will focus on the strategy and structure of multinational firms, where human
resource management is both an input and an output factor.
In Section 3 we will combine the sources of competitive advantage for
MNCs as discussed in Chapter 1 with three different strategic objectives and
define four different types of competitive strategy. These strategies will subse-
quently be linked to the transaction cost theory of international production
which was also discussed in Chapter 1. Section 4 then reviews both classical
and more recent approaches to structuring MNCs and discusses Bartlett and
Ghoshal’s typology of MNCs in some detail. Subsequently, Section 5 provides
an empirical test and extension of this popular typology. In Section 6, we then
link MNC strategy and structure to HRM. In the next section, however, we will
first distinguish what are considered to be the key differences between domes-
tic and multinational firms.
2 DIFFERENCES BETWEEN DOMESTIC AND
MULTINATIONAL FIRMS
Multiculturalism and geographic dispersionAdler (1983) tried to identify the major differences between domestic and
multinational firms by asking a selected group of experts in this field. Two fac-
tors were considered to be of primary importance in differentiating between
domestic and multinational firms: multiculturalism and geographic dispersion.
Multiculturalism is defined as ‘the presence of people from two or more cul-
tural backgrounds within an organization’. Geographic dispersion is defined as
‘the location of various subunits of the parent firm in different countries’.
According to Adler the combination of bothmulticulturalism and geographic
dispersion is of fundamental importance. So far, most international business stud-
ies have focused on the consequences of geographic dispersion and tended to give
little attention to the consequences of multiculturalism. Most comparative man-
agement studies reversed the emphasis. They tended to focus on cultural differ-
ences, while more or less neglecting the geographic dispersion aspect of
multinational firms. To get a complete picture of multinational firms, both per-
spectives are equally important. As the subjects in this chapter fall mainly in the
realm of international business, multiculturalism will occupy only a modest role.
Other chapters in this book, however, will compensate for this shortfall.
ComplexityMulticulturalism and geographic dispersion lead to greater complexity. When
asked to describe this complexity more concretely by completing the statement:
34 International Human Resource Management