The findings of recent studies into relocation by German companies are puzzling: companies relocate because they are willing to cut costs, but entrepreneurs and managers seem to have failed to predict further and sometimes fatal costs associated with relocation. This paper sheds light on why relocation has become a general trend among German companies, despite those inefficiencies and costs. It points to the role of the discourse in creating the myth of relocation as a strategy to reduce costs. Discourse can in fact help to diffuse ideas independently of their empirical truth and give voice to influential actors who are able to induce isomorphic processes. In order to give an account of why companies' decisions to relocate have become so popular in Germany, regardless of their economic soundness, the paper draws on an analysis of German newspapers and business press that were published between January 1990 and July 2005.

PurposeThis paper aims to provide an institutional‐cognitive explanation for headquarters‐subsidiary conflicts based on institutionalism and social psychological studies on rationality.Design/methodology/approachThe paper is based on an empirical qualitative study of German SMEs with subsidiaries in China and on the analysis of the German press on China.FindingsThe study shows that headquarters take decisions on internationalization under legitimation pressure, which pushes companies to reorganize in accordance with what is considered successful, appropriate, and common practice in the field. However, apparently very profitable and hence strongly legitimated options can lead to the creation of expectations based more on wishful thinking than on the reality that subsidiary managers have to address. This can foster conflicts between headquarters and a subsidiary.Research limitations/implicationsBeing based on a qualitative empirical study, the paper cannot provide a precise measure of the relationship between legitimation and cognition in headquarter‐subsidiary conflicts but instead identifies theoretical relationships between the two dimensions that can be investigated further in future research.Practical implicationsThe findings of this study highlight the necessity for research to devote more critical attention to decision‐making processes about internationalization and for companies to reflect on the driving forces for their decision making as well as the consequences in terms of potential conflicts.Originality/valueBy investigating the relationship between cognitive mechanisms and social processes of legitimation, the paper goes beyond a purely macro or micro explanation of conflict which characterizes both mainstream and critical approaches.

In recent decades most developed political economies have been confronted by structural changes such as tertiarization, globalization, and growing unemployment. As a consequence, innovation has become a pressing issue for both national and local economies as a means of increasing competitiveness (Mawson et al, 1990). Policy makers are therefore being encouraged to develop measures that favor innovative services (Hilpert, 1991), such as those in the creative industries, and attract what Florida calls the``creative class'' (Currid, 2009;Florida, 2002). (1) Accordingly, there is a growing body of literature which aims at improving the understanding of organization and innovation in general and of creative sectors in particular. For instance, studies on creative industries have underlined the high degree of uncertainty in these sectors and have described the ways of organizing work and labor-market processes which rely heavily on flexible cooperation and informal networks. These characteristics are considered to be unique in comparison with other industries (

Looking back over the two decades since German unification, the main questions I want to answer are to what extent and through what mechanisms the transfer of the system of industrial relations and vocational training - two cornerstones of the West German model - has occurred in eastern Germany. The literature argues that institutional transfer very often leads to a process of hybridization in institutions. However, the concept of hybridization has also been criticized as being mainly descriptive and vague about the actual mechanisms of hybridization. In this paper I argue that these mechanisms should be specified further and suggest that the hybridization approach can be fruitfully linked to recent theories of institutional change. As far as the transfer of industrial relations and vocational training from western to eastern Germany is concerned, I argue in particular that hybridization has mainly occurred through what institutional literature has recently defined as the mechanism of conversion