- Elgar original reference
Edited by Pietro Mazzola and Franz W. Kellermanns
Chapter 20: Constructing Power to Drive Strategy Processes in Multinational Firms
Markus Venzin Over the years, subsidiaries have gained importance as sources of competitive advantage in many multinational companies (MNCs). Various subsidiary types have emerged (Birkinshaw and Hood, 1998): some subsidiaries are pure sales units, while others are hubs with a global mandate to undertake R&D, marketing, production or other value-creating activities. As a result of the geographically dispersed allocation of productive capabilities, most MNCs attempt to facilitate the peripheral development of knowledge, competences or other sources of competitive advantage. In order to unleash this potential, headquarters must learn how to involve subsidiaries in strategic decision-making processes, and find the right balance between subsidiary initiatives and central control. This chapter explores the role of power in strategy processes. How does power work in strategy processes that attempt to encourage subsidiaries to develop autonomous strategic initiatives rather than following induced strategic guidelines? Many headquarters feel a need to choose between a paternalistic management style in which power is fairly static and based on expert knowledge located at the headquarters and a liberal style in which power is more dynamic and dispersed in order to find the optimal position between decentralized decision making and central control. This chapter shows that these two management styles can co-exist. Firms need to learn how to switch from one style to another depending on the desired knowledge process. Furthermore, complex firms need to manage the dilemma that results from the opposing tendencies of stability and change. FREEDOM WITHIN BOUNDARIES In general, headquarters defines the boundaries of...
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