Viewing global strategy through a microfoundations lens

• Author: Nicolai J. Foss,Somnath Lahiri,Sumit Kundu,Farok Contractor
• DOI: http://doi.org/10.1002/gsj.1329
• Date: 01 February 2019
• Published date: 01 February 2019

SPECIAL ISSUE ARTICLE

Viewing global strategy through

a microfoundations lens

Farok Contractor

1

| Nicolai J. Foss

2

| Sumit Kundu

3

| Somnath Lahiri

4

1

Management & Global Business Department,

Rutgers Business School, Newark, New Jersey

2

iCRIOS-Department of Management and

Technology, Bocconi University, Milan, Italy

3

Department of International Business, College of

Business, Florida International University, Miami,

Florida

4

Management and Quantitative Methods

Department, State Farm Hall of Business, Illinois

State University, Normal, Illinois

Correspondence

Somnath Lahiri, Management and Quantitative

Methods Department, Illinois State University,

232, State Farm Hall of Business, Campus Box

5580, Normal, IL 61790-5580.

Email: slahiri@ilstu.edu

Research Summary:The emerging microfoundations

literature asserts that macro concepts and macro-out-

comes, such as firm-level capabilities, performance and

strategies, need to be understood in terms of the underly-

ing actions, interactions and characteristics of micro-level

entities, such as individual actors and managers. This liter-

ature has specific implications for the understanding of

cross-level explanatory mechanisms; notably, it asserts

that all relations between macro variables are mechanisms

that involve micro variables. While the microfoundations

literature has been influential in the general strategy litera-

ture, global strategy has been less impacted by it. This is

paradoxical because the research challenges pointed to by

the literature are often magnified in the multinational cor-

poration and in a global strategy context, and this context

may introduce novel challenges. For example, Google's

strategic decision in 2018 to reenter the Chinese market

(macro-level analysis) is best understood through the

thinking of decision-makers in the company, as well as

opposition to the move from over 1,000 of its employees.

We characterize microfoundations, discuss their relevance

to the global strategy, and show how the papers in this

special issue fill important microfoundational gaps in the

global strategy literature.

Managerial Summary:For too long, studies of corporate

strategies have focused on the firm as a unit of analysis,

as if the firm could decide or think on its own, neglecting

the fact that it is managers who think. The underlying

motivations, interactions and characteristics of individual

managers of companies have often been missing in expla-

nations of global strategy formulation. This can especially

be a lacuna in closely-held companies in emerging coun-

tries where decision-making is more concentrated in the

minds of owners, top managers and family members.

Received: 5 October 2018 Accepted: 6 October 2018

DOI: 10.1002/gsj.1329

Global Strategy Journal. 2019;9:3–18. wileyonlinelibrary.com/journal/gsj © 2018 Strategic Management Society 3

The microfoundations literature specifically tries to con-

nect the thinking and backgrounds of individual managers

with strategic decisions their firm makes. While the micro-

foundations literature has made some headway in the gen-

eral strategy literature, the analysis of global strategy has

been less impacted by it. This is paradoxical because the

research challenges pointed to by the literature are often

magnified in the multinational corporation and in a global

strategy context. This introductory paper first refines and

enunciates microfoundations theory, in its application to

global business. It then also shows how the papers in this

special issue fill important microfoundational gaps in the

global strategy literature.

KEYWORDS

global strategy, individual actors, managers,

microfoundations, multilevel theory

1|INTRODUCTION

The global strategies of multinational corporations (MNCs) are shaped by various contextual forces,

such as country-level institutions and policies, as well as industry or sector-specific characteristics of

the task-environments that surround MNCs. However, global strategies also emerge from the actions

and interactions of employees and managers. Thus a complete understanding ofglobal strategy is inher-

ently multilevel in nature, involving intricate relations between what goes on at different levels, that is,

here the macro (country or global environment), meso (firm), and micro (manager and decision-maker)

levels. For example, to understand how a procedural justice system works inside a MNC may require

probing managerial decisions, the MNC's strategies and goals, as well as country laws and culture

(Asmussen, Foss, & Nell, 2018). Given such complexity, is any level more privileged than the others?

And, are there definite relations between levels that put inherent constraints on theorizing?

Over the last decade or so, the “microfoundations”literature (beginning with Felin & Foss, 2005;

Gavetti, 2005; Felin & Hesterly, 2007; Teece, 2007) has asserted that (a) the micro level (best repre-

sented by the level of individuals and their interactions) has explanatory primacy and (b) more com-

plete explanations for global strategy require referencing the behaviors and characteristics of

individual managers and actors. MNC-level capabilities, performance, and strategies ultimately

derive from the individuals comprising the MNC (Felin, Foss, & Ployhart, 2015). Of course, such

individuals interact within a certain set of rules of the game as defined by the MNC management and

they are influenced by culture and identity, and other collective beliefs.

Managers, in particular, are key actors simply because they are in a position to make bigger and

more important decisions than lower-level employees. Obviously, managers have long been central

in international business research, such as in work on the internationalization process

(e.g., Johanson & Vahlne, 1977; Welch & Paavilainen-Mäntymäki, 2014) which has consistently

emphasized how managerial knowledge and cognition change over time, or the literature on top-

management teams and internationalization (e.g., Nielsen & Nielsen, 2013). And yet, one may argue

that more scholarly attention needs to focus on how the background, proclivities, and behaviors of

key managers in MNCs lead to decisions that, in turn, shape their companies' strategies, behaviors,

4CONTRACTOR ET AL.