An examination of the fit between organizational strategey and structure and its impact on the economic performance of U.S.-based multinational corporations

Strategic management researchers have long suggested that an organization must achieve a fit between its strategy and organizational structure if that strategy is to be implemented well. In addition, it has been presumed that the achievement of such a fit will have an economic impact on the firm. Yet, a model which clearly defines the relationship between these variables for multinational corporations (MNCs) did not exist. This study attempted to address such issues by examining specific relationships between the strategy, structure and economic performance for large, U.S.-based multinational corporations (MNCs). The strategy of these firms was operationalized by measuring the firm's level of product diversity, foreign involvement, strategic diversity and center of gravity. In addition, each MNC was classified into one of five types of organizational structure. Finally, economic performance was measured by calculating the firm's 5—year average return on investment (standardized by industry averages) and foreign sales growth.

Although tests which addressed the impact of a strategy-structure fit on the economic performance of the firm were inconclusive, discriminant analysis revealed that the firm's strategy is operationalized best by the variables Strategic Diversity and Foreign Involvement. These two strategy variables explained more variance in organizational structure than any other combination of strategy variables. In addition, the results of the analysis suggested that under varying conditions of strategic diversity and foreign involvement, certain organizational structures were predominant. Therefore, a model of the relationship between MNC strategy and structure was proposed and tested.