Transnational Corporations: Fragmentation Amidst Integration

By Grazia Ietto-Gillies | Go to book overview

3

Networks and the TNC

A theoretical framework

3.1Introduction

This second part of the book is devoted to an analysis of the networks established by companies and in particular by transnational companies. The present chapter considers how the firm's objectives and constraints affect the pattern of firms' networks. The next two chapters analyse the empirical evidence on the internal cross-country networks of TNCs.

Contemporary writings on business, the economy or society in general, contain a good deal of research on networks and the network society (Freeman, 1992; Grabher, 1993; Castells, 1996; Hagedoorn, 1996; Dunning, 1997, 1998; Ebers, 1997). Both theoretical and applied aspects of networks figure prominently in the literature. In many business/economics writings the expression 'business networks' is used to indicate a large variety of interfirm or inter-organisational partnerships. These may refer to vertical relationships (backward or downward linkages) or to relationships between firms involved in the same or similar product lines and, in general, at the same stage in the value system.

The inter-organisational network has usually been seen as a business organisational form to be compared and contrasted with the other two major forms: firms/hierarchies and markets. Inter-organisational networks are therefore seen as having an intermediate position between hierarchies and markets. Easton and Araujo (1997:67-8) consider '… Inter-organizational networks to refer to modes of economic co-ordination characterized by dense and relatively stable patterns of economic exchange, embedded in concrete time-space and institutional contexts.'

Richardson's perceptive analysis (1972) places inter-firm networks in the context of the organisation of industry and the division of labour within it. He considers the need for qualitative and quantitative co-ordination of complementary activities within an industry and writes: '… this co-ordination can be effected in three ways; by direction, by co-operation or through market transactions…. Co-ordination is achieved through co-operation when two or more independent organisations agree to match their related plans in advance' (p. 890).

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