Liena Kano and Luciano Ciravegna
Alain Verbeke is one of the world’s leading thinkers on international business (IB) and globalization, a renowned scholar and educator who contributes to creating a better global…
Abstract
Alain Verbeke is one of the world’s leading thinkers on international business (IB) and globalization, a renowned scholar and educator who contributes to creating a better global business environment by addressing some of today’s most critical challenges. He was one of the first scholars to advance a theoretically rigorous and practically significant perspective on international corporate social responsibility (CSR). Verbeke’s work on international CSR is particularly impactful because it is rooted in IB theory and based on a realistic set of assumptions about the behavior of managers, policymakers, and other market and nonmarket stakeholders. In this chapter, the authors apply theoretical principles central to Verbeke’s research – most notably behavioral assumptions of bounded rationality and bounded reliability – to analyze businesses’ and societies’ pace of progress in relation to stated environmental, social, and governance (ESG) goals. The authors argue that bounded rationality and reliability challenges create misalignment between stated/imposed commitments toward ESG performance, and economic actors’ ability to deliver on these commitments. The authors discuss examples of such misalignment, focusing on tensions among stakeholders, between stakeholder organizations and firms, and within firms. The authors propose that to be relevant for policy and practice, the sustainability research should be based on realistic microfoundational assumptions.
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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 significant…
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.
“First principles” of international business (IB) thinking should be applied systematically when assessing the functioning of internationally operating firms. The most important…
Abstract
“First principles” of international business (IB) thinking should be applied systematically when assessing the functioning of internationally operating firms. The most important first principle is that entrepreneurially oriented firms seek to create, deliver and capture economic value through cross-border linkages. Such linkages invariably require complementary resources from a variety of parties with idiosyncratic vulnerabilities to be meshed. Starting from first principles allows bringing to light evidence-based insight. For instance, most companies are not global and even the world’s largest firms rarely change the location of key strategic functions. International new ventures (INVs), emerging economy multinational enterprises (MNEs) and family firms face unique vulnerabilities but also command resources that can be used to create value across borders. The quest for “optimal” international diversification appears to be a futile academic exercise, and in emerging economies with institutional voids, relational networks – and more broadly, informal institutions – are unlikely to function as scalable substitutes for formal institutions. In global value chains (GVCs), many lead firms and their partners have been able to craft governance mechanisms that reduce bounded rationality and bounded reliability challenges, and it is also critical for them to use governance as a tool to create entrepreneurial space. Finally, many of the world’s largest companies have been on successful trajectories toward reducing their climate change footprint for a few decades. But these firm-specific trajectories are fraught with challenges and cannot just be imposed via unilateral, macro-level targets decided upon by individuals and institutions lacking a clear understanding of innovation and capital expenditure processes in business.
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This paper seeks to demonstrate that internalization theory, as a “complete” theory of the firm, is particularly well equipped to analyze multinational enterprise (MNE) regional…
Abstract
Purpose
This paper seeks to demonstrate that internalization theory, as a “complete” theory of the firm, is particularly well equipped to analyze multinational enterprise (MNE) regional strategies, thanks to its joint transaction cost economics and resource‐based foundations.
Design/methodology/approach
This paper builds on recent work by Wolf, Egelhoff, and Dunemann to show that internalization theory's predictions on MNE regional strategy are superior to those suggested by several other conceptual frameworks. For each of the 11 hypotheses formulated by Wolf and his co‐authors, an alternative is proposed here that is consistent with internalization theory predictions.
Findings
MNE regional strategy is an important empirical phenomenon. Internalization theory, as a powerful conceptual framework with general applicability, simplicity and accuracy, allows in‐depth analysis of MNE regional strategies.
Research limitations/implications
Internalization theory scholars need to find new ways of operationalizing MNE firm‐specific advantages (FSAs), as well as MNE resource recombination trajectories, to predict accurately when and how MNEs will pursue regional versus global strategies.
Practical implications
MNE senior management should rethink international expansion strategies and realize that most large MNEs actually pursue regional, not global strategies.
Social implications
Even the world's largest MNEs have great difficulty engaging in novel resource recombination across the globe, and their alleged market power should therefore not be overestimated.
Originality/value
International business scholars should embrace internalization theory as the general theory of the MNE, rather than looking for insight from theories not intended – nor properly equipped – to study strategies of the world's most complex entrepreneurial organizations.