The conceptualization of the multinational corporation (MNC) as a differentiated network suggests that the subsidiaries’ level of embeddedness in their local environment is crucial, as it is the basis for subsidiary-specific advantages and entrepreneur ship (Andersson et al., 2002; Frost, 2001). In addition to possessing important resources, the subsidiaries of a differentiated MNC are conceptualized as being relatively autonomous and powerful, striving at least in part for their own goals (Birkinshaw, 1997; Hedlund, 1986; Nohria and Ghoshal, 1997; Rugman and Verbeke, 2001). The headquarters’ (HQ’s) role is to design differentiated coordination and control mechanisms to ensure that the MNC acts as a differentiated but integrated network of units (Nohria and Ghoshal, 1997). However, this HQ role is very difficult to fulfil if not contradictory. Especially critical is the underlying assumption that HQs have knowledge about a large variety of subsidiary contexts, and that they are able to and possess the power to orchestrate and manage the differentiated network (Björkman and Forsgren, 2000; Holm et al., 1995).
