Integrative Capacity as a Moving Force in Newly Formed Icelandic Multinational Enterprises

Abstract

The rapid growth of multinational enterprises in Iceland at the beginning of the 21st century is one of the most intriguing events in the practice on international business. Past decades have been characterised by profound changes and an increased rate of globalisation. However, much of the globalisation was initiated by large companies in major developed countries. As globalisation proceeds, smaller companies from small countries joined the process. As a result, there have been dramatic shifts in the way businesses are organised and how they compete. These rapid changes in the nature of global competition have caused international managers and international management researchers alike to search for new ways to frame problems and answer questions about how to manage complex multinational corporations (MNCs) most effectively. When a corporation establishes a subsidiary in a foreign country, through Greenfield or acquisition, its managers must decide how much control they need to maintain over the subsidiary; should the company operate separately or should it be integrated into the already existing system. A good balance is attained when the managers in the headquarters have global vision, core values and cultural principles which are shared by all subsidiary managers. The smaller the organisation at the headquarter, the more important is the integrative capacity of the initiators and the builders of the new multinational enterprise. Integrative capacity can be described in the following way: the strategic infrastructure of the corporation is seen as a multidimensional system which contains strategic resources or capability and organisational infrastructure, which might provide a foundation for global expansion and latent linkages within the MNC. When the firm boundaries are fuzzy, a conventional organisational structure is unable to satisfy the internal need for ecological evolution within its network. In a situation like this, a strategic infrastructure is necessary to the coordination and integration of business units that are geographically dispersed, while also maintaining internal differentiation and local responsiveness among individual subunits. The integrative capacity of newly formed Icelandic MNEs is discussed based on a case study of two such companies, Actavis and Marel.