The Spatial Dimension in Hymer’s
analysis of the multinational
organization
Prof Mo Yamin
Mo.Yamin@manchester.ac.uk
www.manchester.ac.uk/research/mo.yamin
Mo Yamin
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Overview
• The spatial dimension is a key aspect of Hymer’s analysis of
the MNE as an organization :
» Hymer’s perspective on the evolution of the Corporate Form
» Hymer’s analysis of multinationality and of the Global Outlook
» Strict separation between the Strategic and Operational domains
and the so-called ‘Correspondence Principle’
• There is also a weakness in his analysis in the neglect of the
impact of ‘embeddedness’ in host countries
» ‘Hymerian’ explanation for the ‘regional’ MNE in terms of reestablishing MNE control over strategy
» Reducing subsidiary value chains scope and outsourcing
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The corporation of today…
• ‘‘In the giant corporation of today, managers rule from the
tops of skyscrapers; on a clear day, they can almost see the
world” (Hymer in Cohen et al 1979:43)
» Emblematically Hymerian statement that captures both the
strength and ‘weakness’ of his conceptualisation of the spatial
dimensions of the MNE
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The evolution of the corporate form
•
•
•
•
The ‘Marshallian’ Factory
The National Corporation (N-Form)
The Multidivisional Corporation(M-Form)
The Multinational Corporation …
» Successive corporate forms entail greater planning capability to
achieve a much tighter coupling over the production cycle across
geographical and product spaces.
» However Hymer believed that the above evolutionary sequence
was not inevitable but (in part) reflected particular corporate
choices; choices that both reflected and exacerbated socioeconomic inequalities
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Hymer on the genesis of the M–Form
• The M-form arose in part because the N-Forms eschewed a policy of
international expansion in favour of a policy of domestic
diversification :
» The N-Form’s capabilities were in mass production and mass
distribution. They were able to integrate previously disparate
regional markets in their industry into a unified national market
as is documented in detail in the Visible Hand.
» These capabilities could have been the basis of a reasonably high
degree of corporate internationalisation: capabilities that had
integrated disparate regions to create a National Market within
the US also ‘opened up new possibilities for transferring
organisational abilities internationally’
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The M-form v the geographical extension of the N-Form
• Internationalisation based on the N-Form would have had a
more ‘egalitarian’ character:
» It was possible “to expand mass production systems very widely
and make basic consumer goods available on a broad basis
throughout the world”
• This did not happen. Hymer’s explanation is in terms of a
change in strategic orientation away from mass production:
» Large US companies turned to a strategy of new product
development aimed at smaller number of higher-income
earners, primarily within the US Market.
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The genesis of the Multinational form: The M-form template
• The M- form has great flexibility because ‘a cortex specialising in
strategy’ resides at the top that can plan on a much wider scale and
with greater flexibility than before and allocate capital with more
precision.
• For Hymer, the key feature of multinationality as a corporate form is
precisely the enhancing of the ‘strategy cortex’:
» “The M-Form has a much wider horizon leading in many cases to
a global outlook and the transformation to the stage of the
multinational enterprise”
» The planning horizon successively elevated from local to national
and to global
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Hymer’s notion of the ‘global outlook’
• A corporation’s thinking “of its world market position rather
than merely its US market position and (planning) in terms of
worldwide factor availabilities and demand patterns”
» Rooted in the confidence of the US corporations that they could
project their market /organisation power anywhere
» Large corporations were seriously studying the “fundamentals of
production and consumption” and would “dominate the taste
patterns and consumption standards of the ‘middle classes’ in
all countries”
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Organizational imperatives of a global planning outlook
• Strategic control resides exclusively at the top of the
organization. Strict separation between strategic and
operational levels
» This is fundamental as otherwise ‘the global outlook’ will be no
more than an ambition with the likelihood that overtime the
mutinational will dissolve into the international analogue of what
Chandler termed a ‘federation of autonomous offices’ (Chandler,
1977, p. 7)
• ‘Divide and Rule’: key to retaining monopoly over strategy at
the top
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The important things for the maintenance and cohesion of control
are
1.
Having an efficient and effective system of vertical
communication so that information from the bottom flows rapidly
and easily to the executive level as do orders from the top to the
operatives below
2.
Cementing lateral communication at the higher levels of the
organization so that important decision makers do not work at
cross purposes but have an opportunity to exchange information
and reconcile differences
Breaking lateral communication at the lower levels so as to
prevent alliances and interchanges that lead to actions counter to
those prescribed by higher management
3.
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‘Cementing’ lateral communication at the top of the pyramid
• Entails both a social and a spatial dimension
» Social and cultural homogeneity:
• ‘Top executives of most of the major corporations in the United states are
drawn from a relatively homogenous cultural group quite distinct from the
population of the united states’
• Stratified education system effectively separated future managers from
future workers even before they entered the workplace. Thus a ‘deep
social gulf was created between mangers as insiders and workers as
outsiders’ (O’Sullivan 2000)
• The spatial dimension is crystallised through the
‘correspondence principle’
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Correspondence principle
• close correspondence between the centralization of control
within the enterprise (microcosm) and the centralization of
control within the international economy (macrocosm)
L
I
Level
II
Level III
Levels
Location of activity
Level I (top
management)
Planning, goal determination and
setting the framework
* Concentrated in ‘central’ cities
Level II management
coordinating the managers at Level III
* Concentrated in ‘smaller’ cities
Level III management
the day-to-day operations within the
established framework
* Dispersed and potentially ‘footloose’
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The importance of central cities: the architecture of dominance
• ‘Cementing’ communication at the top requires an oral rather
than a written system of communication:
» The criticality of face to face communication between key
executives in the company and with those in the media ,
banking , accountancy , legal and key governmental bodies
• “The telephone is prodigally used, of course, but the personal conference
remains the method by which the most important work is done”
• “The skyscraper facilitates my personal contacts in a way never possible
before. From my office on the twenty–eight floor of a building in the
Times Square district, I can get to practically every person of importance
in the architectural and business field in fifteen minutes time“
– US executive cited by Hymer
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Hymer’s notion ‘Divide and Rule’: the ‘missing’ spatial link
• Hymer envisaged the threat to the centre’s monopoly over
strategy as coming only from an alliance between different
subunits within the corporation.
• The implications of individual subsidiaries’ ability to develop
strong linkages with potential counterparts in their host
environment was not addressed
• The contemporary literature on subsidiary ‘embeddedness’
suggests the separation between strategic and operational
domains in MNEs can frequently become fuzzy
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The HQ strikes back!
• Hymer did not consider the inevitably federative nature of the
MNE and the difficulties for retaining full strategic control at the
top that this would imply
» MNE CEOs at the top of skyscraper could not, after all, see what was
‘inside ‘ the subsidiary’s networks !
• However his work does suggests MNE controlling groups would
institute structural changes to diminish subsidiary power:
» the purported preponderance of the Regional MNE strategies
(Rugman 2005) can be explained in Hymerian terms (Yamin and
Forsgen, 2006; Yamin and Sinkovics, 2007)
• In Regionally focussed MNEs HQs have better knowledge of subsidiary
networks and enhanced behaved control possibility
»
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Reducing subsidiary value chain scope to increase HQ control
A
Subsidiary embeddedness in local networks
• Increases subsidiary capability
• Makes HQ control over it more difficult
A
B
• Reducing the value chain scope of individual
subsidiary
Subsidiary value chain
Host
country
firms
Host country
institutions
(e.g.
Universities)
Host
country
firms
Reporting/communication links to corporate or regional HQs
Reduced subsidiary embeddedness
B
Single activity
Single activity
Single activity
(host country)
(host country)
(host country)
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References
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