As international environments become more competitive, requiring ever more complex international strategies, organizing the multinational enterprise (MNE) becomes increasingly difficult. This chapter reviews how scholarly research and theory have addressed this problem in the past and then develops a kind of roadmap for where such theory needs to go in the future. We divide existing research and theory development into two broad literatures. The first we label the HQ–subsidiary relationship literature. This was important from the 1960s to the 1980s. The second we label the subsidiary-level, network perspective literature, and this has been important from the 1990s to the present. After reviewing and contrasting these two literatures, we argue that neither is sufficient for the future – neither by itself provides a suitable theory for organizing the modern MNE. After presenting our assumptions about the environments and strategies that modern MNEs will have to cope with, we outline and illustrate a kind of contingency theory for organizing such firms. We argue that modern MNEs will require the combined coordination capabilities described by both the existing literatures, and that a contingency theory is the best conceptual framework for combining such sharply contrasting capabilities.
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