MNC

• variety of facts about the company
• capabilities of the management
• capabilities of the employees (including education, further
education, etc.)
• manufacturing capabilities
• market oriented capabilities

• does the partner company cover the adequate business areas/activities?
• are the resources suitable? (“closing gap alliances“ vs. “critical mass alliances“)
• does the partner company deal with similar customer groups?
• is the used information technology compatible?
• is the size of the partner company suitable? (e.g. resources, power relation)

• is the corporate culture similar or at least compatible?
• is the “chemistry” right?
• are the company structures similar?
• trust/commitment towards the partnership

• Objective(s) of the JV
• Geographical spread
• Duration of the JV
• Organisational culture
• Sharing of tasks

• Negotiating the legal and contractual parameters of the alliance
• Determining the coordination mechanisms (ex ante): Hierarchy, Management team
• Determining the most important factors of the alliance structure: How Long? What market?
• What legal form should the alliance use?
• How is knowledge shared/protected? Who has the rights?
• Negotiations: common objectives and final structure/configuration have to be agreed on in negotiations

• Ensuring flexibility
• Decision processes
• Formal and informal coordination mechanisms
• Informal coordination mechanisms
• Communication and information management

• due to failure
• due to having reached the defined objectives
• due to having lasted the defined duration

Or:

• each company (re-)focuses on its own business areas

• partnering with the same partner might be best option in a future situation
• re-integration of alliance employees in parental companies difficult
• engagement of alliance partners simultaneously in “multi-projects”
• reputation might be permanently damaged by opportunistic behaviour

A process designed to ensure that the specific objectives of a company are accomplished.

• planning & budgeting
• monitoring / evaluating performance
• information supply for management to support decision making
• deciding on / suggesting corrective actions

1. Defining the performance dimensions
2. Setting performance targets
3. Measuring performance on these dimensions
4. Providing rewards (or sanctions)

• Usually larger number of „control objects“ (divisions, countries, subsidiaries)
• Subsidiary heterogeneity
• Comparability of results
• Gathering external data
• Higher risks

• time horizon for planning / evaluation
• optimism vs. realism in planning figures (UAI)
• degree of formalism in planning processes (UAI)
• quantitative measures vs. qualitative measures
• individual or group results (IND)

• to compare results, currencies have to be calculated into one currency
• currency risks might impose costs on certain subsidiaries

• Level of detail in planning and setting targets
  • „compass“ vs. „roadmap“
• Integration of subsidiaries/divisions in the planning process
  • top-down
  • bottom-up
  • top-down-bottom-up
• Degree of standardisation
• „Orientation“ of control (Ethnocentric, Polycentric, Geocentric)
• Object of controlling
  • control to coordinate, select, evaluate the performance of a manager and to give the optimal incentives
• Organisational integration of division/subsidiary controller

• Strategic
• Tactical
• Operational

• cost control
• inventory control
• break-even analysis
• contribution margin analysis
• budgets

• boarders inside and outside are clear
• different levels of corporate embeddedness (product flows, knowledge flows, coordination)

• Cooperation with other independent companies
• local network of the foreign subsidiaries
  • Market as networks: Network of relations
  • Not only market relations (universitites etc.)
  • different degree of external embededdedness (dependency on Role of subsidiary)

• Boarders in the network are blury, not easily defined
• Neo-institutionalism
  • Implies mutual behavior by organisations
• Contingency approach: Organizations choose between internal & external match achieving

• Horizontal linkages between subsidiaries
• Differentiated HQ-subsidiary relationships

• Age
• Size
• Success
• Value-added activities (Marketing, distribution, production)
• Motives for existence (market-, resource-seeking)
• Available resources
• External environment
• Degree of power relationships

• Firm is a black box
  • Produces only for outsiders
  • Input factors of production are transformed into an output of finished goods
  • uniform inputs into uniform outputs

Firms choose the level of vertical integration that minimizes the transaction cost

Production cost:

• costs of transforming inputs into outputs
• dependent on production functions, independent of the form of organizations

Transaction costs:

• cost of economic exchange
• externally and internally (cost of organizing internal echange)

• Internalize activities that can be carried out cheaper than externally
• Firms will expand until the transaction costs of the market are less than the transactions costs within the firm

• Because it is more efficient to internalize certain cross-boarder activities than to carry them out via market
• Previous theories: Secure monopoly situations across boarders and to reduce competition

Ex ante:

• Search/Information costs
• Bargaining cost

Ex post

• Monitoring costs
• Enforcement costs (Durchsetzung)
• Adjustement costs

Sales:

• Higher transaction costs with independent intermediary vs. foreign sales subsidiary

Production:

• Higher transaction costs with independent supplier vs. foreign production subsidiary

• People have limited capabilites to act rational
• limited information
• limited information processing capabilities
  • impossible to have full contracts

• People act in a self-interested way
• People are not entirely honest and thruthful
• People take advantage of unforeseen circumstances that give them chance to exploit another party

• Market governance of transaction is more efficient than vertical integration
• Competitive pressure makes transaction partners conform to contracts

• Frequency
• Uncertainty
• Specificity (most important)

Enhances the tendency for vertical integration, because the overhead costs for hierarchical governance will be easier to recover for recurring transactions

• Unpredictable ex ante (environmental uncertainty)
• No verification ex post (behavioral uncertainty)

• transaction-specific assets are assets that are tailored to a particular transaction and cannot be easily redeployed outside the relationship of the parties to the transaction (-->lock in effect)