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Abstract. This paper investigates and models the transition process within established multinational corporations (MNCs) in moving from decentralized toward network-based structures. Whereas there has been substantial research on various MNC models, there has been little longitudinal research on the movement toward projected network-based models. This paper develops an evolutionary perspective of this transition, distinguishing adjustments altering how the MNC defines its "global" strategy, where it locates key resources, and how it structures and manages operations. It argues that rather then being a planned process, each phase represents a viable strategic response to thenexisting challenges and opportunities. The paper also argues that the focus of the process shifts over time, initially focusing on building organizational linkages and adjusting the quantity and nature of resources within dispersed units, and later shifting toward reallocating resources and roles across units.
An important stream of literature on multinational corporations (MNCs) relates to how they organize and manage worldwide operations. Distinctions have been made between two traditional models for established MNCs, originally described by Perlmutter [1969] as ethnocentric and polycentric models. These models essentially represent centralized and decentralized approaches, with key differences being their primary organizing principles and management systems for established worldwide operations. The 1980s witnessed extensive discussions of network-based MNC models [Hedlund 1986; Prahalad and Doz 1987; Bartlett and Ghoshal 1989; White and Poynter 1990], building on Perlmutter's geocentric model. Network-based models have been characterized as reflecting an integrated worldwide strategy through globally distributed but interdependent resources and activities. While previous studies have developed a rich administrative perspective of these models, one topic not adequately addressed has been investigating the transition process of how established MNCs move toward proposed network-based models. Investigating this process is in line with a long research tradition emphasizing the need to understand process to interpret outcome (e.g., Cyert and March [1963]; Simon [1976]).
This paper reports on the findings of a detailed longitudinal study at one traditionally decentralized firm, Citibank, focusing on its European corporate banking activities. It argues that the transition between decentralized and network-based approaches involves the gradual linking and integrating of previously autonomous affiliates through a series of identifiable phases, each representing viable strategic responses to then-existing external and internal challenges and opportunities. Building on organizational dimensions previously developed in...