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Ulf Andersson, Peter Ekman and Cecilia Erixon

The theoretical research stream that depicts multinational companies (MNCs) as networked organizations has offered new insights on contemporary enterprises’ way of functioning. However, the majority of the research has focused on external embeddedness, that is, MNC subsidiaries’ local business relationships, and its impact on subsidiary organizational performance. This conceptual chapter addresses the lack of research focusing on internal embeddedness, that is, subsidiary relationships with headquarters and sister subsidiaries. Internal embeddedness is discussed from two dimensions: the internal production network and the MNC manager’s social network. The characteristics of each dimension and how they relate to earlier research, leads to a number of theoretical propositions. The chapter concludes with a discussion on how external and internal embeddedness relate, as well as how they may impact the subsidiary’s (organizational) performance.