subsidiaries form part of an interdependent network, they are all dependent on
each other.
The majority of subsidiaries in multidomestic companies are relatively
independent from both headquarters and subsidiaries. Since this relationship
may seem almost tautological with our description of a decentralized organi-
zation, interdependence was measured in a very objective way: the percentage
of intra-company sales and purchases in relation to total sales and purchases.
Subsidiaries in multidomestic companies buy/sell a low proportion of their
purchases/sales from/to both headquarters and other subsidiaries. In global
companies many subsidiaries have a sales function only, simply transferring
products from headquarters to the local market. Therefore the level of inter-
dependence between individual subsidiaries and headquarters is greater than the
level of interdependence between different subsidiaries. Thus in subsidiaries of
global companies dependence is more important than interdependence. In
transnational companies, we also see a relatively high level of intra-company
sales and purchases. However, since strategic functions such as production may
be assumed by specialized subsidiaries, the level of interdependence between
different subsidiaries is higher than the level of interdependence between indi-
vidual subsidiaries and headquarters. In other words, in subsidiaries of trans-
national companies interdependence is more important than dependence.
Local responsiveness
Local responsiveness is defined as the extent to which subsidiaries respond to
local differences in customer preferences. There are several ways in which
responsiveness to local differences can be conceptualized. First of all, products
can be actively adapted to differences in local tastes and preferences. Since
being locally responsive is a key strategic requirement for both multidomestic
companies and transnational companies, a relatively large proportion of prod-
ucts that are sold by their subsidiaries are adapted or modified to the local
market. In many industries that are traditionally characterized as multidomestic,
such as for instance the food industry (Bartlett and Ghoshal, 1989; Kobrin,
1994; Porter, 1986; Rall, 1989), adaptation of products is also easier and less
costly than for global products such as computers. As the key strategic require-
ment for global companies is to manufacture standardized products in a cost-
efficient way, their subsidiaries do not sell a high proportion of products
modified for the local market.
In a more limited sense, local responsiveness might involve adaptation of
marketing to local circumstances to make products more appealing to a variety
of customers. Because both multidomestic companies and transnational com-
panies place a high emphasis on local responsiveness, for products sold by sub-
sidiaries of these companies a high percentage of marketing is consciously
adapted to local circumstances.In subsidiaries of global companies, which try
to sell relatively standardized products worldwide, a lower extent of marketing
adaptation takes place. However, since adaptation of marketing is a rather easy
54 International Human Resource Management