Implementation of Global Strategy

Manag Int Rev (2011) 51:179–192 DOI 10. 1007/s11575-011-0071-6 R e s e a R c h a Rt i c l e Effective? Global? Strategy? Implementation Structural? and? Process? Choices? Facilitating? Global? Integration? and? Coordination Attila? Yaprak?  ·? Shichun? Xu?  ·? Erin? Cavusgil Abstract:? 0 0 this article offers a contingency framework of global strategy implementation effectiveness on firm performance. The research question we seek to address is what the structural and process requirements are for MNEs to successfully implement global strategy through increased efficiency and effectiveness of integration and coordination across world markets.Our central premise is that MNEs’ capabilities in establishing supporting structural and process mechanisms will enhance the effectiveness and efficiency of implementing their global strategies which would, in turn, lead to better firm performance. Keywords:? Integration and coordination  · Global strategy  · Firm performance  · contingency framework Received:? 25. 12. 2009 / Revised:? 15. 08. 2010 / Accepted:? 11. 10. 2010 / Published? online: 02. 04. 2011  © Gabler-Verlag 2011 Prof. A. Yaprak (? ) Department of Marketing, Wayne State University, Detroit, USA e-mail: Attila. [email  protected] edu Asst. Prof. S. Xu Department of Marketing and Logistics, University of Tennessee, Knoxville, USA Asst. Prof. E. Cavusgil Department of Marketing, University of Michigan-Flint, Flint, USA 180 A. Yaprak et al. Introduction The globalization of the world economy and markets has given rise to the growth of multinational enterprises (MNEs). With the expanded geographical scope and dispersed operations across national borders, managing MNEs effectively has become a challenging task for managers.As such, numerous studies have been conducted to understand what contributes to the success of MNEs in the global market. Many studies have adopted the resource-based view (RBV) of the firm as the theoretical basis of s uch an exploration, arguing that the competitive advantage of MNEs is sourced primarily in their ability to access and acquire rare and inimitable resources that create better value for customers around the world (e. g. Peng et al. 2008). These resources are considered indicators of firm performance levels in the global market (Lu et al. 010; Peng et al. 2008). While RBV has been instrumental in explaining the performance differences among MNEs, arguments have been advanced that the mere possession of resources is insufficient to generate superior performance (Sirmon et al. 2007). For instance, Barney and Arikan (2006) state that assuming appropriate strategic action will automatically follow from the recognition of valuable resources within the firm is an intellectually naive assumption.Specifically, how resources can be used through strategic actions to create superior value to create a competitive advantage for the firm remains unclear (Priem and Butler 2001). While firm resource s have a more or less direct impact on the strategic courses of action a firm may pursue, implementation of such strategies to realize value creation potential remains an under-researched topic (Barney and Arikan 2006). This deficiency in the literature has led to the distinction between resources and capabilities. Lu et al. (2010) propose that resources and capabilities are clearly distinguishable from each other.While Grant (1991) defined resources as stocks of tangible and intangible assets which firms use to convert into products and services while capabilities are viewed as intermediate goods generated by the firm to enhance the productivity of resources (Amit and Schoemaker 1993). As such, capabilities are different from resources since they act as enablers for firms to create value more effectively from the resources they possess. This distinction between resources and capabilities has encouraged researchers to examine the effect of MNEs’ capabilities on firm performan ce.Research regarding the capabilities of MNEs has mostly focused on those that facilitate global strategy formulation. For example, Elango and Pattnaik (2007) propose that networking capabilities have a direct impact on the internationalization strategy of the firm. Peng et al. (2008) articulates a framework in which firm resources and capabilities are viewed as one of three antecedents of a firm’s international business strategy (the other two being industry based competition and institutional conditions and transitions).Thus, the current literature sheds light only on how the capabilities of MNEs enable them to formulate appropriate strategic choices that match their resources with opportunities in their external, that is, their global, environment. However, mechanisms that ensure successful implementation of the chosen strategies remain unclear. While we assume that MNEs should be able to establish appropriate structures to match their strategies, research has shown that there is a lot of incongruence between MNE strategy and structure (Duysters and Hagedoorn 2001).Effective Global Strategy Implementation 181 Based on this backdrop and drawing from the strategic fit literature, the purpose of this paper is to offer a contingency framework of global strategy implementation effectiveness on firm performance. The research question we seek to answer is what the structural and process requirements are for MNEs to successfully implement global strategy through increased efficiency and effectiveness of integration and coordination across world markets.Our central premise is that MNEs’ capabilities in establishing supporting structural and process mechanisms will enhance the effectiveness and efficiency of implementing their global strategies which would, in turn, lead to better firm performance. That is, we argue that firms need to achieve a harmonious configuration among strategy, structure, and process to better deliver superior value from the res ources they possess. The remainder of this article is organized as follows.After reviewing the literature and presenting a comprehensive picture of the integration and coordination dimensions of global strategy, we offer propositions for future research. We discuss the merits of exploring each of these and conclude with suggestions for managerial practice. Conceptualizations? of? Global? Strategy The globalization of the world economy has pushed many organizations, particularly those MNEs with abundant resources, to rethink how they compete in this expanded market.The increasingly interdependent financial, product, and labor markets are all advancing at different paces towards a â€Å"globalized† system (Buckley and Ghauri 2004). As the political, economic, and cultural forces increasingly promote a global environment, many industries have become global in nature (Morrison and Roth 1992; Kim et al. 2003). Such global industries are largely driven by three structural forces: e conomies of scale, comparative advantage, and standardized markets (Birkinshaw et al. 1995).Firms competing in such industries have gradually been adopting a global strategy in which they no longer view their subsidiaries located across the world as independent subunits, but as a highly interdependent network (Kim and Hwang 1992). Global strategy is thus characterized as developing competitive advantage through operating in interdependent national markets by exploiting differences in national resource endowments, the flexibility of MNC networks, and economies of scale and scope, as well as learning (Malnight 1996).Extant literature suggests that the strategic choice of a firm competing in global markets is a function of firm traits and aptitudes and market contexts (Peng et al. 2008). The positive relationship between financial and market performance and global strategy is also well documented in the literature (Roth 1992; Kim et al. 2003). We further argue that these relationships are mediated by the interplay among strategy, structure and processes of the firm (Fig. 1). We now discuss these, in turn. Firm Traits and Aptitudes Firm traits and aptitudes refer to the resources and capabilities that a firm possesses to compete in the global marketplace.These resources and capabilities can take on different forms such as culture, knowledge, orientation, experiences, and learning capability. 182 A. Yaprak et al. Firm Traits Aptitudes Innovative Culture Firm's strategic creativity in its marketing strategy making Latitude in autonomy vs. control Local Embeddedness Depth in local market knowledge Local market orientation International Embeddedness International Orientation International Experience Firm Capabilities in Cross-subsidization (Leverage) Organizational learning Market Contexts Degree of international integration Degree of similarity with the primary international marketProcesses Degree of integration of strategic design and implementation [Integration vs. Independence] Configuration Perspective Strategy Degree of standardization . n marketing strategy [Standardization vs. Adaption] Coordination / Integration Strategy Performance Structure Degree of Concentration of value chain activities [Concentration vs. Dispersion] Contingency Perspective Fig.? 1: Strategy, structure, and processes as mediators of the firm, market and performance relationship. (Source: Constructed by the authors from Lim et al. 2006), Menon et al. (1999), Ozsomer and Prussia (2000), Solberg (2000), Xu et al. (2006), Zou and Cavusgil (2002)) Studies suggest that a fundamental antecedent to superior performance is the corporate culture of the firm, particularly those associated with innovation capabilities. They show that innovative culture, reflected by the firm’s creativity in its marketing strategy making, is a key ingredient in influencing strategic performance. They further show that focus on effective se of the firm’s marketing assets and capabi lities and prudent resource commitments across markets will upgrade its cross-market integration skills, and thereby enhance its market performance (Menon et al. 1999). The firm’s ability in reverse-innovating products, distributing them globally, and its skills in expanding opportunities in difficult markets and pioneering worthy segments in different types of market settings, all manifestations of creative strategy making, will also upgrade its market performance (Immelt et al. 009). A second key firm trait involves local market embeddedness. Local market orientation underscored by increasing depth of local market knowledge will lead to higher levels of global market penetration. When coupled with the ability to adapt to cultural diversity and affinity to the local market intermediaries’ aspirations to extract common denominators for many markets, this will likely lead to higher degrees of strategy effectiveness (Solberg 2000). Equally important is international embe ddedness.International orientation, bolstered by previous international business and/or marketing experience in the major markets of the firm will give the firm latitude in integrating and coordinating its competitive moves across world markets and thus lead to network-wide efficiencies, effectiveness and synergies. This valuable organizational resource will also help simplify worldwide planning and help establish the firm’s brands with a consistent image across markets; thereby enhancing the firm’s marketing strategy performance (Zou and Cavusgil 2002). Effective Global Strategy Implementation 83 Firm capabilities in organizational learning and cross-subsidization will affect global market performance positively. The firm’s ability to learn more and faster than its competitors and from its alliance partners in foreign markets will advance its marketing capabilities. Its skills in leveraging resources, information, experience, and ideas across markets and affili ates, sacrificing competitive gains in some markets for the benefit of other markets, and sharing organizational learning gains across its affiliate network will help the firm maintain a strong configural advantage, nd will improve the firm’s marketing strategy performance (Craig and Douglas 2000; hamel 1991; Lim et al. 2006). In light of these arguments, we propose that: P1: Firm traits, such as innovative culture and strategic creativity and firm aptitudes such as local and international embeddedness, along with capabilities in organizational learning and cross-subsidization, will enhance the adoption of a global strategy, which in turn, will positively influence firm performance. Market Contexts Porter (1990) suggests that the industry in which a firm finds itself competing largely determines its strategic choices.Market contexts specifically examine the external environment and the opportunities it presents to the firm. Market contexts, such as global industry and the fir m’s global orientation and international experience, will also give firms an incentive to adopt a global strategy which will, in turn, enhance marketing strategy performance. One argument here is that global strategy seeks benefits from both comparative and competitive advantages by leveraging economies of scale derived from common market demand and dispersion of operations across world markets to benefit from factor cost differences (Kim et al. 003). The degree of similarity among markets will incentivize firms to adopt a globally-integrated strategy which will lead to efficiencies and strategy effectiveness, and this will improve performance (Zou and Cavusgil 2002). Participation in multiple markets offers the firm the ability to identify different opportunities with which to exploit its resources. For example, the firm can extend its product life cycle by launching products with different pacings across global markets. Market contexts offer greater flexibility in implement ing global business battles against competitors.Participation in multiple markets also helps firms identify different value chain activity locations based on the unique comparative advantages of each location. The degree of integration in the firm’s markets will foster easier leveraging of resources and capabilities and will ease learning from these. As the firm expands increasingly into dissimilar markets, however, it will be inspired to develop creative solutions, innovative marketing mix adaptations, and imaginative strategies.The degree of coordination and differentiation in marketing strategies the firm is able to implement in global markets and its ability to harmonize competitive tactics across regions will also improve performance (Lim et al. 2006; Schilke et al. 2009). Since markets are dynamic, their changing nature will require emerging strategic mechanisms, inspiring the firm toward developing creative market-based learning, rather than deliberative solutions (Ozs omer and Prussia 2000; Vorhies and Morgan 2005). Thus, we propose that: 184 A. Yaprak et al.P2: Similarities and dissimilarities among the firm’s market contexts will move the firm toward adopting a global strategy, which in turn, will enhance marketing strategy performance. Integration and Coordination in Global Strategy and Implementation As the competitive advantage in adopting a global strategy lies in the firms’ ability to effectively link competitive actions across national markets, global integration becomes a critical task in coping with the challenges posed by the integrated global competitive arena (Kim et al. 2003).Thus, firms adopting a globally integrated strategy seek to integrate their globally-dispersed activities in a manner that will help them develop combinations of comparative (that is, location-specific) and competitive (that is, firm-specific) advantages that will foster more effective responses to cross-national competitive forces (Roth and Schwe iger 1991). Global integration, that is the coordination and control of business operations and functions across national borders (Cray 1984), is viewed as the ideal indicator of the degree of comparative and competitive advantage combinations within the firm (Kobrin 1991; Rangan and Sengul 2009).Roth and Schweiger (1991) describe these two sources of advantage in a global strategy as that developed through international scale economies and economies of scope (competitive), and that which results from exploiting the differences in factor costs across country locations (comparative). Comparative advantage arises from the geographic configuration of location choices while competitive advantage resides in geographic coordination or organization (Rangan and Sengul 2009). Thus, integration allows the firm to disperse its value-adding activities across national markets while integrating some of these within the firm’s own boundaries.Two major activities in achieving global integrat ion goals are coordination and control (Kim et al. 2003). The purpose of coordination is to achieve concerted action among the subunits and functional areas toward a unified organizational goal (Roth and Schweiger 1991). Coordination is essential in managing the interdependencies across the subunits of an organization. As coordination effort in an international business organization can range from low to high, the demand of a global strategy puts its coordination effort on the high end.A high degree of coordination implies that functional activities are tightly linked with one another and that these are tightly-integrated across geographic locations (Roth 1992). This integration leads to configural advantage (Craig and Douglas 2000). Thus, we propose that: P3: Superior performance of the MNE’s global strategy will be positively linked to increased integration and coordination of its value chain activities; that is, to the degree of its configural advantage.Structural and Proc ess Requirements for Global Integration and Coordination Even though MNEs enjoy the benefit of abundant resources and capabilities coming from firm traits and aptitudes and the opportunities their environments present, designing the organizational structures and processes that best support the strategies they deploy that Effective Global Strategy Implementation 185 use the resources and capabilities that suit the demand of their external opportunities is mandatory in realizing superior performance.In fact, the task of management is to formulate strategies based on the resources and capabilities of the firm and match them with identifiable opportunities in the external environment by selective market entry. Strategy, as such, is seen as an outcome of the process of identifying the alignment of the resources and capabilities of the firm and the opportunities present in the environment. Implementing such a strategy relies primarily on supporting the organizational structures and proces ses that are in place.Without the appropriate strategy, processes and structure, firm traits and aptitudes and market contexts may each present benefits by themselves, but they may also lead to detrimental performance when inappropriately combined. As such, firms need to examine both their internal strengths and the external opportunities they face and attempt to achieve the best synergy between these two. While strategy is mostly focused on identifying market opportunities that best utilize the resources of the firm, the reverse is also possible; the firm may identify opportunities in the environment but find that it lacks the resources to exploit these.Unique combinations of these structure and strategy elements will yield unique levels of strategic performance (Olson et al. 2005). Interrelationships among the internationalizing firm’s strategy, structure, and processes are positively associated with market performance and will lead to strategy implementation types that can serve as major sources of sustainable global competitive advantage (Xu et al. 2006). Structure A critical determinant of success in implementing a global strategy is the development of effective structures that will carry firm strategy toward superior performance.Organizational structural forces are crucial to effectively deploying and integrating firm resources (Fang and Zou 2009). One element of this effort is the global configuration of value chain activities such that achievement of the firm’s objectives is rationalized. Sourced in competitive advantage theory (Porter 1990), this effort involves selectively concentrating and dispersing activities across the firm’s global network so that it can differentiate, pursue cost efficiencies, focus on market niches, and achieve economies of scale in doing so (Roth 1992).It also involves assigning various roles to the firm’s affiliates so that they will serve the firm’s objectives in the most effective manner. For instance, subsidiaries might play such roles as strategic leader, implementer, and contributor, depending on their level of local competencies and the strategic importance of their markets to the firm or can be early or late movers in carrying the firm’s products throughout its network, depending on their special strengths and competitive advantages (Bartlett and Ghoshal 1989, 1992).The firm’s aims with regard to each local market as it incrementally internationalizes, and its desire for control over affiliates vs. encouragement of autonomy in local markets, can lead to subsidiary roles as local barons or implementers of headquarters strategies (Solberg 2000). These roles can then create internationalizing networks modeled as federations, confederations, and the United Nations (Bartlett and Ghoshal 1989; solberg 2000). Of the different dimensions of organizational structure, three dimensions are recognized as the most influential on global integration and coordina tion: formalization, departmen- 186A. Yaprak et al. talization, and centralization. Formalization is defined as the degree to which organizational norms are defined explicitly (Hall 1982). It essentially prescribes the acceptable and unacceptable behaviors within an organization. Roth and Schweiger (1991) argue that formalization boosts integration and coordination efforts by decreasing the discretion of the managers at both the headquarters and the subsidiary levels. Formalization reduces the direct involvement of the headquarters in subsidiaries by offering rules and procedures that fertilize the emergence of dominant logic within the organization.This dominant logic fosters similar actions from managers at different geographic locations. In addition, firms also increase integration efficiency by formalizing the ways functional activities are performed across units. By establishing standardized procedures, policies and rules, the effectiveness of integration will increase as the p rocess of conducting activities is codified, a form of coordination by standardization (Kim et al. 2003). Centralization is concerned with decision making authority and is regarded as an important means of reaching coordination goals within an MNE (Roth and Schweiger 1991).A global strategy leads to higher levels of interdependencies among the subunits within a global organization. This would require a higher level of coordination among the functional activities. Adopting a centralization structure in an MNE means that critical decision-making lies at the top management level because better understanding of the various activities and units scattered around the world is possible there (Kim et al. 2003). It could be argued that while formalization facilitates coordination of global integration, centralization plays more of a role in the control of global integration.The assumption here is that with a decentralized structure, each subunit will focus on achieving its individual goals an d tasks resulting in the sacrifice of the overall goal of the organization. Formalization and centralization along the firm’s value chain configuration will also affect its strategic behavioral orientations, such as customer, competitor, and innovationorientation, and by extension, the firm’s strategic performance. Departmentalization is defined as the degree to which the tasks are confined to a predetermined domain and members of departments are isolated from cross-functional interactions (Mintzberg et al. 1976).Departmentalization is believed to be detrimental to the integration and coordination effectiveness in business. It is argued that resource integration, especially as it involves knowledge integration, is an essential way to generate new ideas, particularly for new product development purposes. By isolating the subunits or functions from each other, members of the organization lose sight of the overall picture and the unique goals of the organization. Thus, we propose that: P4: Formalization and centralization of structure will positively influence integration and coordination effectiveness in firms that adopt a global strategy.P5: Departmentalization of structure will negatively influence integration and coordination effectiveness in firms that adopt a global strategy. Processes The major characterization of global strategy is focused on the integration of the firm’s global network of activities and the coordination of functions and resources that will yield enhanced strategy performance. This perspective is concerned with whether subsidiaries Effective Global Strategy Implementation 187 are standalone profit centers or parts of a more holistic design of deliberately integrated units (Lim et al. 2006).Its focus is on the dependence of affiliates on the headquarters and the interdependence among the subsidiaries for materials, resources, learning, efficiencies, and company-wide decision-making (Bartlett and Ghoshal 1989; Lim et al . 2006). When combined with the market offering and the concentration dimensions of strategy (Lim et al. 2006), and under the umbrella of contingency theory (Van de Ven and Drazin 1985), this perspective provides a window into our understanding of the spread of strategic autonomy, functional and operative control over affiliates, resource sharing, and cross-market consultation in he internationalizing firm. Dependence of the firm on its local affiliate or subsidiary for market knowledge due to lack of its own proficiency would lead the firm, for instance, to nurture interdependencies with its affiliates and strategic control over them. Low dependence of the subsidiaries on the headquarters, along with low interdependence among subsidiaries and high subsidiary autonomy are associated with worldwide mandates assigned to subsidiaries (Lim et al. 2006). The organizational processes of MNEs largely involve the control aspects of organizational activities.Gencturk and Aulakh (1995) classi fy formal control mechanisms as market-based and hierarchy-based. Birkinshaw and Morrison (1995) add the heterarchy model as an alternative control process. While the market-based control process intuitively works against the goal of integration and coordination, the hierarchy- and the heterarchybased control mechanisms facilitate integration and coordination to a greater degree. We argue, however, that the heterarchy-based control process is more appropriate for a global strategy.First, the hierarchy concept is incongruous with interdependence among the various regional and strategic business units that make up the global enterprise. Second, the hierarchy model implies unidirectional control, imposed by the headquarters over the subsidiary units, a notion incompatible with global integration. Finally, global integration requires stability and instrumentality to succeed and at least one of these, instrumentality, is less present in the hierarchy model than the other models of contro l.The heterarchy control model, in contrast, is based on three characteristics that global integration requires: dispersion of resources and capabilities; existence of lateral relationships among subunits; and coordinated activities. We feel that all three of these are consistent with the coordination and integration efforts of an MNE and foster greater integration. Thus, we propose that: P6: Adoption of a heterarchy-based control model will positively influence the integration and coordination effectiveness of firms that adopt a global strategy.The Interaction of Strategy, Structure, and Process While each of strategy, structure, and process may have a direct impact on firm performance, the interaction among the three may exert even greater influence on that performance. Viewing strategy as matching resources with the environment focuses essentially on strategy formulation. This relies largely on the fit of the external environment with the firm. However, strategy implementation re quires achieving the firm’s intended benefit. It relies more on the internal fit within the organization; that is, the fit between structure and processes (Venkatraman and Camillus 1984).Venkatraman and Camillus (1984) argue 188 A. Yaprak et al. that effective implementation of any strategy requires congruence among a large number of internal elements. This implies that the supporting role of structure and process cannot be separated from each other. In addition, the dominant logic in the strategic management literature is that strategy is the overriding concern, while structure and process are derived from strategy. Strategic performance is determined by how effectively the firm’s strategy is implemented, and by extension, how marketing objectives are accomplished (Olson et al. 2005).While there are many dimensions to performance measurement, financial and non-financial measurement metrics are typically used in strategy performance contexts. Among these are profitabil ity, ROI, and sales volume, as well as the strategic position of the firm relative to its most relevant competitor, its relative market share in key markets, and expectations compared to relevant competitors and satisfaction with achieved expectations (Olson et al. 2005; Zou and Cavusgil 2002). We argue that a holistic view should be used in measuring strategic performance; a measure that would incorporate both financial and non-financial considerations.We also argue that, all things considered, the strategy, concentration, and integration/coordination conceptualizations of global strategy will mediate the relationship between the firm and market antecedents of performance and strategic performance itself. This is evidenced by recent research which shows that the interplay of strategy, structure and processes lead to higher levels of performance when they are mediated by co-alignment of strategy with the market context (Xu et al. 2006). Thus, we propose that: P7: Firm and market ant ecedents of firm performance will be mediated by the interplay among the strategy, structure, nd process components of internationalizing firms. The Capability of Configuring Strategy, Structure, and Process The capability of an MNE to successfully configure a harmonious strategy, structure, and process could be a source of competitive advantage. Unlike the tangible resources such as plant and raw materials, intangible resources and capabilities such as the ability to align structural and process dimensions with the chosen strategy cannot be easily copied or substituted. When skillfully leveraged, these capabilities offer bases of competitive advantage and increase the effectiveness and efficiency in implementing a chosen strategy.Capability development is viewed as path dependent (Nelson and Winter 1982). Firms accumulate knowledge and capabilities by learning by doing. Dosi et al. (1990) views the firm as a historic entity in which repetitive activities offer the opportunity to le arn and form routines and search processes. In this perspective, capabilities are viewed as emerging from the past history of learning by doing. Firms may also actively invest in organizational structures and processes to make constant improvements of routines and practices (Ethiraj et al. 2005).As such, capabilities are a combined result of passive learning by doing and active investment in learning. MNEs with extensive internationalization experiences would have the opportunity to nurture the capability to align their structure and process with their strategies. As such, we propose that: Effective Global Strategy Implementation 189 P8: The international experience of an MNE will be positively associated with its capabilities to configure organizationally effective strategy, structure, and process combinations. Discussion? and? Suggestions? or? Future? Research The relationship between global strategy making and its performance outcomes has generated a rich stream of research in th e extant literature during the last few decades. This interest was heightened recently with the explosive growth in international business activity, especially by internationalizing firms from the emerging economies. This recent interest has resulted in conceptual developments attempting to explain the roles of various antecedents in explaining strategic performance and empirical testing of these frameworks (e. . , Katsikeas et al. 2006; Lim et al. 2006; solberg 2000; Zou and Cavusgil 2002). More recent work has explored the significance of the roles played by various moderators in explaining the strength of the antecedents-performance relationship (Schilke et al. 2009). All of these studies have deepened our understanding of the strategy making-performance relationship, but we do not yet have a comprehensive picture of many of the actors that might mediate this relationship. In this paper, we attempt to contribute to this void by developing one such picture.We propose that firm tra its and market contexts will positively affect strategic performance, but this relationship should be enhanced when mediated by the interplay among the strategy (standardization vs adaptation), structure (concentration vs dispersion), and process (integration vs independence) dimensions of strategy making (Lim et al. 2006). We offer propositions about each of these dimensions and the interface they have with the antecedents and outcomes of strategy formulation. Our work is exploratory and thus aims at offering a conceptual framework that should lead to empirical research.Some empirical questions that future research might explore include the following. First, what are the theory bases that might give us a better understanding of this relationship? The extant literature is full of studies that are anchored in the contingency and the configurational theories, but other theories/paradigms, such as agency theory, transactions cost economics, the resource based view, and social exchange theory might be fruitful avenues of inquiry in explaining the strategy making-strategic performance relationship.For example, agency theory may shed greater light on the impact of principal-agent relationships on product introduction rollouts in international markets and how these might shape the strategy formulation-strategic performance linkage. Social exchange theory might explore the significance that such constructs as trust, commitment, forbearance, and lack of opportunism might render on this relationship. The resource based view might explain the significance of the role played by the interdependence among the firm’s affiliates as they share certain types of esources; participate in decision-making contexts; and leverage capabilities across the firm’s network in the strategy making-strategic performance link. Second, what is the role of culture in defining and predicting the outcomes of the strategy-performance link? Culture, for instance, might influence conce ptualizations of the degree of control desired, what it means to be autonomous or interdependent, what kinds 190 A. Yaprak et al. f gains autonomy and interdependence might bring to subsidiaries and how desired these might be, and how norms and values might shape value chain configurations and levels of adaptations needed in different markets. Third, what role does time play in the shaping of this relationship? Longitudinal studies might show, for example, that the strategy making-strategic performance link changes in short time frames for some products, medium time frames for others, and long time frames for still others.Finally, are there other dimensions of strategy and/or performance that should be considered and how might these interact with the three discussed in this paper? For example, the firm’s position along its internationalization path or the level of its participation in its global markets might be dimensions that need to be considered more formally to better un derstand the strategy-performance relationship. The interactions among these and the dimensions already considered in the literature are also worthy of further study.Our purpose is to depict a more comprehensive picture of the strategy formulationstrategic performance relationship in international business and to suggest that the interplay among strategy, structure, and processes of the firm mediates that relationship. 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