Academic journal article Management International Review

Global Integration as Inter-Area Product Flows: The Internalization of Ownership and Location Factors Influencing Product Flows across MNC Units

Academic journal article Management International Review

Global Integration as Inter-Area Product Flows: The Internalization of Ownership and Location Factors Influencing Product Flows across MNC Units

Article excerpt

Abstract

* Several authors in international strategy literature consider global integration the essence of international competition. However, despite the importance of global integration little effort has been directed toward measuring it based on the firm as the unit of analysis.

* This study focuses on the product dimension of global integration and develops a framework for its determinants based on the internalization of ownership and locations factors.

Key Results

* Regression results, using two samples of U. S. companies, support the influence of ownership factors implicit in technical and marketing competencies on establishing globally integrated product flows. These results also support the influence of location factors represented by the trade openness and wage levels of the countries where the MNC has established operations on the global integration of product flows.

Introduction

Several studies in the globalization literature consider the integration of international operations a key element of a company's international strategy (Bartlett/Ghoshal 1991, Ghoshal 1987, Hout/Porter/Rudden 1982, Porter 1986). Ghemawat and Spence propose that "international integration of some value added activities is the essence of global competition" (1986, p.63). Yip (1989) argues that companies globalize by integrating their international strategies across countries. Further, global integration is one of the dimensions used by some researchers to identify the international strategy of a company (Kutschker/Baurle 1997, Prahalad/Doz 1987).

However, very little effort has been directed towards developing a measure of global integration. Several authors (Ghoshal 1987, Makhija/Kim/Williamsom 1997, Morrison 1990, Rosenzweig 1993) have argued that globalization research presents ambiguities and inconsistencies. These problems may stem from the lack of objective measures. Most studies in global strategy research have relied excessively on case studies that are hard to generalize to a larger population, or used questionnaire surveys that are difficult to replicate.

Regarding global integration, only Kobrin (1991) and Rosenzweig (1993) have conducted empirical studies to explicitly analyze this construct. Kobrin (1991) focused on structural determinants at the industry level, while Rosenzweig (1993) empirically studied the different dimensions of the construct of global integration at the subsidiary level. Other researchers used the firm as the unit of analysis, but they studied global integration indirectly by focusing on the drivers of the process rather than on its direct outcomes (Bartlett/Ghoshal 1991, Birkinshaw/Morrison/Hulland 1995, Roth/Morrison 1990).

Following Kobrin (1991), this study measures the product dimension of global integration. The measure is constructed at the firm level using inter-area product and component flows as reported in a company's financial statements. More specifically, the paper focuses on the internalization of ownership and location factors leading to globally integrated product flows across units of an MNC (Multinational Corporation). Regression results, using two samples of US MNCs, show that both ownership and location factors influence the global integration of product flows.

Global Integration as Inter-Area Flows of Products

Global integration refers to the international exchange of resources among MNC units resulting from the increased specialization and geographic dispersion of value-added activities (Bartlett/Ghoshal 1987, Ghoshal 1987, Gupta/Govindarajan 1991, Kobrin 1991). This paper argues that product flows represent a key dimension of the resource exchange capable of capturing the relationships among integrated company units.

Consistent with contingency theory (Lawrence/Lorsch 1967, Thompson 1967), global companies respond to environmental pressures by differentiating and integrating the roles of their foreign subsidiaries. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.