation (responsiveness) and retention (efficiency)? How do variations get selected, and through what mechanisms are they retained in the organization (the innovation process)? By explicitly drawing attention to the innovation and learning dimension, in addition to efficiency and responsiveness, the transnational model serves to remind researchers that variation and retention may not automatically feed off each other or exist in balance in a complex organization, without appropriate processes and selection mechanisms, and perhaps an element of intentionality, that ensure that this happens. Along similar lines, there is much that the transnational model could add to, and draw from, more micro theories of knowledge creation and sharing, such as theories of transactive knowledge and memory (Wegner, 1986; Liang, Moreland & Argote, 1995). A major feature of these theories is the idea that innovative processes require different types of knowledge: the knowledge held by an individual or a unit itself, as well as "resource knowledge" - knowledge available with the individual or unit about where other needed knowledge resides (Rulke, Zaheer & Anderson, 2000).
Bridges to Context: Questions of Location and Legitimacy Another set of missing bridges from the transnational model is the link to the institutional context in which subsidiaries are embedded. While the transnational model traces its roots to Bartlett's (1986) work, which is firmly anchored in the concept of administrative heritage, it tends to become a little "dislocated" in its pursuit of universal concepts. While the subsidiary environment plays a major role in how responsibility is distributed, the environment tends to be described in fairly universal terms, such as "complexity" or "resource richness" (Ghoshal & Nohria, 1997). As a result, we lose some of the institutional detail and particularity that characterizes differences across locations (Guillen, 2001). We have to find ways to bring context back into the transnational model, in order to address issues such as questions of MNE and subsidiary legitimacy (Kostova & Zaheer, 2000), or of the relationship between locational factors such the presence of clusters and the structure of value-added in the MNE.
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As mentioned earlier, the location and configuration of value-adding activities, while central to the concept of distributed responsibility in the transnational model, have also received scant research attention. We need work that addresses the interaction of location with the transnational organizational model. For example, how does the country or region of location influence the selection of a particular subsidiary as a lead subsidiary with worldwide responsibility for an activity? In turn, how does this type of geographically distributed responsibility influence the legitimacy of the MNE organization in specific host countries? With the increasing loudness of voices against globalization and the consequent pressure on MNEs to justify their existence in both advanced and developing economies, questions of MNE legitimacy and moral capital (Kostova & Zaheer, 1999), and their relationship to the decisionmaking structures of the transnational organizational model, need urgent research attention. A Big Tent can be a Lonely Place
Finally, I believe that one reason for the relatively slow progress in building on and extending Chris Bartlett and Sumantra Ghoshal's work in international management is that we no longer have a true community of scholars working on meso-level international organizational issues. The community that Chris and Sumantra talk about with such enthusiasm in their discussion existed between the late 1970s and the early 1990s, and was primarily a group of people who had been to school at Harvard together, though the group readily welcomed others, such as Gunnar Hedlund and Eleanor Westney, who shared a field-based approach to studying the multinational enterprise. Today, I can name about half a dozen young scholars (with some difficulty) who are doing interesting work on international organizational issues at the meso level. However, there is little shared history in this group. They are located in different departments, some in strategy, some in IB/IM, and some in organization theory or in organization behavior. Some of them are in institutions that favor normative work, and others are in institutions that favor discipline-oriented work. They work on different aspects of MNE organization using different theoretical lenses and methodological approaches. As a result, they are often completely oblivious of each other's research. While I am all for theoretical and methodological pluralism, I find the fragmentation and the lack of any sense of community among the few who plough their lonely furrows in the field of international organization a serious impediment to our making any progress in the area. The "big tent" of international management can sometimes be a very lonely place. As concerned scholars in the area, we can do
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something about this, and we must. I will end by asking for ideas and support, from Chris and Sumantra, from the editors of A I M and IM Division members to help us collectively try to create this c o m m u n i t y and pass on some of the energy and excitement that Chris and Sumantra feel in having "ringside seats" at the birth of the new MNE, to future generations of scholars,
REFERENCES Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17, 99-120. Bartlett, C. A. (1986). Building and managing the transnational:The new organizationalchallenge. In: M. E. Porter (Ed.), Competition in Global Industries (pp. 367-404). Boston, MA: Harvard Business School Press. Bartlett, C. A., & Ghoshal, S. (1986). Tap Your SubsidiariesFor Global Reach. Harvard Business Review, 64(4), 87-94. Bartlett, C. A., & Ghoshal, S. (1987a). Managing Across Borders: New Strategic Requirements. Sloan Management Review, 28(4), 7-17. Bartlett, C. A., & Ghoshal, S. (1987b). Managing Across Borders: New Strategic Requirements. Sloan Management Review, 29(1), 43-53. Bartlett, C. A., & Ghoshal, S. (1989). Managing Across Borders: The Transnational Solution. Boston, MA: Harvard Business School Press. Buckley, P. J., & Casson, M. C. (1976). The Future of the Multinational Enterprise. London: Holmes and Meier. Burgelman, R. A. (1991). Intraorganizational Ecology of Strategy-making and Organizational Adaptation: Theory and Field Research. Organization Science, 2, 239-262. Campbell, D. T. (1969). Variation and Selective Retention in Socio-cultural Evolution. General Systems, 16, 69-85. Chandler, A. P. (1962). Strategy and Structure. Cambridge, MA: MIT Press. Doz, Y. (1980). Strategic Management in Multinational Companies. Sloan Management Review, 21(1), 27-46. DunningJ. H. (1979). ExplainingChanging Patterns of InternationalProduction:In Defense of the Eclectic Theory. Oxford Bulletin of Economics and Statistics, (November),34-48. Guillen, M. F. (2001). The Limits of Convergence: Globalization and Organizational Change in Argentina, South Korea, and Spain. Princeton, NJ: Princeton UniversityPress. Gupta, A. K., & Govindarajan,V. (2000). Knowledge Flows Within Multinational Corporations. Strategic Management Journal, 2•(4), 473-496. Hedlund, G. (1986). The HypermodernMNC: A Heterarchy? Human Resource Management, 25, 9-35. Hennart, J. E (1982). A Theory of Multinational Enterprise. Ann Arbor, MI: University of Michigan Press. Kognt, B. (1983). Foreign direct investment as a sequential process. In: C. Kindleberger & D. Audretsch (Eds), The Multinational Corporation in the 1980s (pp. 38-56). Cambridge, MA: MIT Press. Kogut, B., & Zander, U. (1993). Knowledge of the Firm and the Evolutionary Theory of the MultinationalCorporation. Journal of lnternational Business Studies, 24(4), 62~645.
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Kostova, T., & Zaheer, S. (1999). Organizational Legitimacy Under Conditions of Complexity: The Case of the Multinational Enterprise. Academy of Management Review, 24(1), 64-81. Lawrence, E R., & Lorsch, J. W. (1967). Differentiation and Integration in Complex Organizations. Administrative Science Quarterly, 12, 1-47. Liang, D., Moreland, R., & Argote, L. (1995). Group Versus Individual Training and Group Performance: The Mediating Role of Transactive Memory. Personality and Social Psychology Bulletin, 2•(4), 384-393. Madsen, T., Mosakowski, E., & Zaheer, S. (1999). Static and Dynamic Variation and Finn Outcomes. In: J. Baum & W. Mckelvey (Eds), Variations in Organization Science: In Honor of Donald T. Campbell (pp. 213-236). Beverly Hills, CA: Sage Publications. March, J. G. (1991). Exploration and Exploitation in Organizational Learning. Organization Science, 2, 71-87. Nohria, N., & Ghoshal, S. (1997). The Differentiated Network: Organizing Multinational Corporations for Value Creation. San Francisco: Jossey-Bass. Penrose, E. (1959). The Theory of the Growth of the Firm. New York: Wiley. Perlmutter, H. (1969). The Tortuous Evolution of the Multinational Corporation. Columbia Journal of World Business, 5(1), 9-18. Porter, M. E. (1986). Competition in Global Industries: A Conceptual Framework. In: M. E. Porter (Ed.), Competition in Global Industries (pp. 15-60). Boston, MA: Harvard Business School Press. Prahalad, C. K. (1976). Strategic Choices in Diversified MNCs. Harvard Business Review, 54(4), 67-78. Prahalad, C. K., & Doz, Y. 0987). The Multinational Mission: Balancing Local Demands and Global Vision. New York: The Free Press. Rudner, R. S. (1966). Philosophy of Social Science. Englewood-Cliffs, NJ: Prentice Hall. Rulke, D, Zaheer, S., & Anderson, M. (2000). Sources of Managers' Knowledge of Organizational Capabilities. Organizational Behavior and Human Decision Processes, 82(1), 134-149. Stopford, J. M., & Wells, L. T., Jr. (1972). Managing the Multinational Enterprise: Organization of the Firm and Ownership of the Subsidiaries. New York: Basic Books. Wemerfelt, B. (1984). A Resource-based View of the Firm. Strategic Management Journal, 5, 171-180. Westney, D. E., & Zaheer, S. (2001). The Multinational Enterprise as an Organization (Chap. 13). ln: A. Rugman & T. Brewer (Eds), Oxford Handbook of International Business (pp. 349379). Oxford: Oxford University Press. Zaheer, S. (1995). Overcoming the Liability of Foreignness. Academy of Management Journal, 38(2), 341-363.
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compromise, draws on the best talent worldwide, and where distinctions between periphery and center fade in the pursuit of knowledge, value and excellence. Beyond the framework and this vision, the richness of their insights - subtle, nuanced, never simple - drawing from their intense engagement in studying the phenomenon of the MNE, is truly valuable to scholars and to practitioners. Like the work of Clifford Geertz, it is the "thick description" even the confusion that is evident in their stories of managers trying to manage the conflicting demands for efficiency, responsiveness and innovation placed on them, that brings MAB to fife. Whether it is in the stories of GE's failed attempts in consumer electronics, Unilever's success with transferring the brand concept in fabric softeners across markets, or ITT's efforts to create an integrated worldwide technological capability, each reading of MAB reveals fresh aspects of international organization. MAB quickly becomes the old friend who still has the ability to surprise. What Do We in International Management Learn from Their Work? The contribution of Bartlett and Ghoshal's work, the cases, the readings, and the ideas in MAB to MBA education and to management thought is indisputable. Their work stands with the work of Porter, Prahalad and Doz in the MBA and executive education classrooms, where we cannot begin to talk about international organization without drawing on the concepts in MAB. Their ideas on administrative heritage, on the limits of structure, and on the processes and mindsets that allow a complex organization to simultaneously address its efficiency, responsiveness and innovation goals resonate deeply with anyone who has worked in or observed these organizations. One of my first assignments in Sandoz (India) a few years after my MBA was to work with a team to create an organization that would balance the needs of product divisions with very different cultures and geographies within a country, across the firm's 26 sales subsidiaries. That was decades ago, and when I first came across the Coming case, I was fascinated at how classic a problem this was and wished I had had access to it when we were on the other side, trying to design a solution. While Bartlett and Ghoshal's normative contributions need no comment, we also owe them a great deal for their framing of our descriptive understanding of multinational organization, as MNEs respond to both external and internal economic pressures for efficiency, socio-political pressures for differentiation and long-term competitive pressures for innovation. While their frameworks build on the work of many others, among them Chandler (1962), Stopford and
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Wells (1972), Lawrence and Lorsch (1967), Perlmutter (1969), Prahalad (1976) and Doz (1980), and their work parallels to some extent the concurrent work on multinational strategy and organization of Hedlund (1986), Porter (1986) and Prahalad and Doz (1987), they have made many unique contributions to the literature. In a recent paper with Eleanor Westney (Westney & Zaheer, 2001), we review in some detail the evolution of this stream of work on multinational organization, with its focus on the evolution of the MNE itself toward the transnational form. Some of the most important ideas advanced in this literature by Bartlett and Ghoshal include the central role assigned to innovation in the complex firm, the idea of the MNE as a network of differentiated subsidiaries, and the parsimonious and powerful metaphor of the "transnational" itself. What Can Researchers in Organizational Studies Learn from Their Work?
Going beyond the world of international organization to the world of organization studies, Bartlett and Ghoshal's work in MAB is perhaps one of the more detailed and insightful studies of organizational processes in the complex organization at the 'meso' level in recent years. MAB came at a time when the study of organizational processes had been almost entirely abandoned by traditional organizational studies, a situation that has not changed very much as of today. Organization theorists had largely migrated to the population level, treating organizations as monolithic black boxes, at best classifying them into rather broad-brush categories, such as old or new, large or small. The micro organization behavior scholars have never been able to grasp fully the context within which the individuals and the groups they studied were embedded, despite many calls to do so and sporadic attempts to bring context into their work. Most extant work on organization at the meso level, such as the Aston studies, was already decades old and lay somewhat discredited, either as too simple (the centralization-decentralization dichotomy, for instance) or too archaic, not reflecting changes in organization that the IT revolution of the 1980s, for example, had enabled. It was in this wasteland that MAB came about, and the discussants are right on this - it is perhaps only in the 'big tent' of international management that such a study could even have been attempted at that point.
TWO QUESTIONS ON THEIR WORK In assessing the contributions of Bartlett and Ghoshal and in discussions of their work with others, I am often confronted with two questions. The first is: "Is the concept of the transnational truly a theory?", and the second is "Why
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has there been so little mainstream research following on from this work?" I will deal very briefly with the first question, and spend more of my time on the second, which is of greater concern.
Is the Transnational Model a Theory? To those who would ask this question, I have two answers - one that appeals to my positivist side, and the other to my interpretive side. In the sense that a theory is "a systematically related set of statements, including some lawlike generalizations, that is empirically testable" (Rudner, 1966, p. 10), there are certainly elements of implicit theory inherent in the concept of the transnational corporation. For instance, the transnational model does contain several lawlike cause-effect generalizations - for one, that finns that distribute and coordinate responsibilities worldwide in an "integrated network" model will be able to simultaneously maximize worldwide efficiency, responsiveness and learning. Is this empirically testable? In an ideal world of unlimited access to the world's MNCs and unlimited resources, it could be. In reality, it would obviously be very difficult, if not impossible, to do. However, the criterion of empirical testability of a theory is about possibility rather than about feasibility or practicality. So, on these grounds alone, one cannot rule out the likelihood that there are elements of theory embedded in the transnational model. However, my anti-positivist side says, "Who cares whether the transnational model is a testable theory or not!" What is important is its power as a metaphor, as a catalyst that crystallizes a vision of the modern finn as one where the periphery can become more central, where knowledge and responsibility are widely shared and where nothing is compromised in the pursuit of excellence. These ideas have power - they inspire managers, force us academics to reexamine some of our basic assumptions, and provide us with insight and understanding of this very important organizational form, and that is good enough for me.
Why Have Researchers Not Done More with the Transnational Model? The second question, however, is one that concerns me more deeply: Why have we, as a field, not even begun to integrate Bartlett and Ghoshal's frameworks on international organization into mainstream research and scholarship in significant ways, more than 10 years after the publication of MAB? This is perhaps a reflection of some failure in the field and a serious problem for all of us who like to think of ourselves as students of international organization. The discussants talk of the "low-hanging" fruit in international management as having disappeared - I say there is a ton of fruit lying on the ground to be
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picked up, in danger of rotting or being forgotten if we let it stay there much longer. We can always blame the empirical difficulties associated with extending and testing concepts of this breadth and grandeur, but that is not an acceptable excuse as there are many ideas embedded in Bartlett and Ghoshal's work that are tractable and insightful and that could inform a variety of research streams. There are several different reasons why academics have not fully drawn on this work. I will focus in this paper on a couple of these - the missing "bridges" to other theories in use, to the contexts in which the MNE operates, and the absence of a community of meso-level organizational scholars who can draw on and add to this work in their research. The Island o f the Transnational
The frameworks and concepts advanced in MAB have remained, to some extent, an island unbridged. While the "Notes" to MAB are replete with references to the theoretical streams that Bartlett and Ghoshal draw on, there have been few attempts to explicitly link the work on the transnational to other theories or frameworks, even where there are obvious connections. For instance, how does the transnational framework speak to theories of the multinational enterprise? Surely, there are complementarities and perhaps even challenges as they both examine different aspects of the same phenomenon? In all of MAB, there is an implicit competitive dimension - a belief that organizational capability is a difficult-to-imitate source of sustainable competitive advantage - but the connections from the elements of transnational organization to elements of competitive advantage have never been sufficiently articulated or tested. How does the transnational framework connect to the literature on sustainable competitive advantage and, in particular, to the resource-based view of the firm? While the idea that the multinational firm has an in-built source of knowledge creation and innovation in the requisite variety that exists across its subsidiaries is widely accepted (Kogut, 1983), there have been but a handful of studies that systematically explore exploration and exploitation of knowledge, or variation, selection and retention of organizational patterns and practices in the multinational enterprise. Apart from the missing bridges to theory, scholars have tended to treat the transnational framework as being general enough to be universal, neglecting its origins and roots in the concepts of administrative heritage and locational context. The interaction of location with organization, while a fundamental premise behind the concept of administrative heritage articulated in MAB, remains an area where efforts to achieve greater conceptual clarity and links with other literatures are urgently needed. The role of location and institutional
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context in influencing the configuration of the MNE, and its legitimacy, are burning questions that need research attention. In the following sections, I offer a few thoughts on where I feel the missing bridges are to theory and to context from Bartlett and Ghoshal's work. As is usual in such pieces, I also offer some ideas on where research efforts in these areas are needed, and hope these ideas will not remain calls in the wilderness. I will end with some thoughts on how to create the energy and excitement provided by a community of researchers.
Bridges to Theory and Context While there are many theories to which the transnational model can be linked, such as theories of market positioning or network theories of the firm, I have chosen to focus on three that I think will be particularly beneficial for researchers to examine. These are the theory of the multinational enterprise, the resource-based view of the firm, and theories of knowledge creation and sharing.
The Theory of the Multinational Enterprise The theory of the multinational enterprise (Buckley & Casson, 1976; Dunning, 1979; Hennart, 1982) has focused on why the multinational enterprise exists, given that there are costs of doing business abroad. Variants of the theory have focused on a few key explanations for the existence of the multinational enterprise, among them the presence of firm-specific advantages (also called "ownership" advantages), which enable a firm to be competitive in foreign markets, location-specific advantages that prompt resource-seeking forays into other countries and, finally, internalization advantages (owing to transaction costs and/or market failures) that prompt direct investments in other countries in order to benefit from firm or location-specific advantages (Dunning, 1979). The ideal "transnational" clearly speaks to all of these advantages. For one, efficiency, flexibility and innovation could all be sources of firm-specific advantage. The implicit assumption behind the transnational is that all of these dimensions are important in certain industries (those on the high/high/high zone of the "pressures for integration - pressures for responsiveness - pressures for innovation" grid), though finns have some choice on the specific strategic positions they might take on this grid and, for that matter, on the location of specific activities on the grid. What is perhaps missing is the implicit reference point of competitive advantage. Are efficiency, flexibility and responsiveness necessary or sufficient sources of distinctiveness or differentiation from competition for the focal finn?
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Further, how should the distribution of responsibilities across subsidiaries in terms of what activities are performed in which location, and which parts of the network will require greater or lesser coordination, reflect the need to manage, nurture and protect sources of firm-specific advantage? The differentiated c o m p e t i t i v e needs of different local and global markets are a further source of complexity to be managed in addition to environmental complexity and local resource availability (Ghoshal & Nohria, 1997), in determining how subsidiaries should be managed. I raised some of these issues in an earlier study (Zaheer, 1995) where I examined the performance implications for subsidiaries of copying local best practice versus importing a best practice from the parent corporation: one could speculate that value-adding activities that provide a multinational corporation with its firm-specitic advantage are best carded out in a globally integrated manner (whether the integration happens through centralization or through coordination or through ... systematic replication ...) but that other value-adding activities, those in which the multinational has no particular advantage over local firms (or even faces a disadvantage), are best left to the discretion of the subunit. Of course, an MNE may have different advantages over its competitors in various markets, a factor that shifts the choice from the simple one of whether a particular activity should be managed in an integrated or responsive fashion, to the more complex issue of the transnational management ... of networks of subunits (Zaheer, 1995, p. 360). •
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The question of which location gets to play the lead role for a particular activity worldwide, a key element in transnational organization, is clearly dependent both on questions of which subsidiary is most competent to carry out that activity (i.e. where firm-specific advantage is strongest) and on the locationspecific advantages discussed in the theory of the multinational enterprise. We need research that integrates and empirically validates these perspectives. If we consider the firm competitiveness issues that arise from the interaction of firmand location-specific advantage in conjunction with the organizational model of the transnational, we generate a whole new set of questions on the competitive advantage of the transnational firm. For instance, is it better to locate worldwide responsibility in a subsidiary that faces strong competitors locally or in one that faces weak competitors locally? Under what conditions is competitive advantage driven by location or by traditional resources and capabilities versus the nature of coordination within the firm? When we come to the question of internalization advantages - the transnational model of a differentiated and integrated network of subunits immediately raises a host of questions on the boundaries of the multinational corporation. With an almost infinite range of ownership and alliance modes possible for M N C activities worldwide ranging from 100% owned branches to majority-owned subsidiaries to 5 0 - 5 0 and minority-owned joint ventures or
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subsidiaries to alliances, where does the internal network end and the extended network begin (Nohria & Ghoshal, 1997), and how are they different? If a strategic alliance parmer makes major strategic decisions that affect the firm, should that partner be any less a part of the "integrated network" of the transnational than a 100% owned subsidiary playing a minor role in the value chain? Are our existing definitions of multinational enterprise adequate to account for the extended transnational network? When employees of a multinational, such as Nortel, work long-term in teams with a group of employees of an independent software firm in India who work exclusively for Nortel, how can we continue as researchers to examine internal networks independently of external networks (Westney & Zaheer, 2001)? There is a wealth of such questions linking the "integrated network" model of the transnational corporation with issues of firm, location and internalization advantages from the theory of the multinational enterprise that beg further theoretical and empirical development.
The Resource-based View of the Firm Proponents of the resource-based view of the firm (Penrose, 1959; Wemerfelt, 1984; Barney, 1991) focus on the internal resources of the firm, and suggest that organizational resources that are rare, valuable, and difficult to imitate or substitute can be a source of sustainable competitive advantage to the firm. The transnational model with its complex and, to a large extent, unique-to-eachfirm configuration of responsibilities and its focus on process and people would, at the very least, be difficult to imitate for a competing firm, as process knowledge is often tacit, and there is some causal ambiguity about the effects - the costs and benefits - of different processes. Competing firms may attempt to substitute other configurations and processes in their pursuit of a transnational model, but the particular combination of administrative heritage and processes developed by each firm is unlikely to be identically replicated and will serve to differentiate a firm from others. Thus, while there are some basic shared features across firms that attempt to implement a transnational model - such as distributed worldwide responsibility or extensive crosssubsidiary communication and coordination, it is very unlikely that two firms pursuing this type of model will in fact be organizationally identical. The question then arises, is the transnational model, as interpreted by each firm, valuable in the sense of providing it with a source of competitive advantage? Addressing the value of transnational organization as a resource would also sharpen our understanding of the "costs of transnationalism," an area that has not received much attention. Under what conditions is the transnational model more valuable than a non-transnational model? If two
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firms both pursue different versions of the transnational model, will one enjoy a sustainable competitive advantage over the other, or are all manifestations of the transnational model substitutes and therefore equally valuable? Are there conditions under which one variant - say one that focuses on communication rather than dispersed responsibility - more appropriate and valuable than another variant? Does the value of such variants depend on which of the outcomes pursued by the MNC - efficiency, responsiveness or learning - are currently most valuable, and might that change over time? Are efficiency, responsiveness and learning themselves sustainable sources of competitive advantage? These are clearly questions that need both theoretical and empirical attention, as they form the basis for many of the arguments in favor of the transnational model. Theories of Knowledge Creation and Exploitation
Theories of knowledge management or knowledge creation and sharing are perhaps some of the most closely linked theories to Bartlett and Ghoshal's transnational model and to the multinational enterprise (Kogut & Zander, 1993; Gupta & Govindarajan, 2000). After all, as Ghoshal and Nohria (1997, p. 208) suggest, " . . . a key advantage of the multinational arises from its ability to create new value through the accumulation, transfer and integration of different kinds of knowledge, resources and capabilities across its dispersed organizational units" Yet, here again, few attempts have been made to link the transnational model to extant theories of knowledge creation and retention at different levels of analysis. For example, how does the transnational model connect with theories of learning from variation-selection-retention (VSR) at the organizational level (Campbell, 1969; Burgelman, 1991; Madsen et al., 1999) or to theories of exploration and exploitation (March, 1991)? The multiple goals of flexibility (responsiveness) and efficiency clearly resonate with the concepts of variation and retention, or exploration and exploitation. Theorists who brought the VSR model into the world of organizations have typically assumed that all that is required is some requisite level of variation, and a mechanism for selection and retention for knowledge to be created and diffused within the organization. The variation itself could be accidental or intentional. In a sense, bringing a variation-retention approach to the transnational model would suggest that responsiveness (variation) and efficiency (retention) are the primary goals, and that learning or innovation should be an outcome of the balanced pursuit of responsiveness and efficiency. VSR theories or theories of exploration and exploitation typically gloss over how the balance between variation and retention is to be achieved, or even what
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the selection process is that determines which variations will get selected and how in fact they will be retained or diffused throughout the organization in the exploitation phase. It is these gaps in theory, gaps in the description of processes and mechanisms through which exploration tunas into exploitation that the transnational model can help fill. What the transnational model contributes to our understanding of VSR and exploration-exploitation theories at the organizational level is an understanding of the "hows": How does an organization balance variation (responsiveness) and retention (efficiency)? How do variations get selected, and through what mechanisms are they retained in the organization (the innovation process)? By explicitly drawing attention to the innovation and learning dimension, in addition to efficiency and responsiveness, the transnational model serves to remind researchers that variation and retention may not automatically feed off each other or exist in balance in a complex organization, without appropriate processes and selection mechanisms, and perhaps an element of intentionality, that ensure that this happens. Along similar lines, there is much that the transnational model could add to, and draw from, more micro theories of knowledge creation and sharing, such as theories of transactive knowledge and memory (Wegner, 1986; Liang, Moreland & Argote, 1995). A major feature of these theories is the idea that innovative processes require different types of knowledge: the knowledge held by an individual or a unit itself, as well as "resource knowledge" - knowledge available with the individual or unit about where other needed knowledge resides (Rulke, Zaheer & Anderson, 2000).
Bridges to Context: Questions of Location and Legitimacy Another set of missing bridges from the transnational model is the link to the institutional context in which subsidiaries are embedded. While the transnational model traces its roots to Bartlett's (1986) work, which is firmly anchored in the concept of administrative heritage, it tends to become a little "dislocated" in its pursuit of universal concepts. While the subsidiary environment plays a major role in how responsibility is distributed, the environment tends to be described in fairly universal terms, such as "complexity" or "resource richness" (Ghoshal & Nohria, 1997). As a result, we lose some of the institutional detail and particularity that characterizes differences across locations (Guillen, 2001). We have to find ways to bring context back into the transnational model, in order to address issues such as questions of MNE and subsidiary legitimacy (Kostova & Zaheer, 2000), or of the relationship between locational factors such the presence of clusters and the structure of value-added in the MNE.
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As mentioned earlier, the location and configuration of value-adding activities, while central to the concept of distributed responsibility in the transnational model, have also received scant research attention. We need work that addresses the interaction of location with the transnational organizational model. For example, how does the country or region of location influence the selection of a particular subsidiary as a lead subsidiary with worldwide responsibility for an activity? In turn, how does this type of geographically distributed responsibility influence the legitimacy of the MNE organization in specific host countries? With the increasing loudness of voices against globalization and the consequent pressure on MNEs to justify their existence in both advanced and developing economies, questions of MNE legitimacy and moral capital (Kostova & Zaheer, 1999), and their relationship to the decisionmaking structures of the transnational organizational model, need urgent research attention. A Big Tent can be a Lonely Place
Finally, I believe that one reason for the relatively slow progress in building on and extending Chris Bartlett and Sumantra Ghoshal's work in international management is that we no longer have a true community of scholars working on meso-level international organizational issues. The community that Chris and Sumantra talk about with such enthusiasm in their discussion existed between the late 1970s and the early 1990s, and was primarily a group of people who had been to school at Harvard together, though the group readily welcomed others, such as Gunnar Hedlund and Eleanor Westney, who shared a field-based approach to studying the multinational enterprise. Today, I can name about half a dozen young scholars (with some difficulty) who are doing interesting work on international organizational issues at the meso level. However, there is little shared history in this group. They are located in different departments, some in strategy, some in IB/IM, and some in organization theory or in organization behavior. Some of them are in institutions that favor normative work, and others are in institutions that favor discipline-oriented work. They work on different aspects of MNE organization using different theoretical lenses and methodological approaches. As a result, they are often completely oblivious of each other's research. While I am all for theoretical and methodological pluralism, I find the fragmentation and the lack of any sense of community among the few who plough their lonely furrows in the field of international organization a serious impediment to our making any progress in the area. The "big tent" of international management can sometimes be a very lonely place. As concerned scholars in the area, we can do
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something about this, and we must. I will end by asking for ideas and support, from Chris and Sumantra, from the editors of A I M and IM Division members to help us collectively try to create this c o m m u n i t y and pass on some of the energy and excitement that Chris and Sumantra feel in having "ringside seats" at the birth of the new MNE, to future generations of scholars,
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