Cooperating while competing in multinational corporations

Abstract

In this chapter we investigate the organization of competition among subunits in multinational corporations (MNCs) with the intent to explore how headquarters encourages and organizes for competition and when and why competition is handled by subunits that cooperate. The organization of competition by headquarters among the subunits is characterized by special conditions due to the formal hierarchical organization and access to legitimate tools to instil competition. Competition arises around three sources: allocation of resources, system position and headquarters attention, and the allocation of subsidiary mandates. Empirical findings from six MNCs are used to illustrate the adoption of cooperative and non-cooperative behaviours among subunits as outcomes of headquarters implementation of different tools to organize for competition. The findings also show that headquarters is not only a fourth—but also a third—party as it adjudicates many of the competitive situations that it organizes among its units.