Geography Reference
In-Depth Information
such, even if in purely geographical terms the spatial structure of the MNE
is optimal, the overall ownership-location-internalization (OLI) structure
of the MNE may not be optimal, unless the MNE's organizational and
decision-making structure allows the firm to best take advantage of its
geography.
The particular organizational structure exhibited by an MNE is also
in part dependent on the time period in question. The arguments so far
suggest that the organizational and spatial structure of an MNE often
emerges over time, as the firm locates establishments in new places
thereby expanding its own degree of multinationality. As we have seen,
the reason why firms locate establishments in particular places is due
to a complex mix of strategic issues relating to prices, outputs, risk and
market competition, as well as due to the issues relating to knowledge
generation, monitoring and diversification. This particular mix of issues
implies that the spatial structure of an individual MNE often emerges in
an evolutionary manner. As well as this, however, MNEs in general have
also tended to exhibit different organizational structures in different time
periods, depending on the technological and institutional context. During
the emergence of modern multinational enterprises in the later decades of
the nineteenth century and the early part of the twentieth century (Jones
1996; Chandler and Mazlish 2005), firms tended to exhibit fairly simple
hierarchical organizational structures, as represented by Figures 3.1 and
3.23 in Chapter 3. For instance, the international emergence of US mul-
tinational manufacturing subsidiaries in Europe, and particularly within
the UK, at the beginning of the twentieth century,
9
tended to be character-
ized by tightly-controlled hierarchical decision-making systems. In these
organizational systems, the costs involved in coordinating activities over
space and across national boundaries meant that each European country
hosting such subsidiaries usually exhibited a national headquarters which
was responsible for all the other subsidiaries within the same country,
and which reported directly to the US parent headquarters. However, as
the number of European establishments of US MNEs increased during
the years after the Second World War, many of these firms developed
more complex organizational systems, as characterized by Figure 3.24 in
Chapter 3. These organizational developments were undertaken in order
to allow for more autonomy on the part of the local European establish-
ments, so that multinational firms could better take advantage of, and also
respond directly to, the local specificities of each national market (Casson
and McCann 1999). The high degree of heterogeneity in the economic and
institutional conditions across the European countries meant that their
specific market characteristics differed significantly, and that the effective
management of such heterogeneity required a great deal of local knowl-
