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The Visible Hands of Hierarchy within the M‐Form: An Empirical Test of Corporate Parenting of Internal Product Exchanges


  • Laura Poppo


ABSTRACT In this paper, we dismiss the traditional contingency argument that corporate staff should have minimal involvement with the decisions that its divisions make, because predictability, which underlies this contingency logic, is erroneous for most large corporations at this time. We offer an alternative theory of corporate involvement for the M‐form: under unpredictable environments greater interdependence of corporate staff with divisional operating decisions may be necessary to create value for the corporation. Since corporate staff cannot be involved in all divisional affairs, we empirically explore when corporate involvement is most likely. Building on transaction cost economics and the strategy literature, we reason that corporate staff may selectively involve itself in business level strategy and operating decisions when product characteristics signal threats to effective inter‐divisional coordination as well as opportunities for value creation. To explore this topic, we surveyed corporate managers of Fortune 500 companies. The results suggest some initial support for our theoretical argument: corporate staff is more likely to involve itself in business‐level decisions for uncertain products. We further find that when corporate staff is responsible for the capital investments used for the divisional venture, it is more likely to guide and influence product strategy decisions and inter‐divisional conflicts. We do not find, however, consistent evidence that specialized assets or brand‐name reputation trigger corporate involvement. Implications and limitations are further discussed.

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  • Laura Poppo, 2003. "The Visible Hands of Hierarchy within the M‐Form: An Empirical Test of Corporate Parenting of Internal Product Exchanges," Journal of Management Studies, Wiley Blackwell, vol. 40(2), pages 403-430, March.
  • Handle: RePEc:bla:jomstd:v:40:y:2003:i:2:p:403-430

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    References listed on IDEAS

    1. Holmstrom, Bengt & Tirole, Jean, 1991. "Transfer Pricing and Organizational Form," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(2), pages 201-228, Fall.
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    4. Laura Poppo, 1995. "Influence Activities and Strategic Coordination: Two Distinctions of Internal and External Markets," Management Science, INFORMS, vol. 41(12), pages 1845-1859, December.
    5. Diana L. Day, 1994. "Raising Radicals: Different Processes for Championing Innovative Corporate Ventures," Organization Science, INFORMS, vol. 5(2), pages 148-172, May.
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    1. repec:eee:intman:v:24:y:2018:i:2:p:93-107 is not listed on IDEAS
    2. Marcelo Bucheli & Joseph T. Mahoney & Paul M. Vaaler, 2010. "Chandler's Living History: "The Visible Hand" of Vertical Integration in Nineteenth Century America Viewed Under a Twenty-First Century Transaction Costs Economics Lens," Journal of Management Studies, Wiley Blackwell, vol. 47(s1), pages 859-883, July.
    3. repec:spr:manint:v:57:y:2017:i:4:d:10.1007_s11575-017-0311-5 is not listed on IDEAS
    4. Bucheli, Marcelo & Mahoney, Joseph T. & Vaaler, Paul M., 2007. "Chandler's Living History: The Visible Hand of Vertical Integration in 19th Century America Viewed under a 21st Century Transaction Costs Economics Lens," Working Papers 07-0111, University of Illinois at Urbana-Champaign, College of Business.
    5. repec:hal:gemwpa:hal-00864324 is not listed on IDEAS
    6. repec:spr:manint:v:57:y:2017:i:6:d:10.1007_s11575-017-0325-z is not listed on IDEAS
    7. Tippmann, Esther & Sharkey Scott, Pamela & Mangematin, Vincent, 2014. "Subsidiary managers’ knowledge mobilizations: Unpacking emergent knowledge flows," Journal of World Business, Elsevier, vol. 49(3), pages 431-443.
    8. repec:eee:iburev:v:27:y:2018:i:5:p:993-1006 is not listed on IDEAS
    9. Yuzhe Miao & Yuping Zeng & Jeoung Yul Lee, 2016. "Headquarters Resource Allocation for Inter-Subsidiary Innovation Transfer: The Effect of Within-Country and Cross-Country Cultural Differences," Management International Review, Springer, vol. 56(5), pages 665-698, October.
    10. repec:eee:intman:v:23:y:2017:i:3:p:255-267 is not listed on IDEAS
    11. repec:bla:stratm:v:37:y:2016:i:12:p:2481-2502 is not listed on IDEAS
    12. Giovanni Gavetti, 2005. "Cognition and Hierarchy: Rethinking the Microfoundations of Capabilities’ Development," Organization Science, INFORMS, vol. 16(6), pages 599-617, December.
    13. repec:spr:manint:v:50:y:2010:i:4:d:10.1007_s11575-010-0042-3 is not listed on IDEAS
    14. repec:bla:jomstd:v:54:y:2017:i:8:p:1121-1143 is not listed on IDEAS
    15. Ciabuschi, Francesco & Forsgren, Mats & Martín Martín, Oscar, 2012. "Headquarters involvement and efficiency of innovation development and transfer in multinationals: A matter of sheer ignorance?," International Business Review, Elsevier, vol. 21(2), pages 130-144.
    16. repec:eee:iburev:v:28:y:2019:i:1:p:148-161 is not listed on IDEAS
    17. Cerrato, Daniele, 2006. "The multinational enterprise as an internal market system," International Business Review, Elsevier, vol. 15(3), pages 253-277, June.
    18. repec:spr:manint:v:51:y:2011:i:2:d:10.1007_s11575-011-0068-1 is not listed on IDEAS

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