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Journal of Management Studies 48:6 September 2011 doi: 10.1111/j.1467-6486.2010.00996.x

Political Heterarchy and Dispersed Entrepreneurship in the MNC joms_996

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Christopher Williams and Soo Hee Lee Richard Ivey School of Business, University of Western Ontario; Birkbeck College, University of London abstract We develop and test a new perspective on dispersed entrepreneurship within the multinational corporation (MNC). Various literatures suggest that corporate, subsidiary, and individual level factors can lead to entrepreneurial initiatives diffusing outward from a subsidiary to other MNC units. We extend this to include political heterarchy (mechanisms by which subsidiary managers enhance their power base through heterarchy) as both direct and moderating factor. Using a survey of 135 managers in a wide range of MNC subsidiaries, we find that a tolerance for local initiative (subsidiary level), subsidiary manager proactivity (individual level), and political heterarchy directly influence initiative diffusion. In terms of moderating effects, political heterarchy is seen to activate corporate level entrepreneurial strategy. We show how political heterarchy is central to dispersed entrepreneurship within the MNC and highlight the positive function of networked organizational politics in rejuvenating the international firm.

INTRODUCTION As a process of discovery, evaluation, and exploitation of opportunities to create future goods and services, entrepreneurship is vital to the renewal and competitiveness of large firms. Prior research has shown how such firms, despite their maturity and size, still need to undertake entrepreneurship on an ongoing basis in order to rejuvenate and create new strategic options (Hitt et al., 2001; Stopford and Baden-Fuller, 1994). For this to happen the firm does not only need to emphasize entrepreneurship as part of an espoused strategy, it also requires entrepreneurial competences to be developed (Meyer and Heppard, 2000). In the case of the multinational corporation (MNC), such competences are dispersed throughout numerous locations around the world. This, in turn, makes the process of rejuvenation particularly troublesome because of the internal conflict that can arise from both headquarters-driven initiative (Prahalad and Doz, 1981) and subsidiarydriven initiative (Birkinshaw, 2000; Birkinshaw and Ridderstråle, 1999). In the current paper we draw on the heterarchical view of the MNC (Hedlund, 1986, 1993; Hedlund and Rolander, 1990; Stark, 1999) and the functional view of organizaAddress for reprints: Christopher Williams, Richard Ivey School of Business, The University of Western Ontario, 1151 Richmond Street North, London, Ontario N6A 3K7, Canada ([email protected]). © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies. Published by Blackwell Publishing, 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

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tional politics (Buchanan and Badham, 1999; Coopey and Burgoyne, 2000; Mintzberg, 1985; Pfeffer, 1981) to create a new model for explaining dispersed entrepreneurship in the MNC. By dispersed entrepreneurship we mean the phenomenon whereby initiatives to exploit opportunities are started in one subsidiary and subsequently diffused throughout the MNC. We demonstrate the functional role that heterarchy and internal politics play together in facilitating the progress of initiative in international firms. Whilst prior models of the transnational form (Bartlett and Ghoshal, 1998), differentiated networks (Ghoshal and Nohria, 1989; Nohria and Ghoshal, 1994), and subsidiary initiative (Birkinshaw, 1997, 2000; Birkinshaw and Ridderstråle, 1999; Delany, 2000) have their merits in explaining the importance of subsidiaries to MNC entrepreneurship, they do not adequately address the positive impact of organizational politics (Coopey and Burgoyne, 2000; Lawrence et al., 2005) on the progress of initiative within heterarchical organizations. We address this deficit by developing and testing a new model for understanding organizational determinants of dispersed entrepreneurship within the MNC. Central to our conceptualization is the firm’s ‘political heterarchy’, i.e. mechanisms by which subsidiary managers enhance their power base through heterarchy. We hypothesize four antecedents of MNC dispersed entrepreneurship: (a) entrepreneurial strategy (corporate level); (b) tolerance for local initiative (subsidiary level); (c) subsidiary manager proactivity (individual); and (d) political heterarchy. Our empirical fieldwork tests the direct effects of these variables, as well as the moderating effects of political heterarchy, using a questionnaire survey of 135 subsidiary managers in a wide range of MNCs and locations. The findings show support for the direct effects of tolerance for local initiative, subsidiary manager proactivity, and political heterarchy. In terms of moderating effects, political heterarchy has the strongest interaction effect on the relationship between entrepreneurial strategy and dispersed entrepreneurship. The contribution of our research is to identify internal political heterarchy as a key enabler for the diffusion of entrepreneurial initiatives within the MNC. This extends both functional views of organizational politics and heterarchical views of organization within an MNC context. By integrating these views we develop new theoretical insight into how the MNC is able to explore and exploit opportunities around the world. DISPERSED ENTREPRENEURSHIP IN THE MNC Entrepreneurship may arise in any location of the MNC; subsidiary employees embedded in local host-country networks generate ideas and start new initiatives (Birkinshaw, 1997, 2000; Delany, 2000). Birkinshaw (1997) defined entrepreneurial initiative as a ‘process. . . bounded by the identification of an opportunity at the front end and the commitment of resources to the undertaking at the back end’ (Birkinshaw, 1997, p. 209). According to Low (2001), entrepreneurship occurs ‘under conditions of uncertainty and tight resource constraint and is driven by individual initiative’ (Low, 2001, p. 21). We build on this to define dispersed entrepreneurship in the MNC in terms of initiative: i.e. the outward diffusion of initiative from a subsidiary into the wider MNC. This phenomenon is important as it provides a valuable source of new knowledge for building firm-specific advantages and altering strategic behaviour (Andersson and Pahlberg, 1997; Frost, 2001). © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

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Entrepreneurial cognition theory highlights individual cognitive factors as determinants of entrepreneurial action (Baron, 1998, 2004; Shook et al., 2003) as well as the situational context in which individuals find themselves (Mitchell et al., 2007). An entrepreneurially-minded individual within a subsidiary will be alert to opportunities arising from the subsidiary’s distinct business and organizational context. Dispersed entrepreneurship in the MNC occurs because individuals employed in remote units are closely connected with local actors (Andersson and Forsgren, 1996; Frost, 2001). Consequently, these individuals are better able to spot opportunities within local environments than those located outside of the host country. Such individuals are also better able to notice inefficiencies within the internal organizational system within the local subsidiary, and more likely to be alert to opportunities within the internal context of the subsidiary. In this respect, the judgment of individuals that provides impetus to entrepreneurship (Shook et al., 2003) is dispersed, and, consequently, the location of employees likely to become involved in the perception of new opportunities cannot be designed in advance with any certainty. Furthermore, entrepreneurship is a process: individuals generate ideas but wider bodies of people revise and annotate them as they proceed from discovery, through evaluation, and perhaps to exploitation (Burgelman, 1983a; Kanter, 1983; Lee and Williams, 2007). Each person involved sees the problem through their own interpretive schema and many transactions occur between people as the idea progresses (Van de Ven, 1986). Collective, or team-level, cognition plays an important role in decision-making once the initial entrepreneurial idea has become a tangible venture (West, 2007). In addition, entrepreneurship in organizations often encounters resistance ( Gautam and Verma, 1997; Janis, 1982; Van de Ven, 1986). In the case of the MNC, headquarters managers may resist subsidiary initiatives (Birkinshaw, 2000; Birkinshaw and Ridderstråle, 1999) and subsidiaries may resist those from headquarters (Prahalad and Doz, 1981). Subsidiaries may resist other subsidiaries, and may even suppress their own employees’ ideas. Subsidiaries may compete for charter endowments and use their entrepreneurial initiatives to redefine their purpose and scope of operations (Birkinshaw and Lingblad, 2005). These uncertain behavioural processes challenge established MNC typologies, such as the configuration–coordination (Porter, 1986) and integration–responsiveness (Bartlett, 1986; Prahalad and Doz, 1987) frameworks. Moreover, models of entrepreneurship at firm level have largely overlooked the dynamic nature of MNC dispersed entrepreneurship, focusing instead on how environmental, organizational, and strategic factors combine to impact performance and competitive advantage through entrepreneurship at a corporate level (e.g. Guth and Ginsberg, 1990; Zahra and George, 2002). HETERARCHY AND POLITICS IN THE MNC Two literatures are highly relevant for understanding the behavioural dynamics of MNC dispersed entrepreneurship: (1) the heterarchical view of the MNC; and (2) organizational politics. First, the literature on MNC organization has described heterarchy as an alternative to static organizational hierarchy, emphasizing flexibility and enabling subsidiary co-participation in strategy formulation and innovation (Morgan and Whitley, © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

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2003). Hedlund and Rolander (1990) proposed a conceptualization of the MNC as a heterarchy that supports programmes of experimentation. Knowledge is managed through combination rather than hierarchical division (Hedlund, 1994). Hedlund (1993) identified four assumptions of hierarchy: (1) prespecified and stable relationships; (2) instrumentality and additivity in parts; (3) unidirectionality and universality; and (4) the coincidence of action, knowledge and people hierarchies. These assumptions were criticized by Hedlund as an inadequate representation of the modern MNC. The heterarchical view proposes normative integration as the basis of control, many and different kinds of international centres, foreign subsidiaries having a strategic role, and different types of coalitions and problem solving mechanisms. Heterarchy also allows for autonomy of work units, with authority emerging laterally (Stark, 1999). In this sense heterarchy has important implications for MNC dispersed entrepreneurship; autonomy provides a basis for subsidiary embedment in internal and external networks, subsequent capability development ( Young and Tavares, 2004), and recognition (Frost et al., 2002). Garcia-Pont et al. (2009) described subsidiary embeddedness as a resource which subsidiary managers are able to influence by manipulating resource dependencies and exerting lateral influence. Thus, heterarchy also allows for a strategic role for foreign subsidiaries (Hedlund and Rolander, 1990). Top managers become catalysts and protectors of recombinable knowledge elements (Hedlund, 1994). Second, a large literature on organizational politics has highlighted a relationship between innovation and power dynamics within organizations. Pfeffer (1981, 1994) described the source of power within an organization to be attributable to being in ‘the right place’: having control over resources or budgets, having control or access to key information, and having formal authority. Morgan (1986) extended this to include control over decision processes, control over boundaries, and even the ability to cope with uncertainty. Within the MNC, those pursuing an entrepreneurial idea need to deal with, influence, or even become, sources of power. Kanter identified the innovation process in large corporations as ‘uncertain, fragile, political and imperialistic’ (Kanter, 1988, p. 178). At times of ambiguity or uncertainty, such as when an entrepreneurial initiative is underway, actors seek social proof and influence with those in close proximity (Pfeffer, 1994, p. 207). They also engage in interpersonal influence by using ingratiation and emotional techniques (Pfeffer, 1994, p. 221). This mutual influence and coalition building shapes much of organizational life, occurring on an ongoing basis ‘often in a way that is invisible to all but those directly involved’ (Morgan, 1986, p. 148). Such power games constitute what Mintzberg (1985) defined as a ‘political arena’; ‘the organization captured in whole, or in significant part, by politics and conflict’ (Mintzberg, 1985, p. 133). In Mintzberg’s (1985) terms, ‘politics may be considered one among a number of systems of influence in the organization’ with ‘political behaviour. . . pitting individuals or groups against formal authority, accepted ideology, and/or certified expertise, or else against each other’ (Mintzberg, 1985, p. 134). In the case of the MNC, this phenomenon has close similarity to Birkinshaw’s (2000) portrayal of subsidiary entrepreneurs fighting a ‘corporate immune system’ in the quest for acceptance and funding for their ideas. Many scholars have argued that organizational politics can actually serve the organization as well as erode its effective operation (Buchanan and Badham, 1999; Mintzberg, © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies


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1985; Parker et al., 1995; Pfeffer, 1981). In this sense, organizational politics is ‘ethical and necessary’ (Buchanan, 2008, p. 49); change agents within organizations use political behaviour in pursuit of organizational change (Buchanan and Badham, 1999). Coopey and Burgoyne (2000) argued that politics creates ‘psychic space’ in the organization, encouraging people to speak out. Politics also encourages organization learning as ‘information and knowledge are expressed and mediated through power relations’ (Vince, 2001, p. 1329). As a system of influence, political games can, for example, correct illegal or illegitimate behaviour of those in power. Also, by allowing more than one voice to be heard, organizational needs are better served than just relying on authority, ideology, and expertise (Mintzberg, 1985). When these existing systems of influence act as sources of resistance to change, politics can be used to promote illegitimate power bases that strive to bring about change. In this sense, politics has an entrepreneurial function (Williams and Lee, 2009), realigning the organization to a ‘new, more viable stability’ (Mintzberg, 1985, p. 150).

Defining Political Heterarchy Central to our argument is that MNC heterarchy and internal organizational politics are closely intertwined. This perspective has been somewhat neglected in the MNC literature. First and foremost, because of laterally emerging authority (Stark, 1999), heterarchy will not quash attempts by managers in remote subsidiaries to increase their power bases. Such lateral forces will be as natural as division and specification are in the hierarchical firm. Second, the emphasis on normative integration within heterarchy encourages individuals to be socially active within the MNC. This, coupled with a tolerance for subsidiaries to ‘think’ strategically, will stimulate subsidiary managers to use both vertical and horizontal communication channels to express their opinions on strategy and change. When a large number of subsidiaries do this, there is an increased likelihood that opposing views and competing requests will emerge. Third, the culture of experimentation found in heterarchy will give mandate and legitimacy to dispersed entrepreneurs. Subsidiary managers will be more likely to engage in persuading others outside the subsidiary of the benefits of ideas emerging from their experiments. Consequently, we define political heterarchy in the MNC as: self-organizing mechanisms that enable subsidiary managers to enhance their power base through interpersonal and cross-boundary networking. Political heterarchy becomes activated when subsidiary managers attempt to gain influence and power through horizontal and vertical coordination in pursuit of their subsidiary’s interests.

HYPOTHESIS DEVELOPMENT There are two parts to our model. The first part considers three variables reflecting established arguments relating to antecedents of dispersed entrepreneurship in the MNC. The second part considers the direct and moderating effect of political heterarchy. These arguments are captured in Figure 1. © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

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C. Williams and S. H. Lee Corporate Level Entrepreneurial Strategy

H1 (+)

Subsidiary Unit Level Dispersed Entrepreneurship

H2 (+) Tolerance for Local Initiative Individual Manager Level

H3 (+) H4 (+)

Subsidiary Manager Proactivity

H5a-c (+) Political Heterarchy

Figure 1. Conceptual model of political heterarchy and dispersed entrepreneurship in the MNC

Established Arguments The first variable relates to the link between entrepreneurial strategy (a firm-level variable) and dispersed entrepreneurship. An entrepreneurial strategy is one that seeks wealth creation through risk-taking, innovation, and proactivity (Guth and Ginsberg, 1990; Miller, 1983; Miller and Friesen, 1982; Zahra and Covin, 1995). The entrepreneurial orientation literature has extended this to show how firms’ entrepreneurial postures may range from passive (conservative) to aggressive (entrepreneurial) (Covin, 1991; Lumpkin and Dess, 1996). More recently, scholars of strategic and international entrepreneurship have highlighted learning orientation as a central component of culture and mindset in the entrepreneurial firm (Dimitratos and Plakoyiannaki, 2003; Ireland et al., 2003). These closely-related literatures emphasize entrepreneurship as part of core firm strategy, espoused from its strategic centre. This literature also argues that, to be effective, an entrepreneurial strategy necessitates the buy-in and participation of employees throughout the organization; empowering organizational members to be improvisational (Meyer and Heppard, 2000). This is needed on an ongoing basis because of new opportunities arising through uncertainty and change in the environment (Hitt et al., 2001). Hence, in the case of the MNC: Hypothesis 1: The greater the extent to which entrepreneurship is present in overall corporate strategy, the more likely the subsidiary will generate initiatives that become adopted elsewhere in the MNC. A second argument relates to the entrepreneurial culture within a subsidiary organization (Birkinshaw, 1997; Boojihawon et al., 2007). This denotes the degree to which © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies


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local initiative is tolerated within the subsidiary organization. Organizational culture is an internally developed variable that captures the socio-ideological context of an organization (Smircich, 1983). Thus local subsidiary culture shapes subsidiary managers’ behaviour and decision-making, encapsulating locally held norms, values, and beliefs. Importantly, distinct subcultures can exist within an organization (Riley, 1983); we can expect local subsidiary cultures to differ across the MNC. In this line of thinking local subsidiary culture has a powerful role in facilitating the process of entrepreneurship within a subsidiary. Important aspects of culture in this respect include entrepreneurial individualism, where staff can devote time to their own ideas (Morris et al., 1994), and allowing (or providing incentives for) firm members to search and filter information from the local environment for new ideas and process innovations (Meyer and Heppard, 2000). Furthermore, subsidiary culture is likely to support entrepreneurship if it promotes intra-unit communication (Ghoshal and Bartlett, 1988), i.e. local staff sharing knowledge with each other about new opportunities in the local environment, as well as discussing ways to exploit those opportunities. But why should the culture in a focal subsidiary influence the propensity of the subsidiary to engage in dispersed entrepreneurship (as opposed to, for example, innovating on a local-for-local basis)? We suggest two reasons. First, searching and filtering information from the local environment will increase the subsidiary’s embeddedness with the local business context (Andersson and Forsgren, 1996). Research has shown that a focal subsidiary can influence product and production development in other subsidiaries through its own local embeddedness, particularly its product and production adaptation to local actors (Andersson et al., 2002). The subsidiary becomes recognized as ‘standing out from the rest of the corporation’ (Andersson et al., 2002, p. 984). Second, the outward diffusion of initiative from a focal subsidiary to the wider MNC involves a transfer of (entrepreneurial) knowledge from the subsidiary to other units of the MNC. Studies on internal knowledge transfer within MNCs show how successful inter-unit knowledge transfer is dependent on characteristics of the context of transfer (Minbaeva, 2007). Disseminative capacity has been identified as a key determinant of knowledge transfer success, emphasizing attitudes, ability, and context of those sending the knowledge (e.g. Minbaeva and Michailova, 2004). A subsidiary’s knowledge stock also has a direct influence on outward knowledge transfer from the subsidiary (Björkman et al., 2004; Gupta and Govindarajan, 2000). Furthermore, recipient subsidiaries will be keen to learn from a peer subsidiary that exhibits a strong entrepreneurial culture. Recipient motivation reduces knowledge stickiness ( Jensen and Szulanski, 2004). Clearly, this logic does not mean that all subsidiary initiatives will be adopted by other units, rather that tolerance for local initiative raises the likelihood that outward diffusion will occur. Hence: Hypothesis 2: The higher the tolerance for local initiative in a subsidiary, the more likely the subsidiary will generate initiatives that become adopted elsewhere in the MNC. A third argument is that proactive subsidiary managers drive dispersed entrepreneurship in the MNC. Winning acceptance for, and allocating resources to, the exploi© 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

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tation of an identified opportunity requires a complex series of repeated interactions involving tenacious subsidiary managers (Birkinshaw, 2000; Birkinshaw and Ridderstråle, 1999). Furthermore, where headquarters does not have procedures to cope with subsidiary initiative, or has a closed disposition towards them, the resulting confrontational headquarters–subsidiary relationship can be overcome by the proactive behaviours of subsidiary managers (Birkinshaw, 2000). Birkinshaw (1997) suggested that proactivity within subsidiaries enables the MNC to reconcile global opportunities with internal capabilities, a role traditionally assumed by the corporate centre. De Clercq et al. (2011) in this Special Issue investigate how characteristics of the entrepreneurial initiative influence the internal ‘selling’ of the initiative by corporate entrepreneurs. Proactive behaviours are also associated with feedback-seeking. MNC subsidiary presidents engage in a form of self-regulation through these behaviours (Gupta et al., 1999), demonstrating a willingness to learn from negative as well as positive feedback. Previous research (e.g. Kanter, 1988) has shown that the innovation process requires proactive involvement by individuals at each stage: transformational leadership, risktaking behaviours, and having more ways to influence others. If a subsidiary initiative is seen to be credible in the eyes of headquarters managers, the progress of the initiative will be smoother. Proactivity is one way to help establish credibility (Crant, 2000). Hence: Hypothesis 3: The greater the level of proactivity amongst managers in a focal subsidiary, the more likely the subsidiary will generate initiatives that become adopted elsewhere in the MNC. Political Heterarchy The next hypothesis concerns the direct effect of political heterarchy. Entrepreneurial competences of experimentation, creativity and radical problem solving, and persuading others to accept new ideas, are all facilitated through MNC heterarchy (Hedlund and Rolander, 1990). However, by engaging in political games to increase the power base of a subsidiary, subsidiary managers can develop and leverage these competences. Use of alliance building (Mintzberg, 1985), gaining and exploiting knowledge of the firm’s social system (Pfeffer, 1994, p. 111), and striving for control of the firm’s informal organization (Morgan, 1986, pp. 173–5) enable subsidiaries to apply these competences. Political heterarchy allows knowledge about local initiatives (including opportunities in the local business context of the subsidiary) to be accessed by managers in peer subsidiaries and by headquarters managers. Dispersed entrepreneurs resorting to tactics that increase their subsidiary’s internal influence in the MNC will have a better chance of exposing their ideas to a wider audience, as well as winning acceptance for their initiatives. In this sense, entrepreneurship theory is especially relevant. This posits that entrepreneurship arises not only because of individual characteristics (Baron, 2004), it also depends on an assessment of the existence of opportunities (discovery) and of the value of opportunities (evaluation), i.e. an assessment of what is actually possible (Ardichvili et al., 2003; Kirzner, 1973; Low, 2001; Shane and Venkataraman, 2000). Political heterarchy enables the knowledge that sup© 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies


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ports this assessment to flow. In addition, the interpersonal and cross-boundary networking implied in political heterarchy enables entrepreneurs to gain support for their ideas from others (see also Clarke, 2011, in this Special Issue). Hence: Hypothesis 4: The more active the focal subsidiary in the political heterarchy of the MNC, the more likely the subsidiary will generate initiatives that become adopted elsewhere in the MNC. In addition to these direct relationships, we also expect political heterarchy to have a moderating effect. First, political heterarchy may amplify the relationship between an entrepreneurial strategy and dispersed entrepreneurship. Within a political heterarchy, subsidiary managers may use the presence of an espoused entrepreneurial strategy at corporate level as a way of framing and justifying local entrepreneurial activities. According to Pfeffer (1994, pp. 187–206), framing concerns the relationship between context and the way in which problems are seen: ‘In much the same way that pictures are framed, questions and actions are framed, and the context in which they are viewed and discussed determines what gets done’ (Pfeffer, 1994, p. 203). By referring to the espoused entrepreneurial strategy within the wider organizational context, a subsidiary manager operating within a political heterarchy can define the terms of discussion with other subsidiary managers vis-à-vis entrepreneurial initiatives. The politically active subsidiary manager can draw on the wider organizational circumstances and goals as a tactic to drive change (e.g. Buchanan and Badham, 1999). Hence: Hypothesis 5a: Political heterarchy positively moderates the relationship between corporate entrepreneurial strategy and dispersed entrepreneurship in the MNC. Second, a subsidiary’s tolerance for local initiative may lead to a higher diffusion of its initiatives when its managers are active within political heterarchy. By attempting to enhance their power base through heterarchy, subsidiary managers are able to draw attention to their specific entrepreneurial activities, and to their particular values and beliefs concerning opportunity identification, evaluation, and exploitation (see also Clarke, 2011, in this Special Issue). As such, their disseminative capacity (Minbaeva, 2007; Minbaeva and Michailova, 2004) is increased and they will be less likely to hoard knowledge, or be hostile to knowledge sharing (Husted and Michailova, 2002). Furthermore, subsidiary managers develop lateral authority through heterarchy (Stark, 1999) and they may use this to encourage peer subsidiaries to adopt the same kind of initiativetolerating culture that they themselves have. The socialization found in the normative basis of control within a heterarchy (Hedlund, 1993; Hedlund and Rolander, 1990) can be used to reduce scepticism and resistance; subsidiary managers not only share tacit knowledge about the characteristics and benefits of their initiatives, they are also open to the opinions and needs of peer subsidiaries. Hence: Hypothesis 5b: Political heterarchy positively moderates the relationship between subsidiary tolerance for local initiative and dispersed entrepreneurship in the MNC. © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

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Third, political heterarchy may magnify the impact of proactive behaviours of subsidiary managers, making their proactivity more potent. Without a political heterarchy, proactive behaviours may be constrained to the focal subsidiary or a few closely connected subsidiaries (e.g. geographic neighbours). Proactive behaviours can be used to build credibility of an entrepreneurial initiative and enable managers to engage in issue selling and feedback-seeking (Crant, 2000; see also De Clercq et al., 2011, in this Special Issue). The presence of a political heterarchy enables these behaviours to be more widely applied as subsidiary managers seek to exert influence over an ever-increasing number of locations and units of the MNC. This in turn leads to a higher likelihood that proactive issue selling and feedback-seeking will result in subsidiary initiatives that ‘fit’ the needs of dispersed peer subsidiaries. Thus, through political heterarchy, subsidiary managers’ proactive attempts to learn from feedback (Crant, 2000) can be used to generate or annotate initiatives such that they are more likely to be accepted in other locations of the MNC. Hence: Hypothesis 5c: Political heterarchy positively moderates the relationship between subsidiary manager proactive behaviours and dispersed entrepreneurship in the MNC. METHODOLOGY We tested the model through a questionnaire survey of middle managers working in wholly-owned subsidiaries of MNCs around the world. The use of questionnaires has been shown by prior researchers to be a valid way of assessing both the consequences of political phenomena in the work environment (e.g. Vigoda and Cohen, 2002) and the determinants of entrepreneurship in international firms (e.g. Birkinshaw, 1997). We targeted middle-ranking subsidiary managers because we felt they would have a greater exposure to – and involvement in – political heterarchy and dispersed entrepreneurship than corporate managers or lower level operating staff. First and foremost, middle managers have a central role in progressing entrepreneurship with the MNC (Burgelman, 1983a, 1983b). Burgelman (1983b) highlighted the ‘crucial role of cognizant middle level managers in selecting and supporting bona fide entrepreneurial actors and their projects’ (Burgelman, 1983b, p. 1361). Second, middle-ranking subsidiary managers hold a crucial position in terms of what they know about the MNC; they are able to bridge asymmetry in knowledge between corporate level and geographically remote operating staff. Nonaka (1988) described this as an ability to combine ‘strategic macro (context-free) information and hands-on micro (context-specific) information’ (Nonaka, 1988, p. 15). This was an important consideration in the present research as our model contains variables ranging from corporate level strategy to individual level proactivity. Third, middle-ranking managers have been described as being more perceptive towards organizational politics than employees at very high and very low levels in the organization (Parker et al., 1995). We executed the survey by a postal pilot and by a purposive sampling of subsidiary managers in a wide range of MNC subsidiaries and locations. Purposive sampling is a non-probability approach that aims to recruit participants from a predefined group. In our case, two criteria were used to identify and recruit participants: first, that the © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies


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respondent was a middle-ranking manager in a subsidiary unit (i.e. not operating staff and not headquarters manager or board member); and second, that the corporation was managing production or delivering services in more than one country. This approach is ideal in exploratory entrepreneurship research because it enables construction of a heterogeneous dataset (e.g. Dess et al., 1997). In this empirical setting, it was pertinent to achieve heterogeneity in terms of MNC primary industry and home country, as well as subsidiary host country. We drew on our business and professional networks to identify and recruit managers to achieve this. By conducting the purposive sampling through networking, we also were able to overcome problems of access to experienced middle managers in MNC subsidiaries. Following Coviello and Jones (2004), we conducted tests to establish validity and reliability. These are reported below. Furthermore, personal contact enabled respondents’ ability in English to be validated, and their education level to be assessed (the vast majority were university educated), and confirmed that they had exposure of the concepts captured on the questionnaire (e.g. Venaik et al., 2005). A total of 150 questionnaires were returned, 8 from the pilot and 142 from the purposive phase. Fifteen had to be omitted from analysis due to missing values against our variables of interest. There was a good spread of countries and industries in the final sample: 17 countries of origin, 21 host countries, and 16 distinct industries. Twenty-seven of the MNCs (20.0 per cent) had more than 100,000 employees at the time of the questionnaire response; 38 (28.1 per cent) had less than 5000 employees. Sixty-six respondents (48.9 per cent) indicated that they had greater than 5 years tenure within their MNC. Fifty-one respondents (37.8 per cent) indicated that they had experienced an international placement within their MNC lasting more than 3 months. Respondent functions also varied, and included country managers, sales directors, marketing directors, engineering and project managers, internal strategy consultants, and training managers. The survey contained a number of original statements against which managers were asked to indicate agreement on a 5-point Likert scale (1 = disagree strongly, 5 = agree strongly). Table I shows how scales representing model variables were constructed from questionnaire items. For all scales, Cronbach’s a is above the minimum recommended level (Nunnally, 1978). We assessed the structure of each scale using a principal component factor analysis. In each case, only one factor emerged with an eigenvalue > 1 (Table I). This provided support for the use of these scales as uni-dimensional and internally consistent measures. Dependent and Independent Variables A scale representing dispersed entrepreneurship was built using Birkinshaw’s (1997, 2000) depiction of the impact of new ideas originating in the subsidiary. This involved four items reflecting the degree to which a headquarters adopts and sanctions initiatives started in the subsidiary, the degree of adoption by other subsidiaries, and the degree to which subsidiary initiatives become credible projects within the MNC (Birkinshaw, 2000). This scale represents the main dependent variable (a = 0.77). A scale for entrepreneurial strategy was constructed from five items relating to dimensions of entrepreneurship as present in corporate strategy. Three of these have been defined as innovation, proactiveness, and risk-taking (Gautam and Verma, 1997; Lumpkin and © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

Questionnaire item

This subsidiary starts initiatives which tend to be adopted by a regional or global HQ This subsidiary starts initiatives which tend to be adopted by other subsidiaries This subsidiary generates ideas for new projects which eventually get the go-ahead and investment from an HQ Managers in this subsidiary develop new initiatives that become credible projects and are approved by an HQ Entrepreneurial This corporation has developed a strategy that encourages high levels of risk-taking strategy (5 items) This corporation has developed a strategy that encourages high levels of innovation This corporation has developed a strategy that encourages high levels of proactivity This corporation is looking for new ways to combine existing resources in pursuit of innovative products This corporation is able to learn from past mistakes Tolerance for local Managers in this subsidiary are allowed to invest time pursuing their own ideas and initiatives initiative (4 items) This subsidiary encourages its members to keep up to date with developments within the industry Managers in this subsidiary are encouraged to pursue their own ideas and initiatives because of company incentives This subsidiary has a culture in which people can talk informally about innovations they have seen in the marketplace Subsidiary manager This subsidiary contains many managers with a ‘can do’ attitude proactivity (4 items) Managers in this subsidiary show personal initiative in resolving problems for the corporation Managers in this subsidiary are aware that they can perform duties beyond their job specification Managers in this subsidiary take charge of situations where no owner is clearly identified Political heterarchy Managers in this subsidiary build alliances with managers from other subsidiaries (7 items) Managers in this subsidiary are actively involved in budgeting with a regional or global HQ Managers in this subsidiary sponsor corporate initiatives within the subsidiary Managers in this subsidiary use technical experts when negotiating with an HQ Managers in this subsidiary are developing the subsidiary as a centre of excellence This corporation encourages people to work in multi-disciplinary teams This subsidiary encourages its managers to have face to face meetings with managers in other subsidiaries

Dispersed entrepreneurship (4 items)

Variable

Table I. Scale construction (n = 135)

58.85% (1 factor)

55.94% (1 factor)

55.04% (1 factor)

68.55% (1 factor)

36.75% (1 factor)

0.77

0.79

0.73

0.85

0.70

Cronbach’s Factor variance alpha

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Dess, 1996, 2001; Miller, 1983; Miller and Friesen, 1982; Zahra and Covin, 1995). Others have stressed opportunity search and organizational learning as important aspects of strategic entrepreneurship (e.g. Ireland et al., 2003). Thus we included items relating to corporate efforts to combine resources to pursue new opportunities, and the corporation being able to learn from past mistakes (a = 0.79). A scale for tolerance for local initiative was constructed from four items: the degree of subsidiary individualism (Morris et al., 1994) (i.e. individuals being allowed to invest time to pursue their own ideas); an organizational culture that allows local discussions on external factors (Meyer and Heppard, 2000); reward systems for local innovation (Gautam and Verma, 1997); and subsidiary encouragement for keeping up to date with industry developments (a = 0.73). A scale for subsidiary manager proactivity was constructed from four items adapted from Crant (2000). These were: (1) proactive personality (the inclination to influence the environment in reaction to external conditions); (2) personal initiative (the behavioural pattern to go beyond a formally declared role or job description whilst being consistent with the organization’s mission); (3) role breadth self-efficacy (possessing the interpersonal and integrative skills required to take on a broader role than that defined by ‘prescribed technical requirements’; Crant, 2000, p. 442); and (4) taking charge (‘constructive efforts by employees to effect functional change with respect to how work is executed’; Crant, 2000, p. 442) (a = 0.85). A scale for political heterarchy was built from seven items representing political mechanisms used by subsidiary managers to build a power base (Mintzberg, 1985; Pfeffer, 1981, 1994) and exploit heterarchy (Hedlund and Rolander, 1990). Active power development is necessary for a subsidiary to become a prominent source of initiative within the MNC; the more developed the subsidiary, the more effective its bargaining position will be. Thus we included items capturing political games that can be used for developing an organization (Mintzberg, 1985): involvement in budgeting (see also Morgan, 1986, pp. 161–2), sponsorship, alliances, and lording (Mintzberg, 1985). We also included one item capturing attempts by subsidiary managers to develop power for themselves through expertise (Mintzberg, 1985). For this we drew on the centre of excellence concept, an important symbol of influence within the MNC (Frost et al., 2002). Heterarchical features of boundary crossing and normative integration were captured on two additional items (encouragement for working in multi-disciplinary teams and encouragement to have face-to-face meetings with managers in other subsidiaries) (a = 0.70). Three interaction terms were used to assess the moderating effect of political heterarchy on the independent variables at corporate, subsidiary, and individual manager levels. The interaction terms were calculated as products of political heterarchy with (1) entrepreneurial strategy, (2) tolerance for local initiative, and (3) subsidiary manager proactivity (all standardized). Control Variables First, we controlled for MNC size using the natural logarithm of the number of employees (taken from company filings). Size may determine the ability to identify new entrepreneurial opportunities (Ireland et al., 2003) as well as the scale of resources that are © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

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available to pursue new opportunities. Second, we controlled for economic development of the host country using GDP per capita (US$). This is often associated with investment by MNCs (e.g. Desbordes, 2007). Subsidiaries in developed markets may act in an entrepreneurial capacity as a consequence of knowledge spill-overs and participation within advanced networks of innovation. Third, we controlled for industry as services. The largest sub-group in the sample by industry were MNCs involved in service industries (62.2 per cent). MNC expansion in the services sector has recently been significantly higher than in manufacturing industries. Globalization of services is driven largely by developments in information and communications technologies, including the internet (Ietto-Gillies, 2002). A dichotomous variable was used (services = 1, non-services = 0). Fourth, we controlled for country of origin as the USA. The largest sub-group by country of origin were US MNCs (48.1 per cent). Home country institutions can have an impact on MNC strategic behaviour (Lam, 2003). The USA has a national culture conducive to supporting entrepreneurship and creativity in organizations (low power distance, high individualism, weak uncertainty avoidance) (Hofstede, 1983). However, it has also been noted that US MNCs can be more centralized than MNCs from other regions (Gates and Egelhoff, 1986) and potentially less likely to encourage dispersed initiatives. A dichotomous variable was used (USA = 1, non-USA = 0). Finally, we controlled for knowledge-generating potential of the subsidiary, a potent source of bargaining power for the subsidiary (Mudambi and Navarra, 2004). For this we draw on Bartlett and Ghoshal’s (1998) depiction of certain subsidiaries as strategic leaders within the MNC, generating new knowledge for the MNC because of the importance of the host country in which they reside, as well as the range of capabilities possessed by the subsidiary. Single questionnaire items representing the importance of the subsidiary location (‘this subsidiary is situated in a country of strategic importance to the corporation’) and the range of subsidiary capabilities (‘this subsidiary possesses broad capabilities [e.g. design, production, marketing and sales, customer service]’) were applied (1 = disagree strongly, 5 = agree strongly). Data Quality and Analysis The scales were analysed for normal distribution and multicollinearity was checked by examining correlations between independent variables, as well as variance inflation factors (VIF) (reported below). In addition, we took a number of measures to check for bias and ensure validity. First, we ran Harman’s single-factor test (an un-rotated factor analysis on all questionnaire items used in the model) to check for common method bias (Podsakoff and Organ, 1986). This revealed six distinct factors with eigenvalues ranging from 1.04 to 8.2, with the variance explained by the first factor being 32 per cent – less than half of the total variance. Following Podsakoff et al. (2003), we positioned the questionnaire items used for the scales in non-sequential positions in order to limit the impact of question context and item embeddedness. Furthermore, respondents were guaranteed anonymity and encouraged to answer as honestly as possible in order to overcome social desirability bias (Podsakoff et al., 2003, p. 888). Second, we ran t-tests by early–late response (before vs. after the data collection mid-point in December 2005), respondent tenure (greater than 5 years vs. less than 5 years), and © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies


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whether the respondent had had an international placement in the MNC lasting more than 3 months. These tests revealed no significant differences at the p < 0.1 level. Third, given that the dataset was constructed by purposive networking, we checked that the sample was representative by market capitalization (taken from Datastream, i.e. not self-reported). The distribution of market capitalization compared favourably against a standard reference frame (we used the Financial Times Global 500 list from the year 2008 as a comparison): final sample mean = $40bn, standard deviation = $65bn; reference frame mean = $54bn, standard deviation = $53bn. Fourth, we tested the external validity of the entrepreneurial strategy scale (corporate level) against secondary data obtained from Datastream. We correlated entrepreneurial strategy with a number of variables interpreted in prior work as indicators of firm level entrepreneurship and entrepreneurial orientation. Our scale for entrepreneurial strategy correlated positively and significantly with firm market value (US$) (r = 0.27, p < 0.01, n = 103) and negatively and significantly with net cash flows from financing (r = -0.25, p < 0.05, n = 86) and investing activities (r = -0.20, p < 0.1, n = 86) (a negative cash flow represents a cash outflow). Given the representation of services MNCs in our sample, the sub-sample reporting an R&D expense in Datastream was smaller. However, for those that did report R&D we observed a positive correlation between our entrepreneurial strategy scale and R&D spend per employee (r = 0.29, p < 0.05, n = 49). This provides external support to our entrepreneurial strategy scale: the more entrepreneurial MNCs were more aggressive in investment and were perceived by the market to be creating value for future goods. Finally, given that we relied on single-participant responses from each subsidiary, we checked for inter-rater reliability. We elicited an additional questionnaire response from 18 of the subsidiaries in the sample. Given the problems of distortion in raw agreement and correlation approaches ( Jones et al., 1983), we applied two tests to the 18 pairs: within-group reliability (rwg) ( James et al., 1984) and intra-class correlation tests (ICC) (Shrout and Fleiss, 1979). The median inter-rater agreement scores were as follows: rwg (dispersed entrepreneurship) = 0.86; rwg (entrepreneurial strategy) = 0.96; rwg (tolerance for local initiative) = 0.75; rwg (subsidiary manager proactivity) = 0.93; rwg (political heterarchy) = 0.92. These were all above the threshold of 0.6 used in prior studies (e.g. Gibson and Birkinshaw, 2004). ICC(1) values were all positive (>0.5) and with a significant F-value (p < 0.05), with the exception of political heterarchy (p < 0.1) and tolerance for local initiative (p = 0.16). The hypotheses were tested using linear regression. In the first model, the effect of the six control variables was tested. Second, a direct effects model containing the control variables and the four principal independent variables was run to test Hypotheses 1–4. Finally, a full model with control variables, four direct effect independent variables, and the three interaction terms was run to test Hypotheses 5a–5c. FINDINGS Table II shows means, standard deviations, and correlations between the variables of interest. The scales were normally distributed. We note positive correlations between the main independent variables (ranging from r = 0.47 to r = 0.65). One explanation for this © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies


1 2 3 4 5 6 7 8 9 10 11

3.27 9.71 30,695 0.62 0.48 4.08 3.73 3.30 3.52 3.49 3.23

Mean

Notes: n = 135. † p < 0.1; * p < 0.05; ** p < 0.01; *** p < 0.001.

Dispersed entrepreneurship Ln (employees) Host country GDP/capita Services dummy US home dummy Subsidiary location importance Subsidiary range of capabilities Entrepreneurial strategy Tolerance for local initiative Subsidiary manager proactivity Political heterarchy

Table II. Correlation matrix

0.79 2.17 14,265 0.49 0.50 1.02 1.16 0.77 0.81 0.87 0.66

S.D.

0.16† 0.08 -0.06 -0.16† 0.24** 0.25** 0.47*** 0.53*** 0.59*** 0.58***

1

-0.19* -0.09 -0.06 0.04 0.10 0.20* -0.02 0.04 0.20*

2

0.06 -0.13 0.03 -0.01 -0.15† 0.05 0.00 -0.06

3

0.05 -0.03 0.04 -0.13 0.05 -0.09 -0.17*

4

-0.16† -0.03 -0.13 -0.16† -0.15† 0.00

5

0.35*** 0.21* 0.18* 0.27*** 0.28***

6

0.14 0.21* 0.24** 0.21*

7

0.58*** 0.65*** 0.58***

8

0.58*** 0.47***

9

0.59***

10

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Table III. MNC dispersed entrepreneurship regression models Hypothesis Controls Ln (employees) Host country GDP/capita Services dummy US home dummy Subsidiary location importance Subsidiary range of capabilities Direct effects Entrepreneurial strategy Tolerance for local initiative Subsidiary manager proactivity Political heterarchy Interaction terms Entrepreneurial strategy ¥ Political heterarchy Tolerance for local initiative ¥ Political heterarchy Subsidiary manager proactivity ¥ Political heterarchy Maximum VIF F Adj. R-square N

Model 1

0.05† 0.00 -0.08 -0.16 0.12† 0.12† H1 H2 H3 H4

(0.03) (0.00) (0.14) (0.13) (0.07) (0.06)

(+) (+) (+) (+)

Model 2

Model 3

0.04 0.00 0.01 -0.10 0.01 0.04

(0.03) (0.00) (0.11) (0.11) (0.06) (0.05)

0.04† 0.00† 0.10 -0.10 0.02 0.03

(0.02) (0.00) (0.11) (0.10) (0.05) (0.05)

-0.06 0.22* 0.26** 0.38***

(0.10) (0.09) (0.09) (0.11)

-0.01 0.20* 0.24** 0.38***

(0.10) (0.08) (0.09) (0.11)

H5a (+)

0.19* (0.09)

H5b (+)

0.01 (0.07)

H5c (+)

-0.06 (0.08) 1.18 3.18** 0.09 135

2.34 12.26*** 0.46 135

4.18 10.94*** 0.49 135

Notes: † p < 0.1; * p < 0.05; ** p < 0.01; *** p < 0.001. Beta coefficients with standard errors in parentheses.

could be influence between the levels of analysis, e.g. corporate level entrepreneurial strategy encourages entrepreneurial culture at subsidiary level, which in turn stimulates individual managers to behave proactively. However, there are no extremely high correlations (r > 0.8). In direct effects regression models, VIF values models do not exceed 2.3, i.e. are within an acceptable range. Consequently, we do not expect multicollinearity to affect our interpretation of the results. Table III shows the results of the regression analysis. The best model (adjustedR2 = 0.49) is Model 3, with all variables entered. None of the control variables are significant in all models although we note the positive signs on firm size and host country development. In terms of direct effects, Models 2 and 3 are consistent: tolerance for local initiative, subsidiary manager proactivity, and political heterarchy are positive and significant. This provides support for Hypotheses 2, 3, and 4, but not for Hypothesis 1. In terms of interaction effects, entrepreneurial strategy ¥ political heterarchy is positive and significant (p < 0.05). The remaining two interactions are not significant. Thus we find support for Hypothesis 5a, but not for Hypotheses 5b or 5c. This suggests that entrepreneurial strategy in the MNC does not automatically lead to dispersed entrepreneurship; it requires a political heterarchy in order to take effect. © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

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DISCUSSION AND CONCLUSION Implications for Theory and Practice The main contribution of this analysis is to define and demonstrate the role of political heterarchy in promoting dispersed entrepreneurship in MNCs. Whilst others have highlighted the importance of corporate level entrepreneurial strategy, tolerance for initiative within subsidiaries, and individual manager proactivity, we argue that ideas originating in subsidiaries are more likely to be adopted by the wider MNC when the subsidiary plays a politically active role within the firm’s heterarchical structure. In this sense, political game playing by managers in subsidiaries is something to be welcomed; it encourages the identification, evaluation, and exploitation of opportunities across subsidiaries. Such lateral politicking signals underlying entrepreneurial competences and a capability for dynamic knowledge creation and transfer. However, this does not mean that all political game playing is a productive force in the MNC. Perceptions of politics in organizations can also be negatively related to innovation (e.g. Parker et al., 1995). Nevertheless, our view challenges the typological approaches and static nature of previous studies in understanding entrepreneurial dynamics in international firms. This also presents a fresh challenge to MNC researchers, not least because of the difficulties of operationalizing political heterarchy, and understanding the boundaries of its usefulness. The empirical findings also suggest that the direct effect of political heterarchy is only one side of the coin. Figure 2 shows the moderating effect of political heterarchy on the relationship between entrepreneurial strategy and dispersed entrepreneurship. Without political heterarchy, entrepreneurial strategy will not result in local initiatives diffusing

Figure 2. Impact of political heterarchy on the relationship between entrepreneurial strategy and dispersed entrepreneurship © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies


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outside of a focal subsidiary. Political heterarchy is a key enabler that translates encouragement for exploration at corporate level into diffusion and exploitation within the network of subsidiaries. Whilst our findings support arguments relating to the direct effect of entrepreneurial culture within the subsidiary (Boojihawon et al., 2007) and subsidiary manager proactivity (Crant, 2000), the interaction effects are weaker. The encouragement of an entrepreneurial culture in the subsidiary and the behavioural assertiveness of subsidiary manager proactivity (i.e. having a ‘can-do’ attitude, showing personal initiative, etc.) may make political heterarchy somewhat redundant. In other words, highly enthused and proactive subsidiary managers do not depend on political heterarchy to promulgate their initiatives; they will make their presence felt outside of the subsidiary no matter what. The contribution of our analysis is not only to identify political heterarchy as a principal source of advantage in the MNC, but also to explain why this is so. For this we draw on the definition of entrepreneurship as a process of identifying, evaluating, and exploiting new opportunities (Low, 2001; Shane and Venkataraman, 2000). First, political heterarchy encourages the identification of opportunities that are global in nature. The lateral communications, control through normative integration, involvement of subsidiary managers in strategic decisions that are all part of political heterarchy will enable knowledge about the challenges facing other subsidiaries of the MNC to be shared and internalized within a focal subsidiary. The landscape of opportunities for an employee whose subsidiary is active in political heterarchy will not be limited to the immediate host country market and its set of actors; it will also consist of the external environment and context of other subsidiaries. This makes it more likely that the needs of other subsidiaries are taken into account when an individual recognizes an opportunity for the first time. Second, political heterarchy allows a fuller evaluation of opportunities than is possible through localized evaluation. Other subsidiaries will become involved more readily in evaluation and annotation of a response to an opportunity identified by a focal subsidiary. Here, the emphasis on radical problem-solving, programmes for seeking new firm-wide advantages, and a culture of knowledge integration and recombination (as opposed to hierarchical division and specialization) (Hedlund, 1986, 1993; Hedlund and Rolander, 1990) all contribute a stimulus to subsidiary managers from other locations to provide their input, knowledge, and guidance. Interaction between managers from different subsidiaries regarding the features of the initiative that are salient to each local market allows knowledge to flow about how the initiative can be improved, made more flexible, delivered on an international basis, etc. This interaction also helps establish credibility for the response, assisting those promoting the initiative to gain sanctioning. Third, political heterarchy supports global exploitation by encouraging power bases to develop on an international basis. The ‘political’ part of political heterarchy acts to support the eventual roll-out of entrepreneurial initiative across many countries. Political game playing by subsidiary managers, particularly in terms of alliance building and external coalitions (Mintzberg, 1985) will increase the overall influence that the core group of individuals promoting the response to the opportunity have. The phenomenon of many subsidiaries competing for acceptance and funding for ideas formed as a response to multiple local environment opportunities implies an application of power by remote subsidiary managers. When a coalition competing for corporate funds is bigger, © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

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and where the revenue potential (or cost savings) of the opportunity is larger, the more likely it is that the initiative will be given the go-ahead. The results have relevance for headquarters and subsidiary managers. For headquarters managers wishing to pursue an entrepreneurial strategy and nurture initiatives originating in subsidiaries, the findings suggest that a political heterarchy should be tolerated. To this end, headquarters managers should provide encouragement to subsidiary managers to work in multi-disciplinary teams, to support subsidiaries developing as a centre of excellence where appropriate, to coordinate the engagement of subsidiary managers with peers and with headquarters managers in budgeting, and to allow coalitions and alliances to form. This encouragement can be given by creating heterarchy within the organization, and by allowing lateral power to emerge. This in turn suggests competences on the part of the headquarters manager: being sensitive to political games when encouraging dispersed entrepreneurship, being able to recognize when a political conflict will lead to the emergence of an initiative that may be useful to the wider MNC, and having the ability to limit and mend any relational damage caused by protracted game-playing. For subsidiary managers to pursue their initiatives outside of their local context, our findings suggest they would increase their chances of success by participating in political heterarchy. This equates to actions to increase subsidiary power that are not necessarily related to the initiative itself. Subsidiary managers should therefore be willing to work in multi-disciplinary teams, think about (and plan for) ways in which their subsidiary could become a centre of excellence, use technical experts during negotiations with others outside of the subsidiary, build alliances and coalitions with others within the MNC, and even sponsor corporate initiatives in order to build relational capital with headquarters managers. The findings also suggest that subsidiary managers should develop skills in proactivity, possibly formalizing – i.e. undertaking training in – the art of being proactive within an international organization. Finally, the findings suggest that subsidiary managers should tolerate others within the subsidiary devoting time to developing their own ideas. Implications for Research and Limitations In terms of research, the findings raise questions about the suitability of static models for explaining dispersed entrepreneurship. Mandate models of subsidiaries (e.g. Birkinshaw and Morrison, 1995; White and Poynter, 1984), the configuration–coordination framework (Porter, 1986), the integration–responsiveness paradigm (Bartlett, 1986; Ghoshal, 1987), and associated subsidiary role analysis ( Jarillo and Martinez, 1990) all implicitly suggest ways that entrepreneurship manifests itself in subsidiaries of MNCs. We propose an alternative perspective, namely that dispersed entrepreneurship requires a behavioural analysis to understand the influence of subsidiaries within the internal network. This influence requires an accrual of knowledge and power by subsidiary managers through political heterarchy. Future work could take a relational focus on social capital. The social capital concept has been seen as an integration of structural (actual and potential resources available to actors) and relational (benefits derived from social ties by actors) aspects (Kostova and © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies


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Roth, 2003). This could be extended to the notion that dispersed entrepreneurs find psychic comfort in political heterarchy, where they can fight their agenda and promote their visions. In this sense, social capital could be extended beyond ties of virtuosity to ties of protracted conflict and jockeying for position. An alternative way forward could be to extend prior works on knowledge networks in MNCs (e.g. Gupta and Govindarajan, 2000; Kogut, 2000; Kogut and Zander, 1993) by emphasizing political heterarchy as a principal determinant of knowledge creation and carrier of knowledge. Thus the MNC network as the critical enabler of privately held knowledge and source of the firm value (Kogut, 2000) could be seen to function via political heterarchy. By linking political heterarchy explicitly with internal and external knowledge network characteristics of MNCs, one could address Kogut’s (2000) seminal insight on generative rules and network emergence. Recent work on the impact of lateral relations on knowledge sharing (Tsai, 2002) and the way employees from different work contexts ‘co-create common ground’ to transform production processes (Bechky, 2003) are also endorsed by political heterarchy and could provide a common base with which to develop this line of enquiry. Notwithstanding these contributions and implications, the current paper has limitations that need to be addressed in future work. First, there are likely to be more variables or deviations from the variables analysed here, that are pertinent to dispersed entrepreneurship in the MNC. For instance, trust and procedural justice (e.g. Kim and Mauborgne, 1991) may play a role in defining the outcomes arising from political games. Likewise, the performance impact of allowing political heterarchy to develop within the MNC has not been addressed here. Also, variables at the job location and personal level (such as career advancement opportunity, age, and gender) have the potential to influence perceptions of political phenomena (Ferris and Kacmar, 1992; Gandz and Murray, 1980). Second, from the viewpoint of empirical fieldwork, this study has limitations in terms of operationalization and sample size, and these limitations should also be addressed in future work. The degree to which our operationalization taps into the constructs may undermine the findings. Future research may also modify the scales, particularly that of political heterarchy, and broaden the sample. The use of mixed methods could be beneficial. Overall, causality cannot be claimed in this study and no generalizations are made. Finally, future work should examine the issue of the boundaries of usefulness for political heterarchy, not only in the MNC, but in other types of organizations as well. Understanding the limits and constraints of political behaviour in increasingly networked organizational forms is an important line of enquiry. Whilst such behaviour may have a productive aspect in certain scenarios, this may not always be the case. Future work could extend this to the wider networks in which firms increasingly participate. Concluding Remarks This paper argues that political heterarchy is a key determinant of dispersed entrepreneurship in the MNC, promoting subsidiary initiatives into a wider diffusion. Overall, the conceptual development and empirical findings provide support to the argument that political mechanisms positively impact entrepreneurship within MNCs. Our analysis © 2011 The Authors Journal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of Management Studies

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