Horses for Courses: Organizational Forms for Multinational Corporations

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One of the most enduring ideas of organization theory is that an organization's structure and management process must "fit" its environment, in the same way that a particular horse might be more suited to one course than another. Ghoshal and Nohria show the continued relevance of this classic insight for the organization of multinational corporations. They offer a simple scheme to classify the environment and structure of MNCs. Then, based on data on forty-one large MNCs, they show how some combinations of environment and structure fir better than others. What drives fit is the principle of requisite complexity — the complexity of a firm's structure must match the complexity of its environment. Though developed forMNCs, their argument can also apply to multidivisional firms that operate in different markets or business segments.

Sumantra Ghoshal is associate professor of business policy, INSEAD. Nitin Nohria is assistant professor at the Harvard Business School.

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