Do Multinationals Transplant their Business Model?

What determines whether or not multinational firms transplant their
mode of organisation to other countries? We embed the theory of
knowledge hierarchies in an industry equilibrium model of
monopolistic competition to examine how the economic environment
may affect the decision of a multinational firm about transplanting
its business organisation to other countries. We test the theory
with original and matched parent and affiliate data on the internal
organisation of 660 Austrian and German multinational firms and
2200 of their affiliate firms in Eastern Europe. We find that three
factors stand out in promoting the multinational firm’s decision to
transplant the business model to the affiliate firm in the host
country: a competitive host market, the corporate culture of the
multinational firm, and when an innovative technology is
transferred to the host country. These factors increase the
respective probabilities of organisational transfer by 18.5
percentage points, 37, and 31 percentage points.