Table of Contents

Innovation and Institutional Embeddedness of Multinational Companies

Innovation and Institutional Embeddedness of Multinational Companies

New Horizons in International Business series

Edited by Martin Heidenreich

Multinational companies are crucial actors in a global knowledge-based economy, combining the advantages of global and locally coordinated production and innovation strategies with specific regional and national factors. This book questions how MNCs can best exploit institutionally embedded knowledge, explores the utilization of external institutionally embedded knowledge in corporate innovation processes, and addresses the challenges of embeddedness.

Chapter 3: The Multi-home-based Corporation: Solving an Insider–Outsider Dilemma

Örjan Sölvell

Subjects: business and management, international business, organisational innovation, economics and finance, international business, innovation and technology, organisational innovation


Örjan Sölvell 3.1 INTRODUCTION Today most goods, services and factors of production, including capital, technology and skilled people, face global competition. Globalization has allowed for sliced-up value chains, where materials, components and products criss-cross world markets. A steel leg for a chair might begin in Sweden, go to the UK for assembly, go back to central warehousing in Sweden, and then return to the UK to be sold in the store. International transactions are carried out through efficient export–import markets, but a substantial part of global flows is managed by multinational corporations (MNCs). MNCs control networks of subsidiaries and manage webs of alliance partners and contract partners across the world. Thus the modern MNC is entangled in global value chains, with both in-house units and external partners carrying out headquarter (HQ) functions (strategy, legal, finance, human resource, public relations, communication, branding), R&D, design and engineering, manufacturing (components, subsystems, final products) and assembly/packaging, procurement, logistics and warehousing, and sales and service operations in multiple locations. Some units are highly integrated into a global whole, whereas other units are given considerable autonomy. Sometimes subsidiary units controlling strategic resources and capabilities, such as headquarter functions and/ or R&D, are given the status of ‘centers of excellence’ (see Holm and Pedersen, 2000, and Birkinshaw and Hood, 1998 for overviews), where subsidiaries take on, or are given, roles outside the confines of the local market. Such center mandates are typically driven by both internal and external factors (Frost et al., 2002)...

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