Rajneesh Narula

Multinational Enterprises and Local Contexts: The Opportunities and Challenges of Multiple Embeddedness

Some scholars have argued that globalization will reduce the importance of local contexts. We argue instead that despite the increased frequency and intensity of interactions across local contexts, they continue to retain their distinctive differences. MNEs face growing challenges in managing the complexity of these interactions, because they must manage ‘multiple embeddedness’ across heterogeneous contexts at two levels. First, at the MNE level, they must organize their networks to exploit effectively both the differences and similarities of their multiple host locations. Second, at the subsidiary level, they must balance ‘internal’ embeddedness within the MNE network, with their ‘external’ embeddedness in the host milieu. Balancing the subsidiarys strategic role within the MNE with its local identity and its domestic linkages can sometimes represent a trade‐off. Multiple embeddedness thus creates both business opportunities and operational challenges, which are explored in this special issue.

Industrial Development, Globalization and Multinational Enterprises: New Realities for Developing Countries

Globalization has changed economic realities. First, the competences of multinational enterprises (MNEs) are becoming increasingly mobile and knowledge-intensive. MNEs thus give more attention to the availability and quality of the created assets of alternative locations. Second, among developing countries there are now considerable differences between the catching-up countries (e.g. newly industrialized countries) and falling behind , less developed countries. These developments have helped change the opportunity sets of both MNEs and host countries. Foreign direct investment (FDI)-based development strategies are now commonplace among less developed countries, but there is also increased competition for the right kinds of investment. In general, the balance in bargaining power has shifted in favour of the MNE, and less developed countries increasingly need to provide unique, non-replicable created assets to maintain a successful FDI-assisted development strategy.

R&D collaboration by SMEs: new opportunities and limitations in the face of globalisation

Globalisation has systemically affected the way all firms undertake innovation. First, there has been a growing use of non-internal technology development, both by outsourcing and strategic alliances. Second, products are increasingly multi-technology. This has led to the growing use of networks by all firms, previously a primary competitive advantage of SMEs. These developments have created both opportunities and threats for the SME. On the one hand, large firms have increasingly sought out SMEs as they have developed their use of external networks. On the other hand, by doing so, larger firms are able to avail themselves of the flexibility long-enjoyed by SMEs. This is particularly so in the electronics hardware-based sector, where we have evaluated the R&D activities of both large and small firms. Although SMEs continue to have the advantages of flexibility and rapid response, the traditional disadvantages due to size limitations may have worsened due to the demand for multiple technological competences and by increased cross-border competition.

The R&D Activities of Foreign Firms in the United States

In recent years, considerable attention has been paid in the literature to the process of globalization and the increasing extent of economic integration between advanced industrial countries. In part, these events have been facilitated and fashioned by the activities of multinational enterprises (MNEs) as they have sought to rationalize and coordinate their production in various locations (United Nations, 1993). Initially, as firms engage in foreign direct investment (FDI), they tend to do so in comparatively low-value activities. If successful, these activities are followed by a forward and backward deepening along the value chain. Eventually, such vertical integration may embrace technologically sophisticated production and research and development (RD and there is considerable evidence (Casson, 1991; Pearce, 1989) that, over the last two decades, there has been a steady regionalization or globalization of highvalue activities from both developed and developing countries. However, a particular feature of the increasing foreign ownership of domestic R&D activities in the advanced industrialized countries is that in recent years it has increasingly occurred through the acquisition of existing innovatory assets rather than the setting up of new that is, greenfield R&D ventures. Moreover, such acquisitions have been prompted not so much by the desire of MNEs to exploit existing technological advantages as by a perceived need to protect these advantages or to acquire new ones. To this extent, such FDI in R&D activity is best described as strategic asset seeking FDI.1

Innovation systems and ‘inertia’ in R&D location: Norwegian firms and the role of systemic lock-in

Abstract This paper seeks to enquire why firms— ceteris paribus —tend to concentrate their R&D activities at home, using a systems of innovation (SI) approach. We argue that R&D inertia is associated with structural inertia and resultant systemic lock-in. Interaction within an SI is a self-reinforcing mechanism which may or may not lead to ex post efficiency. Lock-in can be efficient when technologies and institutions maintain the competitiveness of firms. On the other hand, radical innovations or technological discontinuities may require new institutions and resources, but systemic lock-in may prevent rapid reaction. Firms can use a ‘voice’ strategy by intervening to modify the appropriate institutions in the existing SI, or an ‘exit’ strategy by seeking alternative SI which more closely fit their needs. In the case of Norway, two groups of firms exist. Group A benefit from a systemic lock-in. These are large firms in traditional sectors, which are highly embedded, and around whom the Norwegian SI has been built. These firms engage in ‘voice’ and ‘loyalty’. Group B are in science based sectors for whom lock-in results in inefficiencies, and use ‘exit’, (slowly) expanding R&D abroad to seek competences in technologies not available domestically.

Multinational Enterprises, Development and Globalization: Some Clarifications and a Research Agenda

This paper considers how economic globalization has affected opportunities and challenges for developing countries in following a multinational enterprise (MNE)-assisted development strategy, revisiting an earlier article by the authors. The growing share of industrial activity owned and/or controlled by MNEs has not—by and large—led to a proportional increase in sustainable domestic industrial growth. Particular attention is paid to how MNEs have responded proactively to globalization by modifying their strategies, spatial organization and the modalities by which they interact with host economic actors, and how these changes alter our understanding of MNEs and development. What has been learnt over the last decade about embeddedness, institutions, inertia, absorptive capacity, spillovers and linkages, and how they can explain the success of some countries (or regions) in promoting growth, and the failure of others, is examined. The need to link MNE and industrial policies systematically is highlighted. Attracting the “right kinds” of MNE activity remains important, but greater heterogeneity of MNE activity and host locations requires greater customization of policy tools.

ROLE OF HOME AND HOST COUNTRY INNOVATION SYSTEMS IN R&D INTERNATIONALISATION: A PATENT CITATION ANALYSIS

This paper has three novelties. First, we argue that any given R&D facility’s capacity to exploit and/or augment technological competences is a function not just of its own resources, but the efficiency with which it can utilise complementary resources associated with the relevant local innovation system. Just as asset-augmenting activities require proximity to the economic units (and thus the innovation system) from which they seek to learn, asset-exploiting activities draw from the parent’s technological resources as well as from the other assets of the home location’s innovation system. Furthermore, we argue that most firms tend to undertake both asset exploiting and augmenting activities simultaneously. Second, we use patent citation data from the European Patent Office to quantify the relative asset augmenting vs. exploiting character of foreign-located R&D. Third, we do so for European MNEs located in the US, as well as US MNEs located in Europe. Our results indicate that both EU (US) affiliates in the US (EU) rely extensively on home region knowledge sources, although they appear to exploit the host country knowledge base as well.

Technological competitiveness, trade and foreign direct investment

Abstract This paper tests an empirical model of the importance of country-level determinants in explaining export shares and shares of FDI for 41 developing and industrialized countries. It takes a common framework which regards technology as playing a central role. Country determinants appear to be of similar importance in explaining inward and outward investment and exports: technological capabilities and the level of development are found to be two of the key determinants. In the case of industrialized countries there are additional factors, possibly not related to country-specific characteristics, which play an important role.

Multinationals and industrial competitiveness

This book offers an important contribution to the contemporary debate on the role of multinational enterprises (MNEs) in economic development in an increasingly globalizing, knowledge-intensive and alliance-based world economy.

THE ROLE OF FOREIGN DIRECT INVESTMENT IN UPGRADING CHINA'S COMPETITIVENESS

This article assesses the role of foreign direct investment in upgrading the competitiveness of recipient countries with particular reference to the contemporary needs of China. In particular, it examines how this role changes as a country moves along its investment development path, and how host governments have to reorient their locational strategies in order to attract and retain the kind of resources and capabilities, which only foreign firms can provide.