The MNC as an externally embedded organization: An investigation of embeddedness overlap in local subsidiary networks

MNCs have been conceptualized as differentiated networks that, in turn, are embedded in external networks. Previous research has predominantly focused on the embeddedness of established subsidiaries into their local environment, omitting to shed light on the phenomenon of headquarters linkages to the local context which creates embeddedness overlap. We develop a model of why MNCs develop overlapping linkages to local subsidiary networks even if the subsidiaries have grown out of the initial start-up phase. Using detailed information on 168 European subsidiaries, we find that MNCs build and maintain more overlapping network ties when subsidiaries are high performers, hold important resources, operate in turbulent environments, and are closely connected to multinational actors as opposed to purely domestic firms.

Down with MNE-centric theories! Market entry and expansion as the bundling of MNE and local assets

Both Anderson and Gatignon and the Uppsala internationalization model see the initial mode of foreign market entry and subsequent modes of operation as unilaterally determined by multinational enterprises (MNEs) arbitraging control and risk and increasing their commitment as they gain experience in the target market. OLI and internalization models do recognize that foreign market entry requires the bundling of MNE and complementary local assets, which they call location or country-specific advantages, but implicitly assume that those assets are freely accessible to MNEs. In contrast to both of these MNE-centric views, I explicitly consider the transactional characteristics of complementary local assets and model foreign market entry as the optimal assignment of equity between their owners and MNEs. By looking at the relative efficiency of the different markets in which MNE and complementary local assets are traded, and at how these two categories of assets match, I am able to predict whether equity will be held by MNEs or by local firms, or shared between them, and whether MNEs will enter through greenfields, brownfields, or acquisitions. The bundling model I propose has interesting implications for the evolution of the MNE footprint in host countries, and for the reasons behind the emergence of Dragon MNEs.