Abstract:
Multinational corporations implementing multidimensional strategies require
multidimensional organisational structures to perform. Despite the plethora of research
on organisational structures, research on the matrix multidimensional structure remain
sparse. Situated in the international business field, within the strategy-structureenvironment
performance paradigm, understanding how performance is achieved is core
to the execution of MNCs strategies providing a superior competitive advantage. Despite
this, extant literature focuses on understanding how to design and manage matrix
structures, failing to provide an understanding of performance when adopting the matrix
structure. These studies, rooted in the information processing view, fail to address the
primary reasons of flexibility, efficiency, headquarter control, and strategy that the matrix
structure presented difficulty in implementation for MNCs in the 1980’s.
Addressing these gaps, this research focusses on understanding to what extent strategic
choice leading to the primary and secondary structural dimensions adopted, flexibility,
efficiency and headquarter control affect performance in matrix structured MNCs. A
mono-method quantitative study was applied, and a 146 MNCs with matrix structures
participated in the study at the subsidiary level, with 56% from South African MNC
subsidiaries. A moderated regression analysis was conducted to test the hypotheses to
understand performance when MNCs adopt different primary by secondary structural
dimensions, using organisation age as a moderator. Results indicated that matrix
structure adoption is appropriate for MNCs with primary product/service, geographic
region and functional dimensions by secondary customer market, functional dimension,
and product/service dimensions respectively. Levers of flexibility, efficiency, headquarter
control and strategy leading to performance are differentiated based on the type of
primary by secondary dimensions adopted.
The implications of the results provide an a priori understanding of performance,
contributing to transaction cost economics on the most efficient system of organising
transactions, vertical integration, human assets, and contracting. This a priori
understanding allows MNCs to understand the levers of flexibility, efficiency, headquarter
control and strategy, addressing the critical attributes which led to the difficulty in
implementing matrix structure, highlighting the role of headquarter-subsidiary relations.
Future research inculcating type of subsidiary in headquarter-subsidiary relations will extend understanding of the performance in MNCs with matrix structures. These studies
will deepen the a priori levers required by MNCs require adopting the matrix structure.
