Dynamic capability development in multinational enterprises: Reconciling routine reconfiguration between the headquarters and subsidiaries

Abstract

Research Summary Starting from the premise that firms need dynamic capabilities to adapt to changing environments, we discuss how multinational enterprises (MNEs) develop dynamic capabilities from internationalization. Unlike domestic firms that develop dynamic capabilities within one organizational system, MNEs are inherently multi‐level systems with the headquarters and subsidiaries. In this paper, we focus on how internationalization depth and breadth function as sources of learning and unlearning in the headquarters and subsidiaries, and how this serves as the antecedent for routine reconfiguration and dynamic capability development in the MNE. We theorize that the headquarters' and subsidiaries' brokering capabilities are critical for reconciling routine reconfiguration at the two levels so that dynamic capability development can occur, and the MNE can adapt to environmental changes. Managerial Summary Our model of dynamic capability development in multinational enterprises (MNEs) via internationalization makes dynamic capabilities actionable for managers in three main ways. First, we emphasize both learning and unlearning from internationalization as important for both the subsidiaries and headquarters to reconfigure routines to adapt to changing environments. Second, the routine reconfiguration that occurs from the subsidiaries or the headquarters serves as the impetus for dynamic capability development in the MNE. Third, for dynamic capability development to occur in the MNE, both the headquarters and the subsidiaries must be able to reconcile routine reconfigurations via the headquarters' and the subsidiaries' brokering capabilities.

Responding to pandemic challenges: leadership lessons from multinational enterprises (MNEs) in India

“…, 2019) and develop new organizational routines before and after a disruptive pandemic event (Kayes and Yoon, 2020; Rabenu and Tziner, 2021). In the context of Indian MNEs, dynamic capability development involves the reconfiguration of their routines for making rapid transitions in times of pandemic crisis (Riviere et al. , 2021; Bucheli et al.…”

“…It allows the organization to mobilize its resources at the reserve to use (Clough et al, 2019) and develop new organizational routines before and after a disruptive pandemic event (Kayes and Yoon, 2020;Rabenu and Tziner, 2021). In the context of Indian MNEs, dynamic capability development involves the reconfiguration of their routines for making rapid transitions in times of pandemic crisis (Riviere et al, 2021;Bucheli et al, 2019). In the course of responding to a crisis event, many firms show their willingness to change, adapt and innovate (Luo and Bu, 2018;Park and Lee, 2021).…”

The long-term energy transition: Drivers, outcomes, and the role of the multinational enterprise

“…Resource Dependence Theory is a useful lens through which to examine resource security (Bass & Chakrabarty, 2014), dependence on new technology (Dunford, 1987), and the new network interdependencies created by the LTE transition (Rossignoli & Lionzo, 2018). In contrast to New Internalization Theory in which FSAs and CSAs determine MNE strategic choices and performance, Resource Dependence Theory stresses the interdependence of MNEs and governments, as well as the power dynamics and resource-seeking motives of Grøgaard, Colman, et al (2019), Grøgaard, Rygh, et al (2019)), Luo (2000), Riviere et al (2020) and Teece (2014) diverse actors (Cuervo-Cazurra & Li, 2020;Mohr et al, 2016). China serves as a good example, in that historically it has relied on imported nonrenewable energy inputs (World Bank, 2020), but now, as one of the world's leading manufacturers of lithium-ion batteries, is an energy source exporter in the burgeoning market for electric vehicles (Zeng et al, 2015).…”

“…The Dynamic Capabilities literature looks at how MNEs adapt to changing business environments (Luo, 2000;Teece, 2014) and complements New Internalization Theory. While both focus on MNE advantages, Dynamic Capabilities Theory suggests that MNEs can achieve competitive advantage if they can concurrently develop and deploy capabilities for adapting to a changing global landscape (Grøgaard et al 2019a, b;Riviere et al, 2020…”

Organizational Structure Differentiation and Evolution of International Corporations Based on Company-Atom Analogy in the Mobile Internet Era

“…Human society lies within millions of entities such as nodes, forming economic value chains and combining them to become social networks, together with economic ecology. Riviere [22] theorized that MNEs could adapt to environmental changes by reconciling the routine reconfiguration of the headquarters and regional offices with dynamic capability development. Despite the complicated traditional business structure above, Dunning [23] also put forward the view that the contemporary network MNE might be a coordinator of a global system of value-added activities, but its management was still controlled.…”