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local players in global games

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Local Players in Global Games:

The Strategic Constitution of a
Multinational Corporation

peer hull kristensen and jonathan zeitlin

1
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3
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For Chuck
Il miglior fabbro, a benchmark for us all
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CONTENTS

Acknowledgments ix
Preface: Small Worlds of Globalization xii

1. Introduction: Multinational Corporations as

Lead Agents of Globalization? 1

Part I. Local Pathways to Multinational Enterprise

2. Associating Local Strategies of Global Reach:

Horsens, Lake Mills, Eastbourne, and APV 27

Part II: A Global Game Enacted by Local Players

3. Horsens: Local Strategies on a Global Stage 73

4. Lake Mills: Self-limiting Strategies of a Solidaristic
Plant Community 103
5. Howard: A Sleeping Beauty Awakes to the Nightmare
of a Global Enterprise 124
6. Lygon Place: A Corporate Headquarters at War with Itself 135
7. Strategic Positions and Positional Strategies 157

Part III: Managerial Challenges and Human

Promises of Globalization

8. Managing the Multinational: Administrative and

Human Challenges 187
9. The Functions of the Executive Revisited: Contributions,
Inducements, and Constitutional Ordering 212
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viii Contents

10. Pragmatic Solutions: From Procedural Justice to Learning by

Monitoring 243
11. Creating a Multinational Public for the Corporation 264
12. Conclusion: Sideshadowing the Future of Globalization 301

Bibliography 323
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ACKNOWLEDGMENTS

This book is a product of ongoing interactions in many small worlds of the

international business and research communities. In the process, we have
incurred numerous debts, which we are pleased to acknowledge here.
First and foremost, we would like to thank the community of practitioners
within APV, from shop-floor workers, engineers, and technicians to plant-
level managers, supervisors, and corporate executives, who generously
gave us their time and attention, and shared their experiences and interpret-
ations of life in the multinational corporation (MNC). Individually
and collectively, they taught us more about the complexities of strategic
behavior than any scholarly research program ever could. We have
slowly learned the art of reading the world as they did, and we deeply
appreciate the way they reciprocated our persistence with trust so that
we could travel from one part of the small world of the multinational to
the next.
Scarcely less important to the completion of this project was funding for
field research, travel, and meetings, as well as time off for writing and revision
of the manuscript. Peer’s first visit to Wisconsin in 1995, which began our
joint field work at Lake Mills, was financed by the University of Wisconsin-
Madison’s Research Initiative (now Center) for World Affairs and the Global
Economy (WAGE). During subsequent stages of the project, WAGE also
provided vital funding to Jonathan for fieldwork, research expenses, and
writing time. We are grateful to Dave Trubek and Don Nichols, co-directors
of WAGE, for their moral and material support. Generous grants to Peer
from the Danish Social Science Research Council (DSRC) likewise provided
crucial support for the research and writing, as well as for numerous meet-
ings between the authors. The internal training fund of the Danish Trade
Union Confederation (LO) allowed Peer to expand the scope of inquiry
among shop stewards in Danish MNC subsidiaries and provided a valuable
platform for discussing the particularities of our case study in relation to
their broader experience of other multinationals. Jonathan would also like to
thank the faculty sabbatical program and the Office of International Studies
and Programs at the University of Wisconsin-Madison for supporting his
year off from teaching in 2002/3. Peer would similarly like to thank Copen-
hagen Business School for the generous support given to its researchers when
they are engaged in demanding projects.
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x Acknowledgments

This would have been an infinitely poorer work without the critical input
and encouragement of numerous friends and colleagues from different
countries and academic disciplines. We particularly want to thank the Euro-
pean Science Foundation, Danish Social Science Research Council, and
Copenhagen Business School for financing the European Summer Research
Institute for the Comparative Study of Economic Organization (ESRI) in
1999–2001, which provided a platform, deadlines, and pressure for us to
write over three successive years a draft of each of the three parts that
constitute this book. We also presented our work-in-progress to conferences,
workshops, and seminars organized by the Institute of International Business
at the Stockholm School of Economics; the Swedish Council for the Co-
ordination and Initiation of Research (FRN); the Council for European
Studies; the Transnational Communities Programme of the UK Economic
and Social Research Council; the American Sociological Association; the
Economic, Labor, and Organization section of the Italian Sociological Asso-
ciation (AIS-ELO); the Danish Trade Union Confederation (LO) School;
WAGE, and the Economic Sociology Program of the University of Wiscon-
sin-Madison. We are grateful to the participants in these meetings for their
many stimulating criticisms and suggestions. Among them we would espe-
cially like to thank Steven Casper, Anthony Ferner, Henrik Glimstedt, Glenn
Morgan, Valeria Pulignano, Carlo Trigilia, Richard Whitley, and Erik Wright.
We are likewise extremely grateful to those friends and colleagues who
commented on draft papers and chapters, especially Finn Borum, Alex
Bowie, Luigi Burroni, John Mathews, Philippe Pochet, David Soskice,
David Stark, Josh Whitford, and Mira Wilkins. We also want to thank
those who shared with us their own unpublished drafts and research mater-
ials, especially Dong-One Kim, Patchen Markell, and Ken Mericle. Gary
Herrigel and Chuck Sabel read the entire manuscript—some parts several
times—and gave us more valuable criticism and advice than we were fully
able to integrate into our revisions. We would also like to thank three
anonymous reviewers for their careful critical reading of the manuscript,
and to respond in the Preface to some of the methodological issues
they raised. Responsibility for any remaining shortcomings is naturally our
own.
During the course of this project, we have received great support from our
respective departments and institutions. We would particularly like to thank
Marianne Risberg of the Institute for Organization and Sociology of Work at
the Copenhagen Business School for assistance in arranging workshops,
seminars, and meetings, as well as for facilitating our communication by
revising Peer’s English drafts. We also want to thank Darya Vassina of the
European Union Center and the Industrial Relations Research Institute at the
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Acknowledgments xi

University of Wisconsin-Madison for help with the Bibliography and the

preparation of the manuscript more generally.
At Oxford University Press, David Musson has warmly encouraged this
project from the outset, and we are grateful to him and his colleagues for
their helpful advice and support.
Our families deserve the greatest appreciation for putting up with our
numerous absences and ongoing preoccupation during the many years this
book has taken us to research and write, as well as for welcoming each of us
into the other’s home and forging strong bonds of affection between our own
small worlds.
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PREFACE: SMALL WORLDS OF GLOBALIZATION

What do Horsens (Denmark), Lake Mills (USA), and Eastbourne (UK) have
in common? At first glance, there might appear to be no meaningful connec-
tion between a medium-sized industrial/commercial center in eastern Jut-
land (population 56,000), a small semi-rural factory town in south-central
Wisconsin (population 5,000), and a seaside resort on the south coast of
England (population 90,000). Yet as we discovered in the course of our
research for this book, all three of these communities were historic centers
of food, drink, and dairy processing equipment manufacture, home to
prominent local firms with proud records of technological innovation and
international trading, whose origins could be traced back a century or more.
Each of these firms, as we also learned, was deeply embedded in its home
community through a multiplicity of ties, not only to employees and their
families, but also to other local actors and institutions, such as component
suppliers, vocational training schools, trade unions, and municipal govern-
ments. These leading local firms both depended on their home communities
for a variety of critical resources and served as gateways for the latter to the
wider national and world economy.
During the 1970s and 1980s, however, each of these communities’ flagship
firms was transformed into a subsidiary of the same British-owned multi-
national corporation, APV. This London-based company, itself a long-
established producer of food-and drink-processing systems, had expanded
through mergers and acquisitions to become the world’s largest manufac-
turer of such equipment by the late 1980s, with nearly £1bn in sales and some
15,000 employees on five continents, mainly in Europe and North America.1
These formerly independent firms were by no means total strangers, having
competed directly or indirectly with one another and APV itself in markets
abroad and at home over many decades. But now the Horsens, Lake Mills,
and Eastbourne subsidiaries found themselves simultaneously collaborating
on company-wide projects and contending alongside other APV units, some
home-grown and others recently acquired, for product mandates, capital
investment, and coordinating authority from the London headquarters
(HQ). In this way, not only these firms themselves, but also the local
communities to which they belonged, became more closely linked to one
1
Readers will find a detailed presentation of APV’s historical development, organizational
structure, and operational scope in Chs 2 and 7 below.
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Preface xiii

another, their fortunes bound up with the subsidiaries’ struggle for position
within the multinational corporation.
None of this may seem especially remarkable to anyone familiar with
recent debates over globalization. Are not the compression of spatial dis-
tance, the intensification of cross-border interdependencies, and the ascend-
ancy of mobile capital over immobile labor and communities all defining
features of the globalization process, which has been so widely discussed by
popular and academic commentators alike over the past two decades? Per-
haps so. Yet as we investigated the relationship between these three local
subsidiaries and APV’s corporate HQ, a more complex picture of the multi-
national began to emerge, provoking a series of novel and disconcerting
questions. What happens when a number of previously autonomous firms
from different countries, each with their own historically constituted iden-
tities, routines, and capabilities, come together inside a single multinational
corporation (MNC)? And what happens when each of the participants in this
new global game, including top management at the corporate HQ, starts to
play by the rules of their national business systems, mobilizing local allies and
resources to defend and advance their position within the MNC? Can a
unified cooperative game be established that positively advances the devel-
opment of the multinational as a whole, and if so through what organiza-
tional mechanisms? Or may mutual misunderstandings and the unintended
consequences of strategic interaction among the players lead instead to
endemic conflict and disintegration? The answers to such questions, as we
discovered once we began to confront our case study of an ‘actually existing’
multinational with the wider scholarly and managerial literature, are surpris-
ingly hard to determine theoretically, and pose a profound challenge to
established views not only of the MNC but also of the globalization process
more broadly.
The evolution of our study mirrors in striking ways that of its subject,
both intellectually and practically. By the early 1990s, both authors had
been working for many years separately (and in collaboration with
our mutual friend Charles Sabel) on the historical development, internal
dynamics, and innovative capabilities of industrial districts or regional
clusters organized around flexibly specialized networks of small and
medium-sized firms.2 Hence the two of us met occasionally at international
gatherings of researchers and policy practitioners convened to discuss these
issues.3
2
See for example Sabel and Zeitlin (1985); Kristensen (1992b); Zeitlin (1992); Kristensen
(1995a, b); Zeitlin (1995); Sabel and Zeitlin (1997a, b); Kristensen and Sabel (1997).
3
Notably the industrial districts research program organized by the ILO’s International Institute
for Labour Studies: see Pyke et al. (1990); Pyke and Sengenberger (1992).
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xiv Preface

At one such gathering, held improbably in a lotus-shaped conference

center on the grounds of the Futuroscope advanced media park outside
Poitiers, France,4 Peer passed on to Jonathan a recent paper on the strategic
initiatives of local actors at a Danish manufacturing plant that he had been
studying on and off for nearly a decade (Kristensen 1994; Kristensen and
Petersen 1993; Kristensen 1986). This plant had undergone a far-reaching
restructuring during the early 1980s from a functional to a product-based
layout, in which small groups of skilled workers integrated multiple tasks on
modern computer-controlled machinery, while complementary parts were
subcontracted to a dense network of specialized local suppliers. The result
was a highly flexible organization in which many types and variants of
pumps, valves, and fittings could be manufactured in small batches to
customer specifications with low overheads and short lead times. In the
late 1980s, however, the dairy equipment group to which the plant belonged
experienced large losses due to setbacks in international markets, and was
put up for sale by its owner, a Danish holding company. Drawing on a variety
of local institutional resources, from statutory codetermination rights to
labor investment funds, the convener of shop stewards5 helped to ensure
that the group was bought by a British multinational rather than a rival
foreign company that would have been more likely to close the plant down as
a dangerous competitor. In alliance with the union convener, the new
managing director, who had overseen the Danish plant’s earlier reorganiza-
tion as production manager, utilized the flexibility of its internal workforce
and external suppliers first to block the efforts of another foreign subsidiary
of the British MNC to take away its customers and then to win a company-
wide competition to manufacture a new generation of pumps.
As described in Peer’s paper (Kristensen 1994), the MNC’s arm’s-length
management style, based like that of many British companies primarily on
financial accounting performance criteria, appeared paradoxically to have
enhanced the Danish local actors’ scope for pursuing autonomous strategies.
So long as the plant produced good financial results, the parent firm seemed
unlikely to interfere in its affairs, and might even be prepared to sanction new
investment in both physical and human capital. While the collaboration of
local suppliers and institutions such as municipal vocational training schools
proved a crucial resource for the plant in its struggle for position within the

4
The proceedings of this conference, organized in 1993 by the Observatoire du changement
social en Europe occidentale of the Fondation pour la prospective et l’innovation, were published in
French and English as Bagnasco and Sabel (1994, 1995).
5
In Denmark, where multiple unions are often present in the same plant, members of each union
elect shop stewards (Tillidsreprœsentanter), who in turn select a convener (Fœlles-tillidsmand) to
negotiate with management on general issues concerning them all.
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Preface xv

multinational, so conversely the plant enabled its local partners to gain access
to the global internal market of the parent multinational from which the
latter would otherwise have been excluded. In this way, Peer’s study sug-
gested that the wider industrial district to which the Danish plant belonged
had been making ‘local use of global networks’, since workers, managers,
suppliers, and the municipality were all in various ways exploiting its take-
over by the British MNC to further endogenous development. This finding
struck us as extremely important, because it undercut current arguments
about the negative impact of globalization on industrial districts (e.g. Amin
and Robins 1990), while at the same time offering new and potentially
promising tools for the latter’s revitalization.
Beyond its general theoretical and policy implications, Jonathan was in-
trigued by one particular aspect of Peer’s story: his account of the positive role
played by the arm’s-length management style of the Danish plant’s new British
multinational owner. For Jonathan was also deeply engaged with historical
and comparative debates on the performance of British manufacturing firms,
where the very same management style—especially their heavy reliance on
financial accounting criteria for investment decisions—was widely regarded
as a major contributory factor in national industrial decline.6 Inquiring into
the identity of the British MNC—which had remained anonymous in Peer’s
paper—Jonathan discovered a startling coincidence: he himself had recently
visited another plant owned by the same company, just thirty miles from the
University of Wisconsin-Madison, where he was now teaching after a long
academic sojourn in the UK. And like the Danish plant Peer had studied, the
Wisconsin APV facility, which Jonathan had visited along with a small
delegation of European trade unionists organized by the university’s Indus-
trial Relations Research Institute, was also involved in ambitious experiments
with work reorganization and ‘win–win’ bargaining, orchestrated primarily
by local actors, including its Labor Relations Manager, a former union presi-
dent. The new world of globalization seemed small indeed.7 This unexpected
tie between the two plants raised fascinating questions for us about their
relationship both to the parent multinational and their local environments.
A comparison between the ability of local actors in the very different social and
institutional settings of Denmark and the United States to foster endogenous
development through participation in global networks seemed especially
interesting in light of the emerging literature on divergent national business
systems, behind which Peer was a prime mover.8
6
See for example Williams et al. (1983); Armstrong (1987); Hirst and Zeitlin (1989).
7
For a theoretical discussion of ‘small-world networks’ in which apparently remote clusters of
individuals are connected through a few common ties, see Watts (2003).
8
See for example Whitley (1992); Kristensen (1995b); Whitley and Kristensen (1996, 1997).
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xvi Preface

This was too good a research opportunity to pass up. In the spring of 1995,
Jonathan therefore arranged for Peer to come to Wisconsin to conduct a joint
field study at APV’s Lake Mills plant. With the Labor Relations Manager
smoothing our path, we were able to interview a wide range of workers,
managers, and white-collar employees at all levels across the plant’s various
functional departments and product-focused business units, followed up
through several return visits over the next few years. From these interviews
we learned that the Lake Mills plant had undergone in the early 1990s a
similar reorganization to that experienced by APV’s Horsens plant a decade
earlier, in which product-based cells replaced the previous functional layout
and a ‘just-in-time’ component supply system was introduced. By agreement
between local managers and unions, a ‘pay-for-knowledge’ system was also
implemented, based on extensive cross-training and task rotation, which
drastically reduced the number of job classifications.9 As at Horsens, such
reforms enabled the Lake Mills plant not only to cut costs, but also to
improve deliveries, upgrade quality, and accelerate the development of new
products. Like Horsens, too, if somewhat more modestly, the Lake Mills
plant was therefore able to enhance its competitive position within the MNC,
bidding successfully for work from group facilities which had been closed,
winning the right to participate as a junior partner in the manufacture of a
new generation of pumps, and becoming the corporate leader for a new
family of locally developed ice-cream freezers.
As at Horsens, moreover, the reorganization of Lake Mills was primarily
the work of local actors. Cellular manufacturing, just-in-time component
supply, job rotation, and other related reforms were introduced by local
managers without explicit support from higher levels of corporate authority.
Although the blue-collar workforce was initially divided about the pay-for-
knowledge system, local union officials played a key part in its negotiation,
implementation, and subsequent evolution, maximizing training opportun-
ities, persuading recalcitrant workers to rotate, and resolving grievances
arising from the system’s operation. Compared to Horsens, the interdepend-
ence between the Lake Mills plant and its local environment was less intense.
The Wisconsin plant was historically much more vertically integrated than
its Danish counterpart, and much of the performance improvement of the
mid-’90s was directed towards bringing back in-house parts production
outsourced a few years earlier to smaller non-union shops paying lower
wages. Unlike at Horsens, too, most further training at Lake Mills took
place within the plant rather than through participation in external courses
9
In a pay-for-knowledge system, workers’ wages are based on the tasks they are capable of
performing, rather than the job they are actually doing at any given moment. For further explan-
ation, see Ch. 4 below.
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Preface xvii

at municipal vocational training schools. Yet on closer inspection, the social

and institutional resources of the local environment turned out to have
contributed significantly to the restructuring of the Lake Mills plant in
other ways. The plant had long been regarded as the best place in the area
to work, and the absence of comparable employment opportunities nearby
both motivated workers to participate actively in reforms aimed at safe-
guarding its future and reassured management that investments in employee
skills would not be appropriated by competitors. The seniority provisions of
the local union contracts, backed up by legally enforceable grievance arbitra-
tion procedures, also provided a powerful incentive for both sides to pursue
greater flexibility by expanding the skills and versatility of the existing
workforce.
From the perspective of the local actors at both plants, the MNC head-
quarters and its regional/product divisions appeared to have played little
positive role in the restructuring processes and initiatives on which their
survival depended. As a loss-making unit, the Lake Mills plant had attracted
closer attention from the London HQ than its Horsens counterpart, largely
of a negative kind, while requests for new capital investment and increases in
headcount at both plants were tightly controlled from the center. Managerial
turnover in both cases had been high, and lines of communication with the
MNC HQ had been in flux for several years as a result of ongoing efforts to
rationalize the diverse and overlapping portfolio of companies acquired
during the 1970s and ’80s. Viewed from below, the parent multinational
thus resembled a distant Gulliver surrounded by dense fog, seeking to govern
the Lilliputians at his feet with a limited set of rather blunt instruments.
Our research at Horsens and Lake Mills raised a new series of intriguing
questions about the strategies and organization of their multinational parent.
How did APV’s top management conceive the evolving relationship between
the MNC headquarters, the regional and product divisions, and the local
operating units? To what extent did the London corporate center see itself as
pursuing explicit strategies to promote plant-level restructuring, and how far
was it content to rely on financial targets and disciplines, leaving the operat-
ing units to find their own solutions? Was its arm’s-length management style
consciously intended to foster plant-level experimentation, and had the HQ
developed a more sophisticated system for monitoring developments at the
operating units beyond its apparently stochastic interventions? Did London
have any means of learning from these local experiments? How far and in
what ways was APV seeking to foster collaboration between operating units
manufacturing related products in different countries, and where was re-
sponsibility for such initiatives located? To what extent had APV’s top
management come to regard its subsidiaries in countries like Denmark as a
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xviii Preface

means of tapping into the resources of the local environment—such as the

technical capabilities of the Horsens supplier network—which might other-
wise be difficult to access externally?
To explore such questions, we needed to gain access to APV’s London HQ.
And here again, we followed the emergent social and personal ties linking
local actors inside the global firm. As we shall see in subsequent chapters,
people from Horsens had risen during the mid-1990s to prominent positions
within APV’s worldwide organization. One of these managers, whom Peer
had known since his original research on the restructuring of the plant in the
early 1980s, arranged an invitation for us to conduct a brief field study at the
MNC’s London HQ in January 1997. There we were permitted not only to
interview top managers and their staff in some depth but also to read key
strategic planning documents and consultancy reports dealing with succes-
sive efforts to reorganize the entire MNC going back to the early 1990s.
From these sources, we began to realize that far from having resolved its
own structure, the multinational we were investigating was rather in a state of
continuous experimentation where it was not at all clear who directed whom.
A far more complex game than the one we had originally anticipated between
subsidiaries and headquarters was taking place. The HQ itself was riven by
endemic struggles over power and authority, in which individual managerial
ambitions, strategic disagreements, and functional conflicts (between sales,
engineering, manufacturing, and finance) were all closely intertwined. At the
same time, moreover, an intermediate layer of strategic business units (with
responsibilities for up to 25 subsidiary plants around the world) appeared to
be playing an increasingly significant role within the global game of the
MNC. From our researches we learned that Danish plant managers had
succeeded in winning control over many of APV’s major SBUs. This ‘Danish
mafia’ had thus acquired effective influence over much of the multinational’s
‘operational core’, while leaving financial management and relations with
institutional investors, fund managers, and stock market analysts to the
London headquarters. Instead of a well-informed HQ pulling the strings of
a global enterprise, our field interviews led us to conclude that APV’s top
management possessed only a rather limited knowledge of the individual
plants comprising their far-flung empire.
Inspired by questions about home-and host-country effects arising from
the national business systems framework, we also wanted to study an APV
subsidiary based in the UK itself. Through the auspices of one Danish SBU
manager, we were allowed in January 1997 to conduct a detailed field study
of a pump plant in Eastbourne belonging to his global fluid handling
business. There we discovered that APV’s London headquarters had little
practical knowledge about what was happening not only in its foreign plants,
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Preface xix

but even in its domestic subsidiaries. In Eastbourne, as at Horsens and Lake

Mills, we found a hive of innovation in products, processes, and work
organization, but the interaction between the plant and the corporate head-
quarters seemed no closer or more intimate than in Denmark or the US.
From the perspective of the local actors in Eastbourne, their key reference
point in the corporate game was not the London HQ, but rather the Danish
SBU manager to which the plant reported.
It therefore became apparent that to understand how APV was actually
controlled and coordinated, we would need to learn more about the inter-
actions among SBU managers. Initial inquiries suggested that discontent
with the functioning of the multinational had led some SBU managers—
including but not confined to the ‘Danish mafia’—to seek improvements in
its global structure as a means of fostering the continuous development of
the local plants. Thus paradoxically it seemed at this stage of our research to
be local managers who also held the key to improvements in global coordin-
ation and cooperation within the MNC.
But before we could carry this line of investigation further, APV itself was
taken over in May of 1997 by a larger British engineering group. As a result,
we were obliged to suspend our field work, though we continued to keep in
touch with some of our local informants. This enforced break in primary
data collection pushed us to reflect more deeply on two more fundamental
issues raised by our preliminary findings. We began to reconsider the nature
of the multinational corporation and the processes through which it comes
into being; and we likewise began to reconsider what is actually involved in
managing, controlling, and coordinating such an enterprise. Having previ-
ously spoken ironically of ‘Gulliver befogged’, we were struck by a new
humility in contemplating the immense challenges of turning the MNC
into a coordinated actor at all.
These reflections led us in two complementary directions. The first was
towards an historical reconstruction of the multinational’s development.
From our research we learned that the story was not simply one of the
shark eating the smaller fish, since each of the three local subsidiaries in
different ways had joined APV as a result of its own deliberate strategic
action. Thus we knew that the construction of this MNC had to be inter-
preted as the outcome of many independent strategic actors’ search for
solutions to varied local problems rather than as the unfolding of a grand
design pursued by a single global player. But we also wanted to understand
the strategic choices involved in joining or creating the multinational in
terms of the long-term evolution of each of these formerly independent
firms. For this we needed to supplement our field interviews with additional
evidence about the historical development of each of the four ‘local players’.
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xx Preface

Fortunately, with the help of our local informants, we were able to collect a
small but sufficient body of primary and secondary materials on each of the
four firms, including published business histories of the Creamery Package
Company, the Lake Mills plant’s original owner (Godfrey 1937), and the APV
Group itself (Dummett 1981). From 1982, moreover, we could follow the
development of APV in considerable detail through the online archives of the
Financial Times and other British periodicals (electronically searchable
through Lexis/Nexis) which covered the group’s affairs regularly as a major
public company listed on the London stock exchange. These historical
materials not only revealed four quite distinct evolutionary patterns of
business development, but also provided a vital clue as to why one player
had eventually become the headquarters and the other three subsidiaries. The
answer to this puzzle turned out to depend not on any competitive superior-
ity in product markets, technology, or production processes, but rather on
relationships with financial institutions. This discovery in turn prepared the
ground for a clearer understanding of the strategic interactions among the
four players once they had become part of a single MNC.
The other new direction was towards a more systematic engagement with
the existing literature on the multinational corporation, both classic and
contemporary. Only then did we come to realize how exceptional our
empirical material really was. For there were few studies that looked at the
MNC from the ‘bottom up’ as well as the ‘top down’, and fewer still that
could match ours in terms of detailed observations across multiple organiza-
tional levels and geographical sites over a sustained period of time. And with
good reason. In constructing our study to focus on the relationship between
a multinational headquarters and three subsidiaries within the same division
from different countries (including the MNC’s home country), we were
following a logic of inquiry grounded in current debates about the impact
of globalization on local economies and national business systems. But it
would have been practically impossible to design such a study in advance of
the opportunities and contacts that emerged during the course of the re-
search itself, in terms of both the range and degree of access we were able to
achieve within the multinational, and the prior contextual knowledge we
brought to the project from our own earlier work on these issues in Den-
mark, Wisconsin, and the UK.10
Our study has evolved from the conviction that it is important to get the
details right and find coherent ways of recounting them that do not violate
the actors’ own efforts to make sense of their experience. In order to
10
For an insightful discussion of the crucial role of personal contacts in securing research access
to the upper echelons of large corporations even in a purely domestic setting, see Morrill (1995:
229–55), app. A: ‘Anatomy of an Ethnography of Business Elites’.
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Preface xxi

accomplish this task, field researchers must engage in extended contact with
their subjects, so that the actors’ self-understanding can counterbalance the
scholar’s theoretical assumptions. Such detailed analysis and extended ex-
change with multiple actors are particularly essential in a field where it is
widely accepted that there are more generalities than empirical research and
where some of the most influential studies have been sharply criticized for
drawing their findings from headquarters interviews only and accepting top
management’s views at face value.11
But do the serenditipitous origins of our case study and the exceptional
detail of the research limit the possibilities of generalizing from it theoretic-
ally and empirically? We believe not, provided that the case material is
handled intelligently, and have followed two complementary strategies in
this book to maximize its analytical impact. The first is theoretical: by
carefully confronting the organizational strategies and mechanisms for the
coordination and control of the multinational proposed in the managerial
literature with the experience of APV, we can assess their effectiveness in
meeting the challenges of running an actually existing MNC. APV functions
in this respect as a limiting case, capable of demonstrating the inadequacy of
standard models of multinational management, whether or not its experi-
ence can be taken as representative of other global firms. Our second strategy
is comparative: we draw on wide reading of the secondary literature on HQ–
subsidiary relations to situate APV in relation to other multinationals, in
order to highlight both common and distinctive features, and identify
alternative approaches to the coordination and integration of MNCs that
might contribute to overcoming the problems observed in our case. We
conclude from our reading of this literature that much of what we observed
at APV (and at its successor Siebe/Invensys, examined in the book’s final
chapter) is in fact fairly typical of Anglo-Saxon MNCs with subsidiaries in
developed countries that have grown through mergers and acquisitions.
This conclusion suggests in turn some empirical qualifications to our
ability to generalize from the APV case. One concerns the applicability of
our analysis to MNCs that have grown organically through new greenfield
investments. Recent studies show that cross-border mergers and acquisitions
have become the predominant form of MNC growth, accounting for three-
quarters of all foreign direct investment between 1988 and 1998 (Wortmann
2001a: 2, 2001b, 2000). But even in the case of organic multinational growth,
the burgeoning literature on subsidiary initiatives and product mandates
discussed at greater length in subsequent chapters demonstrates that similar
11
See, for example, the trenchant critique by Bélanger and Björkman (1999: 249) of the
presentation of ABB as a trendsetting multinational by prominent management scholars such as
Ghoshal and Bartlett (1995) and Peters (1992).
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xxii Preface

processes of autonomous strategizing by local actors are likely to emerge over

time at greenfield sites.12 A second qualification concerns possible differences
between APV and MNCs from national business systems organized along
contrasting lines such as those of Germany or Japan. The key point here,
which is consistent with our broader argument, is that MNCs from these
countries face similar problems of integrating and coordinating subsidiaries
based in other national business systems to those experienced by APV, but
may bring to them different orientations and resources, based on their own
past histories and institutional contexts. Moreover, insofar as MNCs from
other national business systems may be adopting or borrowing selectively
from Anglo-Saxon practice, our analysis of the APV case has broader rele-
vance for them as well.13 A final qualification concerns the range of host
countries in which the MNC subsidiaries we analyze are located. Clearly, our
study deals with the interaction between MNCs and subsidiaries in demo-
cratic polities that provide various forms of institutional support for em-
ployee rights (though these differ widely across the three cases of Denmark,
the US, and the UK), rather than in developing countries with failed states
and/or authoritarian employment regimes. Although parallels could doubt-
less be drawn with the emergence of independent MNC subsidiary capabil-
ities in various East Asian economies,14 these fall beyond the scope of this
book.

12
See for example Birkinshaw and Hood (1998); Birkinshaw (2000).
13
On variations in organization and coordination patterns across MNCs from different national
business systems, see Whitley (2001); Lane (2001); Ferner (1996). On adaptation and selective
borrowing from Anglo-Saxon practices by German multinationals, see Ferner and Quintanilla
(1998); Ferner and Varul (1999, 2000). For the distinctiveness of US multinationals even in relation
to their UK counterparts, see Edwards and Ferner (2002); Colling and Clark (2002); Ferner
(forthcoming).
14
For the suggestive case of hard disk drive production in Singapore, see Wong (1997).