Chapter 9 – The Challenge of International Organizations: Structure and Culture

Mintzberg’s Five Structural Components

• Strategic Apex

  • Top-level managers; overall responsibility.
  • Dominant in simple structures (entrepreneurial/born-global firms).
  • Key coordinating mechanism: direct supervision.
  • Born-global success drivers: prior international experience + global networks ➔ stronger marketing & tech resources.

• Technostructure

  • Technical analysts (accountants, industrial engineers) who design rules/procedures to standardize the operating core.
  • Central in the \textit{machine bureaucracy} (banks, gov’t departments, cost-focused textile plants, R&D-intensive tech firms).
  • Cross-border machine bureaucracies often fail when cultural norms discourage rule-following.

• Middle Line

  • Links operating core ↔ strategic apex.
  • In machine bureaucracy: executes/adjusts rules.
  • In divisionalized MNCs: senior middle managers (e.g., geographic division heads) wield major decision power.
  • Division design reflects culture + market size, sub-market homogeneity & proximity.

• Support Staff

  • Internal consultants, advisors, service units.
  • Drives \textit{adhocracy}: highly skilled professionals in overlapping project teams (e.g., global consulting firms).
  • Coordination via mutual adjustment, not pure autonomy (vs. professional bureaucracy).

• Operating Core (implied)

  • Line employees who actually produce the product/service.

Five Canonical Organization Designs (Mintzberg Framework)

• Simple Structure
• Machine Bureaucracy
• Professional Bureaucracy
• Adhocracy
• Divisionalized Form

Empirical Lessons (1950s–1970s research)

• Detailed rules are necessary but ineffective if too rigid for professionals.
• Firms can deviate from “ideal” designs and still succeed.
• Matrix intentions (more adhocracy) can regress to machine or professional bureaucracy under pressure.

Macro-Level Theories Explaining Structural Choice

• Ecological Theory (Hannan & Freeman)

  • Natural-selection view: environment eliminates mis-fit structures.
  • Org inertia high; managerial adaptation ability low.
  • Highlights limits on strategic choice.

• Institutional Theory (DiMaggio & Powell)

  • Focus on isomorphism: coercive, normative, mimetic pressures.
  • Explains cross-firm similarity within industries & across nations.
  • MNCs face competing isomorphic pressures from multiple environments, forcing hybrid structures.

Culture & Organizational Structure

Culture-Free (Contingency) Perspective

• Structure effectiveness = fit with size, tech, strategy. Culture deemed neutral (Child; Aston studies).
• Cross-national constants: Larger orgs ⇒ more formalized, specialized, less centralized.
• Nuances: Japanese vs. British centralization; U.S. vs. Japanese tech effects.
• Limitation: ignores informal consultation, rule interpretation, meaning given to structure.

Cultural Contingency Mechanisms (Figure 9.1)

• Two causal paths:
  1. Managers’ Values ➔ Culturally Manifested Patterns
  • Subconscious choice; e.g., German hierarchical rigidity; Swedish flat egalitarian auto plants; Japanese managers ↓ departmental specialization in U.S. facilities.
  1. Societal Pressure ➔ Culturally Legitimate Patterns
  • Environment accepts/rejects forms (institutional isomorphism).
  • Examples:
    • Chinese family business: paternalistic, small, guanxi.
    • Japanese keiretsu: bank-anchored reciprocal shareholding, long-term focus.
    • Korean chaebol: family-dominated, gov’t-backed conglomerates (coercive isomorphism).
    • Italian Modena knitwear “putting-out” clusters: micro family firms thrive via centuries-old cooperation norms.

Informal Organization & Organizational Culture

• Provides identity, socialization, commitment; can impede change & inter-subculture cooperation.
• Globalization fostering a convergent “global work culture” emphasizing competition, change, diversity, CSR, people focus.

Multinational Organizational Structures

• Five Integration Approaches

  1. International Division (favoured by U.S. firms; early-stage expansion).
  2. Product Division (global product lines supersede geography).
  3. Functional Division (marketing, finance, etc., replicated regionally).
  4. Geographic Division (regional P&L units with broad autonomy).
  5. Matrix (dual reporting across product/geography/function; cyclic popularity).

• Bartlett & Ghoshal Typology

  • Multinational (decentralized, local sensing).
  • Global (centralized, scale-driven).
  • International (core competences at HQ, transfer outward).
  • Transnational (interdependent, specialized, worldwide knowledge sharing).

International Collaborative Forms

• Alliances: informal (no contract), formal (contract), joint ventures (equity entity).

  • ≈70 % underperform; partner incompatibility main culprit.
  • Success depends on cultural & structural fit as much as complementary assets.

• Cross-Border Mergers & Acquisitions

  • Often underperform; cultural distance can be threat or asset.
  • Integration style preferences: U.S. absorbers, French imperialists, Japanese preservers.
  • Targets’ cultural context moderates reactions (e.g., high UA countries dislike intense integration).
  • Social integration mechanisms (training, rotations, cross-unit teams) mitigate culture clash.

Subsidiary Structure within MNOS

• Dual pressures (Rosenzweig & Singh):
  \text{Local Responsiveness} \longleftrightarrow \text{Global Integration}
• Figure 9.2 matrix: subsidiaries vary in imitation of local norms vs. HQ consistency ➔ heterogeneous internal landscape.
• Forces for global integration: organizational replication + imperative for control.

Managerial Roles in MNOs

• Boundary-spanners linking HQ ↔ local unit ↔ external environment.
• Face role conflict, ambiguity, overload; severity shaped by culture (power distance, UA, etc.).
• Cultural scripts surface when org cues are weak.
  • Chinese managers: cope with ambiguity via rules; Western managers via personal expertise.
• Dual organizational identification (HQ + local) predicted by MNO type & country.

Psychological Contract in a Cross-Cultural Lens

• Definition: individual beliefs about mutual obligations with employer.
• Two facets: transactional (short-term, economic) vs. relational (long-term, socio-emotional).
• Cultural effects:
  • Individualism ➔ more transactional; collectivism ➔ more relational.
  • Horizontal/vertical I–C orientations map onto dominant contract forms.
  • Exchange ideology mediates cultural impact.
• Culture shapes:
  • Contract formation (what cues matter, shared vs. idiosyncratic meanings).
  • Violation perception (what counts as breach).
  • Response choice (exit, voice, loyalty) moderated by norms (e.g., harmony suppression in collectivist Asia).

Practical Implications for International Managers

• Assess whether home-grown rules/hierarchies will be interpreted similarly abroad.
• In designing structures, weigh size/tech/strategy simultaneously with societal legitimacy & managerial values.
• During alliances/M&As, evaluate cultural fit alongside task complementarity; plan social integration early.
• Support subsidiary managers with role clarification & cultural competence training to mitigate boundary stress.
• Regularly surface and discuss psychological contract expectations with diverse employees.

Connections to Earlier Concepts

• Links to Chapter 2: organizational vs. national culture distinction.
• Links to Chapter 4: cross-cultural interaction; ambiguous contexts intensify cultural scripting.
• Links to Chapter 8: multicultural team synergy parallels M&A integration—maximize difference benefits, minimize conflict.

Ethical & Philosophical Considerations

• Imposing HQ structures without local adaptation can be ethically questionable (cultural imperialism).
• Family-based forms (chaebol, Chinese business) raise governance & nepotism debates vs. communal loyalty benefits.
• Ecological theory’s fatalism contests managerial moral responsibility; institutional theory highlights legitimacy over efficiency.