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Most multinational enterprises (MNEs) face competitive pressure for both global integration and local responsiveness. Put differently, they can sell the same products and use the same strategies in some countries, while having to customise them to meet local conditions in others.
Over the years, we have seen many companies launch important strategic changes to address global competitive pressures, such as standardised internal work processes or joint procurement initiatives. However, these initiatives often fail due to strong resistance within the organisations.
Previous studies have pointed to the importance of organisational flexibility to meet multiple and shifting competitive pressures, yet very little about how these firms develop the necessary capabilities to achieve flexibility.
Legitimising, leveraging and launching
By following a Nordic multinational telecommunications company going through a major internationalisation process, we performed a longitudinal qualitative case study and conducted several interviews with managers and employees over a twelve-year period.
In our study, we found that organisational flexibility requires the development of three dynamic capabilities:
- Legitimising strategic change: The legitimisation of new initiatives are neither automatic nor purely HQ-driven; it is more about treating the different levels within the organisations as stakeholders and getting their buy-in by repackaging changes as win-win scenarios for value creation. For instance, subsidiaries can legitimise global integration when focusing on the opportunity to relieve co-workers from resource-demanding tasks that are not customer-oriented.
- Leveraging existing organisational strengths: Identify key organisational practices that have proven to be successful in the past, and use them to root proposed changes in existing systems, such as financial measures that are already in use to manage and incentivize subsidiaries.
- Launching selective change initiatives: This entails critically assessing which formal and informal initiatives to launch while taking into account efforts to legitimise and leverage.
A continuous process
Taken together, these three capabilities – legitimising, leveraging, and launching – allow the MNE to overcome important organisational impediments and develop organisational flexibility.
Too many firms focus on only one of these, without recognising the dynamic nature and interdependencies of all three capabilities. Developing organisational flexibility is a continuous process that requires learning from experience and linking the three capabilities to the most salient organisational impediments.
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Grøgaard, B., Colman, H.L., & Stensaker, I.G. (2019). Legitimizing, leveraging and launching: Developing dynamic capabilities in the MNE. Journal of International Business Studies. doi.org/10.1057/s41267-019-00245-5
Aguilera, R. V., & Grøgaard, B. (2019). The dubious role of institutions in international business. A road forward. Journal of International Business Studies, 50(1): 20-35.
Grøgaard, B., Rygh, A. & Benito, G.R.G. (2019). Bringing corporate governance into internalization theory: State ownership and foreign entry strategies. Journal of International Business Studies, 50(8): 1310-1337.
Text: Eivind Lindkvist Johansen, Communications Advisor, BI