Geography Reference
In-Depth Information
when looked at in terms of the divide between investor and executives, has
been disturbed both along the supply chain and within corporate hierar-
chies (Ietto-Gillies 2005). In outsourcing and offshoring strategies, owner-
ship changes but control of the value chain activities is largely retained
through various means of pressure on the suppliers and their competitive
bidding (e.g., narrow transfers of technology, strict specifications of the
product, tight supplying schedules, etc.). Conversely, in vertical integra-
tion strategies ownership is not altered, but the distribution of control
within the MNE can vary greatly, with different degrees of autonomy of
the affiliates and subsidiaries that can lead to intra-firm competition and
even to a certain degree of restraint in the powers of the central headquar-
ters of the MNE. Such changes have had huge implications for the loca-
tion choices and advantages of MNEs, which are increasingly dependent
on the balance between technological competencies and capabilities
within
and
outside
the firm or, as we will describe it later, on the integration of
various sources of knowledge which are internal and external to the firm.
Also, different geographies have emerged in relation to different types of
multinational vertical integration, such as more centralized/decentralized
control within the firm, the unbundling of headquarters and core func-
tions, and hierarchical versus heterarchical structural forms and internal
organization (Desai 2009).
Thus, as inward and outward flows have largely ceased to describe what
happens at the sites of MNE activity, also the dichotomy between 'hier-
archies versus networks', which itself is a recent substitute for the tradi-
tional poles of the market and hierarchy, is losing its analytical usefulness.
Neither large vertically integrated MNEs nor small specialized produc-
ers' networks represent the ideal institutional structure to cope with the
rapidly changing competitive advantages. In the words of Robertson and
Langlois (1995, p. 543): 'The relative desirability of the various structures,
then, depends on the nature and scope of technological change in the
industry and on the effects of various product life-cycle patterns'.
MNEs have changed more than other firm types, whether SMEs or large
multiplant uni-national firms, because of the more intense interaction
between MNEs and global institutional, organizational and technological
changes. The causality nexus between MNE evolution and globalization
processes is not straightforward. Globalization exerts pressure on MNEs,
but MNEs are one of the leading agents of globalization.
One of the crucial aspects of the current phase of economic globaliza-
tion lies in the new modes of creating and diffusing new knowledge and
technology (Box 1.3). The central role played by contemporary multina-
tional corporations in such processes has been described in the evolution-
ary economics literature, which stresses the metamorphosis of the MNE
