Incorporating the Multinational: Socio-technical Interfaces between the MNC Affiliate and the Host Country

Abstract

This paper begins by describing an attempt to evaluate the contribution of the overseas affiliates of 20 European parent multinational enterprises (MNEs), based in four South-East Asian countries; Malaysia, Singapore, Brunei Darussalam and Thailand. This was done through semi-structured interviews carried out by the author in parent headquarters, regional offices and affiliated plant locations, together with state institutions in the host nations. The visits were repeated over a 2-year period from 1997 to 1999. The resource-dependency model used to structure the research focused on two characteristics of the affiliates. The first was whether the contribution of the affiliate was to high-value-added locally designed products or to low-value, low-design products. A second dimension was provided by the place held by the plant on local/global supply chains. An initial hypothesis was that distinctively different modes of organizational learning would emerge from the conjunction of nationally differentiated parent MNEs and the institutional context of the host country and would, therefore, shape the manner in which dependencies were operationalized. In practice, two factors seemed more important in shaping the business strategy and style of the affiliate. The first was the nature of the operational technology, particularly the sunk costs of local investment, and the degree to which these ‘captured’ the MNE for the national economic development strategy of the host government. The second was the political economic context of both the parent and affiliate, and the manner in which these caused the dissipation or enhancement of managerial and technical capabilities. In essence, the focus of the study shifted from one in which the MNE and host state were treated as holistic actors interacting along a single common dimension, to one in which the political incorporation and social embeddedness of the former within the context of the latter was accomplished through multiple and socially segmented networks. The question of the extent to which the MNE can act autonomously to shape either its internal or external structure might, therefore, be taken as a matter for political and ethical judgement as much as for market forces.