MNE practice transfer as a process of institutional change

• Published date: 01 June 2014
• Author: Rick Molz,Gwyneth Edwards
• DOI: http://doi.org/10.1002/cjas.1282
• Date: 01 June 2014

MNE practice transfer as a process of institutional

change

Gwyneth Edwards*

HEC Montréal

Rick Molz

Concordia University

Abstract

We build upon current theory on strategic organizational

practice transfer in multinational f‌irms by incorporating

the agency of actors and applying an institutional lens to

the transfer process. Our theoretical analysis suggests that

practice transfer is a process of institutional change that

leads not only to practice adoption, adaptation, or

nonadoption, but also to reconstruction. We argue that

when contradictions exist within and across institutional

environments, misaligned interests motivate actors to

engage in praxis. As a parent-subsidiary coalition, these

actors reconstruct the practice by transcending the multi-

tude of institutional environments that comprise the

institutional system. Our process theory provides insight

into how less powerful subsidiary actors engage in praxis

to extend knowledge and build new capabilities within the

f‌irm. Copyright © 2014 ASAC. Published by John Wiley &

Sons, Ltd.

Keywords: practice transfer, strategic organizational prac-

tices, multinational enterprises, institutional change

Résumé

Cette étude s’inscrit dans le prolongement de la théorie

actuelle du transfert de la pratique organisationnelle

stratégique dans les f‌irmes multinationales, en incorporant

l’agence des acteurs et en appliquant une grille

institutionnelleau processus de transfert. L’analysethéorique

suggère que le transfert de la pratique est un processus de

changement institutionnel qui débouche non seulement sur

l’adoption, l’adaptation ou la non-adoption de la pratique,

mais aussi sur la reconstruction. Lorsqu’il y a des contradic-

tions au sein des environnements institutionnels ou d’un

environnement institu tionnel à l’autre, les intérêts mal al ignés

poussent les acteurs à embrasser l a pratique. Dans le cadre de

la coalition parent-subsidiaire, ces acteurs reconstruisent la

pratique en transcendant la multitude d’environnements

institutionnelsconstitutifs du système institutionnel. La théorie

du processus proposée permet de mieux cerner comment les

acteurs secondaires peu puissants s’engagent dans la

pratique pour augmenter leurs connaissances et bâtir de

nouvelles capacités au sein de la f‌irme.

Mots-clés : transfert de la pratique, pratiques organisationnelles

stratégiques, entreprises multinationales, changement

institutionnel

The dissemination oforganizational practices in the mul-

tinational enterprise (MNE) is considered critically important

to f‌irm performance (Kogut & Zander, 1992; Zaheer, 1995).

Based on the knowledge theory of the f‌irm (Grant, 1996),

the MNE’s ownership advantages stem from the way in

which it creates and disseminates knowledge (Kogut &

Zander, 1992). In particular, the dissemination of knowledge

from the parent to its subsidiaries in the form of strategic

organizational practices is considered a central mechanism

for achieving and sustaining competitive advantage in host

countries (Kostova, 1999).

Subsidiaries, by their very nature, operate at a distance

from the parent, incurring costs that arise not only from

geographical space but also from unfamiliarity with the local

environment (Buckley & Casson, 1976; Dunning, 1977). These

costs put the subsidiary at a disadvantage vis-à-vis domestic

competitors, risking both prof‌it and survival due to a liability

of foreignness (Zaheer, 1995). To overcome this liability,

MNE parents provide their subsidiaries with f‌irm-specif‌ic

competitive advantage, which can be realized through the trans-

fer of knowledge, in the form of organizational practices

(Zaheer, 1995). These organizational practices, which incorpo-

rate know-how (Kogut & Zander, 1993) and tacit knowledge

(Nonaka, 1994), are strategic in nature and characterized as

diff‌icult to imitate, complex and broad, people-oriented, forma-

lized, and eventually, institutionalized (Kostova, 1999).

We would like to thank the editor, Dr. Chang Hoon Oh, for his clear and

specif‌ic guidance, along with the two anonymous reviewers who encour-

aged us to focus on our main contribution. We also thank Dr. Ann Langley’s

Fall 2013 “Reading, Doing and Publishing”doctoral seminar for their

valuable input. Any errors are solely the responsibility of the authors.

*Please address correspondence to: Gwyneth Edwards, PhD., Assistant

Professor, HEC Montréal 3000, chemin de la Côte-Sainte-Catherine, Montréal

(Québec) Canada H3T 2A7. Email: gwyneth.edwards@hec.ca

Canadian Journal of Administrative Sciences

Revue canadienne des sciences de l’administration

31: 116–127 (2014)

Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/CJAS.1282

Can J Adm Sci

31(2), 116–127 (2014)Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd. 116