Academic journal article Management International Review

Entrepreneurship in Multinational Enterprises: A Penrosean Perspective

Academic journal article Management International Review

Entrepreneurship in Multinational Enterprises: A Penrosean Perspective

Article excerpt

Abstract and Key Results

* This paper applies Penrose's (1959) insights on the quantity of managerial services required for firm-level organic expansion to the analysis of entrepreneurial activities in MNEs.

* We use these insights to build a framework relevant to entrepreneurial activities in MNEs, and then apply this framework to assess the metanational model (Doz/Santos/Williamson 2001) in terms of the quantity of managerial services required to implement it.

* Penrose's (1959) insights on firm-level growth processes are still relevant to the analysis of entrepreneurial activities in MNEs.

* The quantity of managerial services required for the effective functioning of the metanational model appears to be particularly high, and the benefits of this model should therefore be carefully weighed against the potential costs.

Key Words

Penrose, Theory of the Growth of the Firm, Metanational Model, Entrepreneurship, Managerial Services, Multinational Enterprises

Introduction

A simple observation motivated writing this paper: there is a missing link between Edith Penrose's (1959) seminal book, The theory of the growth of the firm, and contemporary research on entrepreneurial activities in the modern multinational enterprise (MNE). Doz, Santos, and Williamson's (2001) concept of 'metanational' is the latest, mainstream international management attempt to analyze the need for new types of entrepreneurship in the MNE. The rising interest in MNE entrepreneurial activities reflects both the increased geographical dispersion of critical knowledge in the global economy (Cantwell/Iammarino 2001) and the differentiated network structure of many modern MNEs (Nohria/Ghoshal 1994, Rugman/Verbeke 1992, 2003).

First, as regards the dispersion of critical knowledge, technological activities show a strong tendency to agglomerate in specific locations, thereby creating narrowly specialized knowledge clusters (Cantwell/Iammarino 2001). This trend requires MNEs to rely on their local subsidiaries both to tap into the knowledge pool in such clusters and to search for profitable opportunities related to the newly acquired knowledge in these clusters. MNE corporate headquarters are often incapable to do so themselves given their lack of proximity to host country or host region conditions (Verbeke/Yuan 2005).

Second, in a differentiated multinational network, each subsidiary possesses an idiosyncratic set of resources, the full benefits of which may only be reaped through subsidiary driven initiatives (Birkinshaw/Hood/Jonsson 1998).

Birkinshaw and his co-authors have analyzed the characteristics, determinants, and processes of subsidiary initiatives, emphasizing the benefits for the MNE as a whole of exploiting the specialized resources present at the subsidiary level (Birkinshaw et al. 1998). This emphasis on the exploitation of dispersed knowledge in MNEs through the pursuit of entrepreneurial activities was pushed further in Doz et al. (2001). Doz et al. (2001) suggested the concept of metanational advantage, resting on "the ability to mobilize and leverage pockets of specialized knowledge that are dispersed around the world" (Doz et al. 2001, p. 169). Their idea is that MNEs must learn from the world, transform the knowledge gathered into usable innovations, and pass these innovations to an efficient manufacturing/customer delivery network.

Surprisingly, the analysis of the metanational model provided in Doz et al. (2001), based on specialized resources/competences in MNEs, does not appear to have benefited from Penrosean insights, though the exploitation of inherited resources and the pursuit of new, productive opportunities were addressed extensively in her 1959 book, albeit not in the MNE context. It is true that Penrose, in spite of extensive study of the international activities of large firms, never explicitly dealt with the distinctive characteristics of international operations (Dunning 2003, Pitelis 2000). …

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