The multinational enterprise as an internal market system

Abstract

This paper builds on Birkinshaw's model of multinational enterprise (MNE) as an internal market system [Birkinshaw, J. (2000). Entrepreneurship in the global firm. London: Sage]. This model addresses the issues related to the emergence of market-based mechanisms of coordination within the MNEs and the strategic decisions that affect internal competition. Birkinshaw argues that subsidiaries simultaneously participate in three different internal markets within an MNE: a market for intermediate goods and services, one for charters and another for competencies and practices. The goal of the paper is to expand Birkinshaw's concept of internal market and analyze the logic behind internal competition by considering more fully existing literature and developing an organizing framework to position such a model within that literature. There is specific focus on discussing how the internal market model relates to modern network-based configurations of the MNE. In addition, the study shows that factors affecting the extent to which each of the three internal markets is established can be better understood if we link such a model to the contributions developed by three mainstreams of research: internalization theory, resource-based view and organizational learning literature.