Ferner Power

8/2/2019 Ferner Power

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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


19/43

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


20/43

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


21/43

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


22/43

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.


23/43

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


24/43

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.


25/43

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


26/43

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


27/43

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


28/43

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


29/43

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).


30/43

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.


31/43

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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

[email protected]

Other authors

Tony Edwards

Department of Management

King's College LondonLondon

United Kingdom

[email protected]

Anne Tempel

Faculty of Business Studies and Economics

University of Dsseldorf

Universittsstrasse 1

D-40225 Dsseldorf

Germany

[email protected]

Ferner Power

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