MNC structure, complexity, and performance: Insights from NK methodology

We introduce NK-simulation models to international business research and more specifically show how this methodology provides insights into the effects of MNC structure and internal complexity on performance. The interdependence of decisions made in different MNC-units is theorized as an underlying mechanism by which structure and complexity affect performance. The performance of three organizational structures, regional, matrix, and network, discussed in the IB literature is compared at the various levels of complexity. The results of our simulations show that the relationship between internal complexity and firm performance is an inverted U for all three organizational structures. Furthermore, at high levels of complexity the network structure has the best performance, followed by the matrix, with the regional last. However, at low levels of complexity the rank order of structure performance is reversed. In addition to these conclusions, this paper contributes to the international business research by demonstrating how the methodology's power can help scholars answer fundamental questions regarding other IB phenomena.