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(1) summarize what you see as the major themes or points in the book, if possible using brief quotations from the book to illustrate key points. (2) Develop key issues for criticism (which may be positive points of praise or more negative concerns or worries), again using relevant brief quotation where appropriate. (3) The style of the review should be similar to that in other essays, i.e. based on a balanced yet critically constructive approach. Imagine that you are writing for a journal such as The Economist. Your task is to tell the reader why this book matters, or why it claims to matter but does not in fact achieve its ends. You need to highlight what it says, what is new, and what the limitations are.
REVIEW SYMPOSIUM
Peer Hull Kristensen and Jonathan Zeitlin
Local Players in Global Games: The Strategic
Constitution of a Multinational Corporation.
Oxford, Oxford University Press, 2005
Keywords: political economy, globalization, multinational firms, firm strategy
JEL classification: F23 multinational firms, F59 international political economy
Global games and general claims: locating the
contribution of Kristensen and Zeitlin
Anthony Ferner
Leicester Business School, De Montfort University, Leicester, UK
Correspondence: afhum@dmu.ac.uk
1. The contribution of Local Players in Global Games
This monograph is one of the most important studies of multinationals to appear
in recent years. It takes its place alongside Bélanger et al.’s work on ABB (1999),
showing the potential for generating theoretical insights from the intense scrutiny
of a single company.
The book is an in-depth study of the headquarters (HQ) and three key
subsidiaries—in Denmark, England and the USA—of a UK-owned engineering
multinational, APV. Its theoretical contribution is, simply put, to take subsidi-
aries seriously. It helps redress the neglect of subsidiary strategy by much of
the international business literature, while avoiding the opposite trap of neglect-
ing the HQ perspective. Subsidiaries are seen not as passive subjects of HQ strat-
egy, but as strategizing actors in their own right, in symbiotic relationship with
# The Author 2008. Published by Oxford University Press and the Society for the Advancement of Socio-Economics.
All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org
Socio-Economic Review (2008) 6, 379–394 doi:10.1093/ser/mwn002
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their acquiring company. Thus, subsidiaries actively seek to be acquired by the
parent, in order to gain access to global markets. They strategize by leveraging
local resources to strengthen their position within the global firm, and to
exploit the advantages of membership of a multinational not least for enhancing
the development of the locality in which they are embedded. As a result, the con-
ventional view of the role of the multinational’s HQ is also challenged: HQ is
inherently unable to enact a coherent global vision or to coordinate activities
effectively across countries in order to realize international competitive
advantage.
The book provides a realistic depiction of multinationals as uneasy political
coalitions. Complex game-playing takes place in which subsidiaries are able to
exploit tensions between multiple and sometimes conflicting lines of authority
within the company. The multinational is, in short, ‘an arena for internecine riv-
alries’ (p. 11). In exploring the internal politics of the multinational, the authors
show, importantly, how subsidiary actors engage with other actors in their
locality, often finding accommodations that cut across the boundaries of the
firm. Local Players in short provides a plausible account of subsidiaries as units
operating, politically and strategically, both within transnational chains of
economic activity and within a defined local institutional environment.
These theoretical insights are coupled with—and stem from—the great depth,
richness and subtlety of the empirical account. It is rare for researchers to obtain
such in-depth access to different organizational levels within the multinational
corporation (MNC). The narrative is informed by a historical perspective that
helps show the evolution of different models of ‘constitutional ordering’ within
the subsidiaries, models of varying degrees of stability and efficacy over time.
As well as giving a strong sense of the continuities in the ‘administrative heritage’
of the different subsidiaries, this historical context conveys the fragility and mut-
ability of accommodations: actors’ changing roles, the rise and decline of units,
the relative transience of influence, the complexity and instability of the balancing
acts required to maintain position.
The heart of the empirical material is a detailed depiction of how subsidiary
actors mobilize and deploy resources from their local institutional environment,
and how this feeds a complex dynamic of reciprocal strategizing at a variety of
levels: intra-plant, plant – locality, inter-subsidiary, subsidiary – business unit,
subsidiary – HQ. The Horsens Danish case study in particular is an exemplary
account of how strategizing actors exploit the resources of their environment.
Horsens mobilized local suppliers, engaged with domestic training institutions,
forged strategic alliances with the plant convenor and union, and changed its
internal work organization as part of its ‘strategic positioning’. This engagement
in the locality gave it the base from which to ‘undermine its assigned role’ within
APV and create an innovative one. For example, Horsens management and
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unions used the national institutional framework (the state’s covering of a high
proportion of the wages of workers undergoing training) and the local one
(direct union representation on boards of local schools) to forge an accommo-
dation that secured the supply of skilled workers.
Finally, Local Players furnishes a vision—agreeable if rather idealistic—of a
way forward for actors in multinationals, based on competitive, mutually suppor-
tive and mutually constraining games. Such games centre on the involvement of
employees and their representatives in strategic development, and the building of
linkages with local communities to develop and exploit the competitive advan-
tages they offer. The final part develops some interesting thoughts on what
amounts to the quasi-democratization of relations between centre and peripheral
units, based on pragmatic collaborations on goal definition, problem solving and
the sharing of information.
2. How far can we generalize from Local Players in Global Games?
However, a number of concerns emerge about the methodological approach of
Local Players. At the core of these concerns is the book’s attempts to generalize
from the single case in order to characterize the way multinationals are in
general. This is not an inherently flawed exercise. But its validity depends on con-
vincing the reader that the case-study company is appropriate as a case from
which to generalize. Kristensen and Zeitlin make strong claims for the theoretical
contribution of the study:
[B]y carefully confronting the organizational strategies and mechan-
isms for the coordination and control of the multinational proposed
in the managerial literature with the experience of APV, we can assess
their effectiveness in meeting the challenges of running an actually
existing MNC. (p. xxi)
APV functions in this respect, they argue, ‘as a limiting case, capable of
demonstrating the inadequacy of standard models of multinational management
whether or not its experience can be taken as representative of other global firms’
(page number? emphasis added). This suggests that APV, while not a typical
multinational, is a ‘test case’: in other words, it can be claimed that, if APV is
like this, then other multinationals are likely to be so a fortiori. Unfortunately,
APV does not appear to be such a case. Rather, it is an ‘extreme case’ (as the
authors elsewhere concede), which illustrates the studied pathology to an extent
unlikely to characterize other firms. If this is so, then the wider resonance of the
study is far less than the authors claim.
The essence of APV’s atypicality is that it did not introduce changes into a
‘well-established organizational structure and shared administrative heritage’
Local Players in Global Games 381
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(p. 193). Moreover, when ‘an MNC is created through mergers and acquisitions
of former rivals, no historical bonds of trust or networks of mutual obligation
and respect are likely to exist among its constituent units’ (p. 208). It is, in
short, a company of previously independent, entrepreneurial subsidiaries and,
as a result, ‘a very unstable mixture’ (p. 20). Most multinationals are not like
that, even where they grow abroad by acquisition. They retain a predominant
‘beating heart’: acquisitions are absorbed into a pre-existing organizational/
administrative heritage.
Despite K&Z’s claim that APV is ‘not at all exceptional’ in its lack of effective
integrative structures (p. 200), it is in fact neither typical of current MNCs, nor
the exemplar of an emerging trend. The truth is that there are plenty of hierarch-
ical multinationals with effective centralized control, with the power resources
(the ‘techniques of domination’) to ensure that they have to make relatively
few concessions to local institutional arrangements; for example, they are able
to influence subsidiary managers’ career paths and rewards, and control the
investment, production and export quotas of their operations. Many other
firms, more ‘heterarchical’ in functioning, are nonetheless also successful in coor-
dinating their activities internationally over extended periods of time.
This is not to say that the politics of resistance are absent from such coherently
coordinated firms, merely that they are confined within relatively narrow limits
that do not normally threaten the inherent integrity of the enterprise. Thus the
claim that the ‘unending process of mutually aligning these multiple narratives
. . . constitutes the core challenge of coordination and “control” for the MNC’
(p. 22) appears somewhat overstated.
Having argued that the problems of APV stem from the lack of a common
administrative heritage, the authors try to generalize to M-form companies as
a whole (p. 210 and chapter 9), arguing that the pathology of conflicting colla-
borative games stems from generic flaws in the M-form concept, such as the sep-
aration of strategy and operational decision-making, and the lack of knowledge
by each of each, so that there is difficulty in developing reciprocal positive
games. So which is it, the lack of shared administrative heritage, or the inherent
flaws of M-form, that explains APV? This is an important question because if the
former is the correct explanation, then APV is representative of a minority, niche
subset of MNCs; and if the latter is the case, then it’s a pervasive issue.
This central question dogs many of the conceptual elements of the argument,
for instance the concept of ‘global games’. This is a useful notion, but how appli-
cable is it in situations where the centre is more dominant and can set the frame-
work of rules by which subsidiaries play? Even though games are likely to be
observable in such cases, their salience is likely to be far less than in the special
case of APV, and the subsidiary actors playing them may well have considerably
less room for manoeuvre. More generally, the book does not make explicit what it
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sees as the limits to the scope for games. Where, exactly, do multinational actors
come up against the structural constraints imposed by operating within a global
economic system of competition? And do such constraints vary from firm to
firm? One way of phrasing this issue is to ask whether the fate of APV was inevi-
table, given the financial community’s role in structuring the behaviour of stra-
tegic players in these sorts of firms; or were other paths possible, within the
constraints of the kind of multinational that it was?
At a more practical level, there is an irritating lack of transparency about
methods. On the basis of exactly what data, collected under what conditions,
are the book’s questions addressed? The empirical analysis is prima facie plausible,
coherent and indeed convincing, but rigour demands transparency about
mundane issues such as: the number of interviews conducted, with what
balance and breakdown of categories of respondent by site, function, etc., and
in which time periods of the project’s lengthy duration; how information was
recorded and analysed; the steps taken to ensure equivalence of data collection
procedures between sites and researchers; and so on. This may seem a prosaic
and pedantic criticism, but such transparency is important for the credibility
of the account and the trust of the reader. The lack of information on data
collection means, for example, that we do not always get a sense of how far
accounts of contentious processes or incidents were ‘triangulated’ through the
testimony of multiple witnesses.
A final set of questions revolves around the realism of the prescriptions that
the authors draw from their analysis. Though the authors are duly guarded
about the practicability of their proposals, it is still reasonable to ask whether
the prescriptions for experimental coalitions of actors in and outside the multi-
national as a means of developing local resources can really be effective in coun-
tering the systemic pressures of the ‘institutional equity nexus’. Can the implied
positive sum games be played in practice? Inevitably, it could be argued that there
will be competition for mandates between upskilling localities—and some will
lose out.
There must also be questions as to the generalizability of the prescriptions
taken from this particular case. In many firms, productivity coalitions within
the plant may not be viable because the multinational’s strategy is premised
on driving out costs rather than mobilizing craft skills and knowledge. In such
cases, the inclusive constitution of the ‘collective actor’ at the plant level, and
engagement with local knowledge communities, may not be important for the
subsidiary’s positional strategies within the global firm.
Most fundamentally, factors outside the control of local actors are liable to
swamp the impact of local strategizing. You may strategize all you like at the
level of the plant, but your vision can be swiftly obscured by the global competi-
tive forces within which multinationals operate: cross-border merger and
Local Players in Global Games 383
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acquisition, rapid and radical technological change, investor and share market
pressure on corporate leadership, and so on. Such forces can wash away subtle
positional strategies like tidal waves. Locationally specific competitive advantages
and skills, developed with such care and attention, may become obsolete and
redundant in short order. Indeed, the transitoriness of innovative local solutions
and coalitions is one of the striking findings of the book. The fate of Horsens
itself is a sad confirmation of this observation. In 2006, APV decided to pool
its Danish resources and concentrate its manufacturing on Kolding, relocating
production from Horsens some 40 kilometres to the north.
But despite these qualifications, Local Players is, to repeat, one of the most
stimulating, valuable and important works available. For those serious about
understanding multinationals, it is essential reading.
Reference
Bélanger, J., Berggren, C., Björkman, T. and Köhler, C. (eds) (1999) Being Local Worldwide:
ABB and the Challenge of Global Management, Ithaca, NY, ILR Press.
Institutional leverages and social dynamics
within a multinational
Jacques Bélanger
Département des relations industrielles, Université Laval, Québec, Canada
Correspondence: jacques.belanger@rlt.ulaval.ca
This book contributes to social science on the basis of very detailed empirical
research conducted at all levels within a multinational corporation (MNC),
which Kristensen and Zeitlin have studied in several countries over the course
of approximately two decades. It is a great piece of inductive field research, a
monograph in the best tradition of social science, drawing on and contributing
to several disciplines. The way the study evolved, from the local to the global,
that is, from Horsens, Denmark, and then Lake Mills, Wisconsin, and only
later to the headquarters (HQ) of APV located in London, England, is a charac-
teristic feature of the whole story, both empirically and theoretically. As they
write, ‘it would have been practically impossible to design such a study in
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advance’ (Preface, p. xx), and this polycentric perspective underlies a different
way of looking at MNCs, basically as something socially constructed from
below and not run from the top.
This review seeks to go to the essence of a book which is dense and somewhat
repetitive in some sections, but nevertheless highly readable because there is an
ongoing story being told throughout. I seek to outline what it says (Section 1),
what this means to social science research on MNCs (Sections 2 and 3), and
then what I would see as its limitations (Section 4). Going into its argument in
some detail will allow me to raise more critical questions at the end.
1. Local actors and their institutional environment
The empirical basis of the book relates to three subsidiaries, namely Horsens,
Lake Mills and a British subsidiary located in Eastbourne, as well as to the
APV HQ in London. The empirical material on Horsens and Lake Mills stands
out as the most detailed and impressive. In each case, the origin of the plant is
traced back over more than a century, and there are striking similarities in
the ways these dairy equipment producers developed on the basis of product
innovation and good craftsmanship in the distinct agricultural surroundings of
Denmark and Wisconsin. These firms had long and rich historical legacies by
the time they became part of APV, in 1987 and 1973, respectively.
The authors insist on challenging the ‘received expectation that the MNC
expands from an advanced technological and administrative home economy to
gradually conquer the world’ (p. 65). In other words, ‘rather than simply being
driven by sharks which eat the small fish, globalization is also propelled
by small birds seeking protection under the eagle’s wings’ (p. 63). I hesitate
somewhat in accepting the metaphor here because, as will be pointed out later,
at the end of this APV story, and this is not exceptional: poor decisions on the
part of the eagle had damaging effects on all local actors. But coming back to
the authors’ analysis, it is right that for so many of the MNCs which grew
rapidly on the basis of mergers and acquisitions, the classic view of looking at
the development of MNCs as a natural extension from the national to the
global, within a core set of knowledge in a given sector, should be amended.
Any notion of ‘natural development’ should be avoided. Hence it is useful to
throw light on the social and strategic dimensions of their construction. More
generally, one could never understand how they operate just by reading the
HQ’s discourse (or ‘narratives’ as the authors would say), too often reproduced
in the global business press.
Each of the three subsidiaries has its idiosyncratic features, with a century-long
historical heritage, most of this time having been spent as an independent firm of
medium size but with a key position in its local environment. What the authors
Local Players in Global Games 385
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are intent on showing is: (1) the varied degrees of success these local actors had in
playing global games and (2) how this success has been conditioned by the
national and local institutions. More precisely, the differences between them do
not lie only in national institutions as such, as if these were seen as something
‘given’, static or formal, but they also have to do with the activation of insti-
tutional arrangements by local actors. The analytical point is that we should
look not only at the possibilities of national institutions as complementary
resources for supporting local action, but also at the ways local actors make
use of such institutional arrangements as leverages to improve their strategic
position in their local community and within the MNC.
On such interaction with the local environment, the Danish subsidiary stands
out as the model, and this explains their ‘successful pursuit of positional strategy’
(p. 171) within the site itself, within the local economy and within the MNC. The
involvement of the local union and the leadership of its convenor have played a
role in so many key decisions, including the transaction by which Horsens
became part of APV. But their use of information and influence was significant
because they took advantage of resources such as the 1973 legislation granting
the right to elect representatives on the company board, and later the 1994 Euro-
pean Union Directive on information and consultation rights, which led, through
networking with other subsidiaries in Denmark and other countries, to the cre-
ation of a European Works Council for APV in 1996.
The Wisconsin site was developed on many of the same principles as Horsens,
in terms of know-how and high skills, social cohesiveness, workplace union soli-
darity, etc. However, in contrast to the Danish site, this solid workplace identity
did not lead to efficient linkages and networks within the community or within
the parent firm. At the American site, local actors had different relationships
with external actors within their local environment. They did not show as
much capacity for strategic action, partly for reasons having to do with insti-
tutions. Hence, ‘this stark contrast in the two plants’ relationships with external
suppliers stemmed not only from the strategies adopted by local actors, but also
from the very different rules governing their respective labor markets, rooted in
the broader institutional structure of the Danish and American national business
systems’ (p. 161).
2. ‘Warring fiefdoms’ and distant HQ
A major focus, and contribution, of this book relates to the explanation of the
social distance and inefficient relationships between APV’s HQ and its subsidiaries.
Kristensen and Zeitlin show in great detail how the basic administrative functions
of the MNC, that is, the control of resources and the coordination of activities
among more or less diversified lines of products across geographical boundaries,
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were not realized adequately here. Showing how naı̈ve the orthodox view that all
constituents of a given corporation worldwide should naturally inform, support
and learn from each other is, they stress how opportunistic and strategic games
on the part of subsidiaries were more or less standard behaviour. Indeed,
considering the structure of the situation, which meant having to impress the
London HQ or fighting for the same customers, such behaviour could be seen
as rational on the part of local players. The authors make frequent use of the
term ‘subversive strategies’, by which subsidiaries ‘weaken their ties to the parent
firm while integrating them more tightly into the local economy’ (p. 302).
In particular, the restructuring programmes and benchmarking measures that
were so in vogue during the mid-1990s, and highly recommended by leading con-
sulting firms, exacerbated the competitive spirit between local units. Even when
technically correct, the performance data reported by local actors would often be
‘spun’, so that they would not affect the plant’s position within the corporation,
hence adding one more dimension to the political game. The formalized report-
ing and information systems adopted by the London HQ in order to rationalize
the working of the whole organization had the effect instead of inhibiting the
sharing of innovative ideas and the whole learning process, which the authors
rightly see as crucial to the development of a firm. In short, many of the well-
intended measures taken by the HQ contributed to the state of ‘warring fiefdoms’
described in the book, and they ‘reinforced the feeling of mutual warfare between
the subsidiaries themselves and of arbitrary decision-making by the HQ’ (p. 180).
The study goes beyond describing such managerial problems. In many ways it
explains why these problems are not incidental but are almost bound to occur.
Three distinct factors contribute to the explanation of the polycentric forces
which dominate this organization and of the HQ’s incapacity to really coordinate,
in spite of so many efforts to do so. First, there is the rich history and heritage of
each subsidiary. Second, and related to this, there is the way each of them is
embedded in a specific institutional configuration. More precisely, as noted
above, we find ‘the local use of national institutions’ (p. 84). Third, there is the
fact that, as opposed to textbook prescriptions about corporate culture, such
complex organizations are made up of multiple and competing ‘narratives’.
The authors ‘conceptualize the globalization process as a coming together of mul-
tiple narratives which simultaneously co-exist, rather than merging automatically
into a single unity’ (p. 22).
3. Beyond APV: ideas for transforming MNCs
The final part of the book, comprising five chapters, is a bit unsettling. Part III
goes beyond the empirical study of this multinational and develops theoretical
propositions for transforming such organizations. Some of these propositions
Local Players in Global Games 387
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sound rather idealistic. The logic is that the authors are not satisfied with merely
describing the ineffectiveness of management within APV and explaining why it
exists, two major tasks at which they have, in my view, succeeded; they also put
forward propositions for transforming some of the ways these large corporations
operate. Hence, they write, ‘we will examine in greater detail how these failures
manifest themselves within the setting of a multinational corporation in order
to identify what would be required to overcome them by executive action’
(pp. 225 – 226).
While acknowledging several times that their ‘optimistic vision of transform-
ing the MNC’ (p. 255) is not about to be realized, it would seem that they shift the
emphasis towards this conceptual level for two key underlying reasons. First, the
problems of coordination observed within APV, in particular the social distance
between the subsidiaries and the HQ, each following distinct logics of action
which bring them further apart, are not specific to this firm. From a review of
the literature, the authors seek to establish that APV is by no means an exception.
Rather, they suggest a system failure associated with the very nature of the MNC
as a complex organization. Second, such system failure in the management of
MNCs should not be seen as a problem only for the corporations directly con-
cerned and their shareholders; these are also problems for their employees and
broader society because they affect, and sometimes jeopardize, the development
of collective resources in so many communities.
Of particular interest are the concepts of ‘practical deliberation’ and ‘learning
by monitoring’, as developed by Charles Sabel. While such mechanisms would
operate mostly at the organizational level, the authors also throw light on the pos-
sibilities of current participatory experiments that create links between employees
beyond organizational and national borders. Institutions such as the European
Works Councils and other mechanisms for ‘public deliberation’ may help, the
authors suggest, ‘to civilize the ongoing game between global companies and
capital markets’ (p. 264; see also pp. 299 – 300). Hence,
if MNCs are to become genuine vehicles for mutually beneficial collab-
oration and learning by monitoring among their constituent units, they
need to create new organizational channels for involving employee
representatives and other local focal actors in practical deliberation
about the firm’s strategic objectives and the performance measures
used to assess progress towards them. (p. 309)
However, at the end, the authors explicitly acknowledge that the programme
for democratic reform they clearly favour is unlikely to prevail. And the book
concludes with a set of alternative and less inspiring scenarios which ‘seem at
least as likely but their consequences much less desirable’ (p. 322).
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4. Usefulness and limitations of an idealistic view
I have noted that the final part of the book sounds idealistic, and some of the
propositions rather utopian. But this is part of the logic pursued by the
authors, and there is no need to insist further on this point. Indeed, I share
with Kristensen and Zeitlin the view that the reality is not an acceptable scenario
either.
I would only suggest that a distinction should be more clearly made between
mechanisms aimed at ‘civilizing’ some of the ways the ongoing game is played
(see pp. 264, 299 – 300) and the broader idea of transforming the MNC, as this
would require changes in the rules of the game themselves. What I have in
mind here is that the working of transnational corporations and the keys for
both local and corporate actors to transform them are connected with the
working of capitalism itself.
I presume the authors would not disagree with this general statement because
they do not condemn the political economy perspective suggested here. However,
I feel they do not engage with it either: they stay away from some of its dimen-
sions. The reader finds a general tendency to put the emphasis on how much
leeway the local players have had in shaping their own respective strategies
within the corporation, even in the process of mergers and acquisitions, that is,
from the time they sought ‘membership’ in APV (pp. 39 – 40, 92). This study is
extremely rich on matters of power and strategy. However, when discussing prop-
ositions and scenarios for transforming the current reality, I feel it does not give
proper weight to the structural conditions that shape the rules of the game. It
follows that these propositions sound either too idealistic or too limited to
unlock the dysfunctions so well described and analysed in the book. Indeed,
the concluding chapter recalls how the acquisition of APV by larger firms
(twice in less than two years), as part of the ‘City investment game’, and poor
decisions by successive HQs proved to be quite damaging for these local organ-
izations built over so many years. As illustrated once again by the story documen-
ted here, the local actors usually do not hold so many of the keys for controlling
their destiny within such global corporations. The point I seek to make goes
beyond a simple question of word formulation; it has to do with the conceptual-
ization of MNCs. Although they are complex organizations, embedded in
particular institutional environments, MNCs are still an integral part of, and
driven by, capitalism.
I would not like to sound too pessimistic—or perhaps I should say too
realistic—and I see much merit in many of the ongoing experiments discussed
in the final chapters of the book. I suggest, however, that the possibilities of
such participatory mechanisms to support employees’ and unions’ strategies
within MNCs, nationally and internationally, could be enhanced if more
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attention were given to the ways these corporations operate within the inter-
national political economy.
These questions raised at the end do not change my overall appreciation of
the book Local Players in Global Games is an excellent piece of scholarship, in
the best tradition of social science. Deservedly, it has quickly become a standard
reference in the study of MNCs, from both the organizational and institutional
standpoints.
Challenging the transnational model
D. Eleanor Westney
Schulich School of Business, York University, Toronto, Ontario, Canada
Correspondence: ewestney@schulich.yorku.ca
Scale, complexity and difficulty of access have made research on the organization
of multinational enterprise a somewhat specialized area of study, despite the
importance of multinational enterprises (MNEs) in today’s business environment
and in theories of globalization. With this book, two sociologists whose previous
work has centred on, to use their own words, ‘the historical development, internal
dynamism, and innovative capabilities of industrial districts or regional clusters
organized around flexibly specialized networks of small and medium-sized firms’
(p. xiii) have produced the best study of MNE organization to appear in nearly
two decades. They have absorbed and built on three decades of research on the
MNE within the field of International Business, but they bring a fresh perspective,
a different level and depth of analysis, and an original approach to the managerial
problems that seem to beset today’s MNEs, and they raise challenges to
established models of the MNE that should have a significant impact on future
research agendas.
Serendipity played a role in the genesis of this study: the authors discovered at
a conference that each had been studying a different subsidiary (one in Wisconsin
and one in Denmark) of the same MNE as part of their research on industrial dis-
tricts. That might have remained an interesting coincidence but for the growing
debate over the role of MNEs in industrial districts. Do MNEs simply exploit and
even erode the capabilities of the industrial clusters in which they increasingly
participate by acquiring local firms, or do they bring valuable access to global net-
works and cross-border learning? Their study of three subsidiaries (they added a
unit in England) and the headquarters (HQ) of APV, a British-based engineering
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firm producing equipment primarily for the food processing industry that had
expanded internationally through acquisition, addresses these questions and
makes a major contribution to the research on MNE organization as well as to
the role of MNEs in industrial districts.
Kristensen and Zeitlin take seriously the integrated network model of the
MNE (also known as the transnational) that has dominated the study of MNE
organization in the International Business (IB) field since the mid-1980s, when
the focus of inquiry shifted from asking how a firm becomes multinational to
what advantages a firm derives from being multinational. This model portrays
the MNE as having a sustainable advantage over local firms (and other MNEs)
only if each subsidiary develops distinctive location-based capabilities and par-
ticipates in exchanges of knowledge and learning as well as goods and services
with other subsidiaries. There were two variants of this model. One, the ‘transna-
tional’ model (Bartlett and Ghoshal, 1989), portrayed the MNE as a hierarchy in
which the MNE HQ orchestrated cross-unit cooperation and competition; the
other, Gunnar Hedlund’s ‘heterarchy’ model, which has been influential in
academia but much less so in managerial circles, saw coordination as emergent
from the network itself (Hedlund, 1986). The integrated network model, in
either variant, has important implications for industrial districts: as the
authors observe, ‘By combining these different types of institutionally rooted
capabilities and developing new forms of hybridization between them, multina-
tional corporations could thus benefit not only themselves but also the many
local communities which they tap into and interconnect’ (p. 302).
The authors bring to their analysis of APV a distinctive perspective on the
MNE. Most research on the transnational has taken an HQ perspective; the
smaller body of subsidiary-focused studies adopts the view of the subsidiary
manager. Kristensen and Zeitlin see the MNE from the shop-floor rather than
the manager’s office. Both this perspective and their deep knowledge of the indus-
trial districts in which these engineering-based plants are embedded provide rich
insights into the nature and complexity of the organizational capabilities of which
many in management fields talk so glibly. These organizational capabilities are
grounded in the skills, identities, interests and interactions of the different occu-
pational groups within the workplace and in the local institutional context of
training and labour market institutions. They take a long time to build, and
they can quickly be eroded by executive decisions taken by HQ managers who
may not even know what has produced the performance they value so highly,
let alone understand how to maintain those capabilities.
They also provide a distinctive perspective on the MNE HQ, which they see
not as a separate level of analysis from the local subsidiaries and the provider
of the global perspective on the MNE network in its entirety, but as a unit that
is as locally embedded in its industrial district as the most parochial of
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subsidiaries. The APV HQ industrial district was the City of London network of
‘institutional investors, fund managers, securities analysts, and financial
journalists’ (p. 21) whose collective view of the performance of APV determined
its share price, and therefore the remuneration and longevity of top executives,
access to external investment capital and susceptibility to takeover by a more
aggressive and highly regarded firm. This cluster was also as much the local
employment network for the executives as the local industrial district was for
the skilled craftsmen.
It is impossible to do justice to their analysis in a short review, but basically,
they found that two subsidiaries experienced significant destruction of their
capabilities over the time period of the study, and the third, in Denmark, was,
at the time the study was cut short by the takeover of APV, in danger of being
eroded by success (its managers were being promoted out of the plant, and its
resources stretched thin by demands on its remaining personnel to act as a learn-
ing resource for other subsidiaries). Despite the embrace of the transnational
model by the London HQ of APV (‘In comparing Bartlett and Ghoshal’s concrete
recommendations with what happened in APV, one might think that the top
managers at Lygon Place had simply copied these authors’ programme
step-by-step’ [p. 193]), the outcome was conflict and ‘warring fiefdoms’ rather
than coordination in an integrated network. The question the authors—and
the readers—ask is whether APV’s experience is idiosyncratic, common to all
MNEs, or common to a significant subset of MNEs.
There are some grounds for dismissing APV as an unusual case. APV was con-
structed through a series of mergers and acquisitions, and although those acqui-
sitions began in the mid-1980s, the company lacked a strong base company to
drive the integration process, and well into the 1990s seemed to allow high
levels of local autonomy. This made subsidiaries even more resistant to centrally
driven coordination efforts when they were finally undertaken. And APV faced
strong financial pressures because of the relatively concentrated pattern of own-
ership in London-based institutional investors and the high level of debt taken on
to finance the acquisitions, which intensified short-term performance pressures
and resulted in high turnover at the top of the company. Moreover, it is a case
of an unsuccessful firm, one which was taken over in 1997 (ending the
authors’ access to the company) and which has been taken over, sold off and
restructured several times since then. Throughout this study, APV was under-
going continuous headcount reduction, divestments and executive turnover,
and this would erode capabilities in any company, domestic or MNE.
Kristensen and Zeitlin themselves see APV as typifying the stresses facing
MNEs today. Based on APV and on their reading of a number of recent case
studies, they assert that the problems are generic rather than specific to one
company, that APV’s continuing performance problems were integrally linked
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to their MNE organization, and that that the barriers to achieving the transna-
tional model are inherent in the model itself. First, HQ executives cannot possibly
have the depth of knowledge of each of their many diverse subsidiaries to make
well-informed decisions about the roles each unit should play. The number and
variety of sites even within a single business unit have become too great, and
therefore executives rely on a small number of standardized performance indi-
cators that are, by their very nature, backward-looking rather than
forward-looking, reflecting investments and capabilities built up in the past
rather than the current activities that will pay off in the future. Second, the dom-
inance of the global business division structure reinforces this focus on efficiency
(narrowly defined in terms of costs) and short-term performance. Indeed,
Bartlett and Ghoshal’s model looked to a balance of power and perspectives
across business division, country and functional managers to maintain
cooperation and limit competition within the transnational. Many MNEs
today have eliminated country managers and put the functions under the
business units, tipping the balance heavily to the business divisions, with all
the problems that Kristensen and Zeitlin describe so well.
Third, MNE HQ are increasingly the captives of a financial community that is
locally concentrated, densely networked and characterized by narrow and
strongly convergent views of what makes a good company. This leads to rapid
changes in strategic direction when performance flags, producing many of the
dysfunctional behaviours noted by the authors and familiar to anyone who has
recently worked with MNEs. These include redefining businesses as ‘non-core’
and selling them off, even when they are co-located within a multi-product
plant in a key subsidiary and closely integrated with its production systems;
resorting to a succession of external consultants, who must come up with differ-
ent ‘solutions’ to justify their very hefty fees; across-the-board headcount
reductions; and mandated outsourcing, even when a plant has a competitive
advantage in a particular component or subsystem that is central to its competi-
tive advantage. Additionally, the reward systems and reciprocity norms of MNEs
are individually focused, rather than unit-focused: as the authors observe, ‘profit-
sharing in whatever form receives very little attention not only in our case but in
the general literature on the organization of MNEs’ (p. 231), which suggests to
them that the problem is generic rather than specific. Finally, in the context of
these patterns in the MNE, each unit (including HQ) develops narratives that
attribute problems to other units, leading to negative attributions that become
increasingly difficult to overcome as they become entrenched over time.
If this study prompts new research to assess the generalizability of their find-
ings, then their contribution to the field will be even greater. We need more
studies of the MNEs assembled by acquisition over the last decade of torrid cross-
border M&A, especially those like APV in the middle of industry value chains,
Local Players in Global Games 393
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where consolidation has been driven by concentration in final product markets
(such as Unilever and Nestle in food processing, APV’s market). We need more
comparative studies of subsidiaries in the same location under different
ownership, to explore whether (as the authors suggest) Anglo-Saxon MNEs are
particularly susceptible to the pathologies they describe. Comparative studies
of MNEs headquartered in a major financial centre and those well outside
those centres might be very illuminating. And we need more studies over time
of the Centres of Excellence in MNEs that were analysed in the mid-1990s:
have they sustained their capabilities and their role since those initial studies
were conducted?
Perhaps their most interesting finding, and one that points the way for the
authors towards a new organizational form for the MNE, was that a cooperative
network seemed at times to be emerging among the APV subsidiaries, based on
different locationally specific advantages. This emergent network was, however,
continually (and unintentionally) disrupted by a HQ obsessed with centrally
driven ‘best practice’ as recognized by the City of London. They suggest that
the HQ-driven transnational model underlies many of the problems that
MNEs face today, and that the only viable way forward is an emergent model
that looks more like a heterarchy than a hierarchy—and which also looks remark-
ably like a virtual industrial district—in which competition and cooperation are
balanced by the interactions of the players, not by a presiding authority. While
their thoughtful and detailed discussion of the steps involved in moving in this
direction may sound idealistic, it is certainly no more so than the ‘transnational
solution’ of Bartlett and Ghoshal.
References
Bartlett, C. A. and Ghoshal, S. (1989) Managing Across Borders: The Transnational Solution,
Boston, MA, Harvard Business School Press.
Hedlund, G. (1986) ‘The Hypermodern MNC: A Heterarchy?’, Human Resource Manage-
ment, 25, 9 – 35.
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