What determines subunit integration in the multinational firm? A meta-analysis

Abstract

Although subunit integration matters to performance outcomes in the multinational firm, the determinants of integration remain unclear. We distinguish between formal integration—the centralization of strategic decision-making and the formalization of policies and procedures and informal integration through socialization toward shared goals and a cohesive identity. We argue that corporate parents' implementation of these integration mechanisms is informed by conditions internal and external to the multinational firm. Drawing on 154 empirical studies encompassing 35,752 foreign subunits over 34 years, we find that a locally oriented subunit strategy negatively affects centralization and socialization. Host country constraints positively affect formalization and socialization. These findings are consistent with some theoretical expectations but contradictory to others. We enrich the nomological network of subunit integration, offering novel insights regarding the internal and external drivers of structural heterogeneity within and between multinational firms. Our findings thus inform theory of the complex nature of managerial decisions in multinational firms.