Practice Transfer in Organizations: The Role of Governance Mode for Internal and External Fit

This study leverages multinational corporations (MNCs) as a research context to advance our understanding of the relationship between internal and external fit over the course of the transfer of organizational practices. While internal fit describes the important condition that a practice should be aligned with organizational goals and must gain support internally, external fit refers to an additional condition for successful transfer, namely, that a particular practice must gain and sustain support and legitimacy in the environment. Studying two German MNCs transferring apprenticeship‐based training to foreign operations in the United States, this paper starts from the key observation that organizations can use different governance modes to organize the transfer process: they may either go it alone and organize transfer in a hierarchy mode, or they may partner up with other organizations and form an interorganizational network for transfer. Using rich qualitative data, this paper finds that different governance modes affect the ability to attain internal and external fit by revealing a critical trade‐off: while hierarchy helps create internal fit, it comes with significant additional costs to attain external fit; conversely, using the network mode facilitates the creation of external fit, but involves making compromises that reduce internal fit. Based on these findings, I theorize that different governance modes (hierarchy versus network) work through distinct processes (autonomous versus collaborative), driven by unique mechanisms (inward versus outward orientation), to influence outcomes in terms of internal and external fit. The study contributes to the literature by shifting attention to the implications of different governance modes for transfer processes.