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Introduction
International Rectifier Corporation, an undisguised US-based manufacturer of semiconductor and related devices, has, as of year 2000, five R&D, six manufacturing, and seven marketing units dispersed around the world. Facing the environmental pressures of increased globalization, the company needs to coordinate and control its units within each function by using a set of integrating mechanisms. Our example is a typical situation facing most multinational businesses (MNBs)1 competing in a global industry, and leads to a set of important and interesting questions for integrating business functions. Two of the questions form the basis of our research: What is the pattern of integrating modes that a firm uses to achieve effective global integration of its individual business functions? How does the pattern of integrating modes used in a business function affect the performance of the firm?
How should an MNB design its organization for effective global integration of business functions? This is a tremendous challenge for MNBs as they disperse business activities worldwide to cope with increased global pressures. Functional global integration here refers to coordination and control of individual business functions across borders. This issue is highly critical, as globalization occurs at the level of the function (Malnight, 1995). Although previous research has paid considerable attention to this issue (e.g., Mascarenhas, 1984; Malnight, 1995), we address several important limitations in the functional global integration literature. First, by examining the impact of functional global integration on economic performance we adopt a prescriptive approach, rather than the descriptive approach common to most prior studies. Second, as integrating modes are used jointly rather than individually we adopt a systems approach rather than a reductionistic approach to explore the relationship between global integration and performance. Third, we explore our research questions in an integrated global industry environment, recognizing that a firm's environmental context plays an important role in organizational design (Galbraith, 1973).
Given the impracticality of addressing all business functions, we focus on R&D, manufacturing, and marketing functions. For MNBs facing increased global competition, these functions are regarded as the primary sources of global transfer and integration for achieving scale, scope, and learning economies (Yip, 1992). Further, they are three of the most critical functions that can create competitive advantage for manufacturing firms (Malnight, 1995).
Our results show...