GLOBAL VALUE CHAINS, THE
EFFECTS AND RESPONSES OF
MULTINATIONAL ENTERPRISES IN A
CRISIS ENVIRONMENT
A CASE STUDY ON THE EFFECTS OF THE COVID-19 CRISIS
ARTEAGA GABRIEL
MUKIDI KATUSABE CHRISTINE
SHEHAB QUSAY FAKHRI
School of Business, Society & Engineering
Course: Bachelor Thesis Course code: FOA 230
15 cr
Supervisor: Edward Gillmore Seminar date: 2 June 2020
ACKNOWLEDGEMENTS
First and foremost, we would like to extend our thanks to our tutor Edward Gillmore. His insights have been truly valuable, and he has guided us through our journey whilst writing this thesis. The constructive dialogues have enabled us to see our challenges through a different perspective which has been extremely helpful in the process of writing this thesis. Further, we truly appreciate his responsiveness and fast feedback.
Secondly, we would like to thank our interviewees for dedicating their time to speak with us, especially during these circumstances. Their enterprise insights have been much appreciated and their enthusiastic cooperation has helped us in proceeding with our research.
Gabriel Arteaga, Christine Katusabe Mukidi & Fakhri Qusay Shehab Västerås, June 2020
ABSTRACT
Date: Seminar Date: 2 June 2020, Submission Date: 7 June 2020
Level: Bachelor thesis in Business Administration, 15 cr
Institution: School of Business, Society and Engineering, Mälardalen University Authors: Gabriel Arteaga Fakhri Qusay Shehab Christine Katusabe Mukidi
(96/03/31) (99/01/05) (97/05/15)
Title: Global Value Chains, the effects and responses of Multinational Enterprises in a crisis
environment: A case study on the effects of the COVID-19 crisis
Tutor: Edward Gillmore
Keywords: Global Value Chain, Contingency, Resource-based Management, Global Crisis,
Multinational Enterprises
Research questions:
RQ 1:
How does a global crisis affect the parts of multinational enterprises’ global value chain?RQ 2:
How do multinational enterprises respond to a global crisis with their functions and actions?Purpose: This study seeks to gain in-depth understanding of how a global crisis can affect an MNE’s production and what response an MNE can use to mitigate the consequences of a global crisis.
Method: The method consisted of an abductive approach with the combination of secondary data and semi-structured qualitative interviews with varied top- and middle-level managers within the chosen MNE, to help answer the research questions of the thesis.
Conclusion: The global crisis disrupted parts of the MNE’s GVCs and affected demand, business relationships and caused production facilities to shut down. Since the GVCs are being impacted, the COVID-19 crisis has also impacted the way in which an MNE operates. Both MNEs showed the importance of flexibility and adapted their strategies and operations as the crisis progressed.
TABLE OF CONTENT
Definitions ... 6
1. Introduction ...7
1.1 Background ...7
1.2 Problem formulation ... 9
1.3 Purpose and Aim ... 9
1.4 Research Questions... 10
1.5 Definitions ... 10
2. Literature review ... 11
2.1 Global Value Chain Orchestration ... 11
2.1.1 Governance ... 13
2.2 Contingency theory ... 14
2.3 Resource-based management ...18
3. Theoretical framework ... 20
4. Method ... 22
4.1 Design of the study ... 22
4.2 Epistemological approach ... 23
4.2.1 The choice of approach ... 24
4.3 Data collection ... 25
4.3.1 Secondary Data ... 25
4.3.2 Primary Data ... 26
4.3.2.1 The Interviewees ... 27
4.3.2.2 The Interview questions ... 28
4.4 Reliability of Data ... 29
4.5 Operationalization ... 30
5. Findings ... 32
5.1 The Multinational Enterprises ... 32
5.1.1 Alpha ... 32
5.1.2 Omega ... 33
5.3 A vignette of the COVID-19 effects for Omega and their responses ... 36
6. Comparative analysis ... 38
6.1 Global Value Chain Orchestration ... 38
6.2 Contingency ... 40
6.3 Resource-Based Management ... 42
7. Conclusions ... 44
7.1 Limitations ... 45
7.2 Suggestions for future research ... 46
Bibliography ... 48
Appendix 1 Interview Questions ... 53
Appendix 2 Transcripts ... 54
Figure 1 A Relational Model of a global crisis’ effects on an MNE (Authors’ model)... 20
Table 1 Key determinants of GVC governance (Gereffi et. al., 2005). ... 13
Table 2: Interview processes ... 27
DEFINITIONS
In this section words which are being used throughout the thesis are defined.
Just in Time (JIT) – Is a planning philosophy which strives to produce and deliver goods at the specific time when it is needed.
COVID-19 – A virus, which was classified as a pandemic by the WHO, it is the global crisis which the case study in this thesis investigates the effects of.
Value Chain (VC) – Is the full range of activities that enterprises and workers do to bring a product from its conception to its end use and beyond.
Global Value Chain (GVC) – Is a VC in a global context.
Human Resources (HR) – The personnel of an enterprise, regarded as an asset in terms of skills and abilities.
Resource-Based View (RBV) - Is a theory that explores how enterprises exploit their resources to generate competitive advantage.
Resource-Based Management (RBM) - Is a theory that explores what leads to differential enterprise performance from resource management perspective.
Crisis Management Team (CMT) – A CMT handles events and enforces appropriate actions based on the current and potential risks and impacts of the event.
Multinational Enterprise (MNE) – An MNE is an enterprise which owns or controls production of goods or services in at least on country other than its home country.
Public Health Agency of Sweden’s (PHAS)- Is a Swedish government agency with the national responsibility for public health issues.
1. INTRODUCTION
The section will define the thesis background, as well as the identified problem, aim of the thesis and purpose. Leading to the introduction of the thesis research questions.
1.1
Background
In today's world, businesses seek to internationalize their value chain (VC) due to the increase of globalization (Oyson, 2011). It has been argued that a business can be considered a collection of ‘activities that are performed to design, produce, market, deliver, and support its product.’ (Porter 1985, p. 36 as cited in Oyson, 2011). Further, Oyson (2011) explained that a combination of all these activities are needed for the product to exist, thus causing different VC arrangements to have different value propositions for the business. However, Oyson (2011) also states that it is rare that a business operates a whole VC by itself. Therefore, it is more common that a business outsources their VC to other companies and even beyond country borders, creating a global value chain (GVC) in the process (Oyson, 2011).
A recent study by Miroudot, Cadestin, Desnoyers-James & Rigo (2018) has stated that an increasing part of the production within GVCs has by a majority been driven by multinational enterprises (MNEs) during the past decades. With the increased state of globalization in the world, the probability of worldwide crises increases as well (Fainshmidt, Nair & Mallon, 2017). When it comes to MNEs, there are different types of crises that can occur. According to Lerbinger (2012), there are eight types of crises. The physical crises are natural-, biological- and technological crises. The crises that occur because of failed management procedures are mismanagement-, skewed values-, deception-, and misconduct crisis (Lerbinger, 2012). Looking at the phenomenon of global crises, there has been a couple throughout history.
One of those being the global financial crisis of 2008. The financial crisis is the worst global economic crisis since the Great Depression (Amadeo, 2020). Bianco (2008) described how the financial crisis started in the US back in 2006 when housing prices were relatively low, when a drastic increase in houses foreclosing occurred, due to the subprime mortgage crisis. Further, Bianco (2008) explains how this caused the economic state over the next year to nationally deteriorate continuously until it became a global crisis in the year of 2008. Some effects were that consumer spending dropped, the housing market was down, the number of foreclosures kept increasing and the stock market was in shock (Bianco, 2008).
A second global crisis is the 2009 swine flu pandemic. In April 2009, a new sort of human H1N1 influenza virus, known as the swine flu, was initially found in Mexico (Trifonov, Khiabanian & Rabadan, 2009). By June of 2009, the World Health Organization (WHO)
declared it to be a pandemic and it was spreading immense illness globally (Branswell, 2019). The swine flu was the first pandemic in four decades, however after, it was discovered to have a lower death rate than a typical seasonal flu by WHO (Branswell, 2019).
In 2020 the global spread of COVID-19 began, otherwise known as the coronavirus and the first case was reported in Wuhan, China (“Report on the Epidemiological”, 2020). Since then, as of 19th of April 2020, more than 2 million cases had been diagnosed globally, with over 159,000 fatalities (“COVID-19: epidemiology”, n.d.). Lancet (2020) reported that due to the crisis, public health measures were announced by WHO e.g. social distancing, travel restriction, emphasizing the importance of hand hygiene and delaying non-essential operations and services, counting on that it will delay the spread of COVID-19 (Lancet, 2020). By the 29th of March 2019, The Public Health Agency of Sweden’s (PHAS) announced that the
Swedish Government had enforced ban on public events with over 50 people (“Public gatherings”,2020). There are even several cities globally that have engaged in complete lockdown measures to prevent the COVID-19 virus from spreading rapidly (Lancet, 2020). The global economic state has faced severe repercussion from the COVID-19 crisis and is predicted to soon be as terrible as the global financial crisis of 2008 (Amadeo, 2020).
According to Coombs (2007) a crisis is a threat to business operations which can have severe consequences if not dealt with accurately. When it comes to dealing with a crisis, Coombs (2007) describes how the usage of crisis management is a way to handle and prepare for a business crisis. It is highlighted that there are three phases that the crisis management can be divided into and those are pre-crisis, crisis response, and post-crisis. Further, Coombs (2007) explains the different preparations done in the pre-crisis, the actions taken during the crisis and the recovery process post-crisis. Coombs (2007) underlines how crises are negative and threatful towards the enterprise, however proper crisis management mitigates the crises and gives the enterprise a chance to come out of it stronger. It is also mentioned how preparation for a crisis is vital for an enterprise, since no enterprise is immune to a crisis occurring.
With large MNE’s outsourcing their production and supply, the thesis area of interest became how the COVID-19 crisis impacts the MNEs GVC’S and how the MNEs respond. There is a previous study analyzing 854 MNEs performance as well as their pre-crisis preparation in connection with the 2008 financial crisis (Fainshmidt et al., 2017). In this study the results were variated between the MNEs and the MNEs managers, but mainly showed their capabilities environmentally-, response- and development wise. Their study, however, did not include any analysis of the effects of the MNEs GVCs.
Dale (2014) conducted a study as well, which with the use of a case study examined the global automotive industry and the multi-layered effects in its operation following the 2008
financial crisis. The study found varying data and the data stated the various effects due to the shock of the crisis, i.e. the effects in sales, operations, revenues. The study also states how the economic crisis has not put a hamper to the ongoing economic globalization. While both the Fainshmidt et al. (2017) and Dale (2014) studies have discussed and analyzed both MNEs and a crisis, a study which predominantly examines the effect from a crisis in a MNEs GVC is missing.
Accordingly, the previous studies created an opportunity to perform a study on a smaller scale by analyzing specific MNEs with GVCs, in correlation to the COVID-19 crisis. Therefore, firstly focusing on examining the affect COVID-19 has on a MNEs GVC, which created the first research question of “How does a global crisis affect the parts of multinational enterprises’
global value chain?” Secondly, focusing on the MNE’s crisis management when it comes to
their GVCs. Therefore, creating the second research questions of “How do multinational
enterprises respond to a global crisis with their functions and actions?”.
1.2
Problem formulation
According to Humphrey, Todeva, Armando & Giglio (2019) during the last three decades there has been an increasing growth in global trade and new exporting countries have been incorporated into the global economy. Further, there have been an increase in outsourcing particular parts of the manufacturing, terms as ‘factoryless goods producing firms’ have been introduced (Humphrey et al., 2019). It has been beneficial for large and small companies alike to pursue global strategies and operations to reduce costs and increase productivity simultaneously (Ibrahim, Zailani & Tan, 2015). Enterprises are in an increasing rate shifting their operations to lower cost geographies to reduce the manufacturing costs (Mollenkopf, Stolze, Tate & Ueltschy, 2010). These trends show the increasing importance of globalization and the integration of global value-and-supply chains alike.
However, these global value-and-supply chains are susceptible for crisis conditions that may arise. Unanticipated events in form of terrorist acts and natural disasters will lead to an increased complexity, risks and opportunities for global supply chains (Manuj & Mentzer, 2008). These types of crises can lead to huge losses by disrupting operations which can result in a loss of market share and purchase intentions (Coombs, 2007). A crisis in form of a natural disaster can have a huge negative impact for various parts of the VC. Further, no enterprise is immune for a global crisis and therefore, all must do their best to prepare for one.
1.3
Purpose and Aim
The purpose of this study is to investigate the phenomenon of interconnectedness of production networks in form of GVCs. Furthermore, this study seeks to gain in depth understanding of how a global crisis can affect an MNE’s production and what response an
MNE can use to mitigate the consequences of a global crisis. Thus, the aim is to bring forth new insights regarding this subject which can possibly contribute to future research.
1.4
Research Questions
RQ 1:
How does a global crisis affect the parts of multinational enterprises’ global value chain?RQ 2:
How do multinational enterprises respond to a global crisis with their functions and actions?1.5
Definitions
Just in Time (JIT) – Is a planning philosophy which strives to produce and deliver goods at the specific time when it is needed.
COVID-19 – A virus, which was classified as a pandemic by the WHO, it is the global crisis which the case study in this thesis investigates the effects of.
Value Chain (VC) – Is the full range of activities that enterprises and workers do to bring a product from its conception to its end use and beyond.
Global Value Chain (GVC) – Is a VC in a global context.
Human Resources (HR) – The personnel of an enterprise, regarded as an asset in terms of skills and abilities.
Resource-Based View (RBV) - Is a theory that explores how enterprises exploit their resources to generate competitive advantage.
Resource-Based Management (RBM) - Is a theory that explores what leads to differential enterprise performance from resource management perspective.
Crisis Management Team (CMT) – A CMT handles events and enforces appropriate actions based on the current and potential risks and impacts of the event.
Multinational Enterprise (MNE) – An MNE is an enterprise which owns or controls production of goods or services in at least on country other than its home country.
Public Health Agency of Sweden’s (PHAS)- Is a Swedish government agency with the national responsibility for public health issues.
2. LITERATURE REVIEW
This section will feature the main theories and previous research, based on scientific articles and books which are relevant for the purpose of the study.
2.1
Global Value Chain Orchestration
There is a consensus among academics that over the last three decades an increase in production fragmentation and GVC integration has occurred (Milberg & Winkler, 2010; De Backer & Miroudot, 2014; Humphrey et. al., 2019; Criscuolo & Timmis, 2017; Gereffi, Humphrey & Sturgeon, 2005; Kaplinsky, 2013) De Backer & Miroudot (2014) explains that the main reason for the fragmentation phenomena is due to a significant decrease in trade costs. Trade costs are all the costs that companies face which are associated with the goods or services produced and delivered to the final consumer e.g. land transport, freight, tariffs etc. (De Backer & Miroudot, 2014). These trade costs have decreased primarily due to technological advancements e.g. containers and the internet. De Backer & Miroudot (2014) also mention how other important drivers have been new policies, trade-and-investment liberalization, and regulatory reforms in key transport-and-infrastructure sectors.
According to Humphrey et al. (2019) the share of trade in finished products have declined since the 1990s while trade in parts have increased. Further, a shift of production to developing and emerging economies has meant that an increased amount of outsourcing has occurred for enterprises that specializes in design, marketing and retail. Due to this increase in GVC integration and production fragmentation, Milberg & Winkler (2010) argues that business strategies have become increasingly internationalized were a significant amount of today’s world trade occurs within GVCs.
A VC can be simply defined as the “full range of activities that firms & workers do to bring
a product from its conception to its end use & beyond” (De Backer & Miroudot, 2014, p. 1).
Kaplinsky (2013) elaborates on the concept of VCs as a function of value-added activities. These activities within the VC can be divided further into primary & support activities.
Primary activities consist of inbound logistics, operations, outbound logistics, marketing-and-sales & service. Inbound logistics are activities which deals with the inputs to a product e.g. receiving, storing & disseminating. Operations are those activities which handle the transformation of inputs to final product. Outbound logistics deals with the collecting, storing & distribution process of the product to the buyer. Marketing-and-sales are activities that handle the means which enables buyers to purchase the product e.g. advertising, sales force etc. Service involves handling those activities that enhance or maintain the value of the product (Porter, 1985).
Support activities involve procurement, technology development, Human Resource Management (HRM) & the firm infrastructure. Procurement is the function of acquiring inputs for the firm’s VC. Technology development involves the activities which improves the product & the process e.g. through Research & Development (R&D). HRM consists of all activities which involves the managing of personnel e.g. recruitment, compensation, training etc. Firm infrastructure involves various activities that supports the firm e.g. general management, accounting, quality management etc. (Porter, 1985).
Criscuolo & Timmis (2017) explains that the increased embeddedness within a GVC is significantly affecting economies’ resilience to macroeconomic shocks. Due to the complex web of intermediate input linkages a shock to one part of the supply chain can lead to a disruption throughout the entire production network. An example that Criscuolo & Timmis (2017) brings forth is the 2016 Kumamoto earthquake in Japan, which led to a temporary shutdown of US auto plants. The increased interconnectedness has increased enterprises’ exposure to a myriad of risks e.g. geopolitical risks (political violence), infrastructure risks (2010 Icelandic volcano eruption which disrupted air travel) and financial risks (2008 financial crisis).
Criscuolo & Timmis (2017) explains that complex production networks that are a result of an increasing amount of corporate offshoring, were firms have decided to focus on their core competence and outsource other aspects of the process e.g. their production to others. It has benefited firms through increased productivity and cost-efficiency. The offshoring of activities is either done through foreign subsidiaries or through arm’s length.
Further, Criscuolo & Timmis (2017) explains that the increased specialization in tasks have been an important source for GVC productivity gains. The productivity gains have been yielded through the ability to import cheap, additional and/or higher quality varieties of offshored inputs than would have been possible through previous in-house inputs. It has also allowed restructuring internal processes which have yielded efficiency gains. Additionally, the liberalization of service markets and the entry of new foreign service providers can lead to substantial productivity gains in downstream manufacturing firms. Criscuolo & Timmis (2017) argues that only enterprises with sufficient scale can incur the substantial sunk costs to develop necessary capabilities for GVC integration.
2.1.1 Governance
In Gereffi’s et al. (2005) work they present a framework which helps to identify different types of governances which occurs within GVCs. According to Gereffi et al. (2005) there are three types of supply relationships. The ‘commodity supplier’ which provides standard products through arm’s length market relationships. The ‘captive supplier’ which produces non-standard products with the use of machinery for the buyer’s needs. The ‘turn-key supplier’ which produces customized products and uses flexible machinery to pool capacity for different customers.
Gereffi et al. (2005) argues that there are primarily three factors which helps to determine which type of governance that is probable within GVCs. The complexity of transaction, i.e. the complexity for transferring information and knowledge to sustain a transaction, is one important factor in determining the GVC governance. This complexity is determined by which demands a lead enterprise has on its VC e.g. a lead enterprise which demands to have a Just-In-Time (JIT) supply and increased product differentiation will increase the complexity of transactions. According to Sugimori, Kusunoki, Cho & Uchikawa (1977) JIT is a production method were the lead time is greatly shortened by having all processes produce the necessary parts at the necessary time and have only have the minimum stock necessary to produce. The JIT production method aim is to attain low cost production through elimination of waste (Sugimoro et al., 1977).
Gereffi et al. (2005) argues that the ability to codify transactions, i.e. the extent to which a supplier can comprehend the information and knowledge transmitted from the lead enterprise, is another important determinant for governance. The extent to which a supplier
can codify transactions can be facilitated with the adoption of technical standards. The third factor which Gereffi et al. (2005) argues is important in determining governance type is the capabilities in the supply-base, i.e. the capabilities of actual and potential suppliers to be able to fulfill the requirements of a transaction.
The three key determinants that Gereffi et al. (2005) brings forth can be ranked with two values, high or low which yields five combinations that can be found across different VCs. Table 1 gives clarity to the different types of governance which Gereffi et al. (2005) have established with the help of their framework.
The first is a market governance type where it is a rather low complexity for transactions which is easily codifiable and with a supplier-base that has high capabilities. It is a typical supply-and-demand relationship which can persist over time, but where the costs of switching to new partners are low for both parties. The second governance type is modular value chains, as seen in Table 1, is characterized with high complexity, codifiability and capabilities of supply-base. According to Gereffi et al. (2005) modular value chains typically makes products for a customer’s specific requirements. When they provide turn-key services they take full responsibility for competencies surrounding the entire production process e.g. machinery, components, materials etc.
The third governance type is relational value chains, as seen in Table 1, it is characterized with high complexity and capabilities of supply-base but with low codifiability. Gereffi et al. (2005) explains that they are networks with complex interactions between buyers and sellers with tendency to create mutual dependence and high level of asset specificity. The fourth governance type is captive value chains, as seen in Table 1, it is characterized with high complexity and codifiability but with low capabilities of supply-base. According to Gereffi et al. (2005) they are networks with small suppliers that are transactionally dependent on large buyers, the suppliers face a significant degree of switching costs and are therefore described as captive. The fifth governance type is hierarchical value chains, as seen in Table 1, they are characterized with high complexity and low codifiability and capabilities of supply-base.
2.2
Contingency theory
In an MNE, strategic planning for changes that can occur in the external environment is essential to be able to adapt. Depending on the probability and severity of an event that occurs, an MNE might already have a response strategy. There are several types of strategic tools which can be used, one of which is scenario planning. According to Schoemaker (1995) scenario planning is used by managers to capture a whole range of possibilities in rich detail. Schoemaker (1995) explains that scenario planning is a tool which is used to compensate for an underprediction and overprediction of the future. Scenarios are constructed by identifying
trends, key uncertainties and major stakeholders which can be affected (Schoemaker, 1995). However, according to Schoemaker (1995) scenario planning includes running simulations, however does not prepare for sudden shocks that might occur to the external environment e.g. through natural disasters, economic downturns etc. When these types of events occur, it is essential that MNEs have contingencies built to be able to adapt to these sudden changes (Forsgren, 2017).
The contingency theory is based around three underlying assumptions and as cited are, “1.
There is no one best way to organize a firm. 2. Not all ways of organizing a firm are equally effective. 3. The best way to organize a firm depends on the nature of the environment to which the organization must relate” (Scott 1981, as cited in Forsgren 2017, p.79). The
contingency theory therefore emphasizes the adaptation ability of the enterprises’ organizational structure, in accordance with the current situation (Forsgren, 2017). Forsgren (2017) also describes how the contingency theory was introduced to deal with the environment being an influential factor of how a business would run. Thus, the theory is based on the analysis that if an MNE wants to exist longer and be efficient, then the MNE needs to have the ability to adjust their business, formal structure and formal control systems with the changes in the environment (Forsgren, 2017).
Kováts (2018) describes the main elements of contingency theory and how they relate to each other in terms of organizational efficiency. Kováts (2018) explains that when the contingency theory is applied to an MNE, the changes made to the formal organizational structure needs to be identified for the investigation of why these changes are efficient. Kováts (2018) defines how the formal organizational structures are divided into three sections.
Firstly, is the division of labor as in defined units and how their tasks and responsibilities are delegated. Secondly, comes the distribution of authority, meaning that within the organizational structure it is decided who determines what. Thirdly, is the use of the coordination mechanisms as in regulations, plans, committees, or other means to harmonize activities. Kováts (2018) underlines how the formal organizational structure does not determine the behavior of organizational members, but it creates a general structure of motivation. Kováts (2018) demonstrated the contingent relationship between environmental variables, organizational design, and efficiency but also behavioral change.
Regarding the organizational situation, Kováts (2018) highlights how researchers have identified different contextual factors which affect organizational structures and how enterprises can only impact those factors in the long term. However, according to Kováts (2018) there is a way to distinguish internal and external factors since internal factors are enterprise-specific characteristics and external factors are related to the external environment.
Forsgren (2017) explains that the environment is primarily defined as business relationships with customers, suppliers, and other corresponding factors. Further, Fredericks (2005) elaborates that the environment consists of “individuals, groups, and organizations, as well as external environmental forces” (Fredericks, 2005, p. 556). Kováts (2018) describes how these changes in major environmental forces can lead to developments within the global macro environment, such as social changes. A global crisis impacts socially, thus leading to social changes (Utting, 2012). There is a consensus among academics that environmental forces can involve social changes, which can lead to the development of a global crisis (Forsgren, 2017; Kováts, 2018; Fredericks, 2005; Utting, 2012).
Forsgren (2017) describes that when the contingency theory is applied to an MNE, the theory mainly deals with different types of interplay between the MNE as an enterprise and its external environment. For instance, the contingency theory can be applied in different manners to MNEs, one of which is ‘the information processing view´ (Forsgren, 2017). Forsgren (2017) explains that ‘the information processing view’ application of contingency theory assumes that information is necessary for competent decision-making. Thus, the collection, distribution, and evaluation of the information relevant to the business and environment is essential for the MNE.
Further, Forsgren (2017) highlights that no business can survive in the long term if its organizational design and control systems are insufficient for the current situation. This application is called ‘structural contingency theory’ and concludes that there is a one-to-one relationship between the situation and organizational design (Forsgren, 2017). It is also emphasized that only businesses who adapt to a suitable design, as dictated by the environment, will sustain.
Fredericks (2005) states that organizational flexibility is an important factor for the business to be able to successfully adapt to changes. Further, Fredericks (2005) explains that operational flexibility is the enterprise's ability to handle short-term changes in demand, labor and raw material shortages, or equipment failure. Therefore, regarding the actions the MNE perform, “Strategies call for emphasis on quick adjustments to environmental demands by selecting among an array of day-to-day operational processes and plans” (Fredericks, 2005, p. 558).
According to Fredericks (2005) there is no one correct way of handling the need for a business decision due to an environmental change, therefore it is up to the enterprise to decide which strategies should apply when the time comes. Further, Fredericks (2005) explains that since the preexisting strategies and structure of the enterprise are dominant, it will be quickly responsive to familiar changes. However, coordination and spreading of the new strategies will
be reactive (Fredericks, 2005). Hence, it is emphasized that the planning for the new strategies and spreading of the strategies should be strict.
Luthans & Stewart (1977) explores the system variables of the contingency model of the enterprise. They discuss the primary, secondary and tertiary variables. The primary system variables are the variables which build the foundation of the MNE and include environmental, resource and management variables. Environmental factors have previously been discussed of how it affects an enterprise. Resource variables are tangible and intangible factors which management have more direct control over when it comes to producing desired changes in the organizational system (Luthans & Stewart, 1977).
It is pointed out that there is a possibility that variables may shift between being an environmental or resource variable, as management gains or loses direct control over such factors (Luthans & Stewart 1977). Further, it is stated that the management variables refer to a manager, which is an individual within the organization system who has formal authority. With that authority, the manager makes decisions which regards the allocation or utilization of available resources in the goal of accomplishing organizational system objectives.
Luthans & Stewart (1977) goes onto the secondary system variables which are situation, organization and performance criteria. They describe the situation variable to be a set of variables which are defined by the interaction between environmental and resource variables and how this set of variables result in managers having to collaborate and operate. Further, it is elaborated that the organizational variable is the intersection of the managerial and resource variable. It is explained that the organizational variable is the common construct of organizational structure since what makes up the enterprise is essentially managers who control the resources. Luthans & Stewart (1977) explains that the performance criteria variable is the intersection of the environmental and management variables. Hence, it is relevant for the MNE’s distinct organizational system (Luthans & Stewart, 1977). They underline how the manager has organizational goals which are conceived when a certain level of performance is applied, and that level is decided by the respective performance criteria variables. However, they mention that the goals and objectives change due to the environment and a changing performance criteria.
Lastly, Luthans and Stewart (1977) defines how the tertiary system variables is created by the interaction of the secondary system variables through representing the real performance output of the enterprise. As previously mentioned, the goals or objectives of the enterprise are defined by specific variables which determine the organizational performance. Luthans & Stewart (1977) highlights how “this set of performance variables is perhaps the single most
structs that do not emphasize this important link between theory and practice”( Luthans &
Stewart 1977, p. 187).
2.3
Resource-based management
By looking at the contingency theory and its relationship to GVC aspect of resources, a connection with the Resource-Based View (RBV) can be found. The RBV implies that the potential for competitive advantage occurs when an enterprise controls resources that are rare and valuable (Sirmon, Gove & Hitt, 2008). Barney (2001) states that RBV focus largely on how enterprises exploit their valuable and rare resources in order to generate competitive advantage. Further, he explains that RBV can be applied in several different ways depending on the empirical context in which its applicated.
To explore the reasons in differential firm performance, Sirmon, Hitt & Ireland (2007) introduced Resource-Based Management (RBM) which is one of the ways RBV can be applied with the objective of exploring the reasons to differential firm performance. RBM explores what leads to a differential firm performance from a different approach than the static equilibrium approach, the industrial organization analysis or the asset orchestration approach. Hansen, Perry & Reese (2004) concludes that the way an enterprise uses its resources is at least as vital as which resources it possesses. According to Joseph (1992) “While industrial organization analysis attempts to characterize the behavior of a ‘representative firm’, the resource-based approach focuses on the key success factors of the individual firms behavior to achieve firm-specific advantages by a portfolio of differential core skills and routines, coherence across skills, and unique proprietary know-how"(p.369). RBM focuses on the internal firm and competitive advantage that is to be derived by exploiting the internal firm’s competences instead of focusing on the external factors. The target is to create value for costumers and potentially a competitive advantage for the enterprise, allowing the enterprise to outperform its competitors.
Sirmon et al. (2007) define RBM as the complete process of bundling, structuring and leveraging the enterprise’s resources. Structuring involves acquiring, accumulating, exploiting and divesting resources to form the enterprise’s resource portfolio. Bundling refers to the combining and enriching of resources to form capabilities and create value. Leveraging involves mobilizing, coordinating and deploying, which covers a sequence of processes used to exploit the enterprise capabilities and take advantage of specific target market opportunities. Together the bundling and leveraging processes share the purpose of enhancing an enterprise’s opportunities for success in target markets and engaging specific competitors. Thus, bundling integrates a subset of organizational resources for that engagement while leveraging sets in motion the act of engagement (Sirmon et al., 2008). Therefore, enterprises usually have the
same aim with these processes, however, the outcome differs. Sirmon et al. (2008) notes that the managers influence which resources they choose to bundle and how the managers leverage those resources to create the outcome.
According to Sirmon, Hitt, Ireland & Gilbert (2011) managers have a heavy influence on businesses. Managers must use the resources to build effective relationships with important stakeholders e.g. foreign customers, foreign governments, suppliers etc. The purpose is to create a foundation to ensure the enterprise’s success in foreign markets. Managers actions are an important factor, especially since their actions have major influence on resource-based competitive advantage (Sirmon et al., 2008). Further, Sirmon et al. (2008) explains that when rival’s tangible resources are more similar, the importance of Human Resources (HR) increases e.g. if two companies have HR with similar knowledge and skills. Thus, RBM has the critical impact in determining the outcome. This is due to the way managers chooses to bundle employees with each other and how they use leveraging to exploit their employee’s capabilities. However, the flexibility of these resources influences the managers capacity to bundle and leverage these resources effectively. If the resources available are not flexible, then it is important to keep in mind that managers are unlikely to have positive effect on the outcomes. That is because it makes it harder for the managers to structure, bundle and leverage these resources.
Resources with high flexibility increase the managers ability to respond effectively to market changes (Sirmon et al., 2008). For example, if a manager wishes to bundle two staff members, with industry-specific skills, that do not reside in the same geographical area, in order to yield a greater outcome, the manager could be hindered due to the lack of flexibility. Hence, Sirmon et al. (2011) drew the conclusion that not all resources are equally ‘manageable’. Additionally, Sirmon et al. (2011) showed that rare and valuable resource-based actions are crucial to the recovery of companies that are facing performance crises. The advantages of HR depend on their understanding of different contingencies. Due to that understanding being different among managers, the capability and efficiency of RBM likely varies across companies.
3. THEORETICAL FRAMEWORK
The theoretical framework section introduces a framework which explains the relationships between the theories that has been presented previously.
The relational model presented in Figure 1 illustrates the relationship between the theories which has been presented in the literature review section. Further, it illustrates that a global crisis affects MNEs through their GVC orchestration, contingency and RBM.
An MNE under predictable external environmental changes can be orchestrated without major changes. However, when a sudden shock in the external environment occurs, a contingency plan is essential for the survival of the enterprise (Forsgren, 2017). According to Zsidisin, Panelli & Upton (2000) enterprises execute contingency plans to reduce uncertainties and to avoid supply risks which can affect the value-added function. Since the value-added function is the main component of GVCs, a relationship between contingency and GVCs can be found.
A vital part of any contingency planning and adaptation is to face challenges from the external environment. As previously mentioned, not all ways of facing an external challenge is equally effective. Thus, the process of evaluating the outcome from a measure taken, to face an external challenge is essential for validating the efficiency of that measure taken. According to Pearson & Clair (1998) both success and failure outcomes is to be expected from an organizational crisis. There are various ways to evaluate outcomes e.g. through monitoring Key Performance Indicators (KPI). Pearson & Clair (1998) argues that measures taken to address external challenges are effective when operations are sustained or resumed, organizational and external stakeholder losses are minimized, and learning occurs to mitigate future external challenges. Further, Pearson & Clair (1998) argues that there are also midground outcomes which are somewhere in between a success and failure outcome. To illustrate this, an example will be used, assume that a global crisis would stop the entire production of an enterprise. A
Figure 1 A Relational Model of a global crisis’ effects on an MNE (Authors’ model) ’ effect on an MNE (Created for this thesis)
successful outcome from a measure taken would be that the production would resume to the same capacity as pre-crisis. A failure outcome from a measure taken would instead lead to no change for the production. Lastly, if the measure taken would lead to some parts of the production to resume that would be characterized as a midground outcome, since it is a better outcome than failure but not as successful as a full resumption.
The contingency plan will most certainly involve changes in how the MNE uses its resources. Thus, RBM becomes a vital part of the response made by the MNE as a part of their contingency plan. Sirmon et al. (2007) explains that the RBM is an integration between RBV and contingency theory, thus, a relationship between RBM and contingency can be found. According to Sirmon et al. (2007) an enterprise must seek new resources to be able to compete in the market which is created through an environmental shock. Further, Sirmon (2007) explains that environmental munificence, the scarcity or abundance of critical resources, is also an important contingency factor in the managing of resources. Thus, in order to respond to these factors which can occur through a crisis, the structuring, bundling and leveraging of resources is critical for the enterprise to gain competitive advantage and survive the crisis.
4. METHOD
The method section goes into the background details of certain decisions and why those decisions were made, as well as the method of collecting data.
4.1 Design of the study
The discussion of MNEs is a broad and varied topic by itself and is deeply examined and discussed from different focus areas by researchers. With the increased globalization, there has been an increase in MNEs outsourcing their production, resulting in increased interconnectedness of GVCs (Oyson, 2011). Therefore, the thesis examined the specific niche of crisis in correlation to the MNE’s GVCs. The crisis in focus was the COVID-19 pandemic. The design of the study took on a naturalistic inquiry, which according to Patton (2002) is the studying of real-world events as they unfold naturally, which applies since the COVID-19 pandemic is a real-world event unfolding. Therefore, the design of the study is based on a lack of predetermined findings. Since the phenomenon of the thesis is affected by an ongoing crisis, there is no way for the thesis design to control or determine anything (Patton, 2002).
Hence, the idea was to analyse the influence of the COVID-19 crisis’s impact on the GVC, the actions an MNE takes and the overall preparations for a crisis. The study had access to two MNEs within different business branches, however there was a request by the MNEs, for them to remain anonymous throughout the thesis. This was due to the sensitivity of the information provided by them. Hence, throughout the thesis the companies will be referred to as Alpha and Omega.
The study used a qualitative research method which referred to the research question and purpose of the study. Qualitative research method includes interviews and the thesis conducted semi-structured open-ended interviews with managers from both companies (Fisher, 2007). Quantitative methods are based on standardized outcomes which causes varying perspectives of people to fit into a limited number of predetermined response alternatives (Patton, 2002). In contrast, Al-Busaidi (2008) explains how compared with a quantitative method, the qualitative method is better in exploring unmeasurable aspects such as experience, motivations, attitudes, knowledge, and beliefs of individuals. Considering the contemporary issue where companies are finding themselves in a large global COVID-19 crisis, it requires the managers to have on the ground understanding of the current situation, which then includes the managers experience and personal knowledge.
Therefore, the ideal method to collect the managers on the ground knowledge is through qualitative work. Qualitative studies look at responses after the occurrence, to later analyse the different perceptions (Patton, 2002). Hence, having interviews with the managers allowed for
a different perspective of how MNEs within different business branches handle the same crisis, as well as how the crisis affects their GVCs.
Using a qualitative research method also allows interviewees to talk about sensitive matters easier, which they may not intend to discuss otherwise (Al-Busaidi, 2008). Since there was a risk that asking about an enterprise’s current situation, crisis strategy, or enterprise actions were a sensitive topic; it was ideal to create the best environment that encourages the interviewees to speak as freely as possible.
4.2 Epistemological approach
Whether one chooses inductive, deductive, or abductive reasoning often depends on the chosen epistemology (Rivas, 2017). In an epistemology perspective, which is the theory of knowledge, then the epistemology of this study was constructivism. Ultanir (2012) explains how constructivism is a meaning-making theory that explains the human nature of knowledge. Ultanir (2012) further discusses how the theory argues that the real knowledge for something is constructed based on the person's previous beliefs, ideas, events, and experience. Hence, an individual's way of building their own understanding is very personal since everyone is understanding of something is different, since their understanding depends on the individual's previous experience and background knowledge (Ultanir, 2012). Since the interviews held in the study were with individuals with different experiences, their knowledge of the thesis topics was also individual. Ultanir (2012) states that constructivism observes reality being formed in daily life or in science. The constructivism theory believes that reality is subjective for the individual (Mogashoa, 2014).
In contrast to the constructivism argument is the positivism theory, which believes reality to be objective and generally one reality applies (Philosophyterms, 2018). Furthermore, since the positivism perspective believes there is only one true reality to be discovered, it is commonly used cooperatively with quantitative research and deductive reasoning (Rivas, 2017). Oppositely, Rivas (2017) argues that if one who does research believes that there are multiple versions of reality that exist to be discovered, then qualitative research and inductive reasoning will be most commonly used, and Patton (2002) argues the same. Moreover, as previously mentioned, the interviews were conducted with several managers who are individuals who have different knowledge. Thus, the managers will have different realities regarding the current COVID-19 crisis and more than one reality will then apply. Hence, the constructivism approach is most appropriate concerning the qualitative interviews of this thesis (Mogashoa, 2014).
4.2.1 The choice of approach
A methodological approach can either be inductive, deductive, or abductive and are also known as reasonings (Krippendorff, 2018). Each approach has a different method of conducting a research study. Rivas (2017) specializes in qualitative research and explains the three different approaches and their differences.
Inductive reasoning is when you are trying to research something rather unknown and therefore use a guiding hypothesis to help (Rivas, 2017). It is explained how the guiding hypothesis is a broad generalization and description of the research area since it is not known which factors to test yet. Furthermore, Rivas (2017) says how after exploring the collected data, the guiding hypothesis might change for the possibility to induce concepts and theories from the collected data. Patton (2002) describes how inductive reasoning looks for patterns in the data, which later be presented as dimensions, categories, themes etc. This reasoning is called inductive because one induces concepts, however, Rivas (2017) emphasizes how important it is that the induced concepts must be accurate.
The philosophy of deductivism covers the theory of creating and testing hypotheses to explain occurrences (Bryman & Bell, 2011). Krippendorff (2018) states a deductive approach is concept driven and means that the researchers use the existing theories or explanatory models within the phenomenon and compare against the collected primary data. Therefore, bringing the study from the more abstract and general theory to a more concrete and specific theory and conclusion (Graneheim, Lindgren, & Lundman, 2017). Patton (2002) explains how deductive reasoning usually begins with an existing theory, a premise, or a rule which a hypothesis will develop from. Following, one deduced inference from the hypothesis and that is why the reasoning is called deductive (Rivas, 2017). Rivas (2017) describes how one conducts experiments, or makes measurements, or makes observations to test those inferences with data and if the data finding correlates with the inferences, the hypothesis is correct. While inductive reasoning is helpful since it explores the relatively unknown, deductive reasoning is limited to only exploring what is already believed to be known (Rivas, 2017).
The chosen approach was abductive reasoning. Abductive reasoning is the combination of the logical analysis from data-based inductive reasoning and theory-derived deductive reasoning with a logical foundation (Patton, 2002). This is further explained by Rivas (2017) who described abductive reasoning as a method used when working with incomplete amounts of data and using that data to make a calculated best guess. Rivas (2017) clearly explains how the guess is a suggestion of an idea, which then is applied to one’s case to see if the idea makes sense. However, if the idea does not work, one will go back and forth between data and ideas
until one has something more and more accurate that one can use qualitative research on (Rivas, 2017).
As previously mentioned, the design of the study took a naturalistic inquiry. Patton (2002) explains how with the hopes of revealing and better understanding the problem factors, an abductive approach is necessary. Further, Patton (2002) explains how no preconceived hypothesis is created, since the reasoning rather asks intent full questions to get the answer. This thesis has therefore opted to not have a hypothesis and use a qualitative study, as recommended by Rivas (2017) and used intent full questions in the interview as underlined by Patton (2002). Patton (2002) also describes that since abductive reasoning does not fully use the deductive hypothetical thinking and development of theories, and it neither uses full-fledged inductive concepts or theories, abductive reasoning really is the combination of deductive and inductive. Patton (2002) explain how abductive reasoning uses both deductive and inductive models of proposition development and theory construction.
Dubois & Gadde (2002) write about an abductive approach which is called a `systematic
combining approach´. It is described how the main characteristic of this approach as a
continuous shift between an empirical world and a model world. They further explain how during this shift, the research issues and the theoretical framework are frequently reoriented when they are confronted with the collected data. The systematic combining approach is the chosen approach, since the process of constructing this thesis began with researching theories which could relate to the thesis topic. Thereafter, the first collection of data was completed. However, after viewing the collected data it became apparent that there were necessary changes needed as to which theories that suited the thesis. Subsequently, when the altered theories were more suitable with the collected data, the continuation of additional data collection proceeded.
4.3 Data collection
Data collection is a method of gathering information from relevant sources to find answers to the research questions and research problems. The data collected can either secondary data or primary data.
4.3.1 Secondary Data
According to Bryman & Bell (2011) secondary data is collected data from what researchers have previously found and stated, although it can also be collected from an enterprise or another type of organization. Research was made in relevant areas and secondary data about Alpha and Omega was collected. Fisher (2007) mentioned how the World Wide Web is a useful source of information. Subsequently, these relevant areas include the background information of the MNEs Alpha and Omega, which had their data found on their websites, annual reports
and LinkedIn pages. Therefore, secondary data has been used to get informed about what is happening in Alpha and Omega during the COVID-19 crisis. The collected secondary data was utilized with the objective to during the interviews, increase the ability to discuss the ongoing situations at each MNE with the managers.
“Confidentiality means not revealing your sources” (Fisher, 2007, p.69). Due to the MNEs’ wish to remain anonymous throughout the thesis, secondary data has been used when necessary, but it has been withheld, on advice from the thesis supervisor as well. Therefore, the secondary data has not been presented in the text, to where it required referencing, since the thesis will censure and exclude any references which can link back to the MNEs who requested to remain anonymous.
4.3.2 Primary Data
Primary data can be collected through interviews (Bryman & Bell, 2011). The research questions concern how the COVID-19 crisis effects MNEs GVCs and how MNE’s use functions and actions to respond. Hence, the goal was to collect inside perspectives from different managers, with different experiences, from different MNEs. According to Teherani. Martimianakis, Stenfors-Hayes, Wadhwa, and Varpio (2015) a qualitative research method is then an appropriate research method.
According to Fisher (2007) when it comes to types of interviews, there are open interviews, pre-coded interviews, and semi-structured interviews. Fisher (2007) explained that open interviews allow the interviewee to talk more freely and the researcher controls the discussion only a little. On the contrary, pre-coded interviews are completely controlled by the researchers (Fisher, 2007). It is explained how semi-structured interviews are the combination of open interviews and pre-coded interviews, meaning the researcher is in control of the discussion but lets the interviewee talk freely in different parts of the interview (Fisher, 2007). This thesis also opted for individual semi-structured interviews since the thesis had a small sample size of four managers (Fisher, 2007).
Respectively, semi-structured interview format leaves room for follow up questions (Bryman & Bell 2011). Therefore, individual interviews made the most sense since it presented the possibility to ask the managers for further explanations to their answers. In addition to that, the question formulation was based on creating open-ended interviews. Open-ended interviews may encourage the interviewee to individually decide the direction in which the discussion and interview flows (Fisher, 2007). Patton (2002) also emphasizes how a noticeable smaller sample of open-ended interviews adds insight, detail and meaning to experience at a vastly personal level.
The primary data collection for this study was thereby using qualitative research with semi-structured video call interviews over Microsoft Teams meetings, which later would be analysed. A video call is a phone call using an Internet connection that also has a live video of the people in the call (“What is a Video Call?”, 2018). According to Bryman & Bell (2011), there are many benefits for doing phone interviews instead of in-person interviews. Those benefits are that it is quicker to administer a phone interview and easier to supervise. However, Bryman and Bell (2011) also state the limitations to having a phone interview instead of an in-person interview. Those limitations include having shorter interviews, since in-person interviews can go longer than 15-20 minutes. Also, asking about an enterprise’s crisis strategy is a sensitive topic, and Bryman &Bell (2011) explain how the interviewees can be more reluctant to answer sensitive questions over the phone. Another limitation mentioned by Bryman &Bell (2011) is that phone interviews lack the ability to observe the interviewee. That is why a video call is a perfect medium of them both and an ideal way of performing the qualitative interviews to collect primary data.
The interviews were, as mentioned, semi-structured interviews with various types of managers within Alpha and Omega. All interviews were recorded with the interviewee’s permission since according to Fisher (2007), you must ask for consent before recoding an interview.
To give a more descriptive view of the interviews Table 2 below represents the dates of interviews, the recorded lengths, enterprise, and positions of managers.
4.3.2.1 The Interviewees
As previously mentioned, four managers were interviewed, however those managers worked for two different MNE’s. Since the companies are going to remain anonymous throughout the thesis, they will be called Alpha and Omega.
The first interviewee was a SM started as a salesman in Stockholm in 1986. Today, the SM has worked at Alpha for 6 years, where he started working as a product manager in January 2014. At the start of 2017 he was additionally promoted to a SM for the Alpha’s Swedish unit,
Table 2: Interview processes
Date Enterprise Role Time (Minutes)
2020-04-23 Alpha Sales Manager (SM) 50:38 (37:44 recorded)
2020-04-30 Alpha Production Manager (PM) 47:49
2020-04-28 Omega Line Manager (LM) 25:07
with the main objective to increase Alphas sales within the domestic market. The SM is also a board member for the Alpha’s subsidiary in Finland.
The second interviewee was a PM from Alpha. Alpha’s PM has worked in production and logistics since the start of his working career. He is a graduate of chemical engineering with a master's in economics from a university in Norway. He started working at Alpha in November 2019, today he manages approximately 380 employees at Alpha.
The third interviewee was a LM from Omega. She has a master’s engineering degree in the field of machine technology. Since her graduation in 1999 she has worked for Omega. Through her career she has had several different positions within Omega e.g. within the development and the production department. Thus, the LM has worked with project management, planning, line management.
The fourth interviewee was a PGM from Omega. Before the position at Omega, the PGM has had several years of experience as a software and systems developer, line manager and development manager with the responsibility of overseeing over hundreds of employees. Currently, the PGM has worked at Omega for the past 19 years and his role entails responsibility over business contracts and assuring that the right product is produced and delivered to its customer.
4.3.2.2 The Interview questions
The interview questions were divided into four sections: introduction, strategy, governance and learning outcomes questions. The complete list and structure of the interview questions can be found in Appendix 1 Interview Questions.
In the introduction the interviewees were asked to explain their role at the enterprise today and their career background. These questions were stated to measure the reliability of the data collected. By understanding their current role and experience it was possible to know if the right person in the MNE was going to be interviewed, or if someone else needed to be interviewed for the purpose of this study. The introduction continued by asking the respondent to describe how a typical workday looked pre and during the crises to grasp the crisis daily impact.
The interview carries on with strategy related questions to see the MNE’s ability to adapt and integrate their strategy with regards to the circumstances. These questions contribute with data related to the contingency theory which has been introduced in the literature review. The interviewees were asked to describe their preparation for a crisis before its occurrence, the strategy they implemented to respond to the COVID-19 crisis, when they started implementing the strategy, if they have followed the initial strategy or did the MNE adjust it during the crisis
if there been any changes made for the working environment as well as if there have been any changes that influenced the productivity or the communication.
To understand the effect of the crisis for the two MNEs’ GVC Orchestration questions 12, 13, 14, 15 & 16 were presented to the interviewees. These questions provide us with data to understand the supply relationships and the impact the crisis has on the MNEs, whether the MNEs can adapt quickly and change suppliers in case of complete shutdown or other circumstances. Such questions contributed with essential data needed to understand the effects of a global crisis on the GVC.
Questions 17 & 18 regarding knowledge and resources were also presented later in the interviews to gain better understating on the resource flexibility of the two MNEs. Thus, gaining data that helped with understanding the degree of influence managers had on their resources and what they have learned during these events.
4.4 Reliability of Data
Bryman & Bell (2011) highlights that in the data collection process, possible threats often can occur, thus, making the data collected less reliable. Such threats are interviewee error, interviewee bias, researcher error and researcher bias. Interviewee error is explained as any factor that alters the way an interviewee performs. Interviewee bias is factors that produces false response e.g. an interview held in an open office where the interviewee feels certain pressure to answer in a specific way. Researcher error are factors that alter the researcher's interpretation of the collected data. Researcher bias is factors that cause bias in the researcher's presentation of the data, e.g. a subjective approach when presenting findings. Bryman & Bell (2011) emphasizes that researchers must take measurements to keep bias and errors to an absolute minimum.
Bryman & Bell (2011) explains that when there is more than one observer, the members of the research team need to agree upon what they hear and see. Hence, all members of the team were present when the interviews were conducted. The members of this thesis reminded each other to stay objective when interpreting the collected data. To increase the reliability of the collected data from a researcher bias perspective, all members of this thesis made sure to discuss the collected data and agreed upon its interpretation before presenting it in the findings and analysis sections, to minimize the occurrence of researcher error.
Bryman & Bell (2011) highlighted that providing the same interview circumstances will enhance the collected data’s reliability. Therefore, it was decided to conduct all interviews at around the same time in order to avoid interviewee error. Bryman & Bell (2011) explains that when interviewees are connected online from home, they are being provided with an
anonymous, non-threatening and safe environment, which results in the interviewee bias to decrease. Thus, private interviews were held were the interviewees were alone and not in e.g. open offices. Further, the interviewees were told that they were to remain anonymous throughout the study. Therefore, the chance of collecting biased data from the interviews decreased.
These measures taken has helped increase the reliability of this thesis since the participant and researcher error as well as bias factors were taken into consideration throughout the conduction of this thesis.
Further, to ensure the interviewees were appropriate for the thesis and primary data collection, selection measures were taken. Floyd & Lane (2000) suggested that top-level managers direct the strategies while middle-level managers implement them, the operational level managers conform the strategy. Sirmon et al. (2011) mention that enterprise capabilities are more likely to be delegated to middle managers, who follow the structuring and leveraging actions of the top managers largely. Therefore, it was found necessary to interview several middle-level managers in each of the enterprises to obtain a greater picture of their actions and strategies to handle the COVID-19 pandemic. Sirmon et al. (2011) noted that operational managers focus on daily activities, while top-level managers put their focus on the enterprise. Therefore, it was important for us to find key managers that can provide relevant information about the enterprises during the data gathering. Hence, Floyd & Lane (2000) and Sirmon’s et al. (2011) suggestions about the responsibilities of the different managers made it clear that middle-level and top-level managers were the ideal candidates to interview. The middle-level and top-level managers are responsible for directing and implementing strategies, as well as understanding which functions and actions the MNE’s use to respond to the COVID-19 crisis.
4.5 Operationalization
The aim of this study is to understand the construct of how a crisis affects MNEs. The construct of interest is operationalized by creating questions that was presented in interviews to chosen interviewees with relevant expertise and job descriptions. Due to the construct being complex the effects were measured through the theories that are presented in the Literature review. The aim of this study was to understand the construct of how a crisis affects MNEs. The construct of interest is operationalized by creating questions that was presented in interviews to chosen interviewees with relevant expertise and job descriptions. Due to the construct being complex, the effects were measured through the theories that are presented in the Literature review. Table 3 shows the relationship between the questions which can be found in the Appendix 1 Interview Questions section and the variables presented in the
