Managing the Embedded Multinational: A Business Network View, Mats Forsgren, Ulf Holm, Jan Johansson, Edward Elgar, Cheltenham, 2005.

Research output: Contribution to journalArticlepeer-review


This book articulates a business network approach to understanding the multinational enterprise (MNE). It employs sustained theoretical arguments, case studies of business relationship and networks and empirical analysis on data from an extensive and long standing research project at Uppsala University (Managing International Networks???MIN) initiated by the authors. The book provides business network perspective of the MNE as an inherently loosely coupled organization. As the authors explain, this perspective differs from other influential approaches in two interrelated ways: in the way that the ???environment??? of the MNE is characterized and in the conceptualization of the MNE as an organization. The dominant contingency approach favours the characterization of the environment in terms of general features such as complexity, dynamism and the degree of competition. The MNE then fashions strategies that fit the environment and the control systems that ensure the strategy is effectively implemented. The control systems include not only formal procedures such as the appropriate mix of centralization and formalization but also normative integrative mechanisms ensuring that the (inevitable) differentiation between the different units in the MNE does not become an obstacle to the development of a unified and integrated approach defined by top management (Ghoshal & Nohria, 1997). The underlying assumption is that top management is able to evaluate the environment and effectively ???orchestrate??? the processes of strategy formulation and implementation. The business network approach rejects the comforting assumptions of the contingency perspective. The more realistic picture is held to be one in which top management in MNEs often have only vague ideas about business in most countries. It considers the notion of the environment in the contingency perspective as ???faceless??? and as failing to appreciate the importance of business relationships in the way that firms interact with their environment. Thus in place of general characterization of a business's environment, the network approach advocates a focus on the important actors in the subunit's surroundings such as customers, suppliers, competitors as well as governmental and regulatory agencies. The pattern of direct business relationships between particular MNE subunits and their suppliers and customers (be they inside or outside the MNE) and their indirect relationships (e.g. supplier's supplier and/or a customer's customer) has an important influence on the organization of the MNE. In particular, those (usually few) direct and indirect customers/suppliers with which the MNE unit has developed strong business relationship over (usually a long period of) time constitute the unit's (business) network context. The network context of a unit has a critical influence on the investment and growth activities of the unit???the unit is ???embedded??? in the network context in the sense of its investment and development activities being strongly influenced by a long-lasting and cumulative process of mutual adaptations between it and the actors in its network context. The actors in a unit's network context may sometimes be, almost entirely, outside the MNE while for other units they may straddle ???the inside??? and ???the outside??? of the MNE. In this sense the boundaries between the MNE and its ???environments??? are inherently ambiguous: they are largely ???enacted??? in the sense of reflecting the perception of the various business units??? as to the precise demarcation between the important direct and indirect business relations and the unimportant ones. The demarcation cannot be determined or defined by outside observers. In the book the authors apply this perspective to provide distinctive explanations of a range of issues of central interest of business and management scholars concerned with the MNE. Specifically, various chapters in the book demonstrate how such issues as the meaning of internationalization, HQ control in the MNE, intra-MNE knowledge transfer and subsidiary power and influence over MNE strategy, are all strongly shaped by the business network contexts of the different units in the MNE. For example, the analysis demonstrates how some subsidiaries are less controllable than others and how the roles of subsidiaries in the corporate network may not coincide with their role in their external business networks. A subsidiary's embeddedness in external networks not only enables it to resist the power of the centre, it can also enhance its ability to influence the MNE strategy. Whilst a number of scholars applying different theoretical lenses have fruitfully analysed the complex strategic roles developed by subsidiaries in the MNE, the network approach arguably furnishes the strongest theoretical basis for the view that intra-MNE relationships are not necessarily harmonious. The ability of the HQs to control subsidiaries is partly a function of the network-based resources at the disposal of subsidiaries relative to the dependence of the subsidiary on the resources controlled by the HQ. Generally speaking, the power of the HQs is considerably more constrained than is suggested by the contingency perspective. In a similar vein the analysis casts doubts on the relevance of normative integration (???shared value???) in facilitating knowledge transfer between different units of the MNE; business network configurations turn out to be much more influential in determining intra-MNE knowledge transfers. The fundamental message of this book is that the ???ordinary??? business of business???that is buying and selling???has a profound influence on how MNEs work???as long as we recognize (in the tradition of ???markets-as-networks??? approach) that ???ordinary??? buying and selling develops into fairly stable patterns of business relationships and networks. The markets-as-network tradition has arguably been wrongly neglected in international business and this book provides a forceful and valuable contribution by spelling out in detail how starting from a simple beginning the network approach develops into a powerful analytical tool for understanding the MNE. The approach has surprising ???mileage??? given that some variables that are usually central to IB analysis???such as cultural and institutional differences between countries???play a decidedly secondary role. In particular, internationalization is largely a consequence of network extension; national boundaries do not necessarily imply a punctuation or discontinuity in network relationships. Reflecting on the absence of institutional and cultural factors in the analysis, it can perhaps be argued that whilst in the contingency tradition markets are ???faceless???, in the network approach, markets do not have a nationality. It is important to observe that, in the network approach, subsidiaries are embedded in business relationships and not in host country economies as such. The embeddedness of subsidiaries does not necessarily reflect considerations of physical or institutional proximity. Ironically it is increasingly the case that MNE production activities are becoming more footloose whilst the more ???creative??? activities are indeed highly embedded and sticky-located mostly in ???metropolitan??? economies with appropriate institutions. Thus a fruitful line of inquiry is how the business network approach may shed light on such ???duality??? in the structure of the typical MNE. My guess is that institutions may play a greater role here. A related issue is that MNE HQs (particularly in large MNEs) are likely to be linked to extra???organizational networks (such as finance and the market for corporate control). This is important as the pressure for organizational change often stems from this level. The network analysis suggests that the MNE HQ is just one (albeit very powerful) actor amongst several within the organization. But the HQ is unique in having the legally bestowed power to affect a major re-organization. They may normally refrain from using this ???last resort??? power but if external pressures for example from ownership interests become great they may well employ their ???last resort??? power in order to affect structural change. There is much evidence that MNEs have undergone a process of ???recentralization???, a consequence of which is the narrowing of the roles and scopes of subsidiaries in the organization (e.g. Buckley & Ghauri, 2004). This volume is undoubtedly an important addition to the IB literature. It is a rigorous and holistic demonstration of the important contribution of business network theory for enhancing our understanding of the organization and the management of MNEs. It deserves to be widely read by IB scholars particularly by those specially interested in the MNE. The book has the additional merit of being extremely well written and thus highly accessible, making it also suitable for post graduate students on international business courses not least for the interesting and detailed case studies that the book contains. It has been added to my reading list!
Original languageEnglish
Pages (from-to)136-138
JournalInternational Business Review
Issue number1
Publication statusPublished - 2007


Dive into the research topics of 'Managing the Embedded Multinational: A Business Network View, Mats Forsgren, Ulf Holm, Jan Johansson, Edward Elgar, Cheltenham, 2005.'. Together they form a unique fingerprint.

Cite this