The Regional Embeddedness of Multinational Companies: A Critical Perspective

Abstract

Multinational companies (MNC) face a constant tension between a regional orientation which entails regional embeddedness and their world-spanning activities. The relationship between MNCs and their regional surroundings is here analysed at two levels, the institutional level of the ‘fit’ between the regional environment and the MNC's activities, and the project-specific level in which direct, innovation-related interaction between the company and regional players takes place. It can be shown that these two levels may show very different characteristics with regard to one and the same company, and that selective and dynamic forms of regional embeddedness occur. Furthermore, regional embeddedness of innovation projects does not necessarily take place even if the region offers ample possibilities for cooperation and regional links of the MNC at the institutional level may be strong. A thorough understanding of an MNC's relationship to its region is hence dependent upon a process-oriented two-level analysis.

Acknowledgements

This research was conducted in the framework of the project “Regional Learning in Multinational Companies”, financed by the Volkswagen Foundation and led by Martin Heidenreich, University of Oldenburg between 2006 and 2009. I would like to thank my interview partners for their openness and my project colleagues for many fruitful discussions. I presented this paper at the workshop “Regions and Nations – Newer Developments and their Framework Conditions” at the University of Bamberg and thank the participants for their feedback. A special thank you goes to Sinje Späth for her insightful comments on an earlier version.

Notes

A detailed account of the methodology is available in Mattes (2010).

It should be noted that the setting adopted by headquarters may differ significantly from the one subsidiaries arrange. Whereas MNC headquarters can level out the tension between embeddedness and independence for the company group as a whole, individual subsidiaries have to find their own ways of coping with the tension between headquarter orientation, regional embeddedness, global reach and general independence. Regional embeddedness can thereby act as a tool for improving subsidiary-internal competences and hence provides source of power (Holm & Pedersen, 2000). Headquarters, in turn, are more conscious of acting as a socially responsible player in their direct surroundings and draw more broadly and extensively upon available infrastructure. As both MNCs and subsidiaries provide interesting—and different—aspects of corporate embeddedness, this article looks at a particular innovation project and assesses all the relevant relationships connected to this case on both the general and the specific level (cf. below). In the first place, these take place between the leading subsidiary and the region, but, where relevant, links between the headquarters and the region are also taken into account.

Cf. http://ec.europa.eu/eurostat/ramon/ for details.

Another attempt to combine the concepts of RIS and embeddedness can be found in Cooke (2001). His study is conducted from a political perspective.

The concept hence goes beyond the “institutional determinism” prevalent in the RIS approach (Hekkert et al., 2007).

A fifth subsystem, the financial one, is commonly integrated at the national level (Autio, 1998), but as financial flows are ruled nationally and internationally, it is only rarely addressed in regional analyses (cf. however Asheim & Isaksen, 2002; Cooke, 2001).

Zander and Sölvell (2004, p. 22) describe this tension between adapting to the local business environment and integrating into the internal multinational knowledge as the “insider-outsider dilemma”.

A more comprehensive analysis drawing upon five cases and looking not only at regional, but also at organizational and international dilemmas can be found in Mattes (2010).

As these links are very general, I incorporate all aspects relevant for the subsidiary, many of which are also relevant for the headquarters and the MNC as a whole.

In order to grant anonymity to our interview partners and the company, pseudonyms for the MNC and the region are used. AutoCom refers to the automobile company, AutoComSub for the subsidiary in which the new drive technology is being developed and AutoRegion to the region in which the innovation project as well as corporate headquarters and the relevant subsidiary are set.

All interviews were conducted in German and fully transcribed. The translation was done by a professional and thoroughly double-checked for by the author.