International management: An institutional perspective
International management: An institutional perspective

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International management: An institutional perspective

Global integration versus local adaptation

In multinational organisations, managers are often faced with competing institutional pressures in different parts of the world. For example, a firm headquartered in the USA might have a subsidiary in Germany or China. Many US firms have a very particular approach to HR management that emphasises individual performance appraisal and rewards. The institutional context in China and in Germany is much less favourable to these approaches. This can create particular challenges for managers in such organisations. Kostova and Roth (2002) have studied the way in which institutional pressures affect multinational firms. Multinational subsidiaries face dual pressures; locally, from the host country context, as well as from the parent company located in another country – which faces a different set of institutional pressures. In thier study, Kostova and Roth look at what happens in subsidiaries in different parts of the world when a large multinational firm tries to roll out a common set of quality management practices. They find that both operational implementation and staff buy-in to the quality practices vary depending on the favourableness of the local institutional context.

Interestingly, they find that coercion by the parent company is likely to lead to purely ceremonial adoption (implementation without buy-in) whilst active adoption (high implementation and and buy-in) was more likely in highly favourable normative and cognitive-cultural contexts.

Finally, they also find that the nature of the power relationship between parent and subsidiary is important.

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