Multinational Company

Topics: Multinational corporation, Corporation, Knowledge management Pages: 28 (8882 words) Published: August 23, 2013
Biljana PESALJ1

UDK: 347.471 Biblid 0025-8555, 63(2011) Vol. LXIII, br. 2, str. 237–259 Izvorni naučni rad Jun 2011. DOI: 10.2298/MEDJP1102237P

According to knowledge and network-based theories of multinational companies (MNCs), the main source of MNC competitive advantage is the creation and transfer of knowledge within the MNC system. The processes of knowledge creation and knowledge transfer are extensively investigated in the present literature. However, there are issues that are still underdeveloped, such as control and organizational mechanisms as a micro foundation of modern MNC theories. This paper is aimed at presenting an overview of the modern theoretical approaches of MNC competitive advantages from the managerial point of view. The applicability of these concepts is further considered in the case of MNC affiliates doing their business in transition economies in order to provide guidelines for future empirical research. Key words: multinational companies, knowledge-based theory, network-based theory, transition economies.


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NCs are recognized as the main actors of e international business, international business financing and global economies. According to Ghoshal and Bartlett, MNC is a firm that has substantial direct investment in foreign countries that it actively manages.2 The value of their sales in host countries overpasses the value of trade (imports and exports) in today’s world economy. Multinational companies attracted scientific and public attention Dr Biljana Pesalj, Assistant, Faculty of Economics, University of Belgrade, E-mail address: Ghoshal Sumantra and Bartlett A. Christopher, “The Multinational Corporation as an Interorganizational Network“, Academy of Management Review, 15, 4, 1990, 603–625, p. 603.


Pesalj B., Konkurentske prednosti multinacionalnih kompanija, MP 2, 2011 (str. 237–259)

from the moment of their appearance, and especially from the beginning of their intensive growth (during the 1960s). There are many interesting and important issues concerning MNC that have been elaborated in the literature such as motives of internationalization, forms and strategies of internationalization, effects on host and home countries, political aspects of MNC activities, emerging forms of international business financings, corporate social responsibility of MNC, relationship between the headquarters and MNC affiliates, etc. However, many questions have remain unanswered, such as particular mechanisms used to coordinate MNC’s activities, particularities of MNC affiliates doing their business in transition economies, etc. Modern theories of MNC, such as knowledge-based and network-based theories, indicate that in comparison to national3 companies4 the ability to create and transfer knowledge internally is one of the main competitive advantages of MNCs. Drawing upon knowledge-based and network–based theoretical views MNC is considered “repository of knowledge and a superior way of organizing knowledge transfer across MNC units”.5 In the largest number of studies, (theoretical and empirical) MNC is considered a differentiated network where knowledge is created in various parts of MNC and then internally transferred to different interrelated units.6 The creation of innovation in MNC is no longer focused on the home country, but could be dispersed throughout the MNC system. There are authors which point out that innovative activities of foreign subsidiaries are a crucial part of innovative performance of MNC as a whole.7 Subsidiary’s local business networks (i.e. 3 4 We use the term “national companies” to denote those that organize their production activities in a sole country in contrast to multinational companies. See: Minbaeva D, Pedersen T, Björkman I, Fey CF, Park HJ, “MNC knowledge transfer, subsidiary absorptive capacity, and HRM”,...
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