Multinational enterprises, political economy and institutional theory: Domestic embeddedness in the context of internationalization

Abstract

There is rising interest in placing the study of the multinational enterprise (MNE) at the core of political economy scholarship. This article attempts to locate the MNE in its outer institutional environments. MNEs are embedded in networks of relations with a number of important external actors, not only governments. These networks manifest marked differences between nations and regions, with differential implications for production and managerial arrangements within the firm, public policy choices and the constellation of MNE‐government relationships. In the distribution of wealth and power, MNEs are situated at the interface of domestic structures in national and regional political economies, and the process of internationalization within global political economic structures. A research agenda for the 1990s should, therefore, incorporate a political economy of the MNE in structures of global competition and cooperation that have institutional underpinnings. This study seeks to address elements of such an agenda by attempting to overcome the highly artificial distinction between the international and domestic branches of political economy, and selectively making use of the international business literature. It is therefore suggestive of a partial approach (among a number of others) to enhance interdisciplinary research in political economy, making no claim to universal theory on the political economy of the MNE.