The document discusses factors that influence whether Western multinational corporations (MNCs) sustain long-term commitment to internationalization in Asia or reduce/withdraw over time. It notes that only a few MNCs maintain engaged commitment, while most decrease involvement. The administrative structure of MNCs, and its impact on knowledge transfer between headquarters and foreign markets, plays a key role in determining the level of commitment. Specifically, structures that facilitate motivation, relationships, communication and prior exposure help headquarters absorb complex knowledge from abroad and better defend overseas investments.

1. © 2017 Gordon Perchthold
Why do a few FSI MNCs sustain the initiative?
Why most reduce/withdraw their commitment?
14 June 2017
CEB International CFO Forum
Western Multinational
Internationalisation
towards Asia
Gordon Perchthold, PhD, MBA
Associate Professor of Strategic Management (Practice)
Lee Kong Chian School of Business
Singapore Management University
50 Stamford Road, #05-01 (office 5035)
Singapore 178899
Mobile: +65 8183-4353
Email: gordonrp@smu.edu.sg

2. © 2017 Gordon Perchthold
My working life … relative years: employers & countries
Singapore

3. © 2017 Gordon Perchthold
Client experiences and other activities
“Western Financial Services Multinationals
Differential Pathways to
Commitment to Internationalisation in Asia:
The Impact of Administrative Structures on
Reverse Knowledge Transfer and Absorptive Capacity”
Available on Amazon.com

4. © 2017 Gordon Perchthold
Common Challenge: ’Hello? Anyone in HQ Listening?’

5. © 2017 Gordon Perchthold
PhD Research: Chairman/CEO experiences of 37 MNCs
copy
Subhead became case studies capturing two centuries of historical data

6. © 2017 Gordon Perchthold
In Asia, whatever happened to …

7. © 2017 Gordon Perchthold
What about …
Source: ANZ Bank website, 2015
Vision: “To build the
best connected, most
respected bank across
the Asia Pacific region”
Source: ANZ Bank Annual
Reports 2012 - 2015

8. © 2017 Gordon Perchthold
Only a few MNCs sustain engaged commitment to Asia
1860 1880 1900 1920 1940 1960 1980 2000 2020
1848
1817
1835
1842
home market
only
engaged
commitment
passive
commitment
partial
de-commitment
full
de-commitment
1812
1887
1868
1848
1912
1873
1902
1919
First Wave
Commitment to Internationalisation towards Asia
Second Wave
Commitment
Source: Gordon Perchthold 2016 Thesis
Founded
1865
1865

9. © 2017 Gordon Perchthold
Influences on Western MNC internationalisation to Asia
Revenue opportunity
in Asia is attractive
Home market growth
becomes challenging
Administrative Heritage of firm (organisational competency to internationalise?)
Rationale for internationalisation (will it be long-lasting?)
Tenure of non-conformist Group CEO (does successor retain same commitment?)
Traditional MNC
(home country conceptualisation)
Born global in Asia
Atypical MNC
(composite conceptualisation)
Source: Gordon Perchthold 2016 Phd Thesis

10. © 2017 Gordon Perchthold
Sustained commitment or partial/full abandonment?
“The regulators would be very happy for us just to stay within our domestic borders. That
makes their life easier. The trouble with regulators is that they have no natural predators and
they basically can do what they like and there is nobody stopping them. I mean for a country
like Australia, the size of the economy, not to have an international bank is just ridiculous.”
Group CEO, Australian Bank
“The whole regulatory issue today is safety. And so, if you went back to them and said: ‘I’m
missing out some opportunity to grow,’ they’ll say: ‘Too bad. So long as you’re safe and
you’re not going to come back to our taxpayers to bail you out, I’m fine if you miss a few
opportunities to grow in Asia or somewhere else.”
Chairman, Asia, US Bank
“How to have a global business and a global strategy and a global capital management
strategy but still work within the expectations of the local regulatory environments is really
one of the key challenges.”
CEO, Global Division, US Insurer
Pressure on the Corporate Board: Regulators (how to minimise risk)
Source: Gordon Perchthold 2016 Phd Thesis

11. © 2017 Gordon Perchthold
“Selling the dream [about investing capital in Asia] to institutional investors is very hard work
– even when they acknowledge the success achieved.”
Group CEO, UK Insurer
“What is the one thing that Western boards and companies can do and learn about Asia?
Patience, because it’s something they tend not to have and, when you’re in an organisation
that is driven by quarterly results and the analysts judge you on what you do quarter by
quarter, in an Asian environment, it is not going to get you anywhere.”
Chairman, Asia Pacific, UK Bank
“I was aware it was going to take a very long time to build up a substantial presence [in Asia]
and, in particular, to build up an economic presence because the timeframes of payback are
totally at odds with the expectations of shareholders, at least that is represented by outside
analysts. There is just a huge contradiction there and that’s a big problem. And so, you are
running the corporation in part for local short-term financial results that doesn’t fit long haul
in Asia.”
Group CEO, Canadian Insurer
Pressure on the Corporate Board: Shareholders (realise returns on capital …when?)
Source: Gordon Perchthold 2016 Phd Thesis
Sustained commitment or partial/full abandonment?

12. © 2017 Gordon Perchthold
“The greatest challenge that I’ve had as a chief executive over the years is being able to sit opposite a
director who may, in their own space be the world’s leading expert, who doesn’t get the simple
understanding of how you make profit out of a life insurance product.”
Group CEO, Canadian Insurer
“Up until the [2008] crisis, the board wasn't really there. In my mind it wasn’t really capable. The global
board really wasn’t a serious board and I don’t think it really got involved at all. Other than to just
endorse what the CEO was doing. I think the crisis changed that.”
CEO, Asia, US Bank
“The Europeans and the Australians if you like. They are the companies that flip flop all the time --
they’re in, they’re out, they’re in, they’re out, and that’s driven by short-term results.”
CEO, Asia, Australian Insurer
“If you have a lot of capital tied up in a foreign jurisdiction and a new board comes in. New CEO. They
look at things. That is their prerogative. And I think the bigger the capital, the more likely they are to
look at it and say either: we need to put even more in because we've got to justify it; or, I can't get the
earnings on this and we should get out. Because often the new CEO will want to make a big difference
very quickly because often history shows and so do American studies that they have the most impact as
a CEO in the first eighteen months.” Group CEO, Australian Insurer
Pressure on the Corporate Board: How will they decide?
Source: Gordon Perchthold 2016 Phd Thesis
Sustained commitment or partial/full abandonment?

13. © 2017 Gordon Perchthold
Is HQ equipped with knowledge to defend investments?
Categories of simple and complex knowledge diffuse differently to/from HQ
- HQ most interested & readily receives simple accounting and production data
- HQ has difficulty absorbing non-conforming knowledge of host markets
- Without internalised knowledge, difficult to defend risk and timing of returns
on capital employed overseas (critical issue on succession of Group CEO)
Mediators of Knowledge Transfer
and Absorptive Capacity
Home Market
(headquarters/parent)
Host Markets
(subsidiary)
Business Knowledge
Foreign Institution Knowledge
Internationalisation Knowledge
Networks of Relationships Knowledge
Propositional Knowledge (FSAs)
Corporate directives
Corporate Values & Normative Practices
Motivation
Trusted relationship
Prior exposure to knowledge
+ diversity
Richness of communication
- diversity
- diversity
- diversity
much effort to codify through production systems
difficult to codify through procedure manuals
Accounting and production control data
Objective/Explicit Knowledge
( readily codified and transferred )
Tacit/Experiential Knowledge
( difficult to codify and transfer )
Legend for Category of Knowledge Flows
readily codified in contracts/letters/memos
home market
communications
filter
host market
communications
filter
Strong; penetrates filters
Legend for Strength of Knowledge Flow Transfer
Partial; impacted by cultural distance
Weak; impacted by bounded rationality
Source: Gordon Perchthold 2016 Phd Thesis

14. © 2017 Gordon Perchthold
MNC Administrative Structure determines permeability
HQ conceptualisation of the role of Asia influences the Administrative Structure.
Configuration of Administrative Structure influences transfer and absorption of
knowledge between HQ and host markets in both forward and reverse directions.
Approach to
Decision-
making
Appointed Conduit
to Lead
Within Asia
MNC
Organisation
Structure
International
Experience of Top
Management Team
Approach to
Internal
Communications
Basis for
Codifying
Business Practices
Constructs of Administrative Structure Activating Absorptive Capacity through Motivation, Relationships, Communications, Prior Exposure, Diversity
Approach to
Leadership
Development
Structure Leadership Model Business Practices
Oriented by
Regionalisation
Geographic
Region
Regional Office
Codification
Regional Office
Formalisation
Regional Office
Hierarchical
Hire Best Leaders
in Asia &
Pay Well
Trusted HQ
Executive
Having CQ
Asia is a Revenue
Opportunity to Exploit
Asia is a Strategic
Imperative
Conceptualisation
by HQ of Role of
Asia Within MNC
Asia is Foundational
Matrix
Organisation
Ethos of
Internationalisation
Composite
Codification
Normative
Integration
Cadre of
International
Officers
Rich/Dense
Network
Asian Nationals
Developed to be
Global Leaders
Ethno-centric
Orientation
International
Division
Corporate
Codification
Corporate
Formalisation
Corporate
Hierarchical
Internal/External
Executive Lacking
Status in HQ
(or based in HQ)
Underdeveloped
Leadership Planning &
Development
Source: Gordon Perchthold 2016 Phd Thesis

15. © 2017 Gordon Perchthold
Transferable lessons learned from FSI MNC case studies
1. Internationalisation must be motivated by more than a revenue opportunity
2. Board must commit to internationalisation beyond the current Group CEO despite the
regulator and shareholder bias towards their familiar home market
3. Group CEO must consider how to raise the organisational capacity to internationalise
4. Administrate Structure of a MNC must be designed rather than emerge in an ad hoc
manner
5. Individuals in HQs will not learn non-conforming information from foreign markets
unless they are motivated to learn; develop trusting relationships so that they will
believe the data; communicate through rich interactive channels; and are exposed
repeatedly to the new complex knowledge
6. The design of the MNC organisation structure, leadership model, and business practices
must not only achieve their task objectives but also facilitate reverse transfer and
absorption by HQ’s personnel of non-conforming foreign knowledge
7. Why should you care?.... Interestingly, the factors that facilitate sustained
internationalisation are similar to those that facilitate a sustained innovation capacity
within an organisation (in an era of disruption)

16. © 2017 Gordon Perchthold
THANK YOU
Questions?