Introduction

Scholars have recently pointed out that intra-organizational conflict in multinational corporations (MNCs) between headquarters (HQ) and their foreign subsidiaries is not necessarily dysfunctional (Dörrenbächer and Geppert 2006; see also chapter by Blazejewski and Becker-Ritterspach in this volume) or a sign of unsuccessful global integration (Bouquet and Birkinshaw 2008; Tasoluk et al. 2006), as often stressed in previous management research. Instead, the growing importance of foreign subsidiaries, especially from large emerging markets, requires a different approach when managing headquarters–subsidiary relationships. This includes a departure from the traditional antagonistic view of the global integration versus local responsiveness quandary. This chapter aims to advance the literature on MNC headquarters–subsidiary relationships by adding new insights to the global versus local discussion (Bartlett 1986; Bartlett and Ghoshal 1989; Ghemawat 2007; Prahalad and Doz 1987; Roth and Morrison 1990).

Global integration refers to strategic and organizational activities that seek to reduce organizational and operational dissimilarities between different MNC subunits (Prahalad and Doz 1987). The objectives of global integration include efficiency improvements through aggregation, the exploitation of scope and scale economies, and the transfer of knowledge and practices across the MNC network. Local responsiveness refers to subsidiary decision-making autonomy while responding to local customer needs and specific host market competitive demands (Bartlett 1986; Doz and Prahalad 1991). Local responsiveness activities usually increase intra-organizational heterogeneity in MNCs.