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The Development of International Business

A Narrative of Theory and Practice

Robert Pearce

In this wide-ranging and groundbreaking new book, Robert Pearce provides an analytically-informed basis for understanding the modern multinational enterprise. It does this by tracing the development over the past half-century of two parallel strands of analysis in International Business; designated as the ‘theoretical’ and the ‘practical’. The book shows how the practical restructuring of the MNE as an organisational form has responded to changes in the wider global economy and how this evolution has interfaced with the enriching of the relevant theorising. By tracing the persisting dynamics of the MNEs’ structure and strategic positioning it demonstrates how what it is now can be used as a template for understanding and organising its further evolution as additional changes condition its environment.
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Chapter 4: From multi-domestic hierarchy to network hierarchy

A Narrative of Theory and Practice

Robert Pearce

Extract

Traces what the practical narrative will interpret as the first of two crucial organisational transitions in the structural configuration of the MNE. From a multi-domestic hierarchy (MH) comprising a portfolio of semi-autonomous MS subsidiaries, each competing for the domestic market of its host economy, to a network hierarchy (NH) comprising an integrated and coordinated network of specialised (export-oriented) supply facilities. The exposition will emphasise how the MS subsidiaries could survive, despite their endemic inefficiency (access to strong OAs, protection against more competitive imports) until the move towards more open economies and freer trade exposed these inefficiencies. Shows how the ES NH subsidiaries alleviated the innate inefficiencies of MS and thereby generated higher levels of efficiency and welfare.

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