Bartlett and Ghoshal 1991
Bartlett and Ghoshal 1991
SUMANTRA GHOSHAL
INSEAD, Fontainebleau, France
Historically, North American companies have suffered a major handicap as they expanded internationally-they were located in the worlds largest, richest and most sophisticated market. This benign curse led managers in a large number of U. S.-based multinational corporations (MNCs) to regard their international operations somewhere along a spectrum between attractive sidebet and distractive nuisance. At best they were thought of as organizational appendages that generated incremental revenue, but whose role was tangential to the mainstream of corporate strategy. In some ways this attitude was reflected in the academic community. In the management field, international research was often treated as a specialized and rather esoteric field. It had its uses: just incorporating the new dimensions of the global environment forced some researchers to rethink their comfortable models; for others, studying the practices of non-U.S.-based companies illuminated often subtle culturally biased assumptions about strategies or organizations; and for many the added complexity of the international environment provided a stress laboratory for testing certain assumptions developed in the process of analyzing domestic markets. Overall, however, while some of these efforts were considered interesting, most were
014>2095/Y 1/05OO05- 12$06.00 1991 by John Wiley & Sons, Ltd.
regarded as having marginal relevance to the mainstream of the field. It was the powerful and dramatic impact of foreign competition, particularly from Japan, that jolted awake most American managers, and with them, students and analysts of management and firm behavior. What followed was a decade when managers, consultants and academics alike made global one of the most overused adjectives in the business lexicon. As we were flooded with definitions and analyses of global competition, global strategies, and global organizations, it became increasingly clear that rather than representing a special case, the study of industries, strategies and organizations in their global context needed to be regarded as the norm. With this change, the fields of international business and strategic management have begun to find increasingly common ground, particularly as researchers in both fields began to focus on the development and management of global strategy. Indeed, as we read through the papers submitted for this Special Issue, we became aware that the most interesting and provocative had gone beyond trying to define the field of global strategy, identifying the ways in which it differed from domestic strategy, or testing traditional models in a global environment. Instead, they used their own findings as well
as the accumulating body of concepts and frameworks that have emerged from recent research in the field of international management to challenge some of the established assumptions and theories that dominate the strategy field. As a result, one of the criteria we used in selecting the final group of papers from those that filtered through the review process was that the authors not only had an important contribution to make in the area of global strategy, but also that they helped define and inform the broader debate on strategy research. As those two fields converge, it is important to understand how research findings in each informs and stimulates the other. A brief review of the evolution of research in these two areas of inquiry will highlight the differences in the origins and traditions of the two fields. In doing so. we will emphasize the contributions and lessons international business brings to strategic management (just as we would focus on the opposite if we were writing for the Joiirtiul of lriterriutioriul Business Studies).
foundation the field began to develop in many different, complementary streams-sometimes flowing along in parallel, sometimes merging, and other times branching off from each other. Building directly on Hymers contribution, a wave of research in the 1970s led to increasingly sophisticated explanations of foreign direct investment in terms of oligopolistic competition among firms (e.g. Kindleberger, 1969; Caves, 1971; Knickerbocker, 1973; Graham, 1974). Meanwhile, Raymond Vernon (1966) and his students were moving the focus down from the industry level to the level of the firm. Vernons product cycle theory linked the flows in international trade and international investment by focusing on the observed behaviors of MNCs. By the late 1970s, influenced by the work of Oliver Williamson (1975), an important new stream of research emerged that moved the focus further within the firm-into its internal processes of information transfer-to explain the existence and behavior of MNCs (e.g. Buckley and Casson, 1976; Rugman, 1981; Hennart, 1982). Over a period of a decade and a half the field had shifted its focus from the international FROM INTERNATIONAL BUSINESS TO economy to the firm and, even within the firm, INTERNATIONAL MANAGEMENT to its internal organizational processes. Rather The international business (IB) area has become than compartmentalizing the diverse approaches, increasingly interesting to scholars of strategic this shifting focus led to a broader and more management primarily for the body of knowledge eclectic approach to the phenomena. The prothat has been accumulated in its extensive and gression into lower and lower levels of analysis wide-ranging literature. But some have also only emphasized the need for a multi-level theory begun to see important differences in the way to provide a more complete explanation of the the two fields have developed. Probably because increasingly complex patterns of foreign direct it has evolved from the work of scholars from a investment by multinational companies (Dunning, variety of functional areas, IB seems to have 1977, 1988). Simultaneously, a parallel stream of interdeveloped a broader and more eclectic theoretical base and has established stronger traditions of national management (IM) research was cross-disciplinary integration. Such lessons may developing with a stronger administrative focus. well be the most important ones that researchers Aharoni (1966) examined the process of foreign in strategic management can learn from their direct investment from a more managerial perspective, while Stopford and Wells (1972), Franko new international colleagues. Like strategic management, IB is a relatively (1976), Dyas and Thanheiser (1976) and others young academic field. Until the 1960s. most 1B extended Chandlers work (1962) to examine the research was focused on trade flows between strategy and structure of MNCs. Taking the nation states, reflecting the fields roots in classic perspective to an even more managerial level, a macroeconomic theories and, particularly. in the group of students of Joseph Bower built on the theory of comparative advantage. But, beginning research traditions of the so-called process with Stephen Hymers seminal thesis (1960), the school to examine management actions and field began to pay increasing attention to patterns strategic processes in MNCs (e.g. Prahalad, 1975; of foreign direct investment triggered by the Doz, 1976; Bartlett, 1979). Another group was rapid post-war expansion of MNCs. On this pursuing similar work under Lars Otterbecks
refined in more formal research. Of this early work, the Andrews (1971) model probably became the most influential, shaping the views of a full generation of students. Perhaps its greatest contribution was to articulate a concept of corporate strategy that was unusually broad and inclusive. The relevant environment was defined in terms of the economy, technology, ecology, industry, society and politics; strategy encompassed both the broad patterns of purposes and policies defining the company and its business as well as the more specific choice of product markets; and organization was conceptualized not only in terms of structure, processes and leadership, but also as the unique portfolio of corporate resources and distinctive competence they embodied. Over the years this concept of business policy was subjected to increasing challenge and criticism. On one side, practitioners wanted to reduce the complexity and generality to more applied and quantifiable tools. On the other, academics wanted to move the broad normative models toward a more explicit discipline-based theory of strategy. Both gave birth to new initiatives in the development of the field. In response to the former demands, the decade of the 1970s saw the development of increasingly sophisticated strategic planning processes. Representative of the proliferation of highly quantified and prescriptive portfolio models and factoranalytic tools were the BCG growth-share matrix (Henderson, 1973) and the PIMS model (Buzzell etal., 1975). By the close of the decade, however, there was growing disillusionment that something as complex as corporate strategy could be reduced to boxes and bubbles or regression coefficients. The frustration was evident at a 1977 conference organized by Dan Schendel and Charles Hofer, which was held at the University of Pittsburgh under the auspices of the Business Policy and Planning Division of the Academy of Management. This conference marked an important renewal and revitalization of strategic management (including formalizing this new name for the field) and triggered a round of empirical research that brought it academic respectability and recognition. By the 1980s the initiative had passed fully from the consultants to various academics who were determined to provide the field with new concepts that provided more robust taxonomies
and testable relationships. Perhaps the most influential was Michael Porter (1980), who made important contributions by linking the theory of industrial organization (10) to the business policy traditions represented by Andrews and others. This industrial organization-based view of strategy significantly enriched the environmental analysis dimensions of the Andrews model, particularly in analyzing a firms industry structure and competitive position. In doing so, however, most I 0 economists focus led them to view industry structure as the primary determinant of the competitive rules of the game, and thus of firm strategy. The internal organization, competence and resource variables that were the other half of the Andrews framework became peripheral to their analysis. Unfortunately. the economists prodigious efforts were not matched by more administratively oriented strategy researchers, and the field developed a strong 1 0 orientation. Nonetheless, the tools these researchers brought to bear on this promising area of study were powerful. As a result the decade of the 1980s saw the development of new concepts of strategic management that were considerably more refined and rigorous than t h e underdeveloped and often flimsy concepts of the early writers. The field finally began to develop a stronger theoretical base, clearer concepts, and testable hypotheses. But the progress came at a price. In contrast to the broad and encompassing view of strategy that involved effective matching of external environmental analysis with internal organizational capabilities, the successful interlinking of formulation and implementation, and the creative development of an interdependent strategy and structure, the new streams of research tended to have a narrower and more focused perspective. Thus, just as the environment came to be conceived primarily in terms of a detailed industry analysis (Porter, 1980). the previous rich view of strategy was also simplified to become something considerably less, like interactive competitive games (e.g. Karnani, 1984) or product-market positioning (Day, 1981). And the broad perspective of organization as a portfolio of resources assembled to build distinctive competence was often ignored or perhaps reduced to the classic yet mechanistic M-Form hierarchy model (Williamson, 1975). As a result a field once
variety. Such stimulus, we believe, can help trigger and facilitate this next round of evolution of the field of strategic management. For example, the notion of competitive advantage being based in differentiated resource portfolios is a very familiar one to a field that counts Ricardo as one of its earliest contributors. As the macroeconomists who dominated the early development of the IB field were subsequently joined by microeconomists and eventually by managerial researchers, this foundation in the theory of comparative advantage has remained a distinct feature of the field. Through such collaboration this underlying resource-based view of competitive advantage has been translated across units of analysis from nation states to industry to firms. Not surprisingly, this emerging view of strategy has found one of its richest areas of application in understanding the strategic behaviors of multinational companies (Prahalad and Hamel, 1990). Because of the strikingly different portfolios of resources and capabilities that are developed by companies nurtured in different economic, political, and social environments, the international context clearly offers a rich opportunity to develop this important new research stream. Similarly, the multinational corporation provides a particularly rich context for developing the more administratively focused view of strategy as suggested by the process scholars. When organizational units are separated by large barriers of distance and time, and managers are isolated by differences in language and culture, the administrative challenges become both complex and highly observable. It is not surprising, therefore, that much of the recent work on organizational and administrative processes in large companies has been carried out within the field of international management (e.g. Prahalad and Doz, 1987; Hedlund, 1986; Bartlett and Ghoshal, 1989), and this body of work provides a basis for further research on the strategy process. The papers in this volume provide ample evidence of these contributions that international management research can make to the development of the strategy field. These papers deal with broad, overlapping issues and they often span multiple levels of analysis. Any effort to categorize such a diverse and rich ser of articles inevitably runs the risk of doing injustice to the authors and their contributions. Yet, to organize the
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volume and to relate the papers to the broad argument we have presented, we will describe them in three categories corresponding to three important research domains in the field of strategic management: the environment and environment-strategy interactions, strategy and competitive advantage, and organization.
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nations and firms, both papers challenge us to STRATEGY AND COMPETITIVE broaden our perception of the relevant strategic ADVANTAGE forces in a companys operating environments. Some of the papers in this volume also challenge As influential as they were in the area of the traditional view of how the environment environmental analysis, the economists most influences firm strategy and action. Given their profound impact on the SM field was in the disciplinary roots, the IO-based strategy models analysis and understanding of firm-level strategic tended to be relatively static and a-historical. behavior. By grounding their research in oligopoly Since the environment was viewed as an exogen- theory supported by the attending discipline of ous reality, strategy became an analytical exercise econometric estimation, they brought to this of adapting to changing environmental demands. topic a level of rigor and quantification that had Despite some notable efforts to model the previously been absent. Yet there was a cost. role of history in industrial organization and $Rooted as they were in a theory of markets, competition (e.g. Kreps and Spence, 1983), an industrial economics-based strategy models overwhelmingly large proportion of theoretical tended to view strategy almost exclusively in and empirical work continued to reflect a zero- terms of a firms actions in its output markets. based view of strategy in which little attention A theory of excess profits was grounded in the was paid to the effects of internal organization, theory of market imperfections. As a result. the firms culture, or history as moderators of the mechanisms for building, protecting and exploiting such imperfections in favor of the firm the process of environmental adaptation. Once again, by focusing on firms that are became the conceptual anchors for research on products of very different cultures and histories, strategy content. Increasingly, this exclusive focus on output research on global strategy has increasingly revealed the fallacy of such a zero-based and a- markets has been questioned by the emerging historical view of strategy. These studies have resource-based perspective to which we referred highlighted the continuous and on-going interac- in the introductory section. While some authors tions between organizational and environmental have represented this view in competitive terms vis-ti-vis the more mainstream economic paraforces that shape a firms strategy and actions. Both David Collis analysis of the global digm, we share the view expressed by Collis in competition in the bearings industry and Bruce this volume that this new framework for strategic Koguts explanation of persistent differences in analysis supplements and enriches the traditional country competitiveness make compelling cases IO-based models and does not supplant them. for such a dynamic and historically based view We also believe, however, that building this of the process of environmental adaptation and internally focused part of the Andrews model to change. Collis analysis shows how differences the same level of rigor and precision as the in their cultural heritages and physical infrastruc- externally oriented part has been built represents tures led Minebea, SKF and RHP-three com- one of the more exciting opportunities for strategy petitors in the bearings industry-to respond very researchers in the 1990s. Almost all the papers included in this volume differently to the same set of environmental forces they confronted. Koguts model of country contribute to this resource based view of strategy competitiveness is similarly based on the notion in one way or the other. In fact this may well of path dependency that influences the pattern represent the thread that holds these papers of evolution of organizing principles of nations together. Some, however, ground their arguments which, in turn, serve as the bedrock of their in this emerging perspective more explicitly than international competitive advantage. In essence, the others. both papers echo an argument made by Andrews David Collis analysis of the global bearings over twenty-five years ago: that the creative art industry is explicitly grounded in three conceptsof matching environmental opportunities with a administrative heritage, core competency, and companys distinctive competence and other organizational capability-and he demonstrates internal resources establishes its economic mis- how these concepts can be applied, in an sion. internally consistent way, to understand and
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explain the strategic behaviors of firms. His analysis demonstrates the compatibility of these arguments, as well as the benefits of combining such an internally focused analysis with the external orientation of industry and competitive analysis. Stephen Tallmans paper, while very different in its objectives and methodological approach, shares a common point of view with that of Collis. Tallman compares the resource based perspective directly with both the industrial economics and transaction cost based theories of the firm to explore the strategy, structure and performance linkages for multinational corporations. His analysis of competition among firms of European and Japanese origin in the U.S. automobile market not only demonstrates the power of the resource-based perspective to explain differences in strategic approaches and market share performances of firms, but also suggests how application to the context of global competition can potentially enrich and enhance this new perspective. The papers by Gary Hamel and by Nitin Nohria and Carlos Garcia-Pont apply the resource and competency perspective to the analysis of a relatively new phenomenon of considerable significance: that of large companies cooperating with one another through the formation of strategic alliances and networks. While Hamels focus is on dyadic relationships within an alliance, Nohria and Garcia-Pont investigate the broader web of relationships that are emerging to link groups of competitors from diverse national origins. While focusing on a common phenomenonthat of collaboration among competitors-the two papers adopt very different methodologies and levels of analysis to pursue very different objectives. Hamels research is aimed at understanding the process of skill transfer within an alliance, and the factors that influence this process. Nohria and Garcia-Pont, in contrast, aim to explain the pattern of relationships that are formed by competitors. Despite such differences, their overall conclusions are very similar: alliances are formed to acquire new skills and competencies, and the networks of alliances that emerge as a consequence represent efforts by a group of firms to match the collective capabilities of other groups.
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variety of American, European and Japanese MNCs, these authors review seven major strands of organization theory to suggest that, while each or at least most of the theories can be useful for dealing with some specific and relatively narrow set of questions, none of them are robust enough to serve as a broad umbrella to guide MNCrelated research. Finally, these authors describe a new paradigm that is evolving from the work of a group of process scholars in the field of multinational management and suggest that this new paradigm is relatively more useful for research on such complex organizations.
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opportunities for strategy researchers in the 1990s. Perhaps the most powerful impact of global strategy research will result from the magnitude and rapidity of change that it has helped us describe and understand. The dramatic changes that have occurred in environmental forces, industry structure and firm behavior are individually and collectively having a profound impact on managers' jobs at every level of the organization. In this context a persuasive case can be made that the job of the general manager in today's multinational corporation is fundamentally different from that of his or her counterpart in the same company in the 1960s. Andrews described a general manager who was, in most respects, an heroic figure who determined the company's strategic direction. delegated responsibility for implementation, and monitored results and rewarded performance. Although there was some dispute about the degree to which that role was executed through deliberate strategic planning versus logical incremental actions (Quinn, 1980), the task was largely defined in terms of the comparatively constrained and stable corporate environment in which the general manager was assumed to operate in that era. The management context described by authors in this Special Issue is vastly different. The globalization of markets. technology. and competition has increased both the scope and the dynamics of management's relevant operating environment (see the papers by Collis. Kogut. and Kobrin), straining top management's ability to perceive, let alone understand, all the information vital to the company's strategy. Firm boundaries, once assumed to be clearly defined. have become increasingly fuzzy and permeable. as companies create a complex network of relationships with suppliers, customers. governments, and competitors that greatly complicate ability to develop and deploy vital resources and capabilities (see Nohria and Garcia-Pont. Hamel). Even within the corporation, the clear command and control structure of the classic hierarchy has been eroded by de-layering and transformed by the power of new information technologies into a network form where the management of horizontal information flows is at least as important as control over the classic vertical processes (see Doz and Prahalad, Kim and Mauborgne).
ACKNOWLEDGEMENTS
When we accepted Dan Schendel's invitation to edit this Special Issue we had no idea of the amount of work that was involved. Yet, at the
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