Chapter 10 The Multinational Head Office as a Joint Value Orchestrator: Managing the Global Factory

Purpose We develop a concept of the global factory , first introduced by Buckley and colleagues (2004, 2009, 2010, 2011, 2014), as a stand-alone construct associated with significant predictive capacity, discuss dynamics of success of the global factory, and identify and analyze social mechanisms deployed by the lead firm head office. Methodology/approach We conceptualize the global factory as a form of a flagship network and augment internalization theory with insights from interorganizational networks research to explore the dynamics of the global factory’s origination and functioning. Findings We clarify under what conditions a global factory-type network is more likely to emerge and describe social mechanisms generated by the lead firm head office to help the global factory sustain itself and thrive. We argue that in order to benefit from potential efficiencies of the global factory, the lead firm head office must deploy combinations of social mechanisms. We further argue that the role of the lead firm head office is that of a joint value orchestrator and a social broker, in addition to the controlling intelligence function. Research limitations Future work on the global factory should include further conceptualization of social mechanisms deployed by the lead firm, exploration of operating mode heterogeneity within the global factory, and large-scale empirical research. Practical implications Lead firm managers should embrace the role of the joint value orchestrators and implement social mechanisms described in this chapter to facilitate smooth operation of the global factory. Social implications Global factory governance further increases multinationals’ geographic reach and market power; yet, it is not a universal recipe for market success, and therefore global factories’ power to shape the global economy should not be overestimated. Originality/value By linking the global factory to networks literature, we have suggested a novel way to view the concept and articulated more fully its underlying assumptions. Further research on the global factory will help advance our understanding of the dynamics of the global economy and the role of multinationals, their head offices, and their managers in shaping the economy.