Organizational identity, organizational capabilities, and the evolution of the multinational corporation : JTech's transmission systems business in the US

Abstract

When a multinational corporation (MNC) internationalizes by establishing a new subsidiary, the subsidiary's evolution depends upon its acceptance within its host country environment, by its home country headquarters, by other subsidiaries, and by all other stakeholders, including employees, suppliers, customers, complementary innovators, product market critics and analysts. To be accepted, the subsidiary organization has to have a legitimate form with some combination of properties - such as activities, features, and boundaries - that make it recognizable and understandable as a meaningful social unit. In short, as a social object, the subsidiary has to have an identity that conforms to a recognized and accepted type, so that it is evaluated positively as belonging to a legitimate category of organizations. Yet, if value creation simultaneously depends upon a subsidiary developing organizational capabilities, how does its identity shape the development of those capabilities? How do the capabilities in turn alter the subsidiary's identity? How does the identity-capability relationship influence the subsidiary's strategy, and how do the organizational structures put in place to cope with these changes affect the organization's identity and legitimacy? I explore these issues by analyzing the case of the evolution of a US subsidiary of a Japanese high technology MNC, which had responsibility for activities related to the development and sale of transmission equipment into the US, over a fifteen year period ending in 2000. I find that organizational members constructed an identity for their organization through which they enacted their environment, organizational capabilities, strategy, and structure.

(cont.) These, in turn, recursively interacted with the organizational identity in complex ways, either reinforcing the salient organizational identity or stressing it, resulting in identity work through which organizational members sought to reconstruct a new and legitimate organizational identity. Understanding the identity of a subsidiary is necessary in efforts to improve the effectiveness of managing across borders. As a corollary, management practices designed to improve collaboration, such as facilitating the transfer of more complex information, or that aim to deepen understanding among collaborating units of an MNC, such as increasing personnel transfers, may actually undermine cross-border knowledge development through their negative effect on organizational identity.