Managing DMNCs: A Search for a New Paradigm

The increasing intensity of global competition (Porter 1986), the development of MNCs (Stopford, Dunning and Haberich 1980; Dunning and Pearce 1985), and the attendant academic and managerial interest in the role of the diversified MNC (Ghoshal 1987; Prahalad and Doz 1987; Bartlett and Ghoshal 1989) is too well documented to merit repetition. Although there has been a lot of debate on the nature of global competition and of the diversified multinational corporation (hereafter referred to as the DMNC), very little attention has been paid to the conceptual and theoretical frameworks used to analyze DMNCs and their management. Many attempts have been make to analyze aspects of the MNC starting from an established theoretical base: for example, Buckley and Casson (1986) and Hennart (1982) have attempted to seek a rationale for the MNC using a transaction cost perspective. Others (e.g., Dunning 1980 a and b, 1981b) have emphasized the need for an ‘eclectic’ theory explaining the DMNCs. We shall argue in this chapter that on the whole, scholarly research on the functioning of the MNC has suffered both from desire among some scholars to persist with existing paradigms and from other scholars’ ignorance of what existing theories could bring them. Since existing paradigms, by the very nature of their underlying simplifying assumptions, are not fully able to capture the complexity and richness of the DMNC, and since discipline-based researchers have seldom taken the DMNC as an object of research, this discrepancy is not surprising.