The Challenge of the Multinational Corporation to Organization Theory: Contextualizing Theory

Abstract

Organization scholars have increasingly looked to the multinational corporation (MNC) as a convenient research site for testing and developing general hypotheses applicable to any organization. In this essay, we argue that theorizing about organizational processes in the MNC needs to treat the MNC itself as a research object: that is, to recognize that the complex multidimensionality of the MNC will influence the phenomena under investigation and needs to be incorporated into research design and conceptual framing. To do so requires what we term contextualized explanations: styles of theorizing that view context as constitutive of organizational phenomena. We reanalyse an existing study of identity work in the Carlsberg Group to demonstrate the theoretical insights to be gained from a contextualized approach. Our case analysis illustrates how integrating the MNC into the explanation changes our theoretical understanding of the phenomena being investigated.

Introduction

As three international business (IB) scholars for whom the multinational corporation (MNC) has been a central focus of research, we have been puzzled by the continuing lack of attention to MNCs in organization theory (OT). Nearly four decades ago sociologist Peter Evans (1981, p. 200) urged organizational scholars to study MNCs, on the grounds that ‘MNCs offer a unique opportunity for organization theory’. MNCs have become increasingly important sites for testing general hypotheses about organizational structures, processes and behaviour. However, very little of this research recognizes the opportunity for developing theory by focusing on MNCs themselves as complex organizations with multiple product lines and functions operating in many geographic locations exhibiting widely differing social, cultural, political and linguistic conditions. Despite the opportunities MNCs offer for developing theory, their importance in shaping organizational fields, and their central role in many of the key societal and political challenges of today’s world, they remain at the margins of OT. In this essay, we explore the factors behind this puzzling marginality, and make the case for the MNC as a uniquely promising venue for developing OT.

While the organizational complexity of the MNC is perhaps an obvious reason for the lack of attention from OT scholars, we argue that the explanation goes further. We believe that the universalizing traditions and assumptions that are firmly entrenched not only in OT but also in the social sciences more broadly are ill suited to studying the MNC. Much OT research aims at contributing to the development of general organizational theories that are universal, devoid of the effects of time and place. Due to the influence of this universalizing legacy, most organization scholars do not consider the MNC to warrant separate consideration – rather it is seen to provide a convenient venue for testing and developing general hypotheses about organizations. Consequently, the MNC is treated as a research site rather than a research object in its own right.

In contrast, in this essay we argue that any attempt to theorize about organizational processes in the MNC needs to recognize that multinationality matters at every level of this complex and changing organizational form. In coming to terms with the multinationality and complexity of the MNC, we offer ‘contextualized explanation’ as an approach to theorizing (Welch, Piekkari, Plakoyiannaki, & Paavilainen-Mäntymäki, 2011). Contextualized explanations aim at building distinctive theories of complex phenomena such as the MNC by turning away from the pursuit of general organizational theories. Instead, theories explain by situating organizational phenomena in their time and place. To do so, this approach to theorizing integrates not only the external contexts embraced by institutional theory but also intra-organizational contexts. It recognizes the need for multiple levels of analysis, and for recognizing variations over time as well as across space. Thus, understanding this complex and distinctive organization, which Scott (1992, p. 138) called ‘one of the most influential modern organizational forms’, challenges the dominant approach to theorizing in OT. This challenge, we would argue, is the most important contribution that studying MNCs can make to the OT field.

In what follows, we first set the scene by providing the historical context for the limited attention to the MNC in OT. We then contrast the treatment of MNCs as a research site with the potential for studying them as an object of research in their own right – the approach that we advocate in this essay. We illustrate this potential by reanalysing an existing study of the Carlsberg Group (Hatch, Schultz, & Skov, 2015) that uses an MNC as a research site. By incorporating the multinationality of the company into our re-analysis of the case, we provide a more rounded explanation of identity work at Carlsberg – the focus of the original study. Our re-analysis explains this identity work by contextualizing it within the MNC, as well as situating the MNC in the larger economic, social and political contexts that have shaped it over time – and on which it has itself been and will continue to be a major influence. This enables us to assert that the multinationality of the organization is constitutive of the identity processes under investigation and show how new theorizing can be derived from it. We conclude by arguing that the MNC is a promising venue for developing contextualized OT because it confronts organization scholars with the need to engage with rather than assume away real-world complexity in our theories (Tsoukas, 2017).

Why Has the MNC Received So Little Attention in OT?

The organization of MNCs has been a focus of considerable research since the late 1960s, primarily in the field of IB. However, very little MNC research has found its way back into OT, as subsequent generations of MNC researchers have noted (Dörrenbächer & Geppert, 2017; Ghoshal & Westney, 1993). This lack of OT attention to the MNC has become increasingly important for two reasons. First, as both ‘takers’ and ‘makers’ of institutional patterns and transnational governance, MNCs are crucial to the efforts to understand societal ‘grand challenges’ called for by growing numbers of organization scholars. Second, growing numbers of OT researchers are turning to MNCs as convenient sites for research on a range of organizational issues, but have paid little attention to the potential impact of the MNC as an organizational form on their work and findings. This section provides an historical overview of the interactions between OT scholarship and MNC research that examines the challenges of increasing the dialogue between OT and the IB researchers who study MNCs as organizations.

Since the early years of the IB field in the 1960s and 1970s, the organization and management of MNCs have drawn attention from IB researchers (e.g. Brooke & Remmers, 1970; Stopford & Wells, 1972; Yoshino, 1971). The foundational work on the internationalization of firms and on MNC organization drew heavily on contemporary variants of open systems theory: research on the internationalization and investment patterns of firms, still widely cited today (Aharoni, 1966; Johanson & Vahlne, 1977), built on the Cyert and March (1963) behavioral theory of the firm, while research on the organization and management of MNCs drew on contingency theory (e.g. Fouraker & Stopford, 1968; Stopford & Wells, 1972). The basic premise of contingency theory – that organizational structure is shaped both by internal factors and by the environmental conditions the organization confronts – grounded the fundamental assumption of IB MNC research: as firms internationalize, the growing internal organizational complexity of operating across borders and the external complexity of dealing with differing country environments mean that MNCs face organizational and managerial challenges different from those confronting purely domestic firms (Fouraker & Stopford, 1968). IB scholars have long characterized the MNC as a ‘dualistic organization’ that inescapably confronts seemingly polar opposites, most notably global integration and local responsiveness but also centralization and decentralization, hierarchy and autonomy, and unity and diversity (Bartlett & Ghoshal, 1989; Doz, Bartlett, & Prahalad, 1981; Evans & Doz, 1989). Thus, the key organizing challenge of the multinational, and a recurring theme for successive generations of IB scholars, has been to address the tensions and paradoxes that are introduced by these dualities: how can MNCs balance the organization’s internal variety with the unity implied by being ‘one company’?

Through the 1970s, MNC researchers focused on how headquarters structured and controlled geographically dispersed operations, usually organized as national subsidiaries in charge of the entire value chain in that country. By the late 1980s and early 1990s, an influential body of research, centred in pioneering case study-based research, focused on how MNCs were moving to more flexible network organizational models, as they responded to the challenges of the diverse multiple environments in which they operated (Bartlett & Ghoshal, 1989; Ghoshal & Bartlett, 1990; Hedlund, 1986; Prahalad & Doz, 1987). At the same time, network organizational models were drawing increasing attention in OT (see e.g. Nohria & Eccles, 1992; Powell, 1990), and OT was increasingly focusing on understanding the relationships between organizations and their social environments, especially the emerging neo-institutional perspective (DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Meyer & Scott, 1983; Powell & DiMaggio, 1991). The stage seemed to be set for a fruitful dialogue between the two fields (Ghoshal & Westney, 1993).

However, the challenges involved in developing more ‘two-way trade’ between OT and IB became evident at a 1989 workshop at INSEAD that aimed at bringing eminent OT scholars together with the leading MNC researchers in IB to explore potential synergies between the two fields. Several of the organization theorists saw the MNC not as a distinctive organizational form but as a particularly complex organization whose multiple subunits and environments made empirical research extremely difficult. They asserted that examining a relatively small number of large MNCs was a less promising path to developing good theory than studying much larger numbers of simpler organizations. On the other hand, most of the IB researchers rejected strongly the view expressed by the macro-organization theorists that organizational research should be independent of any motivation to assist top executives in controlling and coordinating their firms. At the time, OT had barely begun its migration into business schools, although micro-level Organizational Behaviour (OB) had been established there for over a decade. Several of the leading macro-theorists at the workshop had social science degrees and were based primarily in social science departments, less exposed to the institutional pressures to make research relevant for managers that influenced scholars employed in leading business schools. Disappointingly, but perhaps not surprisingly, the edited volume on Organization Theory and the MNC resulting from the workshop (Ghoshal & Westney, 1993) was dominated by contributions from IB researchers, and the differences in methodology and orientation that emerged at the workshop have continued to divide the fields in the ensuing decades.

One paper prepared for that volume (Doz & Prahalad, 1991, 1993 ¹ ) responded to the workshop’s debates by asserting that the distinctiveness of large multi-business, multi-location MNCs required a new approach to theory development, one grounded in the study of MNCs rather than on applying existing OT to MNCs. Assessing seven schools of OT (population ecology, power, agency theory, transaction cost theory, contingency theory, organizational learning and institutional theory), Doz and Prahalad argued that no single school spanned all the levels of analysis, from individual behaviour to external environments, needed for studying MNCs. They also indicted OT theories for focusing on structure at the expense of understanding processes, and (with the exceptions of the organizational learning and power perspectives) paying insufficient attention to change. Furthermore, they argued, organization theories were more culture-bound than their claims to building universally applicable general theory admitted: transaction cost and agency theories, for example, being rooted in individualistic United States culture, and Crozier’s (1964) influential work on power being shaped by the French context. Doz and Prahalad acknowledged that, in future, institutional theory might meet these challenges. However, it was in 1989 a relatively new arrival to OT, receiving less coverage than contingency theory even in the 1992 OT textbook by one of its most influential architects, Richard Scott. The potential of institutional theory remained largely unrecognized by most IB researchers until the end of the 1990s.

Intellectual traffic between IB and OT was sparse in ensuing decades. The increasing dominance of quantitative research in IB journals and the established economic paradigm of the MNC left little space for work that drew on OT and employed detailed case studies. Studies of MNCs continued to draw on agency theory, transaction cost theory, organizational learning, power and, eventually, neo-institutional theory (Hillman & Wan, 2005; Kostova, 1999; Kostova & Roth, 2002; Kostova & Zaheer, 1999). The strengthening of critical management studies in the mid-1990s attracted a number of IB scholars, primarily in Europe (Roberts & Dörrenbächer, 2014), but it focused largely on the impact of MNCs on societies and on the emergence and maintenance of the neoliberal world order rather than on MNC organization (Dörrenbächer & Gammelgaard, 2019).

Institutional theory became in the 21^st century one of the major theoretical perspectives employed in IB to study MNCs (Kostova, Roth, & Dacin, 2008). However, for most of these two decades, IB researchers tended to draw primarily either on North’s (1990) economic approach to institutions as ‘the rules of the game’, on Scott’s (1992) sociological ‘three pillars’ of cognitive, normative and regulatory institutions, or on a somewhat theoretically questionable conflation of the two (Kostova et al., 2020). The advantage of Scott’s typology for IB researchers was that each ‘pillar’ could be turned into a quantifiable distance measure and assimilated into the kind of quantitative research that dominated IB journals (Jackson & Deeg, 2019). Institutional theory in OT had meanwhile moved on to work on institutional logics, institutional entrepreneurship and institutional translation, areas that focused either on macro-level or micro-level processes (see Greenwood, Oliver, Sahlin, & Suddaby, 2008, for a survey of post-1991 developments in organizational institutionalism). Some IB researchers began to draw on this work in MNC research, but as appliers of the perspectives rather than providers of new insights into those perspectives. Little of this work seemed relevant for organization scholars, or appeared in organization studies journals, and the potential for studies of MNCs to contribute to institutional theory remained largely unrealized.

There were two significant exceptions to the lack of interest in MNCs in OT. In the late 1990s and early 2000s, some prominent European organization scholars became interested in MNCs from the perspective of comparative capitalism (Morgan & Kristensen, 2006; Morgan, Kristensen, & Whitley, 2001; Whitley, 2005). For these scholars, the MNC, as an organizational form distributed across different business systems, was a potentially significant theoretical anomaly. Their initial assumption was that MNCs were fundamentally home-country-shaped organizations whose subsidiaries would adapt to differences in host countries, and that national business systems would continue to dominate (Whitley, 1998, 1999). This research drew on the work of IB researchers such as Bartlett and Ghoshal, but challenged one of their basic assumptions, that of convergence in MNC organization and management over time, regardless of home country. IB scholars had long recognized that MNCs from different home countries varied considerably in how they organized and managed their international operations, documented in early studies of European (Franko 1976; Hedlund 1984) and Japanese (Tsurumi, 1976; Yoshino, 1976) MNCs and confirmed in later studies, including that of Bartlett and Ghoshal (1989). However, IB scholars continued to anchor their frameworks of MNC organization on the contingency theory-based assumptions. Contingency theory presumes that as MNCs from different countries increasingly competed across the same regions and countries, they would face similar internal challenges and external pressures, leading them to converge on similar ways of organizing, regardless of home country-based differences.

The comparative business systems scholars recognized MNCs as ‘organizations with complex internal processes of conflict and contradiction that are distinctive from those present in non-international forms’ (Morgan, 2001, p. 1) but asserted that although MNCs would become further differentiated from domestic firms as they internationalized, they would develop nationally or regionally distinctive patterns of organizing rather than converging on a single model. Over the next decade, as comparative business systems researchers increasingly focused on the dynamics of business systems and the evolving variations within them, some began to see MNCs not only as ‘takers’ of institutional patterns but also as ‘makers’ – as significant influences on the evolution of business systems not only in host countries but also on their home country systems (Kristensen & Morgan, 2007). These scholars produced a significant body of theory and research on MNCs (e.g. Morgan, Whitley, & Moen, 2005). However, it received very little attention from IB researchers (Jackson & Deeg, 2019), despite intermittent efforts to bring the two communities together (e.g. Collinson & Morgan, 2009; Jackson & Deeg, 2008), probably because the work was difficult to assimilate due to the dominance of the quantitative research paradigm in IB. It also remained a niche within OT, little cited beyond the comparative capitalism community.

More recently, a group of scholars emerged that views MNCs as sites for studying micropolitics (e.g. Dörrenbächer & Geppert, 2011; Geppert, Becker-Ritterspach, & Mudambi, 2016). Individual managers have their own political agendas, engaging in power games that are not necessarily aligned with the interests of the subunit where they are located. Subunits are also seen as sites of conflict between multiple groups. Like the earlier work on comparative capitalism, it has been centred primarily in Europe: 13 of 15 chapters in the edited volume Power and Politics in the Multinational Corporation (Dörrenbächer & Geppert, 2011) were by European scholars and the other two by Europeans in Canadian universities).

Both bodies of work focus on a level of analysis above or below the level of the MNC as an organization. In his concluding chapter to the Dörrenbächer and Geppert (2011) volume on MNC micro-politics, Glenn Morgan, a key figure in the comparative business systems work on MNCs, echoed Doz and Prahalad’s (1991, 1993) indictment of OT theories as fragmented by level of analysis: ‘I want to emphasize first the diversity of the MNC and the need to contextualize any particular MNC and any process of micro-political engagement within a “map” of the diversity of the MNC’ (Morgan, 2011, p. 417). Neither the business systems nor the micro-politics perspectives paid much attention to repeated organizational restructuring within MNCs in the late 1990s and early 2000s that dramatically changed the nature of MNC organization at the local level by slicing national subsidiaries into multiple smaller units and expanding outsourcing. Each MNC unit was increasingly specialized on a particular piece of the value chain, often of one particular product, and few of these units reported directly to a country-based organization. By the end of the first decade of the 21^st century, national subsidiaries no longer existed in most MNCs, and many subunits had more interactions at multiple levels with subunits in other locations than with subunits in the same country (Birkinshaw & Pedersen, 2009).

The complex levels of structure and exposures to multiple environments remain as key challenges for OT in addressing the MNC. Developing and testing theories focused on one or two levels of analysis at a single point in time continues to be more appealing for OT scholars than engaging with the complexities of MNCs as organizations, because it fits more comfortably with the long-dominant approaches of OT to developing theory. However, as Morgan (2011) suggests, without integrating the context of the MNC organization into research undertaken from a specific vantage point (level of analysis or subfield specialty such as teamwork, political processes, or identity work), the purported findings will be difficult to understand or replicate. In the following section, we compare two ways of conducting research on MNCs: treating MNCs as research sites for developing and testing general organization theories, and focusing on MNCs as the object of the research. We first discuss why the MNC has been appealing as a research site, outline the key features of this approach and compare it with the alternative of focusing directly on the MNC as the primary object of research.

Two Approaches to the MNC: From MNC as Research Site to MNC as Research Object

In this section, we elaborate on the contrast we have introduced between using the MNC as a research site as opposed to studying it as the object of the research. The two approaches are summarized in Table 1. We commence by briefly examining the main features of studying the MNC as a research site, as it constitutes the dominant approach not just in OT but also in IB. We then turn to the study of the MNC as a research object – the approach that we advocate. We argue that making the multinationality of the MNC a focus for research has implications for the ways in which empirical studies are designed, conducted and theorized. Thus, considerations of phenomenon, theory and method are inseparable and closely intertwined.

Table 1.

The MNC as a Research Site vs Research Object.

Comparative dimension	MNC as a research site	MNC as a research object
Definition	Research conducted in the MNC; the organization is in the background.	Research conducted about the MNC as a complex multiunit, multilocational and multilingual organization; the MNC becomes part of the study itself.
Role of the MNC as an organization form	The MNC is not considered significantly different from other types of organizations.	The MNC is considered unique and distinct as an organization form.
Temporality and change over time	The MNC is decoupled from systemic shifts that occur over time; temporality and change unaddressed.	The MNC is a moving target that is historized and embedded in temporal dynamics across multiple levels of analysis. The ideology of the researchers themselves studying the MNC may also change over time.
Research design	Research focus is on individuals, teams, or subunits, with little attention to the organization of the MNC in which they function.	Multi-level research design (countries, industries, units) involving spatial variation (multiple locations) and temporality.
Type of theory	Aims to contribute to general theories of the organization that are seen as universal, timeless and placeless.	Aims to build distinctive theories of the MNC that embrace context as having explanatory power, and abandon the pursuit of universal knowledge.
Underlying assumption	Research object is decontextualized, but without acknowledging the risk of misinterpreting the findings or limiting the theoretical insights.	Research object and research context are intertwined and cannot be separated, leading to context-specific findings (relating the part to the whole).

If the MNC is treated as a research site, its multinationality is not considered relevant to the phenomenon under study, whether this be related to individuals, teams or subunits (see Table 1). Instead, this research tradition seeks to develop theory about a specific aspect of organizational life (such as organizational change, innovation patterns, team dynamics or leadership) that is assumed to be generalizable to any type of organization. The MNC is an attractive research site because of its scale: negotiating entry to a single organization provides access to large numbers of employees across a range of levels, subunits and geographies. Large-scale data collection (e.g. employee surveys) in one organization spanning multiple national contexts allows comparative studies to validate theories developed in single country settings. Using the MNC as a research site is also compatible with what Cornelissen (2017, p. 3) terms the dominant propositional style of theorizing in which authors express their theoretical contribution in the form of ‘“if, then” clauses or general statements of association between certain constructs’. In doing so, researchers gloss over the multinationality and the complexity of the organization as it is not considered relevant for explaining the focal phenomenon under investigation. Instead, the research object is seen as separable from the research context in the quest for universal knowledge. Yet decontextualization runs the risk of overlooking key explanatory elements of a study (see Table 1).

However, treating the MNC as a research object (i.e. research about the MNC, not in the MNC) requires a very different approach to theorizing (see Table 1). When researchers study the MNC as a research object rather than use it a research site, they examine how the multinationality of the organizational context matters to the interactions and events under investigation. This entails comparisons across micro, meso and macro levels as well as across time and space in order to understand organizational processes more fully. In this approach, context is no longer external or extraneous to the phenomena under study, but constitutive of them. Thus, the meaning of interactions in a single team, department or business unit of an MNC cannot be explained in isolation from its connections with other units of the organization, its history and its broader industry and societal contexts. In short, the part needs to be related to the whole. This holds not just for the MNC as the research object, but also for the standpoint and ideologies of researchers themselves.

We acknowledge that the MNC is a demanding research object. It is difficult for a single researcher to do justice to the multi-sited, multilingual, multicultural and often multi-divisional nature of such an organization. Edwards, Almond and Colling (2011) likened researchers studying the MNC to ‘fleas on the backs of elephants’ because of the discrepancy between the size of the MNC and the researcher’s resources. Research participants may be in no better a position: even the headquarters managers who are supposed to have an overview of the MNC’s global operations are often found to have little understanding of the organizational structures and processes at the operating level (Kristensen & Zeitlin, 2005). This has triggered an interest among IB researchers to investigate the effects of the ‘ignorant headquarters’ (Ciabuschi, Forsgren, & Martin, 2012; Forsgren & Holm, 2010). Moreover, under intensified scrutiny from regulators and media around the world, MNCs have become warier of opening their doors to researchers. Even when access is granted, the modern MNC is becoming harder to portray in simple terms. Intra-MNC flows and decision-making have become so complex that they cannot be adequately reflected in an organization chart (if the organization still produces one at all) or explained by organization members themselves. Reducing this complexity to a small number of variables and relationships is almost impossible unless they are at such a high level of generalization as to be virtually meaningless.

Exploring and incorporating the multinational context is an example of what we have termed elsewhere ‘contextualized explanations’ (Welch et al., 2011; Welch, Paavilainen-Mäntymäki, Piekkari, & Plakoyiannaki, 2022). As explanations they aim at building distinctive theories of complex phenomena by turning away from the pursuit of general organizational theories. Similar concerns about the inattention to context and the perils of decontextualized research have recently been voiced by others in organization and management research (Busse, Kach, & Wagner, 2017; Jackson, Helfen, Kaplan, Kirsch, & Lohmeyer, 2019; Johns, 2017; McLaren & Durepos, 2021). Without incorporating context, ‘we have either empirical observations of isolated variables or universal theories that we attempt to apply to everything, but often can be applied to nothing’ (McLaren & Durepos, 2021, p. 82). As we shall now demonstrate, contextualized explanations encompass a range of theorizing styles and methodological approaches, but what they have in common is that they produce plausible theories by situating organizational phenomena in their time and place. Our stance is that only by means of these contextualized forms of theorizing are we able to account for the complexity of the MNC, with its manifold variations over time as well as across space.

Contextualized explanations of the MNC as research object

In this section we will introduce studies that develop contextualized explanations of organizational processes in MNCs (Welch et al., 2011, 2022). That is, the focal events and interactions are explained with reference to the multinationality of the organization itself, whether approached from above or below. While studies that take this approach remain relatively few in number, they are diverse in terms of the methodologies and theorizing styles they employ: Moore’s (2011) interpretive and ethnographic work, the historical comparative study of Kristensen and Zeitlin (2005) and the process theorizing by Mees-Buss, Welch and Westney (2019). They are also diverse in their theoretical scope, drawing on insights from both IB and OT. By offering these examples, we do not mean to exclude other possibilities for contextualized theorizing, such as critical management theories tracing the effects of power structures, or configurational theories that allow for complex causality (Welch et al., 2022). Rather than cataloguing all the options, our aim is to demonstrate ways to embrace context as explanatory, not only descriptive, material (see Table 1).

Holistic ethnographies of the MNC

For example, Moore (2011) uses what she terms ‘holistic ethnography’ to account for the diversity within the multinational. She is alert to the diversity of groups, identities and interests, which may not be simply divided along expected faultlines such as local versus expatriate manager versus worker. The meaning of social interactions in the field can only be interpreted by tracing how group members draw on organizational, national and other social discourses as sources of legitimacy and authority. Holistic ethnography therefore makes use of the strengths of the ethnographic tradition to relate the part to the whole. The many contexts of the MNC are not bracketed out but used to explain the lived experiences of those who work in this kind of organization.

Historical comparative studies

An example of a sophisticated comparative design taking the MNC as a research object is the study by Kristensen and Zeitlin (2005) of a British process equipment manufacturing MNC, APV. These two sociologists investigated three subunits with the goal of understanding how operating inside a large complex MNC affected the operations of each subunit. They documented in great detail the processes through which three previously independent firms, each in a different country, were absorbed into the same MNC. Kristensen and Zeitlin showed similarities, but more importantly identified variations in how subunits, because of their context, not only responded differently to corporate change initiatives but also paid very different kinds of attention to the same initiatives. They placed the three subunits in the ‘global game’ inside the MNC, whose rules were set by the requirements of shareholders and financial markets and in which these subunits had different kinds of political weight and voice. Ultimately, the difficulties faced by headquarters led to APV being acquired by another MNC. Kristensen and Zeitlin’s study shows that the same ‘causal variable’ can affect different parts of an organization in very different ways and with different temporal dynamics, indicating that it is unrealistic to assume that the researcher can ‘control for’ organizational factors by looking at them within a single MNC.

Process theorizing

The study of APV is also a reminder that the MNC is a moving target. IB researchers have traced how the organizational forms of the MNC have evolved as part of the reshaping of the global economic system. For example, successive studies of Unilever (Bartlett & Ghoshal, 1989; Jones, 2005; Mees-Buss et al., 2019) have traced how its subunits were transformed as the global economy moved away from national markets to the new era of ‘triad’ competition and growing trade liberalization, and then to the most recent period of global value chains. In this most recent period Unilever became what Mees-Buss and colleagues (2019) have termed a neo-global organization, in which country units were broken into much smaller subunits specializing in a particular value chain activity. This model, initially known as the ‘front/back’ structure (Galbraith, 2000), became extremely popular among MNCs and consultants in the early 2000s. Such shifts in the MNC’s structure and strategy raise the question of whether the theoretical conclusions drawn about organizations retain their explanatory power over time, as technologies, structures, management ideologies and business environments change (Davis, 2010).

We will next illustrate the explanatory power of the contextualized approach by applying it to an existing study of an MNC about a topic of current interest in OT: organizational identity. The re-analysis enables us to contrast in a concrete way how treating the MNC as a research object differs from bracketing it out as a research site. In doing so, we demonstrate that the multinationality of the organization is constitutive of the processes under investigation and show how new theorizing can be derived from this contextualization.

Contextualized Explanations of the MNC: An Illustrative Example

In this section, we turn to a richly detailed study by Hatch and colleagues (2015) on organizational identity and culture that uses the Danish Carlsberg Group as its research site. In this paper, the authors set out to explain ‘how and why’ a new organizational identity claim ‘was both supported and resisted’ by members of Carlsberg (p. 59). They find an answer in the tensions between organizational identity and culture. We provide a re-analysis of this case that explicitly situates the events under study within their organizational context: the MNC. We offer an alternative, contextualized explanation of how and why the new identity claim was ‘both supported and resisted’.

The original study is unusual in providing meticulous contextual detail about Carlsberg’s multinational setting, making our extended reading possible. Hatch and colleagues (2015, p. 62) undertook a five-year ethnographic study to follow the ‘internal implementation of a new corporate brand identity’ at the Carlsberg Group. The authors conducted participant observation, site visits and interviews at corporate and regional headquarters and in subsidiaries in seven countries, representing both newly acquired and longstanding subunits. The article provides exceptionally rich fieldwork-based data, including seven pages of direct quotations from managers in the seven countries and at different levels and functions in the company.

The article ‘presents top and middle managers’ experiences of how organizational identity and culture were entangled’ as part of the strategic transformation of Carlsberg towards operating more like a fast-moving consumer goods (FMCG) company such as Procter & Gamble, Nestlé or Unilever (Hatch et al., 2015, p. 58). The identity claim that ‘we are (becoming) an FMCG company’ meant a relentless focus on cost reduction, speed and efficiency in all functions, especially operations. Achieving this identity involved a major restructuring of the company into centralized functions and more narrowly focused local subunits. During the period of the study, managers demonstrated both support and resistance towards the new identity claims initiated by top managers, which the authors attribute to tensions between the ‘old’ culture and new identity claims. Theoretically, the authors position their study in the organizational identity and organizational culture literatures. They are interested in uncovering organizational identity construction as a dynamic social process. Basque and Langley (2018, p. 1687) define this ‘identity work’ as the efforts of organizational members ‘individually or collectively to form, maintain, strengthen or in other ways influence understandings of the central, distinctive and enduring characteristics of a specific organization’.

We place these micro-processes of organizational identity construction into their broader multinational setting to provide a contextualized explanation (for a summary of this approach, see Figure 1). In this setting, the question of ‘who are we as a company’ is immediately complicated by the existence of multiple locations and units. In re-reading the original findings of the study, we bridge multiple levels of analysis and draw on research from both OT and IB to better understand the complex identity processes at work in Carlsberg. Our explanation differs from the original by attributing the patterns of both support and resistance to the multinationality (specifically, the multi-identity nature) of the organization itself, which inherently involves: (1) identity duality and tensions, (2) inter-unit power and politics, and (3) translation of identity claims across borders and languages. It also (4) traces the linkages between Carlsberg’s change initiative and the macro shifts taking place at the level of the global industry (see Figure 1).

Figure 1.

Contextualized Explanation of the Carlsberg Case.

Identity conflict: One corporation, multiple organizational identities

The MNC context is critical to understanding the identity work that takes place within this kind of organization. Because of its multi-unit composition, the MNC is simultaneously one and many organizations. Individual subunits, due to their distinctive heritage and local embeddedness, may have their own organizational identities. This is especially true for MNCs like Carlsberg that expand geographically by acquisition. This means that new identity claims from top management may exacerbate tensions between one location and another. Paradoxically, by seeking to unify the organization around a strong sense of ‘who we are’, top management risks creating greater conflict if it does not acknowledge the complex diversity that exists and the functions it serves. At worst, the outcome is a loss of local subunit identities and internal conflict that reduces the company’s competitiveness and capacity for local responsiveness.

Carlsberg’s identity work unleashed precisely this kind of identity conflict, and top managers were aware of it, trying to resolve it by employing a widely used term – ‘glocal’ – for the combination of local (which they equated with the country) and global to which the new identity initiative aspired. However, the geographic dimension was only one aspect of local identity in the company, as the analysis makes clear. Another was ‘passion for beer and brewing’ (Hatch et al., 2015, pp. 75–76) that focused on the complex processes of producing beer and anchored by the local brewery. There are indications that the national, ‘professional’ brewing culture and the intensely local identification with a specific local brewery differed across locations, creating distinctive local identities and generating different kinds of challenges for the corporate identity initiative. In Russia, for example, the FMCG identity’s emphasis on efficiency provided a way to assert a distinctive local identity in a business context in which efficient operations were an aspiration of many businesses, but realized by few. In Western Europe, however, where local consumers were increasingly turning to micro-breweries for a less standardized product, the new identity seemed to many managers to involve standardization that made Carlsberg look like just another cost-cutting global giant indifferent to local traditions.

Moreover, the emphasis on the tensions between the local and the global identities and between the ‘old’ brewing-centric culture and the new FMCG identity ignores one of the most interesting aspects of 21^st-century MNCs: the creation of strong corporate-centred functions that cut across country subunits (such as supply chain, marketing and global production). We have almost no research on how these corporate functions develop a shared identity and how this plays out in the interactions among the local departments whose reporting lines now differ from those of the other local departments with which they interact. How do these subunits and their managers and employees balance the local and the global, and what is their cultural identity? In this respect, the Carlsberg case study points to a neglected aspect of the multiple identities inherent in today’s MNCs.

Constructing a coherent organizational identity amid dualities has also attracted the interest of IB scholars (e.g. Ambos, Fuchs, & Zimmermann, 2020). For example, Pant and Ramachandram (2017) investigate ‘identity duality’ at the subunit level, examining a single subsidiary’s identity work as both a local champion (responding to local institutional pressures and logics) and an exemplary multinational subsidiary (responding to corporate pressures and logics). They find that over time, successive chairmen of the local company privileged one set of identity claims over another, or sought to reconcile the contradictory institutional pressures by integrating them in their identity claims. They argue that in doing so, chairmen were able to maintain a ‘dynamic balance’ across the subsidiary’s identities. The study further illuminates an important aspect of a subunit’s identity: it is actively constituted through both its external role in the local community and its internal role in the MNC. As a result, inevitably, subunits within the same MNC differ greatly in their identities, and in their responses to new identity initiatives. It also means that as the MNC architecture changes the nature of subunits and dismantles the country subsidiary into a set of functionally specialized local subunits, researchers need to engage in more contextualized research. This allows them to explore how such changes affect the organizational phenomena of interest to OT scholars.

Our discussion has shown how the multiple identities of the MNC play out at multiple levels of analysis. They are reflected in interpersonal negotiations, conflict and ‘resistance’ to change, in inter-unit relationships, and in the influence of industry pressures (see Figure 1). The production and reproduction of multiple organizational identities in the multinational are linked to the organizational architecture of the company and the roles and activities of subunits, and therefore to inter-unit power and politics in the MNC, the topic to which we now turn.

Inter-unit power and politics: Identity work as power and politics

As the organizational identity of the MNC changes, the grounds for power and politics change. Hatch and colleagues (2015, p. 84) make only a brief reference to power, noting that senior management dismissed middle management concerns as ‘power plays’. Indeed, the identity conflicts documented in the case are part of a power play – that of top management. As critical management scholarship warns, identity claims are contested, involving subordination and control (Alvesson & Willmott, 2002, p. 621). We would argue that organization identity cannot be understood without reference to these power struggles.

Carlsberg’s restructuring process invokes a perennial topic in OT: the dynamics of power and politics in organizations. In the multinational context, organizational change like Carlsberg’s transformation into an FMCG company involves changing the role, resources, responsibilities and decision-making power of individual, geographically dispersed subunits. The tension between headquarters control and subunit capacity for local responsiveness has been a long-standing issue for researchers and managers of the MNC since the earliest generation of work on MNCs in IB (e.g. Andersson & Holm, 2010; Brooke & Remmers, 1970; Kostova, Marano, & Tallman, 2016).

In the Carlsberg case, we can see top management’s identity claim of ‘becoming an FMCG’ as a means to communicate and legitimize a restructuring that involved much greater centralization and loss of local autonomy. National subsidiaries, once either independent companies or integrated local subsidiaries responsible for the full range of value-adding activities within their national territories, were dismantled. Back-end activities such as production and supply chain were centralized, while local responsiveness was allocated to front-end activities such as marketing and sales. National subunits no longer reported directly to the CEO, but to regional management, losing both power and influence. The attempt to replace subunit identities with the new claim about ‘who we are’ was part of this fundamental restructuring, and therefore the identity claims of top management were closely associated with this power shift.

From a historical vantage point, this transition to the front-back structure (Galbraith, 2000) was not an idiosyncratic response by Carlsberg’s top management but reflected broader industry developments. Carlsberg’s new structure was popular both among FMCG companies as well as among MNCs in other sectors. This organizational ‘solution’ was propagated by global consultancy companies to meet the needs for greater efficiency and the globalized nature of competition and rewarded by financial markets. Carlsberg was a latecomer to this search for global scale, forced to catch up to its larger and more efficient competitors (Gammelgaard & Hobdari, 2013). As a well-established organizational ‘solution’ of the time, the front-back structure was familiar to the recently appointed CEO, consultants advising top management and the newly hired senior managers whom Carlsberg recruited from the FMCG industry.

The popularity of the front-back solution reflected the shift towards greater centralization in MNCs and efforts to reduce the power of country subsidiaries to resist central initiatives (Westney, 2009). Yamin and Sincovics (2007, p. 323) suggest that advances in ICT ‘significantly upgrade the monitoring capability of the centre’, enhancing the visibility of subsidiary activities across distances. Macro developments at that time, including trade liberalization that expanded the potential for geographically distributing value chain activities, further pushed MNCs towards centralization. However, as Yamin and Sincovics (2007) argue, greater centralization and loss of the ‘dynamic balance’ can endanger advantages of the MNC as an organizational form: intra-organizational diversity, adaptive capabilities and entrepreneurial and innovative activities by its subunits.

Understanding power and politics in the MNC therefore involves going beyond the micro-politics of interpersonal influence and conflict, to considerations of autonomy and control within the network of MNC units, and to wider power shifts in the global system (see Figure 1). But resistance to Carlsberg’s transformation project was not only cultural or political; change initiatives also went through multiple translations in subunits.

Identity claims translated: One company, multiple translations

Organizational transformation processes such as new identity claims can be seen as translation projects that are rolled out by MNC headquarters. In the multi-unit, multilocational and multilingual organization, local translators have ‘space’ to interpret translation initiatives and use their agency to advance – intentionally or unintentionally – their own agendas (Piekkari, Tietze, & Koskinen, 2020).

Translation work always implies a degree of manipulation or negotiation between major stakeholders in the translation process. It is ‘an act of power, determining who is acknowledged as a full-fledged partner, who is allowed to communicate and whose interests can influence the decision making’ (Janssens, Lambert, & Steyaert, 2004, p. 424). However, IB and OT researchers, including Hatch and colleagues (2015), too seldom recognize that change initiatives undergo multiple translations in subunits (see Ciuk, James, & Śliwa, 2019; Gutierrez-Huerter, Moon, Gold, & Chapple, 2019; Logemann & Piekkari, 2015, for exceptions). Local translation work is hidden from both researchers’ and senior management’s purview because of distance, differences in time zones, languages and meaning systems between subunits and headquarters.

The richness of the Carlsberg study allows us to decipher the wide gulf between the languages spoken by cosmopolitan senior management and local management in subunits. While senior managers engaged in future-oriented conceptual ‘strategy talk’ – in English – with global consultancy firms and representatives of financial markets, the local managers, especially brewery managers, who had spent their careers in the local breweries, spoke concrete ‘brewery talk’ (see also Brannen & Doz, 2012). Hatch and colleagues (2015, p. 65) reveal that there was ‘no brewing expertise at the top level but lots of FMCG experience’. Few senior managers had even visited the closest brewery, only two hours away from Copenhagen. Carlsberg’s front-back organization structure further magnified the division between strategy and operations, making it hard for local managers to relate to the new identity claim of ‘becoming like an FMCG company’. Since local managers served both as receivers and translators of the new identity claims, these claims ran the risk of being lost in translation.

Much of the OT research in this area refers to translation in a metaphorical sense while underplaying, if not distancing itself from, the interlingual dimension of translation (Czarniawska & Sevón, 1996). OT scholars are only beginning to explore the role of interlingual translation within the wider translation processes (e.g. Røvik, 2016), challenging the implicit assumption of monolingualism in the field (Piekkari et al., 2020). However, in the MNC, translation processes are multilingual, and crossing language boundaries is an integral part of these processes. The translation work undertaken on the ground can contribute translation competences at the subunit level, laying the foundation for entrepreneurial activities and for learning across borders. Even though, as we have seen, recent developments have eroded the possibilities for subsidiary autonomy, there are potentially still ways in which subunits may be able upgrade their ‘weight and voice’ in the MNC (Bouquet & Birkinshaw, 2008). In this regard, the translation approach allows us to see the space for local variation in subunits.

Recent research has conceptualized the MNC as a translation ecosystem, consisting of interactions between different sets of translators, translations and translation processes that are simultaneously under way and unfold over time. The translation ecology approach, first proposed by Wedlin and Sahlin (2017), and recently empirically applied by Westney and Piekkari (2020), emphasizes the role and mutual influences between multiple actors – inside and outside the MNC – while remaining attuned to the processual, spatial and temporal dimensions of translations. Theoretically, this approach enables a more holistic understanding of how management models and organizational practices move across boundaries and borders, and uncovers the multi-level nature of translation processes taking place in the MNC and the effects of differences in ‘webs of meaning’ on organizing (see Figure 1).

The translation ecology approach also extends our analysis to the wider global system where the organizational practices of the MNC are constitutive of a hierarchical system of nations reminiscent of imperial powers. In the post-colonial tradition, the imposition of English as a common corporate language is interpreted as a sign of linguistic imperialism (Phillipson, 1992; Ristolainen, Outila, & Piekkari, 2021) and as global hegemony of American-style capitalistic culture (Boussebaa, 2021). Thus, the translation ecology approach lends itself to historical and political perspectives on the role, purpose and impact of languages and translation.

The missing macro: The global context of the Carlsberg case study

The expanded reading of the Carlsberg case suggests that incorporating the MNC more explicitly into the explanation can provide new insights into the research topic (in this case, identity work in the multinational). It reveals an important paradox: the attempt to unify around a single coherent identity, in the pursuit of greater efficiency on a global scale, risks exacerbating the existing tensions that characterize this organizational form. Furthermore, considering the broader industry context helps understand the identity work undertaken by Carlsberg’s top management. Once contextualized in this way, the identity claims of top management turn into signals targeted not only at internal audiences but also at the external audiences that judge the Group’s performance, particularly global financial services and the investor community. Our reading of the Carlsberg case therefore brings into focus another increasingly visible duality of MNCs: their role as both ‘takers’ and ‘makers’ of the global context in which they operate (see Figure 1).

The authors of the Carlsberg study include more information about the industry than do most organizational analyses using the MNC as a research site (Hatch et al., 2015, p. 65). They point out that this industry had been consolidating and internationalizing ‘since the 1960s’, and show that by ‘joining the industry’s M&A boom in 2008’ (Hatch et al., 2015, p. 65) with a major acquisition that greatly expanded Carlsberg’s geographic footprint, the company was faced with two challenges: enormous debt, and a mismatch between the company’s international ambitions and an almost completely Danish top management team. The company was confident that the debt was manageable, given that France, Greece and Russia, where their acquired operations were located, were expanding markets with high growth potential. In the planning stages of the acquisition, in mid-2007, a new CEO with extensive international marketing experience outside Carlsberg had been appointed, who brought in over 20 new executives with international backgrounds. However, as the authors point out, growth in the acquired companies did not meet expectations, and the financial pressures on the company made cost-cutting a priority.

While the authors set the macro context for initiating Carlsberg’s organizational identity programme, they did not address the subsequent impact of this context. The global financial crisis hit in 2008, and the pace of recovery in Carlsberg’s core markets was especially slow and uneven. Carlsberg’s acquisitions in France, Greece and Russia, so promising in the spring of 2008, were unable to provide the revenues to help the company deal with its debt. Because the company continued to be under severe financial pressure both internal resource allocations and management attention were directed to these problems. This may well explain top management’s decision not to launch a corporate roll-out of a major organizational identity campaign in 2009 to supplement and underpin the FMCG approach – a decision the study presents as a missed opportunity due to management short-sightedness, rather than recognizing the intense financial pressures on the company at the time.

The industry environment continued to change. Due to the pressures to cut costs and enhance efficiency the global beer giants were reducing the taste differences of seemingly national brands despite vocal customer complaints. In the second decade of the 21^st century, the most rapid growth in North America and Europe came from small-scale craft breweries (Madsen, Gammelgaard, & Hobdari, 2020). Carlsberg, the smallest of the global beer companies, was in danger of being caught in the middle. In 2014, there were growing tensions between the CEO and the chairman of the board, who began to worry that Carlsberg was ‘stuck with stereotypical FMCG concepts’ (Tamm, 2020, p. 210) and needed more focus on its long brewing tradition. The changing industry environment gave renewed legitimacy to the cultural claims of the brewery managers. In 2015, the CEO was replaced, and the FMCG concept quietly discarded.

Discussion: The MNC’s Challenge to OT and Organizational Researchers

In our re-analysis of the Carlsberg case, we have shown that by paying attention simultaneously to multiple levels of analysis we arrive at an explanation that is different from the one produced by the authors of the original study. Hatch and colleagues (2015) look within the organization, using a tightly focused theoretical lens, to assert that resistance to new identity claims was due to internal misalignment with the old organizational culture. In contrast, our re-analysis suggests that expanding both the level of analysis and the theoretical toolbox is necessary to understand the empirical phenomenon and to contribute to theory. We pointed out that resistance to the new identity claims was weakened in some locations and strengthened in others both by the macro external context, by the structural reorganizations going on at the same time as the identity initiative, and by the organizational and linguistic translation capabilities of the key individual local leaders and their career ambitions. The macro-meso-micro links hold not only for this illustrative example but also for the growing number of studies conducted within MNCs by OT scholars trying to ‘hold constant’ the larger context and focus only on one or two levels within the MNC. Such decontextualized research potentially limits the theoretical insights into organizational processes that we produce because of the risks that it may misinterpret findings or produce oversimplified explanations.

Thus, as opposed to general theorizing, contextualized explanations recognize the need for working across multiple levels of analysis to develop an explanation for activities in the MNC. Even in studies of micro phenomena such as micro-politics the MNC as a whole needs to be brought back into focus (Morgan, 2011) – something that we have illustrated in our analysis of the Carlsberg strategic change process. The Carlsberg case has also demonstrated the importance of ensuring the scope of analysis does not just stop at the boundaries of the organization, but incorporates the competitive pressures of the global industry in which the MNC is seeking to survive and grow.

The importance of the macro goes further than we were able to illustrate with the Carlsberg re-analysis. The MNC is distinctive because it is not just a ‘taker’ of institutional norms, regulations and global governance – but also a maker of them. With the retreat of the state and the rise of private governance in the neoliberal period, this role has become more prominent. Social scientists have become increasingly aware of the important role played by MNCs in the emergence and nature of transnational governance in the 21^st century (see Bartley, 2018, for a review). Growing attention has also been devoted to how MNCs have reshaped markets and the geographic location of production (Gereffi, 2018). And political scientists and sociologists have become interested in the role of MNCs in shaping the neoliberal world order, including financial markets and national politics. Also, the growing influence of highly centralized financial institutions (themselves increasingly MNCs) anchored in Wall Street and London have further transformed social and political systems. The retreat of the state (in terms of privatization of numerous state functions, from the military to IT support) has been facilitated by global consultants like Accenture, PwC and McKinsey, who are often hired first to assess the potential for outsourcing public sector activities, then to manage the transition, and finally to contract for the activities (e.g. Hilary, 2005; Kirkpatrick, Sturdy, Alvarado, Blanco-Oliver, & Veronesi, 2019).

However, much of this work tends to treat MNCs as unified actors rather than as the complex and heterogeneous organizations that the re-analysis of the Carlsberg case and the (admittedly small) body of contextualized research on MNCs have shown them to be. MNCs, as the Carlsberg case demonstrates, face serious challenges in undertaking and carrying through change initiatives of the kind needed to address the ‘grand challenges’ of the 21^st century, including climate change, inequality, rise of anti-elite social and political polarization, public health challenges (Gümüsay, Claus, & Amis, 2020) and the societal effects of organizational and institutionalization processes (Greenwood, Oliver, Lawrence, & Meyer, 2017; Hampel, Lawrence, & Tracey, 2017). Understanding the role of MNCs in the emergence of these challenges and the complexity of their capacities for addressing them is an area where organization scholars should be playing a key role. But to do this requires developing our own capacities as researchers and as a field for contextualized theorizing that recognizes and investigates the complex connections across micro, meso and macro levels of analysis.

Conclusion

Three decades have passed since Doz and Prahalad (1991, 1993) asserted that the distinctiveness of the large multi-business, multi-location MNC requires a new approach to theory development in OT. It is hard to claim that we have come any closer to this goal today (see Roth & Kostova, 2003). Although organizational scholars have increasingly conducted research within MNCs, they have tended to use MNCs as convenient sites for developing and testing existing theories by leveraging its internal variety, rather than as objects of knowledge in their own right. This has inhibited the development of organizational theories of the MNC.

In this essay, we have argued for enriching established styles of theorizing in OT such as propositional, configurational and process theorizing (Cornelissen, Höllerer, & Seidl, 2021) with contextualized theorizing. As a distinct approach to theorizing about complex phenomena, it accounts for change and transformation over time as well as variation across space that theorizing aiming at universal regularities tends to overlook (Welch et al., 2011, 2022). The strength of this approach lies in embracing context as having explanatory power, producing organization theories that span multiple levels of analysis and that are well suited to explain the behaviour of the MNC. In arguing for the importance of context in theorizing, we join recent calls by scholars who undertake both qualitative and quantitative organization and management research (Busse et al., 2017; Jackson et al., 2019; Johns, 2017; McLaren & Durepos, 2021). Thus, we believe that the study of the MNC has revealed the possibility to challenge and broaden the dominant approaches to theorizing in the field of OT.