An Evaluation of the Integration-Responsiveness Framework: MNC Manufacturing Subsidiaries in the UK Author(s): James H.

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mlr vol. 37, 1997/4, pp. 295-318

mir
IIIoiINIINHNII ItuVWW Gabler Verlag 1997

James H. Taggart

An Evaluation of the Integrationresponsiveness Framework: MNC Manufacturing Subsidiaries in the UK

Abstract
Thisstudy is anevaluation oftheintegration-responsiveness framework atsubsubsidiaries offorlevel data from a of 171 manufacturing sidiary using sample itseekstoreview thethree-way taxonomy eignMNCs intheUK. In particular, subsidiarofmanufacturing andMartinez evolvedbyJarillo (1990) in a study ies in Spain.

Key Results
A four-group a low integratheanalysis, from including taxonomy emerges Jarillo and Martinez. notdescribed tion/low classification, by responsiveness acrossthefour A number variables are analysed of structural and operational well defined and is that the of affiliates, taxonomy proposed groups suggesting consistent. internally

Author
BusiInternational inInternational Business James H. Taggart, Senior Lecturer Strategy, Strathclyde UK. ofMarketing, of Strathclyde, nessUnit, Scotland, Glasgow, University Department 1997 March1996,revised received 1996,revised 1996,revised January July September Manuscript

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JamesH. Taggart

The integration-responsiveness has proven to be a robust framework paradigm and analysing thestrategies of international firms at corpobothfordescribing rateand subsidiary level. It owes its development to Prahalad(1975) and Doz andjointly (1987). It has becomeone ofthemostdominant (1976) individually, ofinternational andhasbeensubject tovigorous evalmodels, strategy empirical Jarillo andMartinez uation others, (1990), RothandMorrison (1990) by,among visualises as beingevolvedin two andJohnson (1995). The framework strategy of activities is theinternational firm's to presdimensions: integration response costsandmaximise return the surestoreduce overall markets through exploiting inherent in themultilocation market and imperfections aspectof theoperations; in itsmany forces locations thefirm to attenuate therigours regulatory requires as necessary, and thusbecomemoreloand/or co-ordination of standardisation itsposition as enviBy adjusting alongthesetwodimensions callyresponsive. firm factors the international to create and sustain ronmental change, attempts advantage. competitive is to carry The purpose ofthisstudy outa critical assessment oftheintegraframework which has a rolein classifying alternative intertion-responsiveness and is also a means of multinational national allowing strategies corporations their as a meansofcom(MNCs) to adjust positioning alongthetwodimensions withother In particular, international thispaperwill peting effectively players. outan evaluation andextension ofthederived modelofJarillo andMarticarry nez (1990) as itappliesparticularly to MNC manufacturing subsidiaries. To this uses a databasedeveloped from a sampleofMNC affiliates in the end,thestudy UK. In terms of Rothand Morrison's this classification, (1990) methodological is a "medium-grained" as to case study analysis opposed the "finegrained" or the"course-grained" use of extremely approach largedatabaseslike COMPUSTAT or PIMS. This methodological approachis adoptedwitha view to with other similar to make thisstudygeneralisable and studies, comparisons and to to the in some rereplicable, attempt develop methodology particular spects.

Concepts
With duerespect totherational, linear viewofstrategy Chaffe (see, for example, models(Frederickson the search for an 1985) and synoptic 1983), appropriate international is likely to be morefluid, itis unlikely to resemble strategy though of Mintzberg and Waters closelythe"emergent" concept (1985) or theparallel notion of Quinn(1980). Contingency 1978,Ginsberg/ (Hofer/Schendel theory Venkatraman "there is noonebestway",andtheconstant 1985)tellsus that quest 296 mir vol. 37, 1997/4

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Framework Evaluation of the Integration-responsiveness

of MNC managers of theoretical to fitstrategy to situation underlies a number It drives itis Porter's (1986) configuration/co-ordination approaches. paradigm, of Whiteand Poynter's of it characteristic model (1984) subsidiary strategy, relates toBartlett andGhoshal's(1989) multinational-global-international-transfirm theconcept oftheinternational hierarchic national anditinforms typology, (1990). It has strong developed by Hedlund(1986) and Hedlundand Rolander the tocapture theintegration-responsiveness which links, too,with attempts grid of of economies search for the balance international constant optimal manager's scale andeconomies of scope.
The Integration-Responsiveness Framework

- through which andDoz (1987) model blocksofthePrahaland Thebuilding they the ofcapturing keycharactermethod a managerially claimtooffer meaningful - are globalintegration coof activities, isticsof MNC activity globalstrategic torecthefirst Hedlund andlocal responsiveness. (1981) was among ordination, ofsubto thedegree whenrelated particularly ognisethekeyroleofintegration, in international a (Hitt/Iremarketing plays keypart Integration autonomy. sidiary and customer land 1987), especiallyin managing segmentation relationships, (1988) 1986). Ghoshaland Bartlett design(Takeuchi/Porter physicalproduct intenormative and innovative between a positive found capability relationship is Kobrin For and of (1991),integrationoperationalised gration parent subsidiary. thesubsidiarandbetween andsubsidiaries between ofresources as flows parent inbetween the andJarillo Martinez ies themselves. (1991) explored relationship is correlated levelofintegration that andconcluded anddifferentiation, tegration of recent In a MNC. the within withthedegreeof co-ordinative study activity retask-oriented the as identified German subsidiaries, integration Welge(1994) theperis madefrom this andconflict ofco-ordination sultant resolution; linkage of in the context an interesting oforganisation insight yetoffers theory, spective thispaper. ofglobalresources co-ordination identified While Leontiades (1986) correctly thefirst MNC strategy, to successful as essential analysiswas thatof rigorous similar between of the in terms co-ordination Porter linkages (1986). He defined international MNC's ofthe different and/or countries in different activities parts ofknowledge andsharing accumulation itallowsfor that He recognised network. of scale, economies it helpstheMNC to gaininternational acrossthenetwork, it is where countries between and also allowsit to shift advantage comparative manufunctions: international in is also recognised specific Theconcept located. (Kashani 1990), and R & D (Dorrenbacher/ (Agthe1990),marketing facturing for inthepressure is manifest co-ordination Wortman consistency 1991).Further, ofa tangible theMNC (Rosenzweig/Singh within system 1991)andarea resultant mirvol. 37, 1997/4 297

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JamesH. Taggart

and subsidiary of procedural 1991). (Kim/Mauborgne justice betweenparent a relationship as notedabove, Martinez and Jarillo (1991) identified Finally, a finding that was confirmed enpassant andco-ordination, betweeen integration Morrison Roth and (1992). by in a theimportance of national Bartlett (1981) emphasised responsiveness timeand and thishas been confirmed situation of rapidinternational growth, andPoynter 1984,Agathe1990,Taylor1991). (e.g. White againin theliterature to Leontiades (1986), local responsiveness maybe so welldeveloped According from that of theparent. Bartlett differentiates that itentirely subsidiary strategy in butwith a different thesamepoint, andGhoshal(1986) makemuch emphasis; of such survival certain cases, corporate maydependon proactive development in international R & D, especiallyin an local responsiveness differentiating where likePharmaceuticals vary product specifications widely bycounindustry role of from the identifies the (1988) key responsiveness Finally, Egelhoff try. and it has been described as of theory, specifically perspective organisational the local environment" forisomorphism within (Rosenzweig/Singh "pressure 1991). andDoz (1987) identify for andloPrahalad quiteclearpressures integration with the need for buthavemore co-ordination. cal responsiveness, difficulty They andco-ordination, butrecognise that loa close linkbetween suggest integration subsidiaries willalso require a significant of co-ordinadegree callyresponsive without further to theworking tion.However, discussion, they proceed assumptionthat co-ordination is muchmorecloselyrelated to theneedforintegration, twobroadvariables andthese arethen combined as one dimension ofthemodel, with localresponsiveness the other. This has been being assumption subsequently studies. justified byempirical The overallframework has also beensubjected to supportive testempirical Roth and Morrison and Johnson who concen(1990), (1995) ing,notably by by trated on a single Bothconfirmed Prahaland andDoz' original industry. prescriptionby identifying three clusters of strategy outcomes on thediagonal(see Figure 1) marking thehighintegration-low to low integration-high responsiveness continuum. responsiveness
Integration-Responsiveness at Subsidiary Level

Theframework was adapted andMartinez an empir(1990) for slightly byJarillo ical study of 50 Spanishsubsidiaries of manufacturing MNCs. This modelalso has integration as thevertical butreplaces with localdimension, responsiveness the latter variisation; is, however, operationalised by six responsiveness-type ables. Whileaccepting thatsubsidiaries be locatedin all four could,in theory, oftheir theauthors classifications in thestratmodel, quadrants positonlythree 298 mir vol. 37, 1997/4

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Evaluation oftheIntegration-responsiveness Framework Grid Figure1. The Integration-Responsiveness Need forResponsiveness Low High Integrated product strategy, world-wide business management High

Product emphasis Need for Integration

Multifocal strategy

Areaemphasis

Low

Locallyresponsive strategy, autonomous national subsidiaries

autonarehighly andhighly egyspace:activesubsidiaries integrated responsive, while omoussubsidiaries arehighly but have low recepresponsive integration, tivesubsidiaries havelowresponsiveness butarehighly 2). (see Figure integrated that ofthesample three clusters offirms did,infact, Analysis identify correspond totheproposed rolesso,as wellas confirming thediagonal broadly strategy space Prahalad and the corner ofthemodelwas identiDoz, hypothesised by topright fiedbyan additional classification. locatedin Morerecently, a study of 102 German subsidiaries manufacturing theBritish theviewthat is a keystrategy dimension Isles supported integration atthis twomutually dimensions leveloftheMNC,andidentified (Tagorthogonal andmarare of the These 1995). subsidiary decision-making autonomy gart/Hood could be closely ketscope. Whileit maybe arguedthatthesetwo parameters to local responsiveness, mulinked itmust be remembered that are,in fact, they andwouldtherefore notresolve on to one resultant dimension, tually orthogonal itbe local responsiveness a whether or otherwise. Further evidence comesfrom mirvol. 37, 1997/4 299

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H. Taggart James Framework Figure2. Integration-Localisation

DegreeofLocalisation Low High Receptive Subsidiary High Active Subsidiary

Degreeof Integration

Low

Autonomous Subsidiary

subsidiaries located 1996b) for123 multinational study (Taggart manufacturing in Scotlandin whichthekeydeterminants werefound to be market scope,coordination andintegration; and local decision-making autonomy supply linkages werealso identified as important.

Research Questions
From thediscussion aboveandan examination ofFigure ob2, itis immediately viousthat an unexplained occurs in the to low gap strategy space,corresponding andlow responsiveness; noris there ordiscussion of integration anyexplanation thisgap in anyofthepaperscitedabove.Bartlett andGhoshal(1986) propose a roleComplementer") for subsidiaries with a lowerlevelofcompetence operating within a market that has low strategic fortheparent it importance corporation; 300 mlr vol. 37, 1997/4

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Framework Evaluation oftheIntegration-responsiveness

couldbe argued that lowintegration wouldoccurinsuchanenvironment, andthat low responsiveness of lowersubsidiary maywell be one consequence competence. three Bartlett identified multinational, (1986) corporate strategies (global, in three of thefourquadrants of theintegration-responsiveness transnational) - the a fourth variant Bartlett and Ghoshal(1989) indicated framework; later, firm which, lies in thefourth international (low intequadrant byimplication, do notsayso specifically. lowresponsiveness)), Instead, they they gration, though knowlof international firms indicate that subsidiaries parent company "exploit and adaptation". worldwide diffusion Despitethis edgeandcapabilities through 2 in has notbeen thegap inthestrategy indirect however, evidence, space Figure and responsiveness, of integration in distinct terms evaluated fully previously whofocused and Martinez to Jarillo with most (1990) specifparticularly respect reason no There seems level. on on whyan facie prima ically strategy subsidiary notadopta low integration-low should MNC subsidiary strategy, responsiveness Inoftheparent on thepart ordue to negligence either corporation. pro-actively MNCs in thecement that maywell proindustry deed,Bartlett (1986) suggests as they left corner lower in this subsidiaries of their the locate majority activity and due to logistical to buildglobalscale plants barriers, incentive have "little mato the due or the to differentite limited nationally product operations ability that inmind be borne itshould ofthebusiness". nature ture However, commodity modelofJarillo thederived andextending on evaluating is focused research this research first the at we arrive (RQ) andMartinez thus, question principal (1990); here: addressed RQ1: - low local responlocatedin thelow integration subsidiaries Arethere siveness space? strategy

rolewillbe thisstrategy discussion inthefollowing Forthesakeofidentification labelled"quiescent subsidiary". andresponsivetheintegration multivariate While using techniques analytical itwouldbe rashtodraw ofsubsidiaries, nessconstructs mayyielda classification in theliterature advocated on thisbasis alone. It has been strongly conclusions classifiofanysuchderived thevalidity areusedtotest variables alternative that results the of 1983, richer a allows this inaddition, (Harrigan cation; interpretation of A Venkatraman/Grant 1992). summary 1990,Roth/Morrison 1986,Morrison ofthesupporting with a note research, this usedfor thevariables together purpose, of thispaperis to evaluatethe 3. Thus,thesecondpurpose is givenin Figure research andwe havethesecond ofthese interms variables, taxonomy underlying question: RQ2: from theintegration-responsivederived Does thesubsidiary taxonomy variablesin some across the alternative differentiate ness framework manner? systematic 301

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H. Taggart James Variables Figure3. Alternative

Wells(1972) White andPoynter (1984) Younget al.( 1988) (1996a) Taggart Taggart (1996b) Size (employment, White andPoynter sales) (1984) Youngetal.( 1988) Roth andMorrison (1990) Taggart (1996b) andDunning ( 1983) Export propensity Stopford White andPoynter (1984) ( 1985) Dunning andTurner ( 1985) Stopford Roth andMorrison (1992) Market Rumelt ( 1974) scope White andPoynter ( 1984) Youngetal.( 1988) RothandMorrison (1990) Material to sister White andPoynter ( 1984) outputs subsidiaries Youngetal.( 1988) Kobrin ( 199 1) Rothetal.( 1991) ofsales manufactured White andPoynter (1984) Proportion in-house Jarillo andMartinez ( 1990) Martinez andJarillo ( 199 1) RothandMorrison (1992) from Material sister White andPoynter (1984) inputs subsidiaries Youngetal.(1988) ( 1988) Egelhoff andMartinez Jarillo (1990) Levelofproduction MilesandSnow( 1978) operations Porter (1980) White andPoynter ( 1984) Youngetal.( 1988) RothandMorrison (1990, 1992) 1 Taggart (1996b) Age ofsubsidiary

Variable

SupportingResearch

Active subsidiaries oldest, and quiescent youngest, receptive autonomous intermediate. Active subsidiaries largest, and smallest, quiescent receptive autonomous intermediate.

PresumptiveRelationships

Active andreceptive subsidiaries havehigher export propensity than autonomous andquiescent. Active andreceptive subsidiaries havehigher market scopethan autonomous andquiescent. Active subsidiaries sendlargest smallest, quiescent proportion, andautonomous receptive intermediate. Autonomous subsidiaries manufacture highest proportion, active and least, receptive intermediate. quiescent Active subsidiaries receive largest smallest, proportion, quiescent andautonomous receptive intermediate. subsidiaries have Quiescent level,activelowest, highest autonomous andreceptive intermediate. |

Methodology
Sample

From Jordan's ofUS andother firms in the listing foreign-owned manufacturing of500 was drawn atrandom. A postalquestionnaire was sent tothe UK, a sample Chief Executive ofthese subsidiaries. werereturned; 279 questionnaires Overall, 47 werereturned ofthese, marked bythepostalservice "goneaway",and61 rewere from firms that identified themselves as inmanufacturing sersponses being vices rather thanmanufacturing. This lefta totalof 171 validresponses, reprean effective rateof43.6%. Just overhalfoftheresponses came senting response 302 mir vol. 37, 1997/4

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Framework Evaluation oftheIntegration-responsiveness Firms Table 1. Structural Characteristics ofRespondent Average YearsSinceEstablishment TotalSales ( million) TotalExports ( million) Number ofEmployees 22.6 197.4 74.1 990

execuother and 23% from other 23% from from ChiefExecutives, Directors, of engifirms wereengagedin someform of therespondent tives.Eighty-five classifications. over other 58 and in 31 chemicals, manufacturing spread neering, in Table 1. are shown ofthesefirms Theykeycharacteristics
Measures

wereoperationalised dimensions andresponsiveness The integration by six and Doz and from Prahalad drawn were these fivevariables (1987) and respectively; and validforreliability subsidiaries of 22 foreign a sub-sample with pre-tested variables The six integration in thefinal inclusion (Taquestionnaire. itybefore The fiverecomment. andcall forlittle standard 1-6) arefairly ble 2, variables and usedbyPrahalad variables 7-11) originally (Table2, variables sponsiveness have nor criticised reserachers, they Doz have notbeen overtly by subsequent the to re-establish It maybe helpful, modification. therefore, beenused without thereto measure variables of usingtheseparticular in favour lineof argument where of the 7 concerns customers; Variable construct. heterogeneity sponsiveness cuswhere between little and markets, identified are needs customer vary clearly decision their where the of value the of havea clearperception tomers product, arewelldetrends market where and and established well are familiar, processes 8 which is low.Inthecase ofvariable localresponsiveness theneedfor then fined, for of competitive diffusion characteristics, concerns responsiveness pressures their when andeasilyidentified, arefewinnumber willbe low when competitors be can when and andunderstood, can be distinguished recognised they strategies andthe to technology, 9 relates Variable characteristics. sometypical as sharing to be low where is likely manufacturing needforlocal responsiveness complex technoland with stable in used are manufacturing product conjunction processes theneed are reduction cost and case process important; improvements ogy;inthis acin a willbe reflected rapidly technology forhigher evolving responsiveness and process.Withvariable10, changesin product by unpredictable companied willbe for of the economics to responsiveness manufacturing, pressures relating manof the become utilisation and size when reduced aspects key capacity plant mirvol. 37, 1997/4 303

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JamesH. Taggart

costand/or where locational intheform exist, ufacturing advantages particularly 11 is concerned offactor Variable with theheterogeneity ofthe availability. input and a need for local will in a executive be reflected high group, responsiveness team that is not a constricted uniform culmanagement variegated by corporate theMNC; in thiscase, theexecutive tureoperating throughout groupis much morelikelyto respond and positively to local market stimuli even if rapidly - lacking - they therequired haveto seektheco-operation degreeof autonomy ofregional or globalHQ. Forthefullsampleoffirms, theCronbach ineach alphaacrossthevariables dimension is 0.88 for and 0.84 for these values areinintegration responsiveness; dicativeof measurement 1990, 1992,Johnson (Roth/Morrion 1995). reliability All elevenvariables weremeasured on a 5-point scale. These variLikert-type intervals ables have assumed and maybe considered interval-scaled equidistant The two sets of variables were (Martinez/Jarillo 1991). aggregated by yield meandimensional scoresforeach respondent (Ghoshaland Bartlett subsidiary 1988). The structural variables weremeasured as follows: time elapsedsinceestabin years, lishment sales in poundssterling, as a of sales,and exports percentage in units. The characteristics in were measured three operational employees ways: were a six-classification choice of market first, respondents given scope("mainly UK" to"worlda six-band scaleofpercentages wasusedtomeaswide");second, ureoutputs and inputs to and from other and theproportion groupsubsidiaries, of sales wholly manufactured thenature of production third, by thesubsidiary; was measured a scale operations by 5-point Likert-type ("assemblyonly"to "fully fledged manufacturing").
Data Analysis

was carried out in twostages.First, to evaluateRQ1, cluster Analysis analysis was usedtoinvestigate andidentify theunderlying structure ofthesample, group basedon thetwoaggregated dimensions ofintegration andresponsiveness. This is a common to studies used Dess and Davis others, approach strategy by,among and Pearce(1988), Rothand Morrison and (1984), Robinson (1990), Martinez Jarillo and Johnson Then an of was conducted (1991) (1995). analysis variance to assistwiththeinterpretation of cluster thiscannot be characteristics, though as a testof statistical in thenormal senseas we aretesting regarded significance for differences that we knowmust exist.In thesecondstageofanalysis, ANOVA anda seriesofposthoctests werecarried outusing thestructural andoperational variables totest for differences between theclusters; this wasdesigned significant to evaluteRQ2. The appropriate hereis Duncan'smultiple-range test procedure or planned is an alterna(Roth/Morrison 1990). Contrast analysis, comparisons, 304 mlr vol. 37, 1997/4

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Evaluation oftheIntegration-responsiveness Framework

tive(Johnson is preferred heresinceRQ2 is not 1995)buttheposthoc approach levels of Type1 error thisminimises theriskof inflation determinant; wholly 1987, (Hairetal. p. 283).

Results
- contrary wistoreceived clusters offour distinct theexistence Having predicted dom (Jarillo/Martinez 1990) greatcare is neededto avoid theself-fulfilling methods andnon-hierarchial hierarchical both Accordingly, syndrome. prophesy nonwas appropriate; solution a four-cluster indicated that used.Theformer were in confirwas used of with its hierarchical statistics, profusion output clustering,

Cluster Solution: Table 2. Four-Cluster Analysis variable Industry v.l. v.2. v.3. v.4. v.5. v.6. v.7. v.8. v.9. v.10. v.11. 4 F-value 3 Cluster 2 Cluster 1 Cluster Cluster (n= 45) (n= 43) (n= 32) (n= 51) 1.88 1.60 1.88 2.09 1.79 1.16 2.49 3.00 2.81 2.42 2.56 3.06 3.34 3.59 3.38 3.28 2.03 2.72 3.09 3.09 2.56 2.38 2.73 3.00 3.24 3.45 2.90 1.55 1.55 1.67 1.84 1.63 1.80 17.03* 34.09* 27.17* 26.90* 23.27* 13.15* 26.92* 23.68* 19.82* 17.54* 9.31*

1.60 linked decisions Manufacturing areas market to local orworld-wide 1.47 andquality Product specifications byHQ or subsidiary developed 1.82 serves to which Extent subsidiary world-wide itsMNC's customers 1.87 andsharing Centralisation oftechnology development network theinternal within on linkages 1.47 ofsubsidiary Dependence network theinternal within ofproduction Centralisation planning, 1.00 control andquality inventory 1.51 ofcustomers Heterogeneity needs andtheir 1.76 and to which Extent competitors identifed are their easily strategies 1.64 andlevel oftechnology Stability ofmanufacturing sophistication 1.64 line Lifecyclestageofproduct andmanufacturing process 1.69 ofexecutive group Heterogeneity

* Significant at thep<0.001 level. levelsofintegration v.l. tov.6.: highscoresdenote (min=1,max= 5) higher of levels (min=1, max= 5) v.7.to v.l 1.: highscoresdenote responsiveness high

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JamesH. Taggart

anda evaluamation. Solutions weredeveloped with 2, 3, 4, 5, 6 and7 clusters, soofbetween-groups variance. thetwo-cluster tion madeoftheproportion Thus, 42% of all variance was due to thebetween-groups lution showedthat element, and73.5% for fiveclus70% for 58% for thethree-cluster four-cluster, solution, As a broad this increased ters;thereafter, proportion parallelto veryslowly. infacnumber offactors for theappropriate Cattell's (1966) screetest extracting was appropriate l. This that thefour-cluster solution toranalysis, thisconfirmed ton/30 considered inthemiddle oftherange n/50 solution fallsalmost precisely Variable means for each of the four clustobe acceptable (Roth/Morrison 1990). in Table2. ters are shown thatdifare constructed on theassumption theresearch Finally, questions in strategy differences as prescribed ferences between theclusters reflect bythe than differences framework rather merely indicating integration-responsiveness Theclusters wereexand/or basedon industry membership industry perspective. effect and it was found that the ofreamined for this proportion industry-specific described earlier didnotvary from thethree broadindustry groupings spondents chiamong k-proportions, significantly among the fourclusters(difference = = more confident that differences Thus we can be df=6, 9.54, 0.13). square p Table3 givesa summary ofcharacbetween thefour clusters arestrategy-related. to the evidence of a positive teristics of thefour clusters of subsidiaries, adding toRQL response Before tothenext itshould be noted that theresults moving stageofanalysis, so farsuggest to This is not all a strong at consistent with positive response RQL thecategorisation forward in Jarillo and that there is firm eviMartinez, put by - or 26% ofthesample- in denceof a non-industry-specific cluster of45 firms the low integration/low responsiveness strategy space, not discussedin their model.This is an interesting as Jarillo and Martinez did focusspecififinding, on MNC albeit in located subsidiaries, cally manufacturing Spain. The secondstageoftheanalysis involved outANOVAon thesetof carrying four structural inorder totest whether the newframework derived above variables, in classifying andexplain(and confirmed by theforegoing analysis)is helpful on these variables. A posthoctest was ingdifferences (Duncan'smultiple-range) thismaybe a more conservative than is used,though approach strictly necessary. The results are shown in Table4. A number of conclusions followfrom thistable.First, autonomous subsidiariesaresignificantly than subsidiaries are,on averyounger receptive; receptive olderthanactive,though notsignificantly so. Thus we must conage, slightly clude thatthere is littleindication of a lifecycle or "stagesof development" effect. subsidiaries are significantly Second, bothquiescentand autonomous smaller than active subsidiaries also havehigher affiliates; employers receptive butnotsignificantly variances onthis varlevels, so,indicating employment large iable. Third, sales of quiescent subsidiaries are significantly belowthoseof ac306 mlr vol. 37, 1997/4

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Framework Evaluation oftheIntegration-responsiveness Table 3. Summary oftheCharacteristics ofthefour of Subsidiaries Groups Cluster 1: Subsidiaries Quiescent lowinthis manofitsnetwork arevery with theparent orother group; parts Linkages the and quality decisionsare notmade witha view to serving ufacturing, product is carried outceninother markets. Mosttechnology customers development parent's with sister subsidiarwhere itexistsat all, is notshared thesmalllocal effort, trally; and orstocks. Customers nocontrol overquality, ies. HQ appliesvirtually production of comand strategies are easilyidentified, as are theidentities their requirements andthemanufacturing arerelatively is stable, mature, products petitors. Technology similar have broadly curve.Managers processis well advancedalongthelearning than rather solution" andadoptthe"company bylocal beingstimulated backgrounds market problems. Subsidiaries Autonomous There andlocaldecision is characterised Thisgroup making. linkages bylownetwork at a fairly low level,and sister with oftechnology subsidiaries, maybe somesharing needsare customer Unlikethequiescent reduced. is much central control subsidary, is andtheir as arecompetitors difficult toidentify, much more Technology strategies. havediffernew.Theexecutive lineis stillfairly andtheproduct still group evolving culoritscorporate theorganisation anddo notidentify entbackgrounds closelywith ture. Active Subsidiaries Firms hereshowa high of thequiescent is themirror-image This group subsidiary. arecalledon in thefactthat on all six variables, levelof integration they especially is also high, Local responsiveness world-wide. customers the MNC parent's toservice strateandtheir in identifying driven competitors difficulty bysubstantial especially and in of unknowns the and specifications. process product variety by gies, Subsidiaries Receptive facsubsidiaries. of theautonomous theconverse Thesefirms Integration represent Local reof technology. to thecentralisation in relation torsare all high, especially thelevelof manufacturing are all fairly variables low,though perhaps sponsiveness subsidiaries. than for is somewhat quiescent higher sophistication

2: Cluster

3: Cluster

4: Cluster

theFourStrategy Variables of Structural Table 4. Comparisons Groupings Among Clusters means variable Structural Age subsidiaries 1: Quiescent Cluster subsidiaries 2: Autonomous Cluster subsidiaries 3: Active Cluster subsidiaries 4: Receptive Cluster test ofDuncan'smultiple Results range 2 1.7 16.9 25.1 26.7 4>2 Employment Sales 479 528 1934 1242 3>1,2 60.1 102.6 342.4 307.8 3>1 Export propensity 27.43 30.5 39.4 42.7 4>1

atthe different aresignificantly means that cluster indicates test Duncan's p<0.05 level. range multiple in measured years. Age: in units. measured Employment: in millions. Sales: measured ofsales. as a percent measured byexports propensity: Export

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James H. Taggart ofOperational Variables theFourStrategy Table 5. Comparisons Among Groupings Clusters Market scope 2.56 3.28 3.63 3.69 variables means Operational Outputs Sales 1.40 1.95 2.72 2.33 1<3, 4; 2<3 5.69 5.60 5.19 5.75 3<1,2,4 Inputs Production 2.51 2.95 3.75 3.14 1<3,4 4.62 4.12 3.97 4.49 1>2,3 4>3

1: Quiescent subsidiaries Cluster 2: Autonomous subsidiaries Cluster Cluster 3: Activesubsidiaries 4: Receptive subsidiaries Cluster

test 1<2,3,4 Resultsof Duncan'smultiple range

test indicates that cluster means aresignificantly different atthe Duncan's p<0.05 level. range multiple ofmarkets served Market wider (min=1,max= 6) range scope:highscoresdenote all measured as of sales manufactured and material Material in-house, inputs outputs, proportion (min=1,max= 6) percentages more levels(min= 1,max= 5) ofproduction Nature highscoresdenote complex operations:

size emerges thesetwopiecesofevidence tivesubsidiaries. So, taking together, active andredeterminant of differences. as a fairly Fourth, strategy significant of sales on a than autonsubsidiaries, average, export higher proportion ceptive is significant butthedifference omousand quiescent subsidiaries, onlyin the The differences case of receptive and quiescent. between and active quiescent = = and between autonomous and are not 0.08), 0.07) receptive (p (p quitesignificant. In phasethree oftheanalysis ANOVAwas carried outacrossthefiveoperationalvariables to assess whether thederived wouldassistinclassifytaxonomy these constructs. ingandexplaining strategy-dependent AgaintheDuncan'smulto avoidinflation ofType1 error. The posthoc testwas usedin order tiplerange results are shown in Table5. Thistableshould be interpreted in thesamewayas Table4, anditalso gives riseto someimportant conclusions. The meansformarket scope showthekind of variation that is presupposed butsignificant differby theresearch question, ences are associatedonlywith subsidiaries which have lower market quiescent all other We mayconclude that determines scopethan types. subsidiary strategy market to some extent. Mean values for the ofoutscope significant proprotion subsidiaries forfurther and/or final putsentto other group processing assembly are in line withexpectations from so. RQ2 and,forthemostpart, significantly Theproportion for subsidiaries is lower than all other catquiescent significantly foractivesubsidiaries is significantly thanforautonomous egories;that higher but not so to subsidiaries. affiliates, The third significantly compared receptive variableis the proportion of sales manufactured operating by the subsidiary itself. The meanvaluessuggest further for outby RQ2, andthisis borne support 308 mlr vol. 37, 1997/4

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Framework Evaluation of the Integration-responsiveness

theresults of theDuncanmultiple subsidiaries do, inrangetest.Autonomous a significantly oftheir ownsalesthan active deed,manufacture higher proportion subsidiaries manufacture the as do quiescent subsidiaries. affiliates, Receptive The converse more than active subsidiaries. and highest proportion, significantly of material that is true theproportion of thefourth variable, inputs operational subsidiaries. The meanvaluesshowthekindofrelationcomefrom other group than havea higher recepproportion byRQ2. Activesubsidiaries shipsexpected so (p = 0.09), and thesame appliesto tiveaffiliates, butnotquitesignificantly the andreceptive-autonomous theautonomous-quiescent Likewise, comparisons. but in line with are levelofproduction meanscoresfor RQ2, technology broadly have subsidiaries offer the tests Duncan do,indeed, Quiescent only partial support. and active and than autonomous levels subsidiaries, average higher significantly the otherwise than level a affiliates have active; higher significantly receptive are not statistically significant. comparisons inTables4 an 5 go a considerable summarised The analyses wayto supportcombinatoRQ2, as every a positive thus paired response giving ingthemodel, thereWe variables. the two of at least is tion ofsubsidiary may by types separated measureof derivedabove has a substantial foreconcludethatthe taxonomy validity.

Interpretation
and Martinez theJarillo that ofRQ1 suggests Confirmation (1990) modelis inexistswhich fourth a three their to in addition classifications, strategy complete; ofthesama over Just hereas "quiescent hasbeendescribed quarter subsidiary". defined and it is as and this classification within fall clearly distinctly ple firms taxMartinez and Jarillo the to which aresimilar other as thethree types strategy for hasbeenestablished Thetypical justovertwenty subsidiary quiescent onomy. itexofwhich 60 some of sales has annual around million, 500, employs years, 1 these of amount a token a over (around percent exports Only quarter. just ports finalassembly, and/or forfurther ofsales) goes to other processing plants group sister comefrom about5 percent inputs (byvalue)oftheplant'smaterial though 63 percent manufactures The quiescent subsidiaries. by value of its subsidiary oradapted linewas developed oftheproduct 40 percent ownsales,andjustunder selected some with UK to the confined is Market narrow, being scope very locally. with is of The level incontinental countries technology high, production Europe. is R & D, however, limbeingemployed; techniques manufacturing fledged fully technolofmanufacturing to theadaptation confined itedin scopeandis largely and White to resemblance a bears of affiliate this Poynter's Thus, strong type ogy. mlrvol. 37, 1997/4 309

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James H. Taggart

of Taggart (1984) miniature replica(adopter type)and to thestarter subsidiary inthe andHood(1995). No modeofformation datawascollected current research, butTaggart and Hood's starter was somewhat less than other subsidiary likely to have been and was more to originated byacquistion, perhaps likely have types evolved from a successful distribution and unit. recently servicing The activesubsidiary ofthequiescent It is, in many ways,theopposite type. with andMartinez' ofthesamename, has somesimilarities Jarillo classification In thiscontext, butis much less boundto theparent's network. ithas moresimiof White larities to theproduct and or the branch specialist Poynter integrated of and Hood. "constrained is a more Perhaps plant Taggart independent" aptterm is fairly here.The typical close to therationalised manureceptive subsidiary ofWhite andPoynter facturer andhas somesimilarities to theemergent regional ofTaggart andHood. Jarillo andMartinez' ofthistype is supplier interpretation areclose enough buttheparallels toretain theterminology. The autonolimited, moussubsidiary of thereceptive is, in many ways,themirror-image subsidiary. with White andPoynter 's miniature Ithassomeparallels (innovator model) replica and shareselements of Taggart and Hood's strategic and emergent independent to Jarillo and Martinez' interregional supplier types. Again,it is close enough to retain their The new is shown in 4. model terminology. pretation Figure
at Subsidiary Level Figure4. Integration-Responsiveness

Local Responsiveness Low High Receptive Subsidiary High Constrained Independent

Integration

Low 310

Quiescent Subsidiary

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Evaluation of the Integration-responsiveness Framework

The Quiescent Subsidiary

wasadded a final confirmed the existence ofthe subsidiary, stage Having quiescent identified as from the to theresearch postalsample, process.Five subsidiaries at length wereinterviewed and locatedclose to thecluster centroid, quiescents, subsidofother toa number todiscuss thefindings aboveandlinkthese findings to with the As well as characteristics. regard integration checking position iary ofdecision was also askedaboutthedegree each subsidiary andresponsiveness, ofprocedural ithad,theextent 1991) justice(Kim/Mauborgne autonomy making manfeelsitis treated howthesubsidiary evaluates which byHQ inthestrategic or were its the and how guided operations subsidiary perceived agement process, and network coordination of the extent motivated 1986). (Porter configuration by hisfirm's whohadalso completed Chief Ineachcase the Executive, postal original was interviewed. research instrument, in theUK in 1985. Its annual ownedand was established Firm1 is German It was setup to manufac85% is exported. ofwhich sales aresome18million, vehito servethecontinental location in a low costEuropean vehicleparts ture consultafter the made are Most decisions cle assembly subsidiary by industry. aremadelargely however, decisions, byHQ. Relationships HQ; financial ingwith in a noticeable been has there are with improvement though HQ good, generally in increase a thelastfiveyears performance. subsidiary by significant paralleled of marketing; in terms is generally coordination Network configuralow,except customto final its delivers andthefirm low indeed, tionis very directly output low thefirm's wellwith fit characteristics these ers.In many acknowledged ways, is awareofthelow levelofresponsivetheChiefExecutive levelofintegration; substantial to making is committed and with is improvements it, ness, unhappy to shift the that He believes five next overthe responsivehigher making years. decision theexisting nesswillbe aidedbytwofactors: first, subsidiary-oriented with thesubsidiary's HQ power second, bargaining improved making processes; due to rapidly increasing performance. textiles. industrial in 1955,andmanufactures established 2 is US owned, Firm half is now but UK the to set market, nearly Itwasoriginally up exploit exporting to sells 1 it firm Like markets. annualsalesto wider directly its ofits47million is shared Decisionmaking network. than rather customers usingitsinternational is very theworking whom with good.Levelsofconfigurarelationship HQ, with for sees thisas thereason Executive andtheChief arehigh, andcoordination tion cusof for is now he in that lowresponsiveness, producing many HQ's European charatbeing He was somewhat toHQ's specifications. surprised tomers, broadly of assessment intheoriginal butreconfirmed as a quiescent acterised subsidiary, is notseenas a keyissue,butindiscusTheformer andresponsiveness. tegration to meetitsvery was unlikely his that siontheChiefExecutive subsidiary agreed mlrvol.37, 1997/4 311

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James H. Taggart

ambitious sales targets overthenextfiveyearswithout a substantial increase in He had no clearidea ofhowthismight be done. responsiveness. Firm 3 is also US owned, andwas setupin 1988toaccesstheEuropean chemhasgrown to some 16 and is icalsmarket. Itsturnover million, quickly projected 25million within fiveyears; around 80 percent oftheoutput is exported toreach to customers who require standardised directly fairly products, though specialis shared with isedproducts areseenas an areaofrealpotential. Decisionmaking and the is insofar as makes most decisions reHQ HQ relationship good,except the R&D and this some illthe thrust of causes activities, garding subsidiary's andconfiguration arehigh, andtheChiefExecutive will.Levels ofcoordination willgradully ease up thelevelofintegration. He sees this feelsthat thesefactors in terms as advantageous of his subsidiary moreof thegroup's serving existing In of whom he cannot at the moment. he sees customers, addition, many supply andfeelsthat theneedforincreased local responsiveness, HQ to repersuading is thekey.He is keenly awareofhisquieslease itscontrol on hisR & D facility andwas wryly amused centstatus, bytheterminology. in theUK Firm 4 is a Swiss ownedspeciality foodmanufacturer, established in this in 1936.Itsexports areminimal anditssales levelis 12million; growth the five and the level has not matched inflation over last years, employment figure has also fallen. The subsidiary is highly and the levels of network autonomous, coordination andconfiguration within which itoperates arevery lowindeed. Overseemedsatisfied withthequiescent and all, theChiefExecutive classification, withthesubsidiary's on the other dimensions discussed. The position strategy is thepoorrelationship with has beenexacerbated HQ, which exception bypoor Low was not seen as an important factor but, operating performance. integration after an extensive theChiefExecutive that increased discussion, acknowledged localresponsiveness wascritical toachieving hisfuture Some performance targets. ofthiscan be achieved the but a substantial insituation, through high autonomy of will resources also be the Chief Executive that put group necessary; accepted someattention to improving thesubsidiary/HQ wouldbe necessary relationship to lubricate thisprocess. Firm5 is a Japanese manufacturer of foodingredients, set up originally in 1984toservice theUK market, buta third ofits7million sales is nowbeing exto somecontinental countries. The subsidiary had a highlevel ported European of autonomy andrelationships with Coordination ofactivities HQ areexcellent. is high, and thisis mainly reflected in constantly and highflowsof information around thenetwork. is low,as might be expected from knowledge Configuration a firm in thissector; with thehighlevel of autonomy, thiswas seenas together thestrategic that orients the firm towards its market The imperative opportunities. ChiefExecutive was surprised to find hisfirm low on responsiveness compared to other subsidiaries. of his business and products, he sees Owingto thenature thisas a moreimportant factor than andquickly indicated a number integration, 312 mir vol.37, 1997/4

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Framework Evaluation of the Integration-responsiveness

ofpotential hisresponsiveness, all ofwhich fallwithin hisautomoves toincrease ofHQ. he was confident wouldhavethesupport nomy scope,andall ofwhich is notwholly ofthecharthis selection offivefirms representative Inevitably, three acteristics ofthequiescent as noted earlier. However, general points group was seen these discussions. worth from First, responsiveness highlighting emerge followed of thesix strategic as themostimportant dimensions, by thelevel of than tobe less important integraautonomy; onlyprocedural justicewas thought to in resources seen as useful the former was tion, HQ expandloseeking though characterised of these firms are all cal responsiveness. Second, autonomy byhigh in respect of refactor is an enabling sinceautonomy and low responsiveness; difference themostsignificant 1987),itmaybe that (Prahalad/Doz sponsiveness willlatter are more the is that subsidiaries and autonomous between quiescents five of the none to maximise use their to Third, responsiveness. autonomy ing subautonomous aim to become four in this remain wish to quadrant; quiescents classification. towards theconstrained with firm 3 working sidiaries, independent

Discussion
anddetailed is thedefinition research ofthis themost finding interesting Perhaps three This raises of the whyis questions: subsidiary type. quiescent description the what are and of Jarillo model in the included not Martinez; thisstrategy type a for there is role future ofthequiescent subsidiary type;and what implications allowance maketheoretical and Martinez Jarillo certainly subsidiary? quiescent a subsidiary are independent: forthis type:". . . thesetwo dimensions may is most obvious The corners". four the chart's of one explanation that any occupy has develwhose in occur not does of subsidiary thistype economy Spain, just and sincetheendoftheFrancoregime theaccerapidly opedandindustrialised internahas beena phaseofstrong siontotheEuropean (EC). There Community whichseems have participated in whichMNC subsidiaries tionalisation fully, in substantial them to haveinvolved andMartinez) toJarillo changes (according theEC has enof mode. incompetitive ofroleandshift Integration Spainwithin memin other subsidiaries with sister of Spanishaffiliates integration couraged standarhasencouraged markets ofnewEuropean andtheopening bercountries, This maybe an inappropriate at theexpenseof local responsiveness. disation of A number as described forthequiescent environment previously. subsidiary was Martinez' and Jarillo contribute. differences sample mayalso methodological themostimportant to include that foreign is, itwas selected "non-probabilistic", used weredifferent, sectors. industrial in eight firms Also,thevariables though variables used fiveresponsiveness Thisresearch thisappliesless to integration. mirvol.37, 1997/4 313

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JamesH. Taggart

from Prahalad and Doz' original and perhaps contribtaken work, directly they usedthree Jarillo andMartinez utetoa more construct; broadly-based operational a morespecific variables whichmayproduce construct, though responsiveness ofintegration. as a measure one couldalso be interpreted teamwouldbe content to runa It is unlikely thata proactive management as described itmaybe argued that sucha manhere;indeed, subsidiary quiescent theroleofthesubsidiary, teamwouldeither moveon orquickly change agement interviews. The ofthiswas gathered thefivepost-test andsomeevidence during it neither the worst of all scenarios; subsidiary represents participates quiescent inmultinationality international ofactivities that arecothrough integration fully in thelonordoes itbecomea keyplayer ordinated effectively byheadquarters, inresponse resource commitments cal economy abletomakesubstantial bybeing Norcan itbe tempting or customer demands. to local competitive opportunities as itmight be difinterms ofthecareer of senior subsidiary managers, prospects in is such an environment that ficult to establish performance superior personal network. For themultinadetached from therestof theinternational relatively to envisage thequiescent as an attractional too,itis difficult subsidiary parent, Ityields fewofthe economic benefits ofmultinationality, itseems tivepropostion. and it is to the normal control web of to operate unlikely beyond headquarters, in market. As a maximise commercial the local state of permanent opportunities thiswouldbe virtually intolerable to most efficient leaves affairs, MNCs,which either itis an early a young onlytworational explanations; development stagefor subsidiaries arelessthan five (butonly3 outof45 quiescent old), subsidiary years or it represents a transition between and autonomous (or vice stage receptive ofthiswas gathered thefivepost-test interversa);again,someevidence during views.Thisnotion ofa transition that canstageis a mostinteresting possibility notbe explored with thedatafrom thepresent butmight be research, perhaps the of a more subsidiaries will be no more atQuiescent objective fine-grained study. tractive to hostgovernments as they have fewer international and less linkages in terms of new technology and thesubsequent operational scope,particularly newtechnology intothelocal economy. Due to their leakageof that apparently lowerlevelofcapability, these subsidiaries skilled maydevelopfewer personnel, andwillalmost be poorer contributors to theexchequer. In summary, it certainly is hardly that a or national would much likely regional development agency spend time ordirect substantial resources intoattracting this kind ofsubsidiary, so comforsuchfootloose inward investments wouldbe muted. petition we maybriefly consider thefuture roleofa quiescent One Lastly, subsidiary. clearpossibility is termination ofclosure. Thiswas thefateoftheCommins enin Scotland that was in closed 1995 a when itwasprogineplant following period within its highly international and gressively marginalised network, integrated which itexperienced much reduced access toresources that would during period havealloweditto respond to changing customer andcompetitive The pressures. 314 mir vol.37, 1997/4

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Evaluation of the Integration-responsiveness Framework

is thetype initiated other ofroletransition referred to above,whether possibility ormotivated itself. Someevidence of byheadquarters bysubsidiary management thiswas gathered the five interviews. Another during post-test good exampleis teamhas sucin Corkwhere thelocal management theApple'sEuropean factor clandeswithin the almost increased the level of group by, cessfully integration thewholeinternational as a resource for itsinnovative tinely, increasing potential for software solutions network a seriesof progressively complex bydeveloping the To use a well-worn elsewhere. newhardware phrase, prescription developed is "shapeup or shipout". subsidiaries for quiescent

Conclusions
oftheintegraassessment outa critical was tocarry aimofthis Theoverall paper thetwostrathis of studies As with other framework. nature, tion-responsiveness different the for a demonstrated have dimensions posifacility describing tegic theframeinthestrategy tions byMNC subsidiaries; maybe occupied spacethat a wayofreactsubsidiaries anddecentralised also allowmore work proactive may of alterations conditions compensatory by making competitive ingto changing as intended was research this More in the specifically, space. strategy positioning and Martinez of theJarillo and extension evaluation (1990) model an empirical theintegration-responfrom whichwas derived of subsidiary directly strategy, one to encompass to be inadequate Thatmodelwas shown dimensions. siveness thecurrent evolvedfrom that defined of theclearly analysis, positions strategy the more that was anda related findings. encapsulated fully paradigm developed showeda substantial of thisadapted degreeof internal paradigm Interpretation stratof with elements consistent to be andwasalso shown subsidiary consistency, Hood and andPoynter (1995). (1984) andTaggart byWhite developed egymodels of subthefour in distinguishing modelwas also efficient The proposed groups is consisThis variables. and structural of number a sidiaries operational along refineframework their that Martinez and Jarillo of advice with the tent required be would countries in other studies andthat illuminating. ment, butsomequalmodelareevident, andMartinez theJarillo with Comparisons countookplace indifferent thetwostudies be noted. should factors First, ifying was but was first for the selected, the tries carefully study sample (Spain,UK); of levels the for selected amongSpanish second;overall, integration randomly fortheUK, though than seemsubstantially subsidiaries compariprecise higher areatdifferent sonsaredifficult; stagesofdevelopment, also,thetwoeconomies in each. Specifitherolesof MNC subsidiaries affect andthismaysignificantly UK butnotin in the is the be that well it subsidiary present quiescent cally, may mirvol.37, 1997/4 315

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JamesH. Taggart

in thelatter, levelsof integration and also to higher Spaindue to theapparently in Spain different behind a subsidiary be possibly radically reasoning locating and the UK more mature envi(a (a rapidly manufacturig economy) developing the constructs were somewhat The variables used to ronment). develop Spanish Fia point that has beendiscussed from thepresent different previously. study, incultural theUK andSpainmayalso environment between thedifference nally, inthelatter. subsidiaries theabsenceofquiescent Welge(1994) and,to a explain disDirks(1995) haveemphasised that culture lesser extent, maybe an important in the role of variable cases; thus, quiescent subsidiary may particular criminatory teamswithin and/or to management notbe acceptable Spanishsubsidiaries may roletoallocatetosubsidtobe theappropriate notbe preceived byMNC parents culture. rewithin theSpanishbusiness iariesoperating Onlyfurther empirical will answerthesequestions satisfaccountries searchin Spain,UK and other torily.

Notes
1 As both dimensions are measured on a five-point scale, the theoreticalborderbetween the taxonomy types is the midpointof the scale (i.e. 3). The actual means forthe sample are 2.26 for and 2.13 for responsiveness. This implies that,overall, UK subsidiaries are someintegration and less responsive thanPrahalad and Doz mightsuggestfora global samwhat less integrated ple of subsidiaries. The actual breakpointsbetween the types are thus established by the mean relative to the UK environment, values for the sample. The clusters derived are therefore and could be fullyvalidated only by a cross-country study.

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