The Multinational in Global Production and Trade Networks
The world of international business is complex and contested. It is also changing rapidly. These changes apply to international business and the frameworks and structures of businesses themselves, and the way we understand them. Your task is to take a current theory of international business, apply it to an industry and to also explain the institutional structure and recent history of that industry, in terms of key firms, industry structure, global production and marketing orientation, ownership and financing as well as government and other civil society groups regulation, monitor or contest those industries. Once you have undertaken the industry profile you are then challenged to assess the ways that theories of international business helps us to understand the industry, its history and trends, and where it doesn’t.
1. Your task is to take a current theory of international business, and apply it to an industry and its key corporations.
2. and to also explain the institutional structure and recent history of that industry, in terms of key firms, industry structure, global production and marketing orientation, ownership and financing as well as government and other civil society groups regulation, monitor or contest those industries.
3. Once you have undertaken the industry profile you are then challenged to assess the ways that theories of international business helps us to understand the industry, its history and trends, and where it doesn’t.
4. The written report should blend analytical writing, weighing of historical and contemporary data, and set them against the theoretical framework you have chosen.
A suggested structure for this essay is:
- What is the theory?
- What is the historical context of the theory’s development?
- What are the critiques of this theory?
- Is there still any value to the theory in the current context?
Some Further Guidance on Topics, Topic Selection, Research Strategies and Essay Writing
Assessment Task 2 is asking you to pick a theory of international business, describe the context of its development, then trace its evolution over time, and to provide an assessment of its analytical power today.
You need to pick a current theory – GVC, GPN, Global Factory, Platform business
You will find a list of possible IB –related theories for you consider and a little background on them below.
Here’s a task list once you have made your selection.
- The first task is to do a lit review of the theory, and a little bit of business and economic history. What were the circumstances that have led to the development of the theory? What does the theory try to explain? How does it do so?
- The second task is to then compare the stylised facts of today with those that prevailed when the theory was developed. What is similar in those circumstances and what is different? What are the implications if any of the changed
- The final piece of this is to provide an assessment about the analytical power of the theory – strengths and weaknesses etc.
- Theories to Consider
MNCs as Intra and Inter-organisational Networks – As the number and scale of Multinational Enterprises grew in the 1980s and 1990s, there was increasing recognition that the international businesses were no longer an exception, but now becoming the standard. Their existence did not need to be explained as an , requiring some special advantage. But that growth was not linear. The industries in which MNCs were growing was not uniform. Also, the forms in which MNCs operated was also growing – wholly owned subsidiaries, joint ventures, partnerships, strategic alliances, franchising, outsourcing etc. MNCs often used a range of these and they kept changing. Theories started moving to explaining the MNC in more fluid and organisational terms. The MNC as organisational networks helped to capture this significant development, and made the boundaries of the firm more porous and directed attention to strategic decisions about arrangements within and between firms. As one of the founding scholarly articles of the IOM approach put it, the MNC is here: “…conceptualized as an interorganizational network that is embedded in an external network consisting of all other organizations such as customers, suppliers, regulators, and so on, with which the different units of the multinational must interact. Based on such a conceptualization, the present authors draw on interorganization theory to develop a model of the multinational corporation as an internally differentiated interorganizational network.” (Bartlett and Ghoshal Academy of Management Review 1990)
Readers will also note how it is an approach that GVC and GPN scholars would later build on, or at least develop in parallel ways.
Network and Chain Models of IB
- Global Value Chains (GVC)
As the growth of international production and exchange extended further, we started seeing the unbundling of the MNC as a single coherent and discrete entity with clear boundaries. The GVC literature developed a concept of value chains that was first floated by Michael Porter in his Competitive Advantage work.
The GVC approach was developed around a question about whether an unequal relationship existed between where value was being created and where it was captured. In value chains there may be places where exchange is unequal where, for instance, a grower of coffee may get less than the value created when selling to a merchant, or paying debts from a finance company.
Given that GVC began with a special focus on industries in developing countries, it is perhaps no surprise that the approach is associated with the Institute of Development Studies (IDS) at Sussex University, and has been picked up by international policy institutions like the International Labour Organisation.
GVC decentres the analysis of IB on companies and what companies do themselves. GVC is instead interested in relations of power and control up and down industries. These relations are recast not in terms of ownership but in terms of governance, and there are several forms of governance developed here.
GVC also offers policy action and especially through notions of economic and social upgrading.
- Global Production Networks
The other main network/chain approach is Global Production Networks, developed by economic geographers, notably out of the University of Manchester. Just like the GVC approach the conceptual focus of GPN is on the spatial and institutional relationships between production, exchange, distribution and consumption. It recognises that the way global production is being organised and reorganised is extending across all sorts of countries, producing lots of small components and organised in complex ways.
It is also based on an explicit recognition of the fluidity and changeability of those relationships. As Coe, Dicken and Hess note:
“Production networks are inherently dynamic; they are always, by definition, in a process of flux—in the process of becoming—both organizationally and geographically. The spatio-temporality of production networks, therefore, is highly variable and contingent. As Hudson (2004, p. 462) points out, ‘[…] economic processes must be conceptualized in terms of a complex circuitry with a multiplicity of linkages and feedback loops rather than just “simple” circuits or, even worse, linear flows’. Some networks are long-lived, others are more ephemeral; some are geographically extensive, others are more geographically localized. None remain completely unchanged for very long.” (‘GPN – realising the potential’, Journal of Economic Geography, p 271, 2008)
The claim for GPN then is that like GVC it recognises the increasing fluidity and extended nature of global production. It also claims it is more expansive and comprehensive than GVC, because it opens up non-linear, multi-level relations and transactions.
3. The Platform Economy
The final and most recent approach to IB is the Platform Economy concept. It is probably too early to identify a theoretical discourse built around the concept (it’s still a concept in search of a theory). That’s not to say that there is not theoretical development occurring, and in the second instalment of the lectures on international production we noted work in sociology and social theory – Castells, Beck, Hardt and Negri and others.
But within IB, there is recognition that platforms represent a frontier form of business, and that this form is disrupting earlier forms. For instance, a recent Harvard Business Review article has framed the increasing presence of platforms as a frontier business model this way:
“Products produce a single revenue stream, while platforms—which we define as intermediaries that connect two or more distinct groups of users and enable their direct interaction—can generate many. Indeed, a large number of the world’s most valuable companies by market capitalization in 2015 were platform companies, including five of the top 10 (Apple, Microsoft, Google, Amazon, and Facebook). Although some of those companies started with platforms, many started with products: Amazon launched as a retailer in 1994 and six years later introduced Amazon Marketplace; Google began with a search engine in the mid-1990s and then introduced search advertising in 2000; and Apple created the iPod in 2001 but didn’t move toward a platform until it developed the iTunes Store in 2003 and the App Store in 2008.” Zhu and Furr ‘Products to Platforms: Making the Leap’ HBR 2016)
So, we have many of the leading global firms, especially those that produce intangible products or services either based on or transitioning to more platform type business models. The question here is whether this is generalizable to lots of other businesses or specific to a few spectacularly successful firms? But as an expression of intangible capital and the frontiers of IB this is an exciting and important development; one worth thinking about and taking seriously.