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Book part

Jenny Hillemann and Alain Verbeke

This chapter discusses the global factory paradigm. We show how mainstream international business (IB) thinking, namely, internalization theory, can guide multinational…

Abstract

Purpose

This chapter discusses the global factory paradigm. We show how mainstream international business (IB) thinking, namely, internalization theory, can guide multinational enterprise (MNE) strategic decision-making in the context of a global factory network.

Methodology/approach

We identify the key assumptions made in the global factory paradigm about the fine slicing of economic activities and the related implications for the ownership status and location of each activity. In order to overcome the global factory paradigm’s relative lack of predictive capacity, as compared to internalization theory, we propose an asset-bundling approach. This approach uses a clear and unambiguous criterion, namely, the tradability of resources (and resource combinations) to determine which sets of activities can best be left to external market contracting or should on the contrary be internalized on the basis of efficiency considerations.

Findings

We describe the enhanced role of developing/transition countries in the functioning of the global economy and show that these countries represent an increasing share of worldwide economic activities. Given this macrolevel development, the global factory, as a complex organizational form governing both internal activities and contracts with external parties, is rapidly gaining in importance. We describe, at the conceptual level, the strengths and weaknesses of the global factory and propose a “decision dynamics” matrix to support global factory, senior managers’ strategies in the realm of ownership status and location.

Research implications

Future research on the MNE should focus on in-depth analysis of firms that embody “global factory”-type characteristics in order to understand better the evolution of this type of company and to capture the close requisite links among the focal firm, external contracting parties, and the broader environment. Such research should also lead to a better understanding of innovative resource combination processes and the transferability of non-location-bound firm-specific advantages (FSAs) across the global factory network.

Practical implications

In the global factory, the MNE head office assumes the role of resource orchestrator and is responsible for key strategic decisions on ownership status and location. Here, the head office must assess critically the operations that are part of the MNE’s value chain and reflect on the firm’s international dispersion of economic activities on an ongoing basis, given a myriad of broad environmental changes and changes in external competitive pressures. Our “decision dynamics” matrix provides a simple but effective managerial tool supporting MNE ownership status and location decisions, but the head office’s capability to make these decisions should not be overestimated.

Originality/value

We explicitly link internalization theory with the global factory paradigm and explore unresolved issues in the relevant literature. Internalization theory prescribes the optimal ownership status and location for each economic activity considered. The theory focuses on the bundling of firm-level resources and complementary ones held by external parties, for each fine-sliced economic activity. It also considers explicitly the nature of the linkages among these activities.

Details

Multinational Enterprises, Markets and Institutional Diversity
Type: Book
ISBN: 978-1-78441-421-4

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Book part

Peter J. Buckley

This chapter analyses the rise of the ‘global factory’ – the globally integrated network centred on a focal multinational enterprise. This is a response to the increased…

Abstract

This chapter analyses the rise of the ‘global factory’ – the globally integrated network centred on a focal multinational enterprise. This is a response to the increased volatility of the global economy and involves the creation of systems that allow flexibility in both the location and the control of increasingly ‘fine-sliced’ activities, the avoidance of monopoly and the evolution of new management skills. Foreign direct investment is only one strategy amongst several utilised by globally integrated multinationals.

Details

The Future of Foreign Direct Investment and the Multinational Enterprise
Type: Book
ISBN: 978-0-85724-555-7

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Book part

Liena Kano, Alain Verbeke and Carly Drake

We develop a concept of the global factory, first introduced by Buckley and colleagues (2004, 2009, 2010, 2011, 2014), as a stand-alone construct associated with…

Abstract

Purpose

We develop a concept of the global factory, first introduced by Buckley and colleagues (2004, 2009, 2010, 2011, 2014), as a stand-alone construct associated with significant predictive capacity, discuss dynamics of success of the global factory, and identify and analyze social mechanisms deployed by the lead firm head office.

Methodology/approach

We conceptualize the global factory as a form of a flagship network and augment internalization theory with insights from interorganizational networks research to explore the dynamics of the global factory’s origination and functioning.

Findings

We clarify under what conditions a global factory-type network is more likely to emerge and describe social mechanisms generated by the lead firm head office to help the global factory sustain itself and thrive. We argue that in order to benefit from potential efficiencies of the global factory, the lead firm head office must deploy combinations of social mechanisms. We further argue that the role of the lead firm head office is that of a joint value orchestrator and a social broker, in addition to the controlling intelligence function.

Research limitations

Future work on the global factory should include further conceptualization of social mechanisms deployed by the lead firm, exploration of operating mode heterogeneity within the global factory, and large-scale empirical research.

Practical implications

Lead firm managers should embrace the role of the joint value orchestrators and implement social mechanisms described in this chapter to facilitate smooth operation of the global factory.

Social implications

Global factory governance further increases multinationals’ geographic reach and market power; yet, it is not a universal recipe for market success, and therefore global factories’ power to shape the global economy should not be overestimated.

Originality/value

By linking the global factory to networks literature, we have suggested a novel way to view the concept and articulated more fully its underlying assumptions. Further research on the global factory will help advance our understanding of the dynamics of the global economy and the role of multinationals, their head offices, and their managers in shaping the economy.

Details

The Future Of Global Organizing
Type: Book
ISBN: 978-1-78560-422-5

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Article

Enrico Baraldi, Francesco Ciabuschi, Olof Lindahl, Andrea Perna and Gian Luca Gregori

The purpose of this paper is to explore two specific areas pertaining to industrial networks and international business (IB). First, the authors look at how business…

Abstract

Purpose

The purpose of this paper is to explore two specific areas pertaining to industrial networks and international business (IB). First, the authors look at how business relationships influence the internationalization in time, from the establishment of the first subsidiary in a foreign market to the following ones, and in space, that is, across different markets. Second, the authors investigate how an increasing external network dependence of subsidiaries in their internationalization may cause a detachment of a subsidiary from the mother company as its knowledge becomes insufficient to guide a subsidiary’s internationalization.

Design/methodology/approach

This paper utilizes an exploratory, longitudinal, single-case study of Loccioni – a manufacturer of measuring and automatic control systems for industrial customers – to illustrate the specific dynamics of the influences of industrial networks on the internationalization of subsidiaries.

Findings

The case study helps to elucidate the roles, entailing also free will and own initiative, of small suppliers’ subsidiaries which operate inside several global factories, and how “surfing” on many different global factories, by means of several local subsidiaries, actually supports these suppliers’ own international developments. This notion adds to our understanding of the global factory phenomenon a supplier focus that stresses how the role of suppliers is not merely that of being passive recipients of activities and directions from a focal orchestrating firm, but can also be that of initiative-takers themselves.

Originality/value

The paper contributes to the IMP tradition by providing a multi-layered and geographically more fine-grained view of the network embedding companies that operate on internationalized markets. This paper thereby sheds light on a less investigated area of research within the IMP tradition: the link between internationalization in different countries and the interconnectedness between the industrial networks spanning these countries. At the same time, this paper contributes to IB theories by showing how a late-internationalizing SME can enter highly international markets by “plugging into” several established “Global Factories” as a way to exploit further opportunities for international expansion.

Details

IMP Journal, vol. 12 no. 3
Type: Research Article
ISSN: 2059-1403

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Article

Bublu Thakur-Weigold

This paper explores growth opportunities for a contract manufacturer (CM), which operates a global virtual manufacturing network (GVMN). The Swiss factory should play a…

Abstract

Purpose

This paper explores growth opportunities for a contract manufacturer (CM), which operates a global virtual manufacturing network (GVMN). The Swiss factory should play a profitable role in the holding's competitive strategy, in spite of lower-cost alternatives within its network.

Design/methodology/approach

The study applied a design science method over a period of two years of collaboration with the partner firm to complete three iterations of solution incubation and refinement.

Findings

The design artefact is a growth strategy for a CM with independently-managed, heterogeneous sites. A novel capability mapping tool reveals competitive advantage by deploying the GVMN as an order fulfilment system. Engineering and sales are integrated with production to project higher revenue streams in multiple locations including Switzerland.

Research limitations/implications

The research expands the operations management (OM) focus on optimization and continuous improvement. Results indicate that local and global manufacturing capabilities can be configured to target network performance, implying that the smile curve flattens in certain GVMN configurations. The exploratory case study is limited by a lack of statistical generalizability and is specific to the contract electronics manufacturing industry.

Practical implications

Managing manufacturing as a network can restore feed-forward and feedback loops, which are disrupted by de-verticalization and externalization. The visualization positions a Swiss plant in an inimitable role, serving growth accounts, which require co-development. The order fulfilment strategy and capability maps can be adapted to other GVMNs.

Social implications

The study presents an alternative to shuttering high-cost locations using performance improvements instead of protectionist interventions. This could have a material impact on de-industrialization in developed nations like Switzerland.

Originality/value

The strategy innovation originates in practice. Its synthesis drew on multiple disciplines to position OM as a strategic lever for competing in global value chains (GVCs). The author finds alternatives to the internationalization logic of cost arbitrage and adds to developed country studies. This is an OM contribution to the broader debate on globalization dominated by the social sciences.

Details

Journal of Manufacturing Technology Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1741-038X

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Book part

Peter W. Liesch and Lawrence S. Welch

In this chapter we chart the evolution of the theory of the multinational enterprise (MNE) from Buckley and Casson’s original depiction to Buckley’s conceptualization of…

Abstract

In this chapter we chart the evolution of the theory of the multinational enterprise (MNE) from Buckley and Casson’s original depiction to Buckley’s conceptualization of the global factory. Within that context we consider the issues of risk and uncertainty which continue to challenge firms in the international context. Indeed, despite the explosion in access to greater wealth of digital sources of information and knowledge, risk, uncertainty, volatility, complexity, and ambiguity remain constraints on the ability of firms to function effectively in the international arena. Theoretical development around the nature of the MNE must deal with such enormities, but also other demands in the global context. The evolution of the global factory has been recognized as the disintegration of the MNE through the externalization of many of its previously core activities, including parts of production and marketing, but this form of the MNE will not be the end-game. Ultimately, it may be questioned whether the MNE is becoming, or has become, just a global super-manager of value activities orchestrating the internationalization of production.

Details

International Business in a VUCA World: The Changing Role of States and Firms
Type: Book
ISBN: 978-1-83867-256-0

Keywords

Content available
Article

Merel Serdijn, Ans Kolk and Luc Fransen

Amidst burgeoning attention for global value chains (GVCs) in international business (IB), this paper aims to identify a clear “missing link” in this literature and…

Abstract

Purpose

Amidst burgeoning attention for global value chains (GVCs) in international business (IB), this paper aims to identify a clear “missing link” in this literature and discusses implications for research and corporate social responsibility (CSR) policy-making and implementation.

Design/methodology/approach

The paper combines an overview of relevant literature from different (sub)disciplinary fields, with insights from practitioner and expert interviews and secondary data.

Findings

Because IB GVC research stems from a focus on lead firms and their producing suppliers, it lacks attention for intermediary actors that may significantly impact the organization of production in general, and firms’ CSR commitments in particular. Import intermediaries are often “hidden” in GVCs. This paper indicates the emergence of GVC parallelism with “frontstage” chains managed by lead firms and increasingly exposed to public scrutiny following calls for transparency and CSR, and “backstage” ones in which buyers and intermediaries operate more opaquely.

Practical implications

This study points at salient yet little known practices and actors that influence the organization of production and the implementation of CSR policies in various ways, and therefore offers ground for reflection on the design of proper supply chain and CSR policies.

Originality/value

This study exposes a hitherto neglected category of actors in GVCs and broader IB research and discusses implications, relevance and areas for further investigation. An illustrative example explicates the importance of carefully considering this “missing link”. The study emphasizes the need for further study into ways in which both lead firms and intermediaries deal with contradicting demands of implementing CSR policies and offering competitive prices with short lead times.

Details

critical perspectives on international business, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1742-2043

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Article

Wioleta Kucharska, Karol Flisikowski and Ilenia Confente

Brand positioning based on the brand’s country of origin is at the centre of attention in international marketing. It is evident that global brands constitute critical…

Abstract

Purpose

Brand positioning based on the brand’s country of origin is at the centre of attention in international marketing. It is evident that global brands constitute critical intangible assets for businesses and places. However, it is not clear how they contribute to national economies. This paper aims to discuss the significance of brands as contributing to the value of their companies but also helping to leverage national economies. Although global brands can be produced and purchased in multiple countries, their influence on the economy of the country where their owner’s seat is located can be more meaningful than in other economies included in the “global factory”.

Design/methodology/approach

Based on 500 Brandirectory, the Most Valuable Global Brands 2011-2015 rankings powered by Brand Finance, the authors observed a spatial-economic autocorrelation which exemplifies the potential interdependency between gross domestic product (GDP) and brand value. This relationship has become a starting point for designing a spatial regression model.

Findings

The findings support the hypothesis that assumptive spatial dependencies have a significant influence on the examined relationship of brand value and GDP.

Originality/value

The presented study is the first to examine the potential interdependence between brand values and GDP of the countries of origin using a dynamic spatial approach.

Details

Journal of Product & Brand Management, vol. 27 no. 7
Type: Research Article
ISSN: 1061-0421

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Article

Peter J. Buckley

The purpose of this paper is to review the key analytical principles of internalisation theory as a general theory of the multinational enterprise (MNE). It illustrates…

Abstract

Purpose

The purpose of this paper is to review the key analytical principles of internalisation theory as a general theory of the multinational enterprise (MNE). It illustrates the vitality, relevance and flexibility of the approach in explaining the continued evolution of the MNE. As a grounded social science theory, it provides, in combination with history and economic geography, satisfying and novel explanations of the key phenomena of the modern globalising economy.

Design/methodology/approach

This paper examines the origins and principles of internalisation theory as the foundation theory of the MNE. It considers internalisation theory in the context of current and mainstream theories and concepts in the field of international business.

Findings

Internalisation theory is equally valid for the MNEs of yesteryear as it is for those today. The theory continues to have strong explanatory power for MNE activity. Current research areas, such as multiple embeddedness, fine-slicing of the value chain, etc., and other theories, such as dynamic capabilities and the resource-based view, either are subsets of internalisation and thus explained by the theory, or contain weakness and/or inconsistencies not found in internalisation theory.

Originality/value

This paper coherently synthesises internalisation theory, its origins and evolution. It shows how commonly held and current concepts and theories are related to internalisation theory or have weaknesses, thus making internalisation theory a superior theory to explain the MNE, and identifies potential applications of the theory to novel research areas in the field of international business.

Details

Multinational Business Review, vol. 22 no. 3
Type: Research Article
ISSN: 1525-383X

Keywords

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Article

Takanori Sonoda

I would like to limit my discussion to the experiences and strategies Honda has employed to evolve from our roots as a local company in Japan, with a global viewpoint …

Abstract

I would like to limit my discussion to the experiences and strategies Honda has employed to evolve from our roots as a local company in Japan, with a global viewpoint — into what we are today, a global company with a local viewpoint.

Details

Competitiveness Review: An International Business Journal, vol. 12 no. 1
Type: Research Article
ISSN: 1059-5422

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