Jurnal MNC 7

Journal of International Business Studies (2014) 45, 227–247
© 2014 Academy of International Business All rights reserved 0047-2506

www.jibs.net
The globalization of Swedish MNEs: Empirical

evidence and theoretical explanations
Jan-Erik Vahlne and Abstract

We define globalization as the geographical dispersion of multinational enter-
Inge Ivarsson prises (MNEs)’ value chain, in combination with increased inter-regional coordi-
nation, and use detailed firm-level data to show that 12 of Sweden’s 17 largest
School of Economics, Business and Law, Centre for manufacturing companies indeed are global. By developing a Globalization
International Business Studies, Gothenburg
Process Model we theoretically argue, in contrast to much of the existing
University, Gothenburg, Sweden
literature, that globalization may evolve to a more general phenomenon. The
Correspondence: globalization process is tortuous as MNEs have to develop dynamic capabilities
I Ivarsson, School of Economics, Business and which make them gradually more competitive and able to cope with varying
Law, Centre for International Business institutional contexts. Empirical testing on globalization of MNEs originating
Studies, Gothenburg University, from other home countries is suggested.
Gothenburg S-405 30, Sweden. Journal of International Business Studies (2014) 45, 227–247. doi:10.1057/jibs.2013.60
Tel: +46 31 786 1381;
email: inge.ivarsson@handels.gu.se
Keywords: globalization; multinational enterprises (MNEs); reconfiguration and
coordination; globalization process model
INTRODUCTION
Today, in order to grow and improve on their effectiveness, multi-
national enterprises (MNEs) reconfigure their widely dispersed value
chains and develop their coordination systems to make the different
units specialize, integrate and operate towards the overall best for
the firm as a whole. We name these dual processes “globalization.”
However, in much of the existing international business literature
(e.g., Dunning, Fujita, & Yakova, 2007; Flores & Aguilera, 2007;
Ghemawat, 2003; Rugman, 2003; Rugman & Verbeke, 2004, 2007),
MNEs are often believed to operate mainly on a regional level (i.e.,
have the majority of their sales in their “home-region”), and few are
believed to operate and coordinate their activities on a global level.
This is due largely to a lack of transferrable firm-specific advantages
and to various differences in market and institutional characteristics
among world regions (Cantwell, 2009). From our regular observa-
tions of the development of the largest MNEs in Sweden, we see a
rather different picture, with MNEs such as Ericsson, Volvo, SKF and
many others operating extensive worldwide networks of value-
Received: 15 March 2012 adding activities. To us, this suggests that earlier empirical evidence
Revised: 22 September 2012 of the globalization of MNEs, and related theoretical understand-
2nd Revision: 24 May 2013
3rd Revision: 12 September 2013
ings, need to be complemented with studies of MNEs which could be
Accepted: 13 September 2013 expected to have passed the stage of “internationalization” (i.e.,
Online publication date: 14 November 2013 having limited geographical spread and/or limited coordination) to
The globalization of Swedish MNEs Jan-Erik Vahlne and Inge Ivarsson
228
become “globalized” (i.e., with a wide geographical company to open up a manufacturing subsidiary
spread and coordination of operations). Therefore, abroad, in Russia, in 1882. During the end of the
the initial research gap we set out to close with this nineteenth century, this company was followed by
paper is purely empirical. We want to show that other firms, in most cases beginning on markets
there are indeed some global companies, and have close to home in psychic distance terms. In addition,
collected detailed firm-level data on the geographical most of the leading Swedish manufacturing MNEs
dispersion, coordination and integration of value- operate in engineering industries or other business-
adding activities among the 17 largest Swedish to-business industries where technology, rather than
manufacturing MNEs. As expected, we found that local taste, decides customer choice. In these indus-
most of these indeed have become global: they have tries, product standardization is higher than in busi-
extensive operations in many parts of the world, in ness-to-consumer industries and a strong driver of
combination with inter-regional coordination of globalization (Johansson & Yip, 1994). Barriers to
substantial parts of their value chains. trade forced Swedish firms, supported by favorable
In addition, we also see a more theoretically Swedish policy, to put up manufacturing activities to
important research gap: how can we theoretically protect market shares. Thus, internationalization
explain that some companies have reached a state of was rapid and Swedish MNEs have gained consider-
being global? An answer to this question can be used able experience from managing in international
to discuss the issue of generalization: can we also contexts. Moreover, Swedish MNEs began interna-
expect companies from other countries to globalize? tionalizing early on while they were still small, while
In order to explain the globalization process of the competitors from larger countries often had grown
Swedish multinationals, we present a Globalization large on the home market before beginning to
Process Model, which is a development and adaption internationalize. Swedish companies were forced to
of the well-established Uppsala Model (Johanson & adjust to local needs and to cooperate in a network
Vahlne, 1977, 2009; Vahlne & Johanson, 2013). The fashion with customers, while competitors from
core of these models, both the old and new versions, large home markets had strong opinions about
is management under uncertainty, in which MNEs what was the best solution for the customer. The
gradually build strength by experiential learning and concentration in the engineering industries, such as
by building relationships with relevant parties in the telecommunication and mining operations, also
environment. In this way the level of uncertainty is contributed to the applicability of systems solutions
kept at an acceptable level while exploiting opportu- (Hörnell & Vahlne, 1986). However, while the small
nities through means such as product development size of the home market has forced Swedish MNEs to
and investments in emerging markets. Such oppor- pioneer globalization, we believe the most impor-
tunities include reconfiguration of existing (and tant explanations for globalization are also relevant
new) units dispersed around the globe and increased to MNEs from other countries.
efforts to coordinate. The main differences com- Thus, the aim of this study is to contribute to the
pared to the previous Uppsala model are that we knowledge on globalization, first by presenting
now see globalization capabilities as a critical empirical data on the larger manufacturing Swedish
dynamic capability, and the degree of globalization MNEs to establish the fact that the process of
as an important performance variable, both of which globalization is advancing and that some companies
help MNEs to strengthen their transferable firm- are global already. Second, we also try to theoreti-
specific advantages and learn to cope with institu- cally explain our findings by developing and apply-
tional differences among countries and regions. ing a globalization process model and demon-
We believe that the globalization process of MNEs strating the probability that globalization is by no
is progressing, but that it is tortuous and that some means only a Swedish phenomenon, but presum-
MNEs will never achieve the state of being fully ably of a general character. We focus on indigen-
global. As we have shown in a recent case study of ously driven MNE globalization as an input into the
AB Volvo (Vahlne, Ivarsson, & Johanson, 2011), the theory of the firm, not denying the importance of
process takes time. Part of an explanation as to why exogenous drivers (e.g., Hult, Cavusgil, Deligonul,
Swedish MNEs might be more globalized com- Kiyak, & Lagerström, 2007). In line with Buckley and
pared to many others can be related to the specific Ghauri (2004), we believe that the analysis of globa-
Swedish context. As the home market for Swedish lization is a “big question” for international business
companies is small, internationalization started very researchers, with relevance for policymakers as well
early, mainly by sales. Ericsson was the first Swedish as for managers.
Journal of International Business Studies

229
The paper is structured as follows. First, we present classified direct investments into resource, market,
some earlier research on globalization and on the efficiency and strategic asset seeking, he argues:
existence of global companies. Second, we present “With the gradual geographic dispersion of created
our extensive empirical data, showing that most of assets, and as firms become more multinational by
the major Swedish manufacturing MNEs indeed deepening or widening their cross-border value
have become global. Thereafter, we theoretically chains, then, both from the viewpoint of harnessing
try to explain our empirical findings by presen- new competitive advantages and more efficiently
ting a globalization process model. This is largely deploying their home-based assets, the structure
influenced by a dynamic capability perspective in and content of the location portfolio of firms becomes
combination with the well-established Uppsala more critical to their global competitive position” (p
internationalization process model. In our conclu- 16). Dunning (2009) also argues that there are three
sion, we make an attempt to link the globalization changes of the international context supporting this
process model to some of our key empirical findings. view: intellectual assets are becoming a dominant
The paper ends with a discussion of the results and advantage, communication and transportation costs
some ideas for further research. have decreased considerably, and finally, alliance
capitalism has emerged, accompanied by a rise in
Previous Research inter- and intra-firm collaboration. In other words,
In line with Welch and Loustarinen (1988), we the reasons to globalize have increased and the
define internationalization as increasing engage- impediments have decreased; consequently, as long
ment in foreign markets. But with globalization we as expanding into new locations for some reason
have a higher ambition: not only should engage- provides an opportunity to develop the business,
ment in foreign markets be widely dispersed, but we managers will try to exploit the opportunity. The
also understand the MNE as a network of units way most countries around the globe develop, there
which are differentiated to exploit the advantages will be few places that are of no interest to MNEs. But,
of specialization and locational advantages (Bartlett of course, not all industries have members that pos-
& Ghoshal, 1990). This network has to be integrated sess globally exploitable firm-specific advantages.
with the help of various coordination tools. We As discussed in the introduction, MNEs are often
believe that to make the concept of globalization believed to operate on a regional level, mainly due to
meaningful, both the aspects of geographical loca- geographical differences in market and institutional
tion and integration must be paid attention to. characteristics. During the past two decades, Alan
In the literature, definitions of a global industry Rugman and his co-authors have been the prime
vary, but they are similar in their intentions. Hout, proponents for the position that there is little or no
Porter, and Rudden (1982) argued that an industry is scope for global strategy: either firm-specific advan-
global if the competitive position of a company in tages do not lend themselves to globalization, or the
one country market is affected by its competitive heterogeneity among regions is too large to make
position in other country markets. Morrison (1990) globalization feasible, or a combination of both
proposed that a standardized product being mar- these factors. The debate has been extensive and we
keted all over the globe should be one criterion. That refer the reader to overviews offered by Banalieva
a focal firm is facing the same competitors every- and Athanassiou (2010), and to Aggarwal, Berrill,
where is another criterion for a global industry Hutson, and Kearney (2011), who also demonstrate
(Porter, 1986, 1990). Companies in such industries how different measures can give different results.
have both an opportunity and a compulsion to Also of interest are issues of The Multinational
globalize. Competitors will no doubt exploit the Business Review (2010) and The European Manage-
potential to compete globally when the context so ment Journal (2009), both devoted to studies of
permits, as this is expected to positively affect per- “regionalization vs. globalization,” where it repeat-
formance (Hult et al., 2007; Johansson & Yip, 1994; edly is argued that globalization is a myth. “The
Kim, Park, & Prescott, 2003; Yeniyurt, Cavusgil, & myth of globalization” position is also supported by
Hult, 2005; Zhou & Cavusgil, 2002). Dicken (2011), who uses UNCTAD's “transnational-
From an industrial-organizational perspective, it is ity index” (e.g., UNCTAD, 2011) which is a weighted
expected that competitors will exploit opportunities average of the geographical distribution of MNEs'
not exploited by the focal company. Dunning sales, assets and employment, to argue that most
(2009), contemplating location of the MNE from an companies are still mainly dependent on their home
economic perspective, supports this view. Having country.

230
According to an influential study by Rugman and is characterized by a high level of validity and
Verbeke (2004) on the degree of globalization of the reliability, as compared with many previous studies
world’s largest companies, there were only nine of globalization, which – as discussed above – have
global companies in 2001. However, that study has produced inconclusive results. We apply two basic
received criticism as it mainly uses the geographical dimensions of “global”: the geographical configura-
dispersion of sales as the sole criterion for evaluating tion (i.e., location) and the coordination of activities.
whether a company can be classified as “global.” In geographical configuration terms we analyze the
Rugman and Verbeke (2004) argue that global firms distribution of MNEs' functional activities between
need to have stronger intangible assets than regional six large world regions: Western Europe (including
companies. That is probably true, however, in our Sweden), Russia and Eastern Europe (including
opinion one should apply a dynamic view as is done the Baltic states and the other formerly centrally
in the resource-based theory (Barney, 1991) or the planned economies), North America, South Amer-
Uppsala model (Johanson & Vahlne, 2009), where it ica, Asia/Pacific, and Africa/Rest of World (ROW).
is assumed that companies will continue to learn and This regionalization is in line with how economic
develop new and/or strengthen previous advantages. data generally are presented officially by the sur-
A dynamic approach to testing the global/regional veyed MNEs (e.g., in annual reports), as well
issue is taken by Flores and Aguilera (2007). They as by international institutions (e.g., the World
investigate whether the top 100 US MNEs have Bank). The functional activities include data on
expanded their locational choice between 1980 and employment, sales, purchasing of intermediate pro-
2000 and find that they have, but that regional diffe- ducts, manufacturing and R&D. We also collected
rences in terms of culture and institutions remain information on the location of division/business
important, hence “there is a continued importance area offices, as well as units operating as “centers of
of learning…” (p 1204). This to us implies that it is excellence.”
a matter of time until a higher degree of globaliza- Coordination is the other dimension of the con-
tion will be achieved. Interestingly, Ghemawat cept of global. The existence of coordination can
(2003) finds that “semiglobalization” captures the have as a consequence that inter- and intra-regional
state of affairs with market integration having integration is achieved. In terms of coordination
increased over time, although location specificity is we collected two types of data. First, data on the
still an important ingredient in international busi- functional activities that were “coordinated”
ness strategy. between world regions (including cases of explicit
To conclude, numerous studies, some theoretical joint management), covering sales, purchasing,
but most of them mainly empirical, arrive at different manufacturing and R&D operations. We did not
conclusions concerning the existence of global firms pay attention to intra (within) regional coordina-
and the success of global strategies. We have not gone tion. Secondly, we collected data on four types
into detail concerning methodology and measure- of intra-firm trade between corporate units in differ-
ment, since this is not the point of our criticism. To ent world regions, covering intermediate pro-
us it is rather a matter of the approach taken. It is ducts, finished goods, production technology, and
striking that most authors take a static view in their engineering, design, testing and other technical
empirical work, and even more so in their theoretical services.
reasoning. We agree with Westney (2006: 448), who Thirdly, we collected information on some general
states that “…the real test of global strategies is change characteristics of the companies and their indus-
over time, not absolute levels of geographic dispersion tries, including whether their products could be
in a single year.” Important to note is that those classified as mainly globally standardized or locally
researchers, (e.g., Cavusgil, Yeniyurt, & Townsend, designed or adapted, the extent to which their
2004; Hult et al., 2007) who claim that coordination manufacturing units were specialized or non-specia-
is a crucial dimension of globalization find that lized, the extent to which their competitors were
globalization leads to improved performance. mainly few and global in scope (oligopoly) or mainly
local. In the spirit of Perlmutter we collected data
METHOD on the national/regional background of members
in the top executive team of the company, and
Operationalization of the Concept of “Global” finally assembled data on recent trends of globaliza-
We make an effort to develop multi-dimensional tion within the surveyed MNEs and their main
measures of globalization as to make sure our result competitors.

231
Data Collection globalization trends, both within their own com-

Some of the data were officially available in MNEs’ pany and more generally within their industry. The
annual reports, including most numerical values on respondents provided all information using a com-
the geographical distribution of employees and bination of personal assessment and controllable
sales. However, the main empirical data were col- data (e.g., numerical values and on the formal
lected between January and November 2011 during organizational set-up). In a few specific situations
personal visits to MNEs’ global, or in two cases, local where the respondents were unable to give answers,
head offices in Sweden, where we conducted inter- information was collected from relevant colleagues
views with one or two senior managers from each and experts and was provided directly during our
company. The interviews generally took around 2 h visits or communicated later through telephone
and were based on a semistructured questionnaire, conversations.
helping us to collect comparable data as well as As we judged it too problematic for companies to
allowing respondents to provide additional informa- answer questions concerning the situation five or
tion. The respondents included group level execu- ten years prior, we mainly focused on the current
tives consisting of vice presidents for divisions/ situation (2011). This is regrettable, as historical data
business areas, or in two cases heads of global would have been of value to trace the direction of
supply-chain management. They were all knowl- the globalization process. For the geographical
edgeable about the operations, based on a long distribution of sales and employees, however, we
experience from different leading position within collected aggregate data for the period 2000–2011,
their company. The responses were recorded on the and for each company we also have more detailed
interview form, a copy of which was given to the data on the geographical distribution of their sales
interviewee. and employees for the years 2000 and 2011, making
The respondents provided three types of data, all it possible to discuss the direction of development in
referring to the group level. The first type of data was these variables.
information on the geographical distribution of the
functional activities, including complementary fig- EMPIRICAL FINDINGS
ures on the geographical distribution of sales and
employment (most of this was taken from annual Overview of the MNEs Included in the Study
reports). They also provided numerical data on the The 17 companies included in the study consist of
purchasing of intermediate products, or, when this Sweden’s largest manufacturing companies by
information was not readily available, estimates on annual sales in 2010 (excluding Tetra Laval, where
the amount of sourcing per region, including “sig- we were unable to gain access). The inclusion of
nificant,” “minor,” or “none.” To make that distinc- these companies is based on the fact that they
tion did not seem to be a problem. The respondents constitute a distinct group in terms of their large
also provided information on the MNE’s manufac- size, compared to other manufacturing companies
turing and R&D operations, indicating the regions in Sweden.
where these activities were seen as “significant.” We We focus only on manufacturing companies, leav-
also collected data on the geographical locations of ing out pure service firms, although these increas-
key formal decision-making units, for example, divi- ingly also have expanded internationally (e.g.,
sional/business area-offices and “centers of excel- UNCTAD, 2004). The globalization processes among
lence.” The second type of data focused on the manufacturing and service firms are in many
coordination of operations; we asked the respon- respects different, making it problematic to include
dents to identify which, if any, of the five key types both types of companies within the framework of
of activities were coordinated among the six world this study. We also want to contribute to the debate
regions, and also among which of the six world on globalization, which remains dominated by stu-
regions, if any, their company had significant dies on manufacturing companies.
volumes of intra-firm trade of products and services. As a result of large mergers, three of the 17 MNEs
The third type of data provided by the respondents are not Swedish companies in legal terms. However,
was related to the company’s overall strategy, although ABB, AstraZeneca and Stora Enso are dom-
including the level of product standardization and iciled in Switzerland, UK and Finland, respectively,
production specialization and whether the firm significant parts of their historical legacy (until the
operated in oligopoly markets. Finally, we asked 1990s, being Swedish-registered companies for a
respondents to provide their view on the major century or more), and current operations are in

232
Sweden, and therefore we have also included where 12 MNEs have operations in at least 100
them in our study. Volkswagen has recently countries and the other five operate in 30–70 coun-
acquired the majority of Scania, but at the time of tries. Part of an explanation of this worldwide pre-
the research the company remained Swedish regis- sence is found in the fact that most of the MNEs
tered and independently managed from the head were already established before the mid-twentieth
office in Sweden. century; column E shows that a majority of the
In Table 1, some key facts on the surveyed MNEs MNEs also have a very long history of international
are presented. From column A we find that most operations, with foreign sales and manufacturing
MNEs produce capital goods and other industrial units abroad dating back at least a half century.
products, which mainly are sold to customers Another contributing factor for the worldwide pre-
through business-to-business relations. sence is that significant international expansions
Only three companies (SCA, Electrolux, Husqvarna) have been made through acquisitions of existing
partly also produce consumer goods. Column B companies. While green-field investment tradition-
shows their size measured by total turnover, where ally has played a dominant role for international
the six largest companies have annual sales exceed- expansions for most of the MNEs, the figures in
ing 100 billion Swedish kronor (SEK), or approxi- column F clearly show that a high number of major
mately US$ 13 billion, the largest being AB Volvo, acquisitions have been made during the past three
AstraZeneca, ABB and Ericsson. By contrast, Alfa decades; these have added international markets,
Laval and Trelleborg are considerably smaller, with distribution channels, and manufacturing capacities
an annual turnover of approximately SEK 25 billion. as well as new technologies. A well-known example
The size measured by total employment is found in of this is Electrolux, which on average acquired 10
column C. As can be seen, this varies from 9000 companies per year during their rapid expansion
people in SSAB, which operates in the capital-inten- period in 1970–1990.
sive steel industry, to over 100,000 employees in Below, we will give a more detailed empirical
ABB. In column D we find that the surveyed MNEs account of the globalization of the 17 Swedish-based
have sales and other value-adding activities in a very MNEs, structured along our two main globalization
large number of countries throughout the world, dimensions: first, their geographical configuration
Table 1 The companies included in the study with (A) their main products, (B) total sales (SEK billion), (C) total number of employees
(thousands), (D) number of countries with operations, (E) starting year of their first operation abroad, (F) Number of major aquisitions
(various periods) (2010 figures)
Company (A) (B) (C) (D) (E) (F)
AB Volvo Commercial transport solutions 264 90 190 1928 —a

AstraZeneca Biopharmaceuticals 255 61 100 1934 n.d.
ABB Power and automation technologies 240 116 100 1911 25b
Ericsson Telecommunications equipment and services 203 90 100 1882 15c
SCA Personal care, tissues, packaging, forest products 107 45 100 1947 80d
Electrolux Household and professional appliances 106 52 150 1919 200e
Stora Enso Packaging, paper and wood products 95 30 35 1929 10f
Sandvik Tools for metal cutting, mining and construction 83 47 130 1914 86g
Scania Heavy trucks, buses, industrial/marine engines 78 35 100 1957 n.d.
Atlas Copco Compressors, mining/construction equipments 70 33 170 1916 105h
SKF Rolling bearings, seals, mechatronics 61 45 130 1911 80 i
Autoliv Automotive safety systems 54 43 30 1982 15 j
SSAB High strength steel 40 9 50 1966 —k
Assa Abloy Locks and security products 37 37 70 n.a. 150 l
Husqvarna Lawn movers and other outdoor power products 32 15 100 1913 12 m
Trelleborg Polymer products for sealing, damping, protecting 27 20 50 1951 80 n
Alfa Laval Heat transfer, separation, fluid handling 26 12 100 1883 30 o
a
Renault/Mack Trucks (2001) and Nissan Diesel (2007); b2007–2012; c2005–2012; d1995–2011; e1970–1990; f1998–2008; g1993–2012; h1999–2012;
i
1995–2012; j1995–2012; kIPSCO, 2007; l1994–2012; m1995–2012; n1996–2012; o2007–2011.
(n.a.) data not available.
Source: Survey data, annual reports and Department of Business Administration (1970) Survey to Swedish multinational enterprises, Uppsala University.

233
(i.e., location) and second, the degree of global This general change should be seen in the context
coordination of value-adding activities. of an overall growth by around 46% in their world-
wide sales, from SEK 1.347 billion in 2000 to SEK
1.921 billion in 2011. Non-European sales have
Globalization Dimension 1: The Geographical continued to grow throughout the period, while
Configuration sales in Europe declined in absolute terms in 2009
as part of the economic downturn, and have since
Sales and employees
only partly recovered.
The first dimension of globalization is related to the
We also find a significant but more gradual change
geographical configuration of MNEs’ value-adding
in the geographical distribution of employment,
activities (i.e., their locations). The possibility for
where non-European regions now account for 50
MNEs to generate dynamic capabilities is largely
per cent of the total number of employees, com-
dependent on the configuration of their internal
pared to one-third in 2000. Behind these changes are
(and external) network of value-adding activities. If
an increase in the absolute number of employees
we take a look at the 17 Swedish-based manufactur-
worldwide among the surveyed MNEs, from almost
ing MNEs included in our study, most of them
750,000 in 2000 to almost 840,000 in 2011.
clearly operate on a global level. We compiled
Throughout the period, this expansion is totally
empirical data on the locations of five key value-
accounted for by an increase in the number of
adding activities, including sales, employees, sour-
employees outside Europe and a decline in those in
cing of intermediate products, manufacturing, and
Europe.
their R&D activities.
If we take a closer look at these trends at the
Starting with the company’s sales and employ-
company level, Table 2 shows the share of sales and
ment, Figure 1 shows the aggregate trend for all
employees per world region in 2011, and the percen-
companies included in the study over the period
tage point-change since 2000, for each of the sur-
2000–2011 (measured by two-year intervals, and
veyed MNE, where we have grouped the companies
also 2011). We focus on the share of total sales and
according to the share in their home region, this
employment outside their European home region
time more narrowly defined as Western Europe. We
(here defined as Western Europe, Eastern Europe and
see that only a few MNEs have a clear majority of
Russia) and the trend clearly demonstrates that both
sales in the home region, that is, Western Europe
sales and employment increasingly are concentrated
(SCA, Stora Enso, SSAB), while eight MNEs sell at
to regions outside of Europe. On average, non-
least two-thirds in other world regions, especially in
European sales have expanded from around 47% in
Asia/Pacific and North America, which are the two
2000 to almost 60% in 2011, with the most signifi-
other key sales regions. Almost all MNEs also have
cant increase after 2008.
sales in the other world regions, especially in South
America. Finally, there is a general trend since 2000
with increased sales in Asia/Pacific, partly also in
70
South America and Africa/ROW, and a decrease in
60 Western Europe and North America.
Turning to employment, the figures in the table
50 also show that only five of the MNEs (Stora Enso,
SSAB, SCA, Scania and Trelleborg) have a clear
40
%
majority of employees (ca. 60–90%) in Western
30 Europe, 10 MNEs have around half (ca. 45–55%) of
Sales their employees there, while two MNEs (Assa Abloy
20 and Autoliv) clearly have most of their employees
Employees
elsewhere. A second observation is that most of the
10
MNEs (12) also have significant shares of their
0 employees in Asia/Pacific, responsible for around
2000 2002 2004 2006 2008 2010 2011 one-fifth to over one-third of total employment.
Figure 1 Sales and employees outside Europe (i.e., Western Today, Asia/Pacific generally accounts for larger
Europe, Russia and Eastern Europe) in Sweden's largest manufac- shares than North America, the third major employ-
turing MNEs (2000–2011) (Per cent). ment region. Furthermore, with only a few excep-
Source: Survey data. tions, all MNEs have measurable employment in all

234
Table 2 Sales and employees and per world region by Sweden’s largest manufacturing MNEs (per cent 2011 and percentage point change
compared to 2000)
Company Western Europe Russia, Eastern Europe North America South America Asia/ Pacific Africa, ROW
Sales
Stora Enso 77% −5 a —a 1% −9 5% +4 15% +9 2% +1
SCA 66% −21 7% +2 12% +8 3% +1 4% +3 8% +7
SSAB 56% −35 a —a 34% +30 2% +1 6% +3 2% +1
Trelleborg 57% −5 a —a 20% −11 7% +5 16% +11 0% 0
Scania 50% −23 3% −1 0% 0 29% +17 13% +8 5% +1
Assa Abloy 41% −7 2% 0 32% −7 2% +2 21% +12 2% 0
SKF 41% −10 5% +3 18% −9 6% +1 27% +14 3% +1
Electrolux 40% −8 a —a 33% −9 17% +11 9% +6 1% 0
ABB 38% −16 a —a 20% −6 b —b 29% +17 13% +5
Autoliv 38% −17 a —a 29% −4 6% +4 26% +17 1% 0
Husqvarna 37% −6 a —a 41% −13 8% +7 10% +9 4% +3
Alfa Laval 35% −12 3% +2 17% −3 6% +1 38% +12 1% 0
Sandvik 34% −11 4% +2 17% −7 7% +1 28% +9 10% +6
AB Volvo 34% −20 5% +2 18% −12 11% +7 25% +18 7% +5
Atlas Copco 32% +2 —a 18% −33 11% +7 28% +17 11% +7
AstraZeneca 30% −4 3% +2 45% −7 0% −3 16% +7 6% +5
Ericsson 24% −13 5% +2 24% +11 9% −7 27% +6 11% +5
Employees
Stora Enso 90% −1 a —a 1% −5 1% 0 7% +6 1% 0
SSAB 82% −15 1% +1 14% +13 1% 0 1% +1 1% 0
Scania 73% −9 1% −2 0% 0 15% +3 7% +5 4% +3
SCA 59% −6 9% +1 6% +4 13% −10 7% +6 6% +5
Trelleborg 59% −17 a —a 16% +2 5% +1 20% +14 0% 0
Sandvik 55% −5 a —a 14% −4 5% 0 20% +7 6% +2
AB Volvo 54% −15 a —a 13% −7 6% +2 23% +18 4% +2
ABB 51% −15 a —a 14% −3 b —b 26% +16 9% +2
Alfa Laval 51% −6 3% −2 11% 0 3% 0 31% +8 1% 0
SKF 50% −9 8% +2 11% −4 7% +2 23% +9 1% 0
Atlas Copco 47% +6 2% +1 13% −30 7% +4 24% +15 7% +4
Ericsson 46% −18 2% 0 15% +2 7% 0 24% +12 6% +4
Electrolux 44% −13 a —a 20% −6 27% +19 8% 0 1% 0
Husqvarna 44% −26 a —a 36% +14 4% +1 15% +11 1% 0
AstraZeneca 43% −13 1% 0 24% −5 7% +6 24% +12 1% 0
Assa Abloy 28% −7 4% −2 19% −5 2% +1 46% +16 1% −3
Autoliv 25% −17 20% +11 24% +3 2% −8 22% +9 7% +2
a
Including Western Europe and Russia/Eastern Europe.
b
Including North and South America.
Source: Annual reports and survey data.
other world regions, especially in South America. We employees in the home region. This is also true for
notice a clear geographical shift in employment the North American share of many companies, while
since 2000, where almost all MNEs have reduced the share of the other regions generally has grown.
their shares in Western Europe and substantially Atlas Copco is the only one exception to this pat-
increased their shares in Asia/Pacific. For the other tern, where their rental business in the US, with a
regions these changes are more mixed, but there are turnover corresponding to 20% of the total, was
numerous increases of employment in regions out- disinvested in 2006. The dramatic change for
side the broader “triad” of Western Europe, North SSAB is due to an acquisition in North America in
America, and Asia/Pacific. 2007. On the whole, the geographical distribution
Over time, the trend towards a more global foot- has become more even since the year 2000 with
print is very clear, as all companies have been sales in the lead and other functions following,
experiencing a rapidly decreasing share of sales and as indicated by distribution of employment. The

235
companies that are slowest in the process of expand- source measurable amounts of intermediate products
ing globally are those at the raw materials end of also from Russia/Eastern Europe (13 MNEs) and South
the value chain, presumably having firm-specific America (14 MNEs). In summary, only a few of the
advantages somewhat less applicable for global MNEs have their dominant sourcing operations in
exploitation. Western Europe, while most MNEs operate a global
sourcing strategy that at least includes Western Eur-
Sourcing of intermediate products ope, North America and Asia/Pacific.
Our third key indication of MNEs’ global operations
is the sourcing of materials, components and other Manufacturing
intermediate inputs used in their manufacturing Turning to the geographical locations of MNE man-
operations. Compared to the figures on employment ufacturing units, we collected information regarding
and sales presented above, the data on sourcing in which world regions the MNEs had “significant”
regions are less complete. However, we have detailed manufacturing operations, according to their man-
information on the share of total purchases per agers. Table 4 shows that most of the surveyed MNEs
region from nine of the surveyed MNEs, while the have substantial manufacturing operations in all
information from eight MNEs only includes three world regions, with the exception of Africa/ROW,
different estimated levels: “none,” “minor,” and where fewer MNEs have manufacturing. All MNEs
“significant.” As can be seen in Table 3, Western have manufacturing in Western Europe, and almost
Europe is only the dominant sourcing region for a all also have production units in Russia/Eastern
few of the surveyed MNEs. Among the nine MNEs Europe, North America, South America and Asia/
where detailed data are available, four source over Pacific. It is noteworthy that 10 MNEs also have
half of their intermediate inputs in Western Europe. production in Africa/ROW.
Among the MNEs where we only have broad esti-
mates, none seem to source the majority of material Research and development
inputs in Western Europe. The fifth variable on MNEs’ global footprint is the
Instead, most of the MNEs have significant shares geographical location of their R&D activities. The 17
of sourcing in other world regions, mainly in Asia/ Swedish-based MNEs have to a large extent built their
Pacific, where typically around one-fifth (or “signifi- global networks of value-adding activities on the basis
cant” shares) are sourced, and in North America, of very strong technological competence and signifi-
which typically accounts for 10-40% (or “significant” cant investments in research and development. As
shares) of the MNEs’ global sourcing. Most MNEs shown in Table 5, these MNEs have generally high
Table 3 Sourcing of intermediate products per world region by Sweden’s largest manufacturing MNEs 2011 (per cent)
Company Western Europe Russia, Eastern Europe North America South America Asia/Pacific Africa, ROW
No. 1 80 14 0 2 4 0
No. 2 75 0 2 15 8 0
No. 3 70 2 5 3 20 0
No. 4 65 0 15 0 20 0
No. 5 58 12 14 12 3 1
No. 6 40 4 32 1 23 0
No. 7 35 0 40 0 25 0
No. 8 29 25 13 3 29 1
No. 9 26 2 25 2 43 2
No. 10 Significant Minor Significant None Significant None
No. 11 Significant Minor Significant Minor Significant Minor
No. 12 Significant Significant Significant Significant Significant Minor
No. 13 Significant Minor Significant Minor Significant None
No. 14 Significant None Significant Minor Significant None
No. 15 Significant Significant Minor Minor Minor None
No. 16 Significant Minor Significant Minor Significant Minor
No. 17 Significant Significant Significant Minor Significant Minor
Source: Survey data.

236
Table 4 Regions with “significant” manufacturing operations Table 6 Regions with “significant R&D operations among
among Sweden's largest manufacturing MNEs 2011 (Number of Sweden's largest manufacturing MNEs 2011 (Number of firms
firms (N = 17)) (N = 17))
Western Russia, North South Asia/ Africa, Western Russia, Eastern North South Asia/ Africa,
Europe Eastern America America Pacific ROW Europe Europe America America Pacific ROW
Europe
R&D 17 4 12 4 12 0
Manufacturing 17 14 15 16 16 10
Table 5 R&D intensity, number of R&D personnel, number of

of the surveyed MNEs have R&D operations in North
major R&D sites, and firms recognized as one of the world’s leading
innovators, among Sweden’s largest manufacturing MNEs 2011 America and in Asia/Pacific.
Company R&D Number of Number of Recognized as

intensity a R&D major R&D a leading Globalization Dimension 2: Degree of Global
personnel units innovator b Coordination
Ericsson 15.5 22,000 23 Yes
AstraZeneca 12.6 10,000 14 Yes
Divisional offices and other organizational units for
Volvo AB 5.0 9000 7 Yes coordination
Autoliv 5.0 4400 20 The second dimension of globalization is related to
Scania 4.5 3400 3 Yes the degree of coordination of their geographically
ABB 3.4 7500 10 Yes distributed units. A first type of empirical indications
Assa Abloy 2.8 1300 10 on global coordination among the surveyed MNEs is
Husqvarna 2.6 1100 6 their formal organizational structure, where we find
Alfa Laval 2.5 500 14 Yes that only a few have a clear structure based on
Sandvik 2.5 2300 11 Yes
geographical, functional or product division/busi-
Atlas Copco 2.3 2500 13 Yes
ness area factors. Instead, the large majority (14
Trelleborg 2.0 300 5 Yes
SKF 2.0 1700 16 MNEs) have a “matrix” organization, where most of
Electrolux 1.9 1600 9 the operations within geographical, functional and
SSAB <1 200 4 product divisions/business areas are combined and
SCA <1 400 6 coordinated at a global corporate level. Further, a
Stora Enso <1 400 4 substantial number of MNEs have set up division or
a
R&D investments as a per cent of total sales. business area offices in different parts of the world,
b
According to Forbes (2012), Thomson Reuters (2005, 2011, 2012), Booz potentially playing an important role for worldwide
and Company (2006).
Source: Survey data, Annual reports, Forbes (2012), Thomson Reuters
coordination. These offices are mainly found in
(2005, 2011, 2012), Booz and Company (2006). Western Europe (11 MNEs), North America (12) and
in Asia/Pacific (11); a few also are located in South
America (2) and in Russia/Eastern Europe (1). More-
over, a substantial number of MNEs have affiliates or
R&D intensities, also measured by international stan- other units, which have an explicit corporate-wide
dards, and when compared to major competitors responsibility within specific functional areas (e.g.,
(OECD, 2011; SCB, 2009). We also find that they production, sales). These units operate as “centers of
employ substantial numbers of R&D personnel and excellence”, and are mainly found in Western Eur-
operate many significant R&D units, which make ope (13 MNEs), North America (12) and Asia/Pacific
many of them among the most innovative firms in (11), with a few in South America (3) and Russia/
the world. The exception to this general picture is the Eastern Europe (2). These data indicate that most of
three firms mainly operating in the raw materials the MNEs have an organizational structure that is
industries, which are less R&D intensive. designed to combine resources found at corporate
In order to analyze the geographical configuration units in different parts of the world. A final interest-
of their R&D, we asked MNE managers to identify ing observation related to managerial organization is
the world regions where they had “significant” R&D that 39% of the 171 top managers on the executive
operations. Table 6 shows that Western Europe is boards of the 17 MNEs are not of Swedish origin.
still the dominant region, but a substantial number This is a 6 percentage point increase in the number

237
Table 7 World regions and company functions included in inter-regional coordination among Sweden’s largest manufacturing MNEs 2011
(Number of firms with coordination/Number of firms with operation in the region (N = 17))
Coordinated function Western Europe Russia, North America South America Asia/ Pacific Africa, ROW
(total number of firms) Eastern Europe
Purchasing (17) 17/17 13/13 14/16 14/14 16/17 7/7

Manufacturing (16) 16/17 11/14 13/15 15/16 13/16 6/10
Sales (15) 15/17 14/17 14/16 15/16 15/16 12/12
R&D (13) 13/17 2/4 11/12 4/4 9/12 0/0
n.d.: No data.
of non-Swedes compared with 2001 when 32% of Table 8 Coordination between three or more world regions
the 126 top managers were foreign citizens. among Sweden’s largest manufacturing MNEs 2011 (Number of
MNEs (N = 17))
Inter-regional coordination Function Number Major regions included
While the above data show some key formal organi- of MNEs
zational units for global coordination, our second
Purchasing 17 All, except Africa;
type of data on coordination relate to the extent to
mainly WE, N. Am, Asia.
which MNE operations in different world regions
Manufacturing 14 All, except Africa;
actually are managed independently or linked mainly WE, N. Am, Asia.
together through various coordination mechanisms. Sales 14 All
Here we explicitly asked company managers to R&D 9 WE, N. Am., Asia.
indicate to what extent their activities in different Source: Survey data.
parts of the world were operated in a “coordinated”
manner, with an explicit joint management. We
included four different functions - sales, purchasing, exception. Here, the coordination mechanisms
manufacturing and R&D - and asked company man- include corporate-wide quality standards and pro-
agers to identify between which world regions, duction systems, as well as product and/or process
if any, each of these activities was coordinated. specialization. In relation to this, it is interesting to
Table 7 shows that all except two MNEs manage note that 14 MNEs manufacture products that their
their sales activities through inter-regional coordina- managers classified as “globally standardized,” while
tion, including such mechanisms as common sales/ a few MNEs (3) had products that mainly were
distribution channels, global pricing policies, world- classified as “locally adapted.” In addition, managers
wide introduction of business offerings, and global in a large number of the MNEs (13) indicated that
customer specialization. The high degree of coordi- they operated manufacturing units that were partly
nation is also motivated by the fact that a substantial or fully “specialized” (i.e., produced unique products
number of the surveyed MNEs (12) operate in what compared to other corporate units), while a few
their managers classified as “oligopoly” markets (i.e., MNEs (4) indicated that their manufacturing units
global competition between a few companies), while were basically “non-specialized,” with production of
a few MNEs (2) mainly operate in markets with similar products at many corporate units.
many local or national competitors, and a few (3) A substantial number of the surveyed MNEs (13)
operate in mixed markets including local, national report that their R&D activities are coordinated on
and global competitors. an inter-regional level, although these activities are
We also see that inter-regional coordination of mainly concentrated in three leading regions (W.
purchasing was found in all 17 MNEs. This included Europe, N. America and Asia), where managers use
mechanisms such as corporate-wide sourcing agree- such mechanisms as R&D specialization, joint pro-
ments, sourcing committees, quality standards, and jects and the sharing of R&D results.
standardized supplier assessment systems, as well as In Table 7 we also see that the coordination
the existence of international sourcing offices in key covered most parts of the world for most functions,
sourcing regions. although Africa/ROW was generally less included.
Inter-regional coordination of manufacturing is If we take a closer look at how many regions are
also found among all MNEs, with only one included in MNEs’ coordination, Table 8 shows that

238
this generally involves at least three world regions, “regular and measurable levels” of four categories of
usually consisting of Western Europe, North Amer- intra-firm trade between world regions: (a) raw
ica and Asia/Pacific; but often also South America materials, components and other intermediate
and Russia/Eastern Europe; and for sales, even Africa. inputs used for further processing; (b) finished pro-
ducts for distribution to external customers; (c)
Intra-firm trade machinery, equipment and other types of produc-
Above we showed that most of the surveyed MNEs tion technology; and (d) design, product deve-
operated specialized production units that partly or lopment, production engineering, testing and other
completely manufactured unique products com- types of technical services. As can be seen in
pared to what was produced by other corporate Table 9, almost all MNEs (15) exported intermediate
units. One outcome from such specialization is products from Western Europe, which were used for
a flow of intermediate and finished products and further processing by their manufacturing units in
services between corporate units. If these units are Asia/Pacific (11), North America, (10), South Amer-
located in different world regions, such flows can be ica (9) and Russia/Eastern Europe (8).
described as inter-regional intra-firm trade, which we Almost half of MNEs (8) also shipped intermediate
believe is a distinctive indication of inter-regional products from North America, mainly to their pro-
coordination (cf. Kobrin, 1991). In order to analyze duction units in South America and Asia/Pacific,
this, we asked company managers to identify any while a smaller number of MNEs had intra-firm
Table 9 Intra-firm exports of intermediate products between world regions in Sweden’s largest manufacturing MNEs 2011 (Number of
firms. (N = 17))
To:From (Total): Western Europe Russia, Eastern Europe North America South America Asia/ Pacific Africa, ROW
Intermediate products
Western Europe (15) — 8 10 9 11 4
Russia, Eastern Europe (6) 5 — 3 3 4 2
North America (8) 4 1 — 5 5 1
South America (4) 3 2 0 — 2 1
Asia/Pacific (5) 5 2 3 3 — 1
Africa, ROW (0) 0 0 0 0 0 —
Finished products
Western Europe (17) — 15 13 12 15 14
North America (13) 7 5 — 12 9 3
Asia/Pacific (11) 9 8 11 9 — 6
Africa, ROW (0) 0 0 0 0 0 —
Production technology
Western Europe (8) — 4 5 6 7 4
Asia/Pacific (0) 0 0 0 0 — 0
Africa, ROW (0) 0 0 0 0 0 —
Technical services
Western Europe (12) — 8 10 8 11 6
Asia/Pacific (6) 5 5 5 5 — 5
Africa, ROW (0) 0 0 0 0 0 —

239
Table 10 Intra-firm exports between three or more world regions especially of sales and employment. Thus, we can
among Sweden’s largest manufacturing MNEs 2011 (Number of clearly see a geographical extension of their opera-
MNEs (N = 17)) tions. According to the managers in most of the
Type of Number of Major regions included surveyed MNE (14), there is also a clear trend
intra-firm trade MNEs towards increased coordination between units
worldwide, both within their companies and among
Intermediate products 13 All except Africa,
their larger competitors. At the same time, some of
mainly WE, N.Am, Asia
the MNEs explicitly argued that the trend of global
Finished products 17 All
Production technology 6 All except Africa, coordination now needs to be complemented by a
mainly WE, N.Am, Asia larger degree of local responsiveness, both in terms
Technical services 10 All except Africa, of products and firm strategies. This is mainly due to
mainly WE, N.Am, Asia the increased competition in Asia, especially in
Source: Survey data. China, where local companies often expand their
market shares by delivering products and services in
a range of low- and medium-priced segments, thus
exports of intermediate inputs from Russia/Eastern building economies of scale and brand recognition
Europe (6), Asia/Pacific (5) and South America (4). and gradually beginning to compete with foreign
Turning to finished products, all MNEs had intra- companies that normally only focus on the pre-
firm exports from Western Europe, mainly to corpo- mium segments. In order to meet the increased
rate units in Russia/Eastern Europe (15) and Asia/ competition from domestic companies, especially
Pacific (15), but also to all other regions, including in emerging markets in Asia, some of the Swedish
Africa/ROW. We also find that a large number of MNEs included in this study (e.g., Atlas Copco, Stora
MNEs had intra-firm exports of finished products Enso and Volvo) explicitly now operate with a
from North America (13) mainly to South America, strategy that not only offers premium-priced pro-
from Russia/Eastern Europe (12) mainly to Western ducts, but also medium-priced products that directly
Europe, North America and Asia/Pacific, and from compete with local companies in more market seg-
Asia/Pacific (11) mainly to North America but also to ments. This new strategy is based on a higher degree
South America and Western Europe. Intra-firm of local responsiveness, including a greater variety of
exports of production technology were found in product offerings and market channels.
fewer MNEs, but almost half of the surveyed compa-
nies (8) shipped machinery, equipment and the like Summary of Empirical Findings
from Western Europe, mainly to other corporate Table 11 summarizes our main empirical findings at
units in Asia, South America and North America. an aggregate level. Looking at the geographical con-
The final type of intra-firm trade included various figuration of the manufacturing Swedish MNEs we
types of technical services, where many MNEs (12) find that they operate on a worldwide basis, albeit
carried out production engineering and the like in dominated by the Western Europe, North America
Western Europe on behalf of corporate units mainly and Asia/Pacific regions. At the same time, we see
located in Asia/Pacific and North America. Some a significant shift towards Asia/Pacific especially in
MNEs also exported such consultancy services from sales and employment. Most MNEs have a matrix
North America (8) and Asia /Pacific (6) to corporate organization where divisions/business areas are coor-
units in other regions. dinated at a global level. The global coordination is
If we take a closer look at how many regions are also facilitated through a number of division/business
included in MNE intra-firm trade, Table 10 shows area offices and units operating as “center of excel-
that this generally involves at least three world lence,” most of which are located in Western Europe,
regions, usually Western Europe, North America North America and Asia/Pacific. Around 40 per cent
and Asia/Pacific. of MNEs’ executive boards consist of non-Swedish
directors, a clear increase over the last decade.
Increasing trend of inter-regional coordination We also found that most MNEs managed their
In the beginning of our empirical analysis we operations through inter-regional coordination,
showed that expansion of the operations of the especially their sourcing of inputs, manufacturing
surveyed MNEs has mainly taken place outside and sales, but also their R&D. For most operations
Western Europe over the past decade, with Asia this coordination included at least three world
now accounting for significant world shares, regions, normally Western Europe, North America

240
Table 11 Summary of empirical findings on inter-regional coordi- responsiveness with less global standardization and
nation among Sweden’s largest manufacturing MNEs 2011 (Num- coordination as concerns this region.
ber of MNEs (N = 17)) Table 12 summarizes the empirical findings at the
Geographical footprint firm level, by measuring the level of globalization of
Sales Globally, mainly WE, N.Am, Asia; nine key dimensions among the 17 companies in
growth in Asia our studies. Each company has been classified as
Employees Globally, mainly WE, N.Am, Asia; being “global” or “not global” on each of the nine
growth in Asia dimensions. The cutoff point for each dimension to
Manufacturing Globally, except Africa be regarded as global is given in the footnotes to the
Sourcing Globally, mainly WE, N.Am and Asia
table. We find that most companies clearly are global
R&D Mainly in WE, but also N.Am and Asia
in many of their operational dimensions. For the
Organization sake of discussion we have, somewhat arbitrarily,
Type of management Mainly matrix decided to consider a company as global if it is above
Division/Business area Mainly in WE, N.Am and Asia the cutoff level according to a clear majority, or six
offices out of the nine dimensions. Despite this conserva-
Center of excellences Mainly in WE, N.Am and Asia tive way of reasoning, we find that no less than 12
Executive boards 40% non-Swedish citizens out of the 17 largest manufacturing MNEs are global.
Another key observation in Table 12 is that if we
Inter-regional coordination
make a simple “cluster analysis” by grouping com-
Sourcing Between most regions, especially WE-
N.Am-Asia
panies that share common globalization dimen-
Manufacturing Between most regions, especially WE- sions, we find some distinguishing features among
N.Am-Asia the 12 most globalized MNEs. First is the extent to
Sales Between all regions, especially WE-N. which they have foreign citizens who sit on the
Am-Asia Group executive board. They are partly also distin-
R&D Between WE-N.Am-Asia guished by the extent to which they have located
regional or functional head offices in different world
Intra-firm trade
regions. Thirdly, the level of intra-firm exports is also
Intermediate products Mainly from WE to N.Am and Asia
a distinguishing feature. For the five less-globalized
Finished products Mainly from WE and N.Am to E.Eur.
and Asia MNEs we find that all have globalized their manu-
Production technology Mainly from WE to N.Am and Asia facturing operations but none the R&D operations.
Technical services Mainly from WE to N.Am and Asia Thus, our empirical data suggest that globalization
is clearly a multidimensional phenomenon that
includes not only a worldwide presence, but also a
capability to simultaneously coordinate a range of
value-adding activities on a global level, rather than
and Asia/Pacific. A clear indication of such inter- a few selected parts of the value chain.
regional coordination was illustrated by the fact that
most of the MNEs have intra-firm exports of inter-
mediate and finished products between world THE UPPSALA GLOBALIZATION PROCESS
regions. A significant number of MNEs also had MODEL
intra-firm exports of engineering and other techni- In our endeavor to theoretically understand and
cal services and even of machinery and other explain the globalization of the Swedish companies,
production technology. Most intra-firm exports we have applied the well-established Uppsala Model
included units in Western Europe, North America (Johanson & Vahlne, 1977) and developed it in a
and Asia/Pacific, but also in other parts of the world. modified version: The Uppsala Globalization Process
A main empirical finding is that we clearly can see Model as described below. Before doing so, we briefly
a geographical extension of the operations of these refer to the original 1977 version that was con-
MNEs, as well as a clear trend towards increased structed to explain the characteristics of the inter-
inter-regional coordination, especially among units nationalization processes of firms. It was believed that
in Western Europe, North America and Asia/Pacific. an important characteristic of the internationaliza-
At the same time, a couple of the MNEs explicitly tion process was the high degree of uncertainty, as
claimed that the increased competition in Asia little was known about the environment the focal
requires a reorientation towards greater local firm was entering. Hence, the entrant progressed in

241
Table 12 Global activities among Sweden's 17 largest manufacturing MNEs 2011
Company Salesa Employentb Sourcingc Manufacturingd R&De Coordinationf Division Intra firm Foreign
HQg exportsh executivesi
Global MNEs
A Yes Yes Yes Yes Yes Yes Yes Yes Yes
B Yes Yes Yes Yes Yes — Yes Yes Yes
C Yes Yes Yes Yes Yes Yes — Yes Yes
D Yes Yes — Yes Yes Yes — Yes Yes
E Yes Yes Yes Yes Yes Yes — Yes —
F Yes Yes Yes Yes Yes Yes — — —
G Yes Yes Yes Yes Yes Yes Yes Yes —
H Yes Yes Yes Yes Yes Yes Yes Yes —
I Yes Yes Yes Yes Yes — Yes Yes —
J — Yes — Yes Yes Yes Yes — Yes
K Yes Yes Yes Yes — Yes Yes — Yes
L Yes Yes Yes Yes Yes — Yes — Yes
Not (yet) global MNEs
M — Yes Yes Yes — — — Yes Yes
N Yes Yes — Yes — Yes — Yes —
O — — Yes Yes — Yes Yes — —
P Yes — — Yes — Yes — — —
Q — — — Yes — — — — Yes
Yes = Companies that meet the following requirements:
a
Global sales: at least 50% sales outside the home region in Western Europe.
b
Global employment: at least 40% employment outside the home region in Western Europe.
c
Global sourcing: significant or at least 15% sourcing in three or more world regions.
d
Global manufacturing: significant manufacturing in at least three world regions.
e
Global R&D: significant R&D in at least three world regions.
f
Global coordination: significant coordination in at least three functions (including sales, sourcing manufacturing and R&D) among at least three world
regions.
g
Division headquarters: regional or functional headquarters in at least three world regions.
h
Intra-firm exports: significant intra-firm exports of intermediate products among at least three world regions.
i
Foreign executives: at least 25% foreign citizens at the Group executive board.
small steps so as to keep risk-taking at an acceptable variables. The first type comprises the commitment
level, gradually gaining knowledge allowing it to decisions to reconfigure the value chain and change
take new steps. Another source of uncertainty in the the coordination system (the 1977 version had only
globalization process (Vahlne et al., 2011) is com- “commitment decisions”). The second set of change
plexity and lack of knowledge on such matters as variables comprises the continuous processes of
how to manage in the external and internal net- learning, creating and trust-building (the 1977 ver-
work. The globalization process model introduced sion had “current activities”; that is, operations
here aims to explain the characteristics of the globa- seeing experiential learning as a by-product). There
lization processes of firms. The original model was are also two sets of state variables: operational and
inductively deduced but underpinned theoretically, dynamic capabilities, and the degree of globalization
mainly by relying upon Penrose (1956) and Cyert (consisting of global configuration and global coor-
and March (1963); the modified version builds on dination as shown in the empirical part). In the 1977
Vahlne et al. (2011) and Vahlne and Johanson version, the state variables consisted of market
(2013) as well as sources given therein. knowledge and market commitment.
Like the original version, the globalization process We now describe the Uppsala Globalization
model contains two sets of variables: state and Process Model in more detail. As illustrated in
change (stock and flow) variables. There are causal Figure 2, the right-hand side of the model contains
relationships between the two sets as the state vari- the change variables. The first is the commitment
ables affect the change variables and the change decisions, depicted in the upper, right quadrant.
variables in turn affect the state variables. This makes Helfat et al. (2007: 22) call such decisions “asset
the model dynamic. There are two sets of change orchestration,” which in our terminology are defined

242
State variables Change variables
Operational Capability Commitment decisions

-Reconfiguration
Dynamic capabilities -Change of coordination
-Opportunity development-capability
-Networking-capability
-Technology development-capability
-Globalization-capability
Performance Organizational processes

-Degree of globalization (geographical -Learning
configuration and coordination) -Creating
-Trust-building
Figure 2 The Uppsala Globalization Process Model.
as reconfiguration and change of coordination (Vahlne & in many different foreign locations and these units
Johanson, 2013). performed differentiated roles. The same was also
Reconfiguration (re-, since we are dealing with found for the important external network of sup-
MNEs with existing and significant foreign opera- pliers and distributors. To allow for specialization,
tions) includes the intermittent decisions to change economies of scale and scope, in exploiting country-
the geographical footprint, as well as to improve the specific advantages, the activities of all units, inter-
value chain, for example in hardware and software, nal and external, have to be coordinated (Cavusgil et
relationships, and specialization. In an earlier Volvo al., 2004; Kim et al., 2003; Johansson & Yip, 1994;
case study (Vahlne et al., 2011) we identified numer- Zhou & Cavusgil, 2002). The objective of coordina-
ous such changes, for example restructuring of the tion is to improve on the effectiveness of the focal
manufacturing activities. The increased differentia- network as a whole, as the increasing differentiation
tion of the various parts of the value chain will of the internal and external network leads to
increase the degree of specificity. As an example, an increased need for coordination. The need to
units or other organizational structures that are put develop strong local capabilities, as to improve on
together with a special purpose in mind are charac- the ability to benefit from insidership in local clus-
terized by a degree of specificity if they cannot be ters, will lead to subsidiaries gaining their own
changed to meet other purposes. This, times the size stronger power bases (Emerson, 1962). Learning
of the investment, determines the degree of commit- how to cope with acquired subsidiaries takes time
ment (Johanson & Vahlne, 1977), in this case to and patient trust-building may be necessary (Vahlne
globalize. Decisions may of course have impacts in et al., 2011). These reasons combined lead to increas-
the opposite direction, which is to decrease the ing difficulties for HQ to master coordination, which
degree of commitment as the model assumes no instead has to be partially decentralized and even
deterministic development. left to the units concerned. Consequently, more
The second dimension, change of coordination, “subtle” coordination mechanisms, combined with
affects the commitment by making it possible to centralized financial control, are being applied
control the functioning of the reconfigured activities (Ghoshal & Bartlett, 1990; Martinez & Jarillo, 1989;
which constitute the internal MNE network. That Vahlne et al., 2011).
the multinational firm can preferably be conceived The lower right quadrant in Figure 2 identifies key
as a network itself in micro-level studies has been organizational processes, including continuous pro-
established since the study by Bartlett and Ghoshal cesses of learning (mainly experiential), creating and
(1990). We found that perspective preferable in the trust-building. This is the resource-based part of the
recent case study of the globalization of AB Volvo argumentation in that it depicts the construction
discussed above (Vahlne et al., 2011). The internal of advantages, of which the more important over
Volvo network consisted of a large number of units time have come to be intangible. In addition to

243
experiential learning, we have included active ability to apply coordination. Thirdly, the technology
search, imitation and exploitation of knowledge by development capability has been shown to be critical
creative activities (Forsgren, 2002; Johanson & to international expansion (e.g., Dunning &
Vahlne, 2009). Individuals learn and what is learned Lundan, 2008: Ch. 11). Finally, globalization capabil-
is transferred to other organizational members and ity includes the capacity to develop knowledge
may be made into routines (Nelson & Winter, 1982). (objective and experiential) on how to expand into
The relationship between learning and creation is and function in foreign environments, knowledge
close and is of course critical as it infuses novelty in on how to conduct business, and knowledge on how
the evolution of the MNE (Dosi & Marengo, 2007). to adjust or co-develop with foreign markets so as to
The novelty may have an impact both on the stock arrive at an institutional fit (Cantwell, Dunning, &
of knowledge and the network composition. Accord- Lundan, 2010). This capability is important as suc-
ing to Nahapiet and Ghoshal (1998), social capital cessfully globalizing companies must “match con-
and knowledge have a mutually positive impact on text” (Helfat et al., 2007: 7). The locational aspect of
each other’s development. This is one reason why configuration has also become more important,
we have included trust-building as a critical process. specifically to source complementary knowledge
The other reason is that, as we define both the (Cantwell, 2009). Following Dunning (2009) and
external and the internal environment of the MNE Cantwell (2009), we believe that the locational
as networks, trust-building is an essential prerequi- pattern of MNEs in itself can constitute a firm-
site for efficient relationship building (Morgan & specific advantage for further internationalization.
Hunt, 1994) and coordination (Martinez & Jarillo, Similarly, we think that globalized MNEs’ ability to
1989). coordinate worldwide operations in itself contri-
The left-hand side in the model identifies the state butes to generating unique capabilities that further
variables, where the content of the upper left quad- strengthen their possibility to operate at a global
rant identifies internal characteristics of the firm level. This globalization capability variable is an
in terms of capabilities, constituting firm-specific important addition to the earlier Uppsala model
advantages. Operational capabilities are the routines (Vahlne & Johanson, 2013).
applied to produce and sell the output of the focal The lower left quadrant in Figure 2 identifies the
firm. The dynamic capabilities are the capacities performance variables. Again, many such perfor-
to adjust and develop the operational capabilities mance dimensions can be envisaged. Here, we stay
to fit in relation to a changing environment with degree of globalization since it is the object of this
(Teece, Pisano, & Schuen, 1997). Teece (2007) found study. Geographical dispersion in combination with
dynamic capabilities to be of special relevance to the a high degree of coordination is the two sub-dimen-
performance of MNEs dealing with extremely com- sions of globalization applied in this study. Reconfi-
plex and rapidly changing environments. Dynamic guration and changes in coordination result in
capabilities cannot be acquired, they have to be increased degree of integration. Although the degree
built, constituting intangible resources hard to imi- of globalization is a performance variable, it also
tate (Dosi, Faillo, & Marengo, 2008; Katkalo, Pitelis, constitutes a firm-specific advantage, as well as being
& Teece, 2010). The dynamic capabilities, via learn- an input into the continued evolution of the focal
ing and trust-building, impact on the strength of the MNE. The degree of globalization variable is also an
firm-specific advantages (Helfat et al., 2007). important development, compared to the earlier
A first dynamic capability consists of firms’ oppor- Uppsala model.
tunity development capability, the ability to identify
and implement opportunities (Teece, Pearce, & CONCLUSIONS
Boerner, 2002). An entrepreneurial spirit with As discussed in the Introduction, in much of the
numerous individuals engaging in making the firm current international business literature, MNEs are
grow or improve on its effectiveness, wherever such believed to typically operate on a regional basis rather
opportunities emerge, or can be created, constitutes than on a global level. The empirical foundation for
such a capability. Next, networking capabilities this is that many MNEs’ sales and other activities are
are essential to perform business successfully, and found to be concentrated in their “home-region,”
overlap with the other dynamic capabilities, since and also managed through limited coordination. The
much of what happens, happens in relationships theoretical explanations for this basically focus on
(Johanson & Vahlne, 2009). A critical aspect of this is difficulties for MNEs to overcome barriers of distance
the existence of a coordination system and the and differences in market and institutional

244
characteristics between world regions. Based on our manner, we provided some indirect empirical
regular observations of the largest MNEs in Sweden, evidence on their critical commitment decisions,
we believe that these earlier empirical and theoretical showing that MNEs reconfigure their value chains
understandings need to be complemented with stu- towards a greater importance for Asia as a sales
dies of MNEs which have become “globalized” (i.e., market and location for manufacturing and other
with a wide geographical spread in combination with activities, and also make numerous acquisitions that
global coordination of their operations). Therefore, bring in new technologies and markets. There is also
the aim of this study is to advance the understanding a parallel process where we demonstrated that the
of how far the globalization of MNEs has developed, MNEs, as well as their main global competitors,
first in empirical terms, and secondly by offering a change their coordination systems towards a greater
novel theoretical explanation. degree of integration between units worldwide.
Using detailed firm-level data from 2011, collected Another point of the model is that the continuous
through personal interviews at the 17 largest manu- processes of learning, creating and trust-building
facturing MNEs in Sweden, we have empirically allow the MNEs to develop their competitiveness to
shown that 12 of these indeed can be defined as the extent that they are prominent global players in
globalized. This is indicated by the fact that they their respective industries.
combine a significant worldwide presence with a
high level of coordination of their value chains. A DISCUSSION AND IDEAS FOR FURTHER
key empirical finding suggests that the MNEs coor- RESEARCH
dinate a range of value-adding activities on a global In this final section we review some issues that may
level, rather than a few selected parts of the value be dealt with in future research. The reconfiguration
chain. This suggests that MNEs can generate system dimension of globalization has as an objective for the
gains if globalization is managed as a multidimen- MNEs to be present in locations offering a suitable
sional phenomenon, in a similar manner to that environment for a particular activity. For example, it
discussed by Dunning (2009) and Cantwell (2009), is generally accepted that exchange of knowledge and
where the coordination of a diversified structure of people with outside parties is a must for successful
location-specific assets are seen as a source of a firm- development of new knowledge (Andersson, Holm, &
specific advantage. Johanson, 2005). Some foreign subsidiaries, expected
In order to theoretically explain our empirical to have the potential to produce knowledge to
findings, we presented a Globalization Process improve on the business of the MNE as a whole, must
Model, which is a development and adaption of the to some extent be embedded in the local envi-
well-established Uppsala Model. The new concept ronment (Vahlne et al., 2012). A good example is
brought into the model as compared with a previous Astra Zeneca with large R&D units in Boston and
version (Vahlne & Johanson, 2013) is the globa- Gothenburg, close to basic research performing uni-
lization dynamic capability and the performance versities. With larger MNEs, one can talk of “multiple
variable, degree of globalization. Through the globa- embeddedness” (Meyer, Mudambi, & Narula, 2011).
lization process model we suggest that the Swedish Developing an “entrepreneurial theory of the MNE,”
MNEs have globalized by building and using critical Pitelis and Teece (2010) stress the importance of co-
dynamic capabilities, in combination with reconfi- specialization and the creation of “eco-systems”
guring their value chains and development of their building on the stepping stone of “dynamic capabi-
coordination systems so as to make their opera- lities” (Teece et al., 1997). Co-specialization implies
tive capability efficient on a global scale. Our data that different companies and actors develop diffe-
include direct empirical evidence on one of the rent but complementary assets (e.g., technologies),
dynamic capabilities, where the significant R&D together providing for a product or system relevant
investments indicate that these MNEs succeed in for a particular set of customers (Teece et al., 1997:
renewing their technology. In addition, we provided 1257–1260). This is close to the meaning of a “net-
some indirect empirical evidence on dynamic cap- work” in our terminology (Johanson & Vahlne, 2009)
abilities, where the very long and diversified experi- or an “industrial cluster” in Porter’s (1990) termino-
ence from foreign markets indicate that these global logy. A location that offers suitable conditions for
firms indeed have developed their ability to operate different parts of the value chain of the MNE makes it
global networks, as well as to discover and develop possible to combine firm-specific advantages with
business opportunities and globalize. That is, they country-specific advantages, as claimed by Dunning
have relevant dynamic capabilities. In a similar (2009). To allow for the required local embeddedness,

245
a necessity for subsidiary knowledge development special varieties of their product line for the emer-
and entrepreneurship, some degree of subsidiary ging markets, implying a switch towards different
independence must be allowed. Subtle coordination global standards rather than one single global stan-
mechanisms are used and a strong corporate culture is dard as traditionally has been their main strategy.
a critical component (Birkinshaw, 1997; Vahlne et al., Examples include Atlas Copco and StoraEnso, as well
2012). Globalization might consequently lead to as AB Volvo which has developed the “Value-family”
strengthened capabilities. However, knowledge on for the emerging markets. This is an empirical obser-
the nature and methods of coordination in those vation, not following from our globalization process
situations is not well developed and could be object model. It rather points to the fact that so much of
for research. global growth is happening in emerging markets
A main impediment to globalization is a lack of that MNEs are forced to adjust to local circum-
knowledge concerning the conditions on foreign stances. Obviously, global companies have the abil-
markets, such as institutions and business networks ity to work with more than one global standard. We
(Eriksson, Johanson, Majkgård, & Sharma, 1997), think this is a fascinating area for research.
that requires experiential learning to acquire. The However, to be able to compete successfully at a
liability of foreignness and outsidership may not global scale, there also has to be a global orientation
necessarily be easier to overcome then before, even (Yeniyurt et al., 2005) which enables a company to
if some homogenization of institutions can be observe opportunities and to stay informed about
observed (Johanson & Vahlne, 2009). It is also true the activities of other actors. This is in the tradition
that the sort of deeper involvement in local environ- of the geocentric attitude advocated by Perlmutter
ments described above can add to adjustment diffi- (1969) and requires MNEs to develop that attitude.
culties. Hutzschenreuter, Voll, and Verbeke (2011) Also, attitudes leading to optimization of “the
identify larger costs out of “Penrosian” reasons whole” of the MNE are relevant. How MNEs work to
(Penrose, 1956), connected with added barriers to develop suitable global attitudes is an important area
distance and, as claimed by Cantwell et al. (2010) to research, we believe.
learning to cope with an uneven and uncertain local Our study has demonstrated that a dozen of the
institutional context is a time-consuming and trou- surveyed 17 largest Swedish manufacturing MNEs are
blesome process. This seems to be especially pro- global, where our findings suggest that globalization
nounced in emerging markets. The process of is a multidimensional phenomenon: they have dis-
establishing local units of the MNE as credible persed most functions globally, they operate in global
partners in the relevant local network is an even industries, they produce globally standardized pro-
more complex and time-consuming process. This ducts, they have globally exploitable abilities, they
can explain why, even if impediments to globaliza- have a presence in all regions of the world, they con-
tion are decreasing, globalization, as explained in tinue to strengthen their capabilities, they employ
our globalization process model, cannot happen foreigners in top management positions and they
very rapidly (Vahlne et al., 2011). This can be seen coordinate their activities globally. Thus, we believe
from the long history of global companies. Moving that our expectation that Swedish companies have
rapidly, not allowing for enough learning and rela- advanced longer towards being global was correct.
tionship-building, may be counterproductive And the opinion of the managers we have surveyed
(Vahlne & Johanson, 2002). This observation is well is that the process of globalization will continue.
in line with the globalization process model: globa- We believe that our globalization process model will
lization is a tortuous process. However, learning make it credible that companies from other markets
more about MNEs’ co-evolvement with local busi- and industries will follow a similar pattern. This
ness partners and authorities would be beneficial. expectation, of course, has to be investigated.
At the outset of this project we were of the opinion
that in business-to-business industries, the trend ACKNOWLEDGEMENTS
would be towards one global standard. However, We are grateful to the Editor, John Cantwell, and
today, emerging markets such as China, India and two anonymous reviewers, who have been more than
Brazil are enjoying most of the global market growth usually patient and provided excellent advice that
for many industrial products. But customers in these improved the paper. We also want to thank the execu-
markets do not necessarily have the same demand tives in the 17 companies that provided the information
characteristics as do customers in the mature mar- constituting the base for this paper. Research funds
kets, and some Swedish MNEs are now developing were provided by the Swedish Research Council.

246
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Strategic Management Journal, 28(13): 1319–1350. ABOUT THE AUTHORS
Teece, D. J., Pierce, J. L., & Boerner, C. S. 2002. Dynamic Jan-Erik Vahlne (PhD, University of Uppsala, 1973;
capabilities, competence and the behavioral theory of the firm.
In M. Augier, & J. G. March (Eds), The economics of change, Dr h.c., University of Oulu, 2013) is Emeritus Profes-
choice, and structure: Essays in the memory of R.M. Cyert. sor in Business Administration at the Centre of
Cheltenham: Edward Elgar. International Business Studies, School of Business,
Teece, D. J., Pisano, G., & Schuen, A. 1997. Dynamic capabilities
and strategic management. Strategic Management Journal, 18 Economics and Law, University of Gothenburg. His
(7): 509–533. research interests include processes of internationa-
Thomson Reuters. 2005. Thomson Reuters top 100 global lization and globalization, and management under
innovators. http://thomsonreuters.com.
Thomson Reuters. 2011. Thomson Reuters top 100 global uncertainty (jan-erik.vahlne@handels.gu.se).
Thomson Reuters. 2012. Thomson Reuters top 100 global Inge Ivarsson is Professor of Economic Geography
UNCTAD. 2004. World investment report: The shift towards at the Centre of International Business Studies,
services. New York: United Nations. the School of Business, Economics and Law at the
UNCTAD. 2011. World investment report: Non-equity modes of
international production and development. New York: United University of Gothenburg, Sweden. His research
Nations. includes the globalization of multinational enter-
Vahlne, J.-E., & Johanson, J. 2002. New technology, new environ- prises, with focus on location strategies, technology
ments and new internationalization processes? In V. Havila,
M. Forsgren, & H. Håkansson (Eds), Critical perspectives on transfer and the organization of research and
internationalization: 209–228. London: Pergamon. development.
Accepted by John Cantwell, Editor-in-Chief, and Paul Almeida, Area Editor, 13 September 2013. This paper has been with the authors for three
revisions.

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Journal of International Business Studies (2014) 45, 227–247

© 2014 Academy of International Business All rights reserved 0047-2506

The globalization of Swedish MNEs: Empirical

Jan-Erik Vahlne and Abstract

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Data Collection globalization trends, both within their own com-

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Company (A) (B) (C) (D) (E) (F)

AB Volvo Commercial transport solutions 264 90 190 1928 —a

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Table 5 R&D intensity, number of R&D personnel, number of

Company R&D Number of Number of Recognized as

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Purchasing (17) 17/17 13/13 14/16 14/14 16/17 7/7

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Table 12 Global activities among Sweden's 17 largest manufacturing MNEs 2011

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State variables Change variables

Operational Capability Commitment decisions

Performance Organizational processes

Figure 2 The Uppsala Globalization Process Model.

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