Different forms of agency and institutional influences within multinational enterprises.

Zusammenfassung

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RESEARCH ARTICLE

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Different forms of agency and institutional influences within multinational enterprises.

Abstract:

* Given their exposure to diverse institutional settings, decision making in multinational enterprises (MNE) is marked by inconsistencies and conflict. Within the comparative institutional analysis (CIA) literature, such inconsistencies are seen as a source of experimentation or innovation. By contrast, in the international business (IB) literature, institutions are primarily understood as constraints on MNE activity. The latter focuses on 'institutional effects' taking institutions as stable and determining of social agency. As a way of addressing this limitation, we aim to understand the conditions that enable actors to engage in strategic action despite institutional pressures towards statis.

* The research draws on systematic comparative case studies of two large MNEs in the chemical industry, headquartered in Germany and the UK, and operating in Italy, Germany, and Poland. It focuses on one example of agency, subsidiary efforts to change product formulations that are successfully developed by the headquarters.

* We demonstrate that agency within MNEs is influenced by a fit between MNE coordination structures shaped by home country institutions and host country institutions' demands for flexibility or collaboration.

* Institutional incompatibilities between home and host contexts are unlikely to trigger actors' reflective capacity to change if the actors cannot draw on supportive coordination structures in the MNE. This is not just an 'institutional distance' argument as is commonly understood in IB. It is related to whether local institutions support the subsidiary to take advantage of specific opportunities conditioned by the home country institutions.

Keywords: Embedded agency * Host institutions * Institutional incompatibility * MNE coordination structures

Introduction

Decision making in MNEs is marked by inconsistencies and conflict owing to their exposure to diverse institutional settings. Although institutions are primarily understood as constraints on MNE activity, inconsistencies between them can be a source of experimentation or innovation. Inspired by this theoretical insight, we aim to understand the conditions that enable actors to engage in strategic action despite institutional pressures towards staffs. We emphasize the enabling effects of institutions and demonstrate the importance of a fit between MNE coordination structures shaped by home country institutions and host country institutions' demand for flexibility or collaboration in fostering agency.

Institutional theory has provided a rich theoretical foundation in MNE research (e.g. Dacin et al. 2002; Djelic and Quack 2003). However, most IB scholars have adopted a narrow view of institutions, drawing predominantly on the institutional economics understanding of institutions as 'rules of the game' (North 1990). They study institutions in terms of how diverse regulatory rules and legal norms affect the performance of MNEs (Brouthers 2002) or expose firms to politically-related hazards (Delios and Henisz 2000). Accordingly, institutions are understood as constraints on MNE activity, through transaction costs, differing resource environments or institutional distance. In this view, actors are understood as agents for legitimizing organizations to enhance the organization's likelihood of survival (Jackson and Deeg 2008). However, this view of institutions and their relationship to the agency of individual actors in the MNE is rather constrained. Achieving and maintaining legitimacy are difficult for MNEs given their operation in multiple, fragmented, often conflicting institutional environments (Kostova et al. 2008). Ambiguity created by such diversity can create room for strategic responses to institutions that involve creative reinterpretation and redeployment of resources for new purposes (Jackson 2005). In other words, the exposure to multiple institutional environments can trigger innovative change. Institutional change can result as actors use contradictions to reflect on the limits of existing institutional arrangements and to inspire ideas for new ones (Hardy and Maguire 2008). The question of how actors are enabled to engage in institutional work remains largely unanswered (Battilana and D'Aunno 2009). Consequently, we aim to address how institutionally-embedded actors are enabled t...

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