This article was produced and financed by BI Norwegian Business School
Power and politics needed to revise newly acquired subsidiaries
One key to success in knowledge transfer when a multinational corporation takes over a subsidiary is finding the right balance between give and take.
BI Norwegian Business School
Transfer of knowledge throughout multinational corporations is fundamental for achieving and sustaining a competitive advantage where headquarters play an important, but challenging role. The key challenge lies in the ability to overcome business units’ resistance to new business concepts, management routines and ‘ways of doing things’, and influence change in their learning behavior and attitudes.
A political role of the headquarters is particularly salient for multinational firms that undergo strategic transformations, aim to create global solutions and diffuse new corporate culture throughout the organizations.
How to make power and politics work in MNC knowledge transfer?
In her Doctoral study at BI Norwegian Business School, Ieva Martinkenaite explores knowledge transfer processes from corporate and regional headquarters to the existing and newly acquired business units operating in emerging economies of the Baltic States.
Martinkenaite has followed three multinational firms undergoing strategic change and post-merger integration processes over a period of 4 years.
Successful transfer of knowledge
“Knowledge transfer capacity of the parent firm headquarters in multinational corporations is political and strategic in nature”, she argues.
The study shows that in the times of strategic change, successful transfer of new business concepts, routines and ‘ways of doing things’ throughout multinational corporations is less driven by rational argumentation, sophisticated means of communication or problem-solving skills of headquarters’ managers. Rather, it requires a strong political action to affect change in the behavior and attitudes, such as negotiating conflicting interests, forming dominant coalitions, politicizing change, demonstrating power and legitimating headquarters’ involvement.
“Success of headquarters’ engagement in knowledge transfer is driven by their capacity to influence change in the behavior and attitudes towards new ‘ways of thinking’ and ‘doing things’ in the business units”, says Ieva Martinkenaite, a PhD graduate from BI Norwegian Business School and a senior research scientist in Telenor Group.
Political action with positive implications
In contrast to a conventional wisdom, this doctoral study shows that headquarters’ engagement in politics has positive implications to knowledge transfer, both in terms of efficiency and effectiveness of transfer. Why is that so?
- Power is important for accomplishing many collective goals, such as knowledge transfer from one business unit to another. This study shows that headquarters’ managers use various types of influence tactics to overcome resistance and leverage learning in the business units. These tactics are means to exert pressure, mobilize and mitigate tensions, create shared values and beliefs throughout multinational corporations that, ultimately, facilitate knowledge transfer.
- Engagement in political games is a deliberate, strategic act of the MNC headquarters and capability to identify and exploit their power dependence on other business units. This Thesis shows that different influence tactics are effective under different levels and sources of power imbalance between headquarters and business units of multinational corporations.
“It is not only politicking in the right power context, but also maneuvering between high political pressure and withholding from it that makes headquarters’ managers successful in transferring corporate knowledge throughout multinational corporations”, argues Ieva Martinkenaite.
How to make power and politics work?
The strategy researcher presents five learning lessons for managers based on her Doctoral Thesis:
- To headquarters’ managers, this study suggests that engagement in politics can facilitate knowledge transfer to the business units and could, therefore, be encouraged.
- However, politics should be carefully managed in order to make it a ‘win-win’ game for all. Different levels and sources of power imbalance between headquarters and other business units in multinational corporations require different tactics to influence change in learning behaviors and attitudes of the latter.
- Headquarter managers should also aim to balance between active political involvement in knowledge transfer and withholding from it. This Thesis shows that in some power contexts less headquarters’ involvement is more beneficial. Knowledge transfer is costly, and headquarters’ political actions are often perceived negatively by the business units.
- Using influence tactics should be a deliberate and strategic act - first and foremost, to overcome business units’ resistance to new corporate culture, business concepts and routines without delimiting their learning from local networks.
- An important role of headquarters’ managers is to identify business units’ needs for local learning and innovation, and to balance these processes with corporate initiatives. For that, a strong expatriate leadership is essential.
Role of foreign expatriates
This study shows that foreign expatriates are instrumental in aligning conflicting interests and building networks, ‘translating’ and adapting headquarters’ needs for new knowledge in the business units.
“This implies careful selection, training and succession planning for expatriate managers, as well as flexibility in their assignments”, says Martinkenaite.
Higher attention to expatriate management is particularly relevant for multinational firms operating in the emerging economies where high uncertainty, cultural ambiguity and rapidly changing learning opportunities are common.
Read the Norwegian version of this article at forskning.no
- Ieva Martinkenaite: “Evolutionary and Power Perspectives on Headquarters-Subsidiary Knowledge Transfer”. Series of Dissertation - 04/2015, BI Norwegian Business School, 2015.