The Coordination of Manufacturing Interdependence in Multinational Companies

Abstract

Many companies have recently adopted global manufacturing rationalization programs. In order to realize the full benefit of these internationally integrated manufacturing strategies, however, companies need to overcome the problem of coordinating operations where interdependence exists among subsidiaries. This article, which is based on a field study of 25 multinational companies, provides insights on how manufacturing interdependence among country subsidiaries is coordinated. Specifically, the study examined the relationships between increasing manufacturing interdependence with the use of 4 coordination modes—impersonal methods, use of organization members who have a system sensitive outlook, executive compensation systems based on a subsidiary's performance, and personal communication—and with the use of 3 communication patterns—communication between managers of different country subsidiaries, communication with top management, and communication with a central manufacturing staff group. Findings suggest that although there is an extensive use of impersonal methods of coordination, with increasing interdependence there is a change in coordination mix towards greater use of system-sensitive members and personal communication. Increasing interdependence is also significantly associated with greater communication among country-subsidiary managers and greater communication with a central manufacturing staff group. Although the relationships between increasing interdependence and communication with top management through the formal hierarchy was not found to be statistically significant, interviews with managers suggested the importance of this channel when communication among country-subsidiary managers and communication with the central manufacturing staff group are inadequate for managing the manufacturing interdependence. Implications are drawn for companies planning to increase the international integration of their manufacturing operations.