Introduction

It has been common for MNEs to develop structures that have resembled federative rather than unitary organizations. In these MNEs, subsidiaries have a national focus and substantial latitude to forge locally oriented strategies (Birkinshaw and Hood 2000). Porter (1986) and Prahalad and Doz (1987) referred to this particular generic MNE strategy as the multi-domestic strategy and contrasted it with a second generic strategy, the global strategy. The essence of the multi-domestic strategy is its emphasis on the need to be responsive to each local environment in order to achieve local competitive advantage (Yip 1989). In contrast, a global strategy views competitive advantage as being based on capturing global scale or scope economies through the integration of the activities of the business and focusing on customer demands that are standardized across markets (Roth 1992). Thus in terms of the degree of integration of activities across locations, whereas MNEs pursuing a global strategy seek to exploit cross-national sources of advantage through a high level of intra-firm resources, those pursuing a multi-domestic strategy allow business units to be largely autonomous and to depend more on locally-sourced resources as opposed to inputs from affiliated business units (Prahalad and Doz 1987). This embeddedness in host country networks is potentially a source of strategic power for subsidiaries and thus may constitute a serious challenge to the MNE headquarters' monopoly over strategy (Yamin and Forsgren 2006).