Citation
Rugman, A.M. (2014), "On regional multinationals, Scotland, multiple embeddedness and multinational enterprises knowledge transfers", Multinational Business Review, Vol. 22 No. 2. https://doi.org/10.1108/MBR-05-2014-0018
Publisher
:Emerald Group Publishing Limited
On regional multinationals, Scotland, multiple embeddedness and multinational enterprises knowledge transfers
Article Type: Letter from the Editor From: The Multinational Business Review, Volume 22, Issue 2
In this issue of Multinational Business Review (MBR), we are pleased to publish five papers across three areas of research. First is a paper that presents ten years of longitudinal data on regional multinational enterprises (MNEs). Second is a paper that explores the role of foreign direct investment (FDI) in Scotland (and the impact of the independence vote on FDI). Third are three papers that deal with knowledge transfers within multinational enterprises. The first two of these three papers deal explicitly with issues in multiple embeddedness. This is an advance on the mainstream literature which mainly confines itself to the dual embeddedness of subsidiaries. The last paper deals with FDI spillovers within the local networks of Japanese clusters.
The first paper in this issue celebrates the tenth anniversary of the first published paper on the regional nature of multinational enterprise activities, by Rugman and Verbeke in JIBS in 2004. As is well known, this controversial and path-breaking paper found that the great majority of the world’s 500 largest firms undertook both sales and assets mainly in their home region of the triad markets of Europe, North America and Asia. This paper reported data provided in annual reports on such activities, and according to the regional definitions reported by the firms, to comply with international accounting conventions. The data were for the year 2001. Over the past ten years, a large amount of literature has been developed, examining the implications of the regional nature of MNEs, in particular to develop better theoretical explanations about the lack of globalization, along with the relevance of regional strategy for top management teams. This paper answers a related criticism that there may be a trend toward globalization over time. Yet, no evidence of such a trend is found using data for the ten-year period, 1999-2008. Instead, it is found that the original finding on regionalization is robust using longitudinal data.
Our second paper addresses the timely topic of possible Scottish independence and FDI, including the economic costs potentially facing international business firms. This data-intensive paper, contributed by three international business professors in Scotland, addresses the nature and extent of FDI in Scotland, and how it may be affected by the September 24, 2014 vote on “Should Scotland be an independent country?” While the authors find that Scotland is already, and might remain, an attractive place for FDI, they indicate that, especially in the short term, there will be increased risks facing MNEs in Scotland. The paper is somewhat deficient in not actually attempting to evaluate these risks, as all the data reflect the pre-independence vote, a situation in which there has been considerable devolution of political decision-making to the Scottish Parliament. If the vote for independence is positive, then this analysis of FDI in a devolved Scotland, but one still integrated into the UK, will be called into question. It is difficult to avoid the conclusion that the economic costs of a “yes” vote for independence will substantially increase risks for international business, not only in the short run but also in the long run.
The third paper in this issue is a response to the pioneering thinking, in our last issue, by Alberto Ferraris on the nature of “multiple embeddedness” within the internal and external contexts of parent firm MNEs and their subsidiaries. This paper by Matevz Raskovic uses the philosophy of economic sociology to engage with the concept of multiple embeddedness used by Ferraris as he uses the four types of embeddedness linkages to analyze the rebundling capabilities of MNE subsidiaries. Raskovic argues that Ferraris mistakenly uses embeddedness as a metaphor for rebundling, and that he ignores the institutional properties of embeddedness. Essentially, he argues that an economic sociology perspective views embeddedness as both an institutional process and an outcome. Raskovic concludes that international business (IB) research “must switch from the recombination process of achieving firm-specific advantage (FSAs) and SSAs to the underlying capability of MNEs to switch from/between various types of embeddedness and disembeddedness in a structuration based process […]”. In short, my understanding of this paper is that Raskovic, using concepts from economic sociology, believes that the process of embeddedness is itself a type of organizational capability (or in IB terms, a Penrosian dynamic managerial capability). Obviously this debate about multiple embeddedness and its use in IB research is an example of how, at MBR, we can stimulate the conversation of international business and related cognate areas. We look forward to publishing more papers on this topic.
The fourth paper by Yen-Chen Ho uses the IB literature to review and synthesize the concept of multiple embeddedness by exploring its relationship with knowledge transfers within the MNE. This literature review addresses embeddedness in the context of knowledge flows within the MNE, between headquarters and subsidiaries in both directions and between subsidiaries. Ho argues that in the context of knowledge flows, multiple embeddedness is characterized by interdependencies between headquarters, subsidiary and host country environment that influence the creation and dispersion of knowledge within the MNE network. Specifically, he argues that host country-specific advantages (CSAs) in knowledge encourage subsidiary external embeddedness and that knowledge-creating firm-specific advantages of subsidiaries encourages internal embeddedness. Further, he argues that the headquarters of an MNE influences the level of subsidiary embeddedness in its external, host-country environment through its strategic approach. This paper provides an excellent synthesis of two streams of IB literature: knowledge flows within MNEs and both dual and multiple embeddedness. As mentioned above, at MBR, we are pleased to publish papers like this that investigate the complexities and tensions incumbent in MNE subsidiary embeddedness.
The last paper in this issue, by Kimino, Driffield and Saal, incorporates thinking on networks with FDI productivity spillovers, finding that in the Japanese context, keiretsu networks play an important role in technology spillovers from an inward FDI. They find that inter-industry productivity spillovers from FDI are linked to the keiretsu structures, particularly in that the forward and backward linkages in vertical keiretsu are positively related to domestic productivity. Conversely, they find that intra-industry spillovers from FDI weaken as vertical keiretsu becomes stronger, indicating that domestic firms suffer competition and crowding-out effects. This paper calculates a metric for total factor productivity (TFP) based on firm-level data. The focus on keiretsu also hints at some network and/or group effects, but they are not the main focus of this paper. While the paper does not measure directly the internal knowledge assets and transfers within MNEs, largely because it uses the macro-level approach of TFP, it serves as a good complement to the two previous papers on multiple embeddedness.
Alan M. Rugman
Editor-in-Chief