The Role of Headquarters
New Horizons in International Business series
Edited by Ulf Andersson and Ulf Holm
Chapter 5: Evaluating the Role of Parent HQ in a Contemporary MNC
William G. Egelhoff INTRODUCTION Much has been written about how MNCs have changed over the past 20 years. They are dealing with a much more global and much more competitive environment. And many MNCs are reported to have transformed themselves into flatter, more network-like organizations. Assuming this is the case, what is the future role of a parent HQ in such a network organization? To date this question has received little or no attention. The roles of foreign subsidiaries have been widely discussed, and one often gets the impression that tomorrow’s MNC will consist of subsidiaries, their new differentiated roles, and their flexible relationships with each other (Ghoshal et al., 1994; Birkinshaw, 2000; Forsgren et al., 2005). Largely missing from this picture is the fate of the parent HQ. As its primary task, this chapter will attempt to evaluate the role of the parent HQ in MNCs with network organization structures. First, the chapter will briefly describe the competitive environments and strategies that characterize contemporary MNCs. Next it will discuss the functioning of MNCs with network organization structures. Then the bulk of the chapter will attempt to (1) evaluate where network organization structures fail to provide adequate coordination and where hierarchical structures with HQs are required, and (2) evaluate how the horizontal specialization and centralization of deep conceptual knowledge at the HQ level can improve an organization’s capability to develop new knowledge. COMPETITIVE ENVIRONMENTS AND STRATEGIES Most contemporary MNCs face challenging competitive environments, characterized by rapid technological and/or market change,...
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