Implementing international strategy at the business unit level: the role of managerial decision-making characteristics

Journal of Management, Dec, 1992 by Kendall Roth

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Lawler, E.E., III. 1974. For a more effective organization-match the job to the man. Organizational Dynamics, 3(1): 19-29.

Lawrence, P.R., & Lorsch, J.W. 1967. Organization and environment. Boston, MA: Division of Research, Graduate School of Business Administration, Harvard University.

Lorsch, J.W., & Morse, J.J. 1974. Organizations and their The belief systems of an organization are exemplified in part through managerial decision making. These belief systems are not, however, inflexible or unalterable. Rather, part of the role of top management is reshaping and redirecting belief systems in a manner that supports strategic choices (Donaldson & Lorsch, 1983). From this perspective, research has attempted to identify belief systems that are consistent with different strategy types. Studies generally confirm that a higher level of organizational performance results when the decision-making characteristics within an organization and its strategy are aligned (e.g. Govindarajan, 1988, 1989; Gupta & Govindarajan, 1984; Miller, Kets de Vries & Toulouse, 1982; Miller & Toulouse, 1986).

The international strategy literature suggests that the management of decision making characteristics may be particularly important for businesses competing in global industries (Bartlett & Ghoshal, 1989; Hedlund & Rolander, 1990) because geographic and cultural distances between subsidiaries within the business unit inherently creates variability in the organization's decision making. As a result, attention must be devoted to managing decision-making characteristics in order to avoid fragmentation and dissipation across locations. Furthermore, Doz and Prahalad (1988) assert that recent patterns of global competition cannot be fully explained without considering the influence of managerial belief systems. In an international context, capital, technological, and cost differentials between businesses are diminishing as businesses with dispersed operations have access to comparable resources and country-based factor endowments. Where asymmetries do exist, they may be offset quickly through strategic alliances, collaborative agreements, or other cooperative arrangements (Doz & Prahalad, 1988). Given comparable access to the fundamental sources of the advantage, a critical source of competitive advantage becomes managerial characteristics because such characteristics may create a differential or unique capability to implement a particular strategy, thereby becoming a firm-specific advantage.

Thus, a potential exists to further understand international strategy by considering the influence of the decision-making characteristics of top level management. As suggested by upper echelon theory, possible benefits of this approach would include not only a "greater power to predict organizational outcomes" but also a clearer direction for the design of management development programs and normative integration activities within the organization (Hambrick & Mason, 1984: 193). Furthermore, a better understanding of top management decision making may enhance understanding of organizations' abilities to exploit strategic opportunities. Given these considerations, the purpose of this article is to determine if organizational outcomes can be predicted from patterns of businesses' decision making characteristics and international strategy. In addition, the article examines whether congruence or contingency models of top management decision making and type of international strategy best predicts organizational outcomes.

In the following section, managerial decision-making characteristics are related theoretically to the strategic choice of a business. The specific strategic choice--global versus multidomestic international strategy--is introduced. Individual managerial decision-making characteristics are then related to the international strategy types. Finally, a systems argument is forwarded considering the collective effects of the decision-making characteristics.

Theoretical Background Hypotheses

Managerial Decision-Making Characteristics

Three decision-making characteristics of top level management are considered in this study: (a) willingness to take risks, (b) openness of decision making, and (c) consensus decision making. These three decision-making variables were selected based on the substantive theoretical base linking each to the alternate international strategy types and because each relates to the uncertainty, resource requirements, and interdependencies that are associated with the strategy types. This study takes the position that a consistency between these decision-making variables and the organization's international strategy is desirable. This consistency should occur in both how the variables are linked or associated as well as in the different system states within which the variables take on characteristic values (Dubin, 1976; Fry & Smith, 1987). Thus, the integrity of the system is presumed to be maintainable as the system changes from one state to another (Dubin, 1976: 28).