Abstract
This paper examines the mechanisms of coordination used by Multinational Corporations (centralization, formalization, and socialization) related to capability building of overseas subsidiaries in emerging countries.
Organizational behavior literature indicates that there are numerous effects (both positive and negative) associated with organizational socialization.
Nevertheless, in international business studies, organizational socialization is considered the ideal management tool for dealing with overseas subsidiaries, and very little data have been published to contradict this view.
The successful performance of overseas subsidiaries requires the transfer of home-base knowledge as well as the creation of local knowledge to facilitate capability building.
However, international business studies have not analyzed the influence of headquarters’ coordination on knowledge transfer and knowledge creation based on the above issue related to organizational socialization.
Accordingly, this paper addresses the following: 1) the influence of three modes of headquarters’ coordination on both knowledge transfer and knowledge creation, and 2) the influence of knowledge transfer and knowledge creation on capability building of overseas subsidiaries.
Case studies and comparative analyses of Japanese MNEs have revealed that: 1) Three modes of headquarters’ coordination promote knowledge transfer in comparison with the case where all controls are minimal, but inhibits knowledge creation, and 2) Both knowledge transfer and knowledge creation will make a contribution to the capability building of the overseas subsidiary; however, there is a trade-off between the two.
Based on the above-mentioned analysis, we suggested two success patterns of organizational socialization in the overseas subsidiary.
