Success Factors of Regional Strategies for Multinational Corporations: Appropriate Degrees of Management Autonomy and Product Adaptation

Citation

Rugman, A.M. (2012), "Success Factors of Regional Strategies for Multinational Corporations: Appropriate Degrees of Management Autonomy and Product Adaptation", Multinational Business Review, Vol. 20 No. 3. https://doi.org/10.1108/mbr.2012.57220caa.002

Success Factors of Regional Strategies for Multinational Corporations: Appropriate Degrees of Management Autonomy and Product Adaptation

Success Factors of Regional Strategies for Multinational Corporations: Appropriate Degrees of Management Autonomy and Product Adaptation

Article Type: Book review From: Multinational Business Review, Volume 20, Issue 3

Patrick Heinecke,Springer-Verlag,Berlin,2011

This is one of the most important books that I have read in the last ten years. Dr Heinecke offers a brilliant new synthesis of the literature on the regional nature of MNE activities, including new theoretical insights into this research. Building on this, he conducts the first comprehensive testing of regional strategies and their implications for performance. He does this by combining published data on the world’s 500 largest MNEs with primary data obtained from a novel questionnaire to the top managers of 96 of these firms. He uses structural equation modelling across 32 variables to determine the regional success factors responsible for enhanced MNE performance. In so doing, he substantially advances the debate about global versus regional strategy. He offers many new and useful insights into both of these literatures.

In the path-breaking empirical work by Heinecke, the dependent variable, regional success, uses the conventional metrics of regional to total sales; regional to total assets; and regional to total profits. The logic of this regional success factor is based on my empirical observation that the world’s 500 largest firms average 75 percent of these metrics in their home region, Rugman (2005). The 32 independent variables are grouped into two sets of 16, with one set representing “regional management autonomy”. Another 16 represent “regional adaptation of products and/or services”. Data for these 32 variables are obtained from both company annual reports and the managerial questionnaire.

The logic for these two sets of independent variables builds upon the regional strategy matrix on page 49 of Rugman (2005). This 3x3 matrix relates the firm’s organisation structure and decision making power (across corporate HQ; regional head offices; and national subsidiaries) to the firm’s product characteristics (at global, regional and local level). This yields a regional 9 cell extension of the classic economic integration and national responsiveness 2x2 matrix of Bartlett and Ghoshal. Heinecke examines the regional, bi-regional, and multiregional (global) strategies introduced by Rugman and Verbeke, which expand on Bartlett and Ghoshal’s international, multinational, transnational and global strategies. To these strategies, he develops a plausible rationale for the four other cells not examined in detail by Rugman (2005). In other words, Heinecke examines all nine cells in the Rugman (2005) matrix, thereby teasing out all possible variations of regional and global strategy.

The rich empirical work is broadly aligned to theory. In particular, the 16 variables for regional management autonomy all represent FSAs based upon integration. For example, they include aspects of coordination, R&D, capital allocation and other aspects of HQ, or regional HQ, control. The 16 variables for regional adaptation represent another set of FSAs, but not all seem to be amenable to adaptation. For instance, it is difficult to understand how the four factors representing brand can be adapted. However, this is where the details in the book become important, as the 32 variables displayed are built upon a complex interaction between theory and data availability. Here, Chapter 4, on the regional success factor model, makes important advances on the current literature; in particular pages 105 to 111 expand on current empirical research.

Overall, this is a stimulating and refreshing book to read. The 200 plus pages offer Heinecke the opportunity to extend research on regional strategy in a manner unavailable in the traditional academic journal format; where “global” strategy reigns supreme and “regional” strategy is largely ignored. Readers weighed down by the intellectual deadweight of such global strategy thinking (including work by Porter, Doz, Prahalad, Bartlett, Ghoshal, Gupta, Govindrajan and others) need to read this book in order to better understand the nature and extent of regional strategy and firm performance.

Alan M. RugmanHenley Business School, University of Reading