ICT and MNE reorganisation: the paradox of control

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Abstract

Purpose ??? The purpose of this paper is to aim to highlight the ICT-enabled enhancement of control capability in MNEs. The literature on MNE structures acknowledges the role of ICT as a support system, but the specific changes facilitated by ICT have remained significantly underdeveloped. The paper seeks to address this issue conceptually and link contemporary ICT advancement with changes in MNE strategy or structure. The paper further posits that certain applications of ICT may paradoxically reduce a key advantage of multinationality. Design/methodology/approach ??? The paper is of conceptual nature and critically examines and develops literature to generate insight on the implications of ICT applications for MNE development. Specifically the focus is on enterprise resource planning systems (ERPs) and the impact of enhanced visibility of remote operations to headquarter management. Findings ??? The finding is that ICT application entails a possible trade-off. It may facilitate an enhancement of control capability for MNE headquarters, however, potentially entails the risk of lessened adaptive capability of subsidiaries, thus potentially constraining the long-term viability of MNE operations: Practical implications ??? Whilst ICT applications may improve coordination and control for the MNE, a level of subsidiary autonomy and initiative taking is still beneficial for MNE strategic and organisational development. ICT applications should not go so far as to suppress it. To this end, managers may be advised to purposefully ???blur??? subsidiary visibility, by, e.g. allowing the use of different ERP systems. Originality/value ??? The main contribution is the integration of literature on ICT advancements, specifically the application of enterprise resource planning systems (ERP), into the IB literature.

Keyword(s)

Adaptability, Communication technologies, Manufacturing resource planning, Multinational companies, Organizational structures

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