Advertisement

Journal of International Business Studies

, Volume 50, Issue 2, pp 223–249 | Cite as

The interplay between HQ legitimation and subsidiary legitimacy judgments in HQ relocation: A social psychological approach

  • Julia BalogunEmail author
  • Kathryn Fahy
  • Eero Vaara
Article

Abstract

This paper marks a departure from the focus on external stakeholders in much research on legitimacy and multinational corporations, adopting a social psychological approach to study how MNCs build internal legitimacy for controversial decisions with their subsidiaries. We explore this through a longitudinal, real-time qualitative case study of a regional office relocation, since office relocations represent rare yet significant strategic decisions. We analyze the interplay between the legitimation strategies of senior managers and subsidiary legitimacy judgments, based in instrumental, relational, and moral considerations, and how the relationship between the two develops over time. From this analysis, we derive inductively a process model that reveals the dynamics of building internal legitimacy with subsidiaries, and how an MNC moves on even in the absence of full legitimacy, when dealing with controversial MNC decisions. The model highlights two important dynamics. The first is a dynamic between legitimation strategies and legitimacy judgments and how this is influenced by local subsidiary contexts. The second is a temporal dynamic in how both the legitimation strategies and legitimacy judgments evolve over time. Our model contributes to research on legitimacy in MNCs, what we know about tensions that characterize MNC–subunit relationships, and research on headquarters relocation.

Keywords

headquarters–subsidiary roles and relations strategic change qualitative research case study 

Résumé

Cet article marque le point de départ d’une focalisation sur les parties prenantes externes dans de nombreuses recherches sur la légitimité des entreprises multinationales, adoptant une approche psychologique sociale pour étudier comment les EMN développent la légitimité interne pour des décisions controversées avec leurs filiales. Nous explorons ceci par une étude de cas qualitative longitudinale en temps réel d’une relocalisation d’un bureau régional, parce que les relocalisations de bureaux représentent des décisions stratégiques rares mais significatives. Nous analysons l’interaction entre les stratégies de légitimation des dirigeants confirmés et les jugements de légitimité des filiales, fondée sur des considérations instrumentales, relationnelles et morales ; et comment la relation entre les deux se développe dans le temps. De cette analyse, nous déclinons de manière inductive un modèle processuel qui révèle la dynamique pour développer une légitimité interne avec les filiales, et comment une MNE se développe malgré l’absence de légitimité totale, quand elle doit faire face à des décisions controversées de la MNE. Le modèle met en lumière deux dynamiques importantes. La première est une dynamique entre les stratégies de légitimation et les jugements de légitimité et comment ceci est influencé par les contextes de la filiale locale. La seconde est une dynamique temporelle de comment les stratégies de légitimation et les jugements de légitimité évoluent dans le temps. Notre modèle contribue à la recherche sur la légitimité dans les MNE, ce que nous savons sur les tensions qui caractérisent les relations d’une MNE avec ses unités et la recherche sur la relocalisation des sièges.

Resumen

Este artículo marca una partida del enfoque centrado en grupos de interés externos en mucha de la investigación sobre la legitimidad y las corporaciones multinacionales, adoptando un enfoque socio-psicológico para estudiar como las EMN construyen legitimidad interna para las decisiones controversiales con sus subsidiarias. Exploramos esto mediante un estudio de caso cualitativo longitudinal en tiempo real del traslado de una oficina regional, puesto que el traslado de oficina representa una decisión estratégica rara pero significativa. Analizamos la interacción entre las estrategias de legitimización de la alta dirección y los juicios de legitimidad de la subsidiaria, basados en consideraciones instrumentales, relacionales y morales, y como la relación entre los dos se desarrolla con el tiempo. De este análisis derivamos inductivamente un modelo de proceso que revela las dinámicas de la construcción de legitimidad interna con las subsidiarias y como una EMN sigue adelante incluso en ausencia de legitimidad plena, cuando enfrenta decisiones controversiales. El modelo resalta dos dinámicas importantes. La primera es una dinámica entre las estrategias de legitimización y los juicios de legitimidad y como esta es influenciada por los contextos de las subsidiarias locales. El segundo es una dinámica temporal sobre como ambas las estrategias de legitimización y los juicios de legitimidad se desarrollan con el tiempo. Nuestro modelo contribuye a la investigación sobre la legitimidad de las EMN, lo que sabemos sobre las tensiones que caracterizan las relaciones de las subunidades de las EMN, y la investigación en traslado de las casas matrices.

Resumo

Este artigo marca um distanciamento do foco em stakeholders externos em pesquisas sobre legitimidade e corporações multinacionais (MNC), adotando uma abordagem psicológica social para estudar como as multinacionais criam legitimidade interna para decisões controversas nas suas subsidiárias. Exploramos isso por meio de um estudo de caso qualitativo longitudinal e em tempo real na realocação de um escritório regional, uma vez que as realocações de escritório representam decisões estratégicas raras e significativas. Analisamos a interação entre as estratégias de legitimação dos gerentes seniores e os julgamentos de legitimidade da subsidiária, baseados em considerações instrumentais, relacionais e morais, e como a relação entre os dois se desenvolve ao longo do tempo. A partir dessa análise, derivamos indutivamente um modelo de processo que revela a dinâmica da construção de legitimidade interna com subsidiárias e como uma MNC se move mesmo na ausência de plena legitimidade, ao lidar com decisões controversas da MNC. O modelo destaca duas dinâmicas importantes. A primeira é uma dinâmica entre estratégias de legitimação e julgamentos de legitimidade e como isso é influenciado por contextos da subsidiária local. O segundo é uma dinâmica temporal em que as estratégias de legitimação e os julgamentos de legitimidade evoluem ao longo do tempo. Nosso modelo contribui para a pesquisa sobre legitimidade em MNCs, o que sabemos sobre tensões que caracterizam as relações das subunidades das MNC e a pesquisa sobre a realocaçào de sedes.

摘要

本文标志着背离在合法性和跨国公司大量研究中对外部利益相关者的关注,而采用社会心理学的方法来研究跨国公司如何建立对子公司有争议的决定的内部合法性。我们通过对一个区域办事处搬迁的纵向的、实时的定性案例研究来探索这一点,因为办事处搬迁代表了罕见而重大的战略决定。我们基于有作用的、关系的、和道德的考虑,分析了高级管理人员合法化战略与子公司合法性判断之间的相互作用,以及两者之间的关系如何随时间发展。从分析中我们推导出一个过程模型,它揭示了建立子公司内部合法性的动态性,以及跨国公司在处理有争议的跨国公司决定时,甚至在没有完全合法性的情况下如何继续前进。该模型突出两个重要的动态性。第一是合法化战略与合法性判断之间的动态性,以及这是如何被当地子公司的情境所影响的。第二是合法化战略和合法性判断如何随时间演变的时间动态性。我们的模型对跨国公司合法性的研究、对我们了解刻画跨国公司子单元关系的紧张局势,以及对总部搬迁研究做出了贡献。

Notes

Acknowledgements

The authors gratefully acknowledge the financial support in the preparation of this article received from the UK ESRC/EPSRC/Advanced Institute of Management (AIM) Research: RES-331-25-3014 (Balogun).

References

  1. Arndt, M., & Bigelow, B. 2000. Presenting structural innovation in an institutional environment: Hospitals’ use of impression management. Administrative Science Quarterly, 45(3): 494–522.Google Scholar
  2. Bacharach, S., Bamberger, P., & Sonnenstuhl, W. 1996. The organizational transformation process: The micropolitics of dissonance reduction and the alignment of logics of action. Administrative Science Quarterly, 41(3): 477–506.Google Scholar
  3. Balogun, J., Huff, A., & Johnson, P. 2003. Three responses to the methodological challenges of studying strategizing. Journal of Management Studies, 40(1): 197–244.Google Scholar
  4. Balogun, J., Jarzabkowski, P., & Vaara, E. 2011. Selling, resistance and reconciliation: A critical discursive approach to subsidiary role evolution in MNEs, Journal of International Business Studies, 42(6): 765–786.Google Scholar
  5. Birkinshaw, J., Braunerhjelm, P., Holm, U., & Terjesen, T. 2006. Why do some multinational corporations relocate their headquarters overseas? Strategic Management Journal, 27(7): 681–700.Google Scholar
  6. Birkinshaw, J., Holm, U., Thilenius, P., & Arvidsson, N., 2000. Consequences of perception gaps in the headquarters–subsidiary relationship. International Business Review, 9(3): 321–344.Google Scholar
  7. Bitektine, A. 2011. Toward a theory of social judgments of organizations: The case of legitimacy, reputation, and status. Academy of Management Review, 36(1): 151–179.Google Scholar
  8. Bitektine, A., & Haack, P. 2015. The “Macro” and the “Micro” of legitimacy: Toward a multilevel theory of the legitimacy process, Academy of Management Review, 40(1): 49–75.Google Scholar
  9. Blazejewski, S., & Becker-Ritterspach, F. 2011 Conflict in headquarters–subsidiary relations: A critical literature review and new directions. In Dörrenbächer, C. & Geppert, M. (Eds), Politics and power in the multinational corporation: The role of institutions, interests and identities: 139–190. Cambridge: Cambridge University Press.Google Scholar
  10. Bouquet, C., & Birkinshaw, J. 2008a. Weight versus voice: How foreign subsidiaries gain attention from corporate headquarters. Academy of Management Journal, 51: 577–601.Google Scholar
  11. Bouquet, C., & Birkinshaw, J. 2008b. Managing power in the multinational corporation: How low-power actors gain influence. Journal of Management, 34(3): 477–508.Google Scholar
  12. Chan, C. M., & Makino, S. 2007. Legitimacy and multi-level institutional environments: Implications for foreign subsidiary ownership structure. Journal of International Business Studies, 38(4): 621–638.Google Scholar
  13. Clark, E., & Geppert, M. 2011. Subsidiary integration as identity construction and institution building: A political sensemaking approach. Journal of Management Studies, 48(2): 395–416.Google Scholar
  14. Coeurderoy, R., & Verbeke, A. 2016. The unbalanced geography of the world’s largest MNEs: Institutional quality and head office distribution across countries. Global Strategy Journal, 6: 127–148.Google Scholar
  15. Creed, W. E. D., Scully, M., & Austin, J. R. 2002. Clothes make the person? The tailoring of legitimating accounts and the social construction of identity. Organization Science, 13(5): 475–496.Google Scholar
  16. Deephouse, D., Bundy, J., Tost, L.P., & Suchman, M. 2017. Organizational legitimacy: Six key questions. In Greenwood, R., Oliver, C., Lawrence, T., & Meyer, R. (Eds), The Sage handbook of organizational institutionalism (2nd edition). Thousand Oaks, CA: Sage.Google Scholar
  17. Delmestri, G., & Wezel, F. C. 2011. Breaking the wave: The contested legitimation of an alien organizational form. Journal of International Business Studies, 42(6): 828–852.Google Scholar
  18. Dörrenbächer, C., & Gammelgaard, J. 2011. Conflicts in headquarters–subsidiary relationships: Headquarters-driven charter losses in foreign subsidiaries. In Dörrenbächer, C. & Geppert, M. (Eds), Politics and power in the multinational corporation: The role of institutions, interests and identities: 231–245. Cambridge: Cambridge University Press.Google Scholar
  19. Dörrenbächer, C., & Geppert, M. 2006. Micro-politics and conflicts in multinational corporations: Current debates, re-framing, and contributions of this special issue. Journal of International Management, 12(3): 251–265.Google Scholar
  20. Drori, I., & Honig, B. 2013. A process model of internal and external legitimacy. Organization Studies, 34(3): 345–376.Google Scholar
  21. Eisenhardt, K., & Graebner, M. 2007. Theory building from cases: Opportunities and challenges. Academy of Management Journal, 50(1): 25–32.Google Scholar
  22. Elsbach, K. D. 1994. Managing organizational legitimacy in the California cattle. Administrative Science Quarterly, 39(1): 57–88.Google Scholar
  23. Elsbach, K. D., & Sutton, R. I. 1992. Acquiring organizational legitimacy through illegitimate actions: A marriage of institutional and impression management theories. Academy of Management Journal, 35(4): 699.Google Scholar
  24. Festinger, L. 1957. A theory of cognitive dissonance. Stanford, CA: Stanford University Press, Faber.Google Scholar
  25. Geppert, M., & Williams, K. 2006. Global, national and local practices in multinational corporations: Towards a sociopolitical framework. International Journal of Human Resource Management, 17(1): 49–69.Google Scholar
  26. Geppert, M., Becker-Ritterspach, F., & Mudambi, R. 2016. Politics and power in multinational companies: Integrating the international business and organization studies perspectives. Organization Studies, 37(9): 1209–1225.Google Scholar
  27. Gioia, D., Corley, K., & Hamilton, A. 2013. Seeking qualitative rigor in inductive research: Notes on the Gioia methodology. Organizational Research Methods, 16(1): 15–31.Google Scholar
  28. Golant, B. D., & Sillince, J. A. A. 2007. The constitution of organizational legitimacy: A narrative perspective. Organization Studies, 28(8): 1149–1167.Google Scholar
  29. Green, S. E. Jr. 2004. A rhetorical theory of diffusion. Academy of Management Review, 29(4): 653–669.Google Scholar
  30. Hillman, A. J., & Wan, W. P. 2005. The determinants of MNE subsidiaries’ political strategies: Evidence of institutional duality. Journal of International Business Studies, 36(3): 322–340.Google Scholar
  31. Hoenen, K., & Kostova, T. 2015. Utilizing the broader agency perspective for studying headquarters–subsidiary relations in multinational companies. Journal of International Business Studies, 46(1): 104–113.Google Scholar
  32. Huy, Q. N., Corley, K., & Kraatz, M. 2014. From support to mutiny: shifting legitimacy judgments and emotional reactions impacting the implementation of radical change. Academy of Management Journal, 57(6): 1650–1680.Google Scholar
  33. Jarzabkowski, P., & Balogun, J. 2009. The practice and process of delivering integration through straetgic planning. Journal of Management Studies, 46(8): 1255–1288.Google Scholar
  34. Kim, W. C., & Mauborgne, R. A. 1993. Procedural justice, attitudes, and subsidiary top management compliance with multinationals’ corporate strategic decisions. Academy of Management Journal, 36(3): 502–526.Google Scholar
  35. Kostova, T., & Roth, K. 2002. Adoption of an organizational practice by subsidiaries of multinational corporations: Institutional and relational effects. Academy of Management Journal, 45(1): 215–233.Google Scholar
  36. Kostova, T., Roth, K., & Dacin, M. T. 2008. Institutional theory in the study of multinational corporations: A critique and new directions. Academy of Management Review, 33(4): 994–1006.Google Scholar
  37. Kostova, T., & Zaheer, S. 1999. Organizational legitimacy under conditions of complexity: The case of the multinational enterprise. Academy of Management Review, 24(1): 64–81.Google Scholar
  38. Laamanen, T., Simula, T., & Torstila, S. 2012. Cross-border relocations of headquarters in Europe. Journal of International Business Studies, 43(2): 187–210.Google Scholar
  39. Langley, A. 1999. Strategies for theorizing from process data. Academy of Management Review, 24(4): 691–710.Google Scholar
  40. Lefsrud, L., & Meyer, E. 2012. Science or science fiction? Professionals’ discursive construction of climate change. Organization Studies, 33(11): 1477–1506.Google Scholar
  41. Maguire, S., Hardy, C., & Lawrence, T. B. 2004. Institutional entrepreneurship in emerging fields: HIV/AIDS treatment advocacy in Canada. Academy of Management Journal, 47(5): 657–679.Google Scholar
  42. Miles, M. B., & Huberman, A. M. 1994. Qualitative data analysis: an expanded sourcebook. California: Sage.Google Scholar
  43. Monin, P., Noorderhaven, N., Vaara, E., & Kroon, D. 2013. Giving sense to and making sense of justice in postmerger integration. Academy of Management Journal, 56(1): 256–284.Google Scholar
  44. Mudambi, R., & Navarra, P. 2004. Is knowledge power? Knowledge flows, subsidiary power and rent-seeking within MNCs. Journal of International Business Studies, 35(5): 385–406.Google Scholar
  45. Piekkari, R., Welch, C., & Paavilainen, E. 2009. The case study as disciplinary convention. Organizational Research Methods, 12(3): 567–589.Google Scholar
  46. Rao, H., Greve, H., & Davis, G. 2001. Fool’s gold: Social proof in the initiation and abandonment of coverage by Wall Street analysts. Administrative Science Quarterly, 46(3): 502–526.Google Scholar
  47. Schmid, S., & Daniel, A. 2011. Headquarters–subsidiary relationships from a social psychological perspective: How perception gaps concerning the subsidiary’s role may lead to conflict. In Dörrenbächer, C., & Geppert, M. (Eds). Politics and power in the multinational corporation: The role of institutions, interests and identities: 255–280. Cambridge: Cambridge University Press.Google Scholar
  48. Schotter, A., & Beamish, P. W. 2011. Performance effects of MNC headquarters–subsidiary conflict and the role of boundary spanners: The case of headquarter initiative rejection. Journal of International Management, 17(3): 243–259.Google Scholar
  49. Suchman, M. C. 1995. Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3): 571–610.Google Scholar
  50. Suddaby, R., & Greenwood, R. 2005. Rhetorical strategies of legitimacy. Administrative Science Quarterly, 50(1): 35–67.Google Scholar
  51. Suddaby, R., Bitektine, A., & Haack. P. 2017. Legitimacy. Academy of Management Annals, 11(1): 451–478.Google Scholar
  52. Taplin, I. M. 2006. Strategic change and organizational restructuring: How managers negotiate change initiatives. Journal of International Management, 12(3): 284–301.Google Scholar
  53. Tost, L. P. 2011. An integrative model of legitimacy judgments. Academy of Management Review, 36(4): 686–710.Google Scholar
  54. Vaara, E., & Monin, P. 2010. A recursive perspective on discursive legitimation and organizational action in mergers and acquisitions. Organization Science, 21(1): 3–22.Google Scholar
  55. Vaara, E., Tienari, J., & Laurila, J. 2006. Pulp and paper fiction: On the discursive legitimation of global industrial restructuring. Organization Studies, 27(6): 789–813.Google Scholar
  56. Van Maanen, J. 1979. The fact of fiction in organizational ethnography. Administrative Science Quarterly, 24(4): 539–550.Google Scholar
  57. Yin, R. 1994. Case study research: Design and methods (2nd edition). Beverly Hills, CA: Sage.Google Scholar
  58. Zelditch, M. 2006. Legitimacy theory. In Burke, P. J. (Ed.), Contemporary social psychological theories: 324–352. Stanford, CA: Stanford University Press.Google Scholar

Copyright information

© Academy of International Business 2017

Authors and Affiliations

  1. 1.University of Liverpool Management SchoolLiverpoolUK
  2. 2.Lancaster University Management SchoolLancasterUK
  3. 3.Aalto University School of BusinessAaltoFinland
  4. 4.EMLYON Business SchoolLancaster UniversityLancasterUK

Personalised recommendations