K a trin G la tz e l E d ito ria l

Table 1
Organizational Characteristics
Configuration of assets
and capabilities
Role of overseas
operations
Development and diffusion
of knowledge
without sacrificing, or at least seriously compromising,
the others. 2 These dilemmas arose from the ways in
which companies configured their assets and capabilities,
assigned roles to their overseas units, and diffused
knowledge within the company.
With its resources and capabilities consolidated at the
center, the global company achieves efficiency primarily
by exploiting potential scale economies in all its activities.
Such a configuration of assets, however, also implies
that national subsidiaries are managed without any
slack resources and thus have neither the motivation nor
the ability to respond to local market needs. Similarly,
centralization of knowledge and skills allows the global
company to be highly efficient in managing innovations.
It can create new products and processes at relatively low
cost and high speed. Yet the central groups responsible
for innovation often lack adequate understanding of the
market needs and production realities outside of the
home market. Even when diverse local needs are under-
stood, the central responses can be inappropriate because
of either overspecification that tries to satisfy all the
demands, or a grand compromise that satisfies none.
Limited resources and the narrow implementation role
of its overseas units prevent the company from tapping
into learning opportunities outside its home environ-
ment. These are problems that a global organization can-
not overcome without jeopardizing its trump card of
global efficiency.
Multinational Global International
Decentralized and nationally
self-sufficient
Sensing and exploiting local
opportunities
Knowledge developed and retained
within each unit
Organizational Characteristics of Multinational, Global, and International Companies
Centralized and globally scaled Sources of core competencies
centralized, others decentralized
Implementing parent company
strategies
Knowledge developed and retained
at the center
Adapting and leveraging parent
company competencies
With dispersed resources and decentralized decision making,
subsidiaries of the multinational company can respond
to local needs, but the fragmentation of activities
inevitably carries efficiency penalties. Learning also suf-
The Transnational 23 Revue für postheroisches Management / Heft 5
Knowledge developed at the center
and transferred to overseas units
* Wiederabdruck mit freundlicher Genehmigung des Autors und
des Verlags. Erschienen in: Bartlett, Ghoshal: Managing Across
Borders: The Transnational Solution, 2nd ed. Boston, Mass.:
Harvard Business School Press 2002.
1 The concept of the transnational that we present in this chapter
has many features that have been highlighted by other authors.
The concept closest to our view, and the one that has substantially
influenced our approach and interpretations, is in the seminal
work of Perlmutter (1969). He developed a typology of different
multinational mentalities or cognitive orientations toward
international business, and this typology remains as valid today
as it was when proposed over two decades ago. He classified
multinationals as ethnocentric, polycentric, and geocentric:
The first refers to an approach of home country dominance that
is central to the centralized lab model we have described; the
second describes companies that treat each subsidiary on a country-by-country
basis, similar to our model of the decentralized
federation; and the third identifies companies that develop a cosmopolitan
and integrative style – an approach that is similar to
the organizational form we describe as the transnational.
Similarly, the heterarchy model of MNCs proposed by Hedlund
(1986), the multifocal organization described by Prahalad and
Doz (1987), and the horizontal organizational form suggested by
White and Poynter (1989) identify many of the environmental
and organizational forces that are driving multinational companies
to develop modern complex organizational capabilities
and highlight some of the features of what we describe as the
transnational. These models differ significantly in their levels
of specificity but share the overreaching conclusion that organizational
capability is increasingly the key constraint for effective
worldwide operations.
2 For a more theory-grounded discussion of these dilemmas, see
Ghoshal (1986).