Academic journal article Multinational Business Review

Misunderstanding Embeddedness: A Response to Ferraris' Rethinking Multiple Embeddedness

Academic journal article Multinational Business Review

Misunderstanding Embeddedness: A Response to Ferraris' Rethinking Multiple Embeddedness

Article excerpt

Introduction

In his paper, "Rethinking the literature on 'multiple embeddedness' and subsidiary-specific advantages" published in the Multinational Business Review (MBR), Ferraris (2014) has provided an interesting and long overdue call to rethink the literature on multiple embeddedness of multinational enterprises (MNEs). Even more importantly, he has focused on how the concept can be applied to better understand subsidiary-specific advantages (SSAs) in terms of headquarters (HQ)-subsidiary MNE relationships. Ferraris (2014) has provided us with an interesting and "innovative framework" of four main types of MNE relationships (Ferraris, 2014, p. 1), yet his further attempt to provide us with a better understanding of the multidimensionality and dynamics of MNEs' multiple embeddedness and subsidiaries' dual embeddedness fails to be fully achieved. In my opinion, this is because of two reasons:

a lack of understanding of embeddedness as a cornerstone economic sociology concept and its evolution within the relevant economic sociology literature; and

a lack of application of embeddedness as a methodological principle, not just as a substantive theory (Gemici, 2008; Raskovic and Makovec Brencic, 2014).

This paper is a response paper to Ferraris's (2014) work. It addresses the misunderstanding and the misapplication of the embeddedness concept in his work, as well as in the international business (IB) literature focusing on MNEs in general. It shows how the concept of embeddedness needs to be used as a cornerstone economic sociology concept within his proposed framework, not just as a mere metaphor. In doing so, the aim of my paper is not to criticize Ferraris's emphasis of the four different MNE relationships, which is indeed very important, but to show how the concept of embeddedness should be appropriately applied within his framework in terms of an economic sociology perspective.

While Ferraris (2014, p. 2) positioned the four-relationship framework as one that better facilitates "the analysis of the multidimensionality and dynamics" of the MNEs' embeddedness phenomena, Rugman (2014) described his contribution more in terms of a literature synthesis on multiple embeddedness, which suggests a broadened and deepened account of all types of interacting relationships within MNEs. By specifically addressing the subject of SSAs, Ferraris (2014) has adopted a network-oriented perspective of MNEs (Ghoshal and Bartlett, 1990), and took the subsidiary as the key unit of analysis (Bartlett and Ghoshal, 1986; Birkinshaw, 1997), which follows recent subsidiary-centric research in the IB literature (Rugman et al. , 2011a). The concept of double or dual subsidiary embeddedness, with subsidiaries drawing their specific advantage from the MNE as an intra-organizational network and building it through exposure to specific local environments (host country-specific advantages [CSAs]), appears to be fundamental to subsidiaries' SSAs.

Drawing on some recent MNE embeddedness literature - mainly Heidenreich (2012) and Meyer et al. (2011) - Ferraris's (2014) proposed conceptual framework emphasizes the need for a broader and deeper understanding of different HQ - subsidiary relationships, as well as a need to better understand how subsidiaries develop their SSAs through a critical recombination process which leads to the development of higher-order non-location-bound (NLB) firm-specific advantages (FSAs). This perspective is taken by Ferraris (2014) against the backdrop of Rugman's (1981) seminal FSA - CSA matrix.

This paper is organized into five parts. Following the introduction, the second part of the paper provides a brief overview of the key principles of economic sociology, defines embeddedness as a cornerstone economic sociology concept and provides a short historical overview of its evolution within the economic sociology literature. It also addresses different types of embeddedness. The third part traces the source of Ferraris's misunderstanding and misapplication of the embeddedness concept and looks at each of the four types of MNE relationships within his proposed framework. …

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