The optimal performance of the global firm: Formalizing and extending the integration-responsiveness framework

This paper provides an expanded approach to thinking about the organizational forms and linkages that exist in international business operations. Building on the popular integration-responsiveness framework of international strategic orientation, we develop a more expansive approach that is better able to account for the diversity of organizational forms and strategic choices open to managers. By adding a third set of environmental pressures, incorporating the beliefs of managers, and by employing the idea of efficient frontiers, we reformulate the integration-responsiveness framework, making it more consistent with modern economic models of the firm. Our integration-responsiveness-completeness (IRC) model argues that global firms can respond to these fundamental and competing pressures by configuring themselves in a variety of ways – rather than normatively prescribing that the transnational form is optimal. In addition, our model has methodological ramifications. Its formal structure suggests that empirical techniques that focus on the best rather than average performance are necessary to adequately investigate the performance differences among alternative or organizational forms. This may explain the paradoxical lack of empirical support for a link between organizational form and performance.