The impact of strategy, flexibility, efficiency and headquarter control orientations on the performance of multinational corporations adopting a matrix organisational structure

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.