Network Knowledge in International Business

Network Knowledge in International Business

New Horizons in International Business series

Edited by Sarianna M. Lundan

This book focuses on current cutting-edge research concerning the increasing strategic importance of subsidiary networks to the multinational firm. It combines contributions from three major related areas of inquiry: the changing theoretical conception of networks and the structure of the multinational firm, the importance of spillovers and agglomeration economies related to multinational investments, and the management of the flow of information and knowledge from headquarters to subsidiaries and vice versa.

Chapter 5: On the dynamics and coexistence of multiple subsidiary roles: an investigation of multinational operations in the UK

Robert D. Pearce and Ana Teresa Tavares

Subjects: business and management, international business

Extract

Chapter 5 21/6/02 11:24 AM Page 1 5. On the dynamics and coexistence of multiple subsidiary roles: an investigation of multinational operations in the UK Robert D. Pearce and Ana Teresa Tavares INTRODUCTION AND THEORETICAL BACKGROUND One of the persistent aims of analysing MNEs has been to indicate the nature and value of their impact on host countries (Dunning, 1994; Ozawa, 1992). A prevalent mode of articulation has then been to suggest that MNEs transfer to host countries their existing competitive attributes (notably the technology and expertise to produce established goods) in order to improve the efficiency of their use through combination with local standardized (cost-effective) inputs (Vernon, 1966; Kojima, 1978). By allowing a more effective use of the existing competitive attributes of both the MNE and the host country such behaviour enhances static efficiency through improved resource allocation. As a means of propounding the virtues of MNEs, however, the static nature of this line of argument represents a hostage to fortune. Thus critics can point to an implicit vulnerability to ‘footloose’ exit. MNEs allow their mature and standardized technologies (in particular) to be activated in a certain country due to the cost characteristics of its qualitatively homogeneous inputs. Successful local development (a dynamic scenario) changes, it is argued, the host country’s input characteristics through higher prices for qualitatively improved assets and impels the cost-obsessed MNE operations to migrate to a new, now lower cost, country. This hollows out part of the development process to which the MNE initially...

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