i introduction - ntnu.edu.tw

Progress in Human Geography 29, 4 (2005) pp. 437–457

© 2005 Edward Arnold (Publishers) Ltd 10.1191/0309132505ph559oa

I IntroductionThere is now a growing, but long overdue,recognition in economic geography that therapid rise of retail transnational corporations(TNCs) since the mid-1990s is a phenomenon

which merits urgent attention in both theo-retical and empirical terms (Wrigley, 2000;Coe, 2004a). While the ever-expandingglobalization literature has had remarkablylittle to say about retail TNCs (although see

Globalizing retail: conceptualizing the distribution-based transnationalcorporation (TNC)

Neil Wrigley,1 Neil M. Coe2 and Andrew Currah3

1School of Geography, University of Southampton, Highfield, SouthamptonSO17 1BJ, UK2Geography, School of Environment and Development, University ofManchester, Oxford Road, Manchester M13 9PL, UK3Department of Geography, University of Cambridge, Downing Place,Cambridge CB2 3EN, UK

Abstract: In this article we argue that the retail transnational corporation (TNC) is an entity thatmerits urgent theoretical and empirical investigation from economic geographers. Using recenttheoretical developments that conceptualize TNCs as the complex nexus of intrafirm, interfirmand extrafirm relational networks, we explore the special characteristics of retail TNCs thatdistinguish them from their manufacturing counterparts, still the predominant focus of interest inthe literature on economic globalization. In particular, using Hess’s (2004) notion of three differentkinds of embeddedness (societal, network, territorial), we explain how it is the necessarily highterritorial embeddedness in markets and cultures of consumption, planning and property systems,and logistical and supply chain operations that defines the distinctive theoretical and organizationchallenge of the retail TNC. In turn, we argue that this high level of embeddedness frequentlyimplies a very different experience of host-market regulation than is found in other sectors.Additionally, we use Dicken’s (2000) distinction between ‘placing firms’ and ‘firming places’ toexplore how territorial embeddedness of the retail TNC is influenced by its societal embeddedness(home country institutional origins), and how network embeddedness is critical to anunderstanding of how places/host economies are inserted, reciprocally, into the organizationalspaces of the retail TNCs. In particular, we argue that intrafirm management of innovation andknowledge dynamics across highly dispersed store and sourcing operations poses particularproblems and possibilities for retail TNCs.

Key words: embeddedness, globalization, knowledge, networks, retailing, TNC.

438 Globalizing retail

Dicken, 2003a), the extensive literature onretail internationalization emanating from abusiness/management studies tradition hasremained rather insular and disconnectedfrom broader debates about transnationalproduction systems (Coe, 2004a). In thispaper we engage conceptually with the retailTNC, arguing that both these positions areno longer sustainable, and that the disconnec-tion between these literatures is hamperingour ability to comprehend and explain a pro-foundly important dimension of the emergingglobal economic landscape. Our aim is tobegin the process of moving retail TNCstowards the centre of contemporary debateswithin economic geography, and to suggestthat not only is the deeply rooted productivistbias of existing debates on economic global-ization increasingly inappropriate in a world inwhich distribution-based TNCs have becomea reality, but also that the emergence of thesefirms poses some novel conceptual questions.

Our conceptualization in this paper drawson recent theoretical developments to posi-tion retail TNCs as complex configurations ofintra-, inter- and extrafirm relational net-works. These networks are highly embeddedin, and therefore shaped by, the economic,political and institutional contexts of bothhome and host economies. While such aframework can be applied to any TNC, weargue that it is the necessarily high territorialembeddedness in markets and cultures ofconsumption, planning and property systems,and logistical and supply chain operations thatdefines the distinctive theoretical and organi-zational challenge of the retail TNC. It alsofrequently implies a different experience ofregulation in the internationalization processthan that typical of the production-basedTNC. The organization of the retail TNC isqualitatively very different, therefore, from afunctionally integrated manufacturing TNC(Dicken, 2003a), from a market-facing pro-ducer service TNC (Coe, 2003) or from aTNC involved in offshore routine service pro-vision (e.g., software coding or call centres)(UNCTAD, 2004).

Before proceeding further, it is crucial torecognize the sheer scale and scope ofcontemporary retail TNCs (for further details,see Wrigley, 2000; Wrigley and Lowe, 2002;Coe, 2004a; 2004b). The last decade haswitnessed the emergence of a select group offood and general merchandise retailers withconsiderable, and rapidly growing, interna-tional sales. As Dicken (2003a) describes, one clear indication of the rapid growth ofthese retail TNCs is that, while in 1993 therewere no retailers in the top 100 TNCs, in1999 there were four, namely Royal Ahold(The Netherlands), Metro (Germany),Carrefour (France) and Wal-Mart (USA). By2003, there were no less than 14 retailers (allbut two were food and general merchandiseretailers) each deriving over US$10bn ofannual sales from international markets. And as the annual IGD Global Retail Index(www.igd.com) demonstrates (a compositeindex which attempts to capture both ‘hard’and ‘soft’ indicators, e.g., percentage ofinternational sales, presence in key regions,number of countries of operation, clarity ofglobal strategy, extent of within-organizationknowledge sharing and learning, etc.), a coreand relatively stable group of retail TNCs hasseparated out. That group includes Carrefour,Wal-Mart, Metro, Ahold, Tesco, Auchan,Casino, Ito-Yokado, Aldi, Delhaize, Costoand Tenglemann, and must be supplementedby a small number of firms (e.g., IKEA) fromother sectors of retailing with comparableinternational sales. These firms typically have operations in 10–30 countries, a level ofinternationalization comparable with manymanufacturing sectors, in addition to exten-sive international sourcing operations. Adeluge of retail FDI by these firms has, inturn, significantly altered both the corporateand physical landscape of retailing in theemerging markets of Latin America, EastAsia and central and eastern Europe. These dramatic expansion processes, we willargue, highlight issues of considerable con-ceptual importance to debates in economicgeography.

Neil Wrigley et al. 439

Our argument proceeds in the followingthree stages. Section II briefly critiques exist-ing approaches to the retail TNC before sug-gesting that Hess’s (2004) notion of threedifferent kinds of embeddedness provides auseful way of characterizing the distinctive-ness of such firms. Sections III and IV thenuse Dicken’s (2000) distinction between‘placing firms’ and ‘firming places’ to framethe subsequent analysis. Under the formerheading, Whitley’s (2001) work is used toexplore how differing intersections of homeand host country conditions will influence thenature of the retail TNC and its international-ization processes. Under the latter, wedevelop our notion of the retail TNC as anexus of relational networks, with particularfocus on the organizational learning chal-lenges posed by the necessarily dispersed and highly embedded configuration of retailTNCs.

II Towards a conceptualization of thedistribution-based TNCWe begin by noting that, to the extent thatthere is treatment of retail corporations and ofthe missing ‘role of commercial capital in theglobalization process’ (Gereffi, 2001b: 33), it isto characterize that role and those corpora-tions as the lead firms in ‘buyer-driven’ globalcommodity chains (Gereffi, 1994) ‘in whichlarge retailers, marketers and branded manu-facturers play the pivotal roles in setting updecentralized production networks in a vari-ety of exporting countries, typically located inthe Third World’ (Gereffi, 2001a: 1620).Production is viewed as being carried out bytiered networks of developing world subcon-tractors to specifications supplied by the largedeveloped-world retailers and ‘marketers’(which Gereffi, 2001b, defines as firms with abrand but no factories or stores). Such com-panies are seen as exerting substantial controlover how, when and where production takesplace, and how much profit accrues at eachstage of the chain (Gereffi, 2001a). That is tosay, the main leverage in buyer-driven chains isseen as being exercised ‘at the design and

retail ends of the chain’ (Gereffi, 2001a: 1620),not least because the increasing use of productdifferentiation strategies has meant ‘thatretailers derive competitive advantage fromselling non-standardized products . . . com-peting not only on price, but also on factors such as reliability, product variety, productquality and speed of innovation’ (Dolan andHumphrey, 2000: 150).

It is indisputable that this perspective hasprompted extremely useful insights into theglobal sourcing operations of the major retail-ers and their close management of supplychains which have become increasingly‘demand pull’ in character. The work ofHughes (2000; 2001; 2004), Leslie andReimer (1999; 2003; Reimer and Leslie,2004), Barrett et al. (2004) and Friedberg(2003; 2004) in geography, and related workin other disciplines (e.g., Kaplan and Kaplinski,1998; Burch and Goss, 1999; Dolan andHumphrey, 2000; 2004; Schmitz andKnorringa, 2001) on sectors ranging fromhorticulture, processed fruit, wine and cutflowers to furniture and footwear is indica-tive, as is Gereffi’s (1999) own work on theapparel commodity chain. However, to viewthe role of retailers in debates on economicglobalization solely through the lens of firmswhich may be centrally involved in buyer-driven global commodity chains, but whoseinvolvement in those chains may simply be toenhance/protect their competitive position indomestic markets in which their entire assetand sales bases are located, seems to us to befraught with difficulties. Such an approachonly captures one facet of the complexity ofthe retail TNC.

Researchers in business studies writing onretail internationalization have illustrated themany aspects of retail TNCs that are distinc-tive from manufacturing TNCs. For example,Dawson (1994), in a well-known early contri-bution to that literature, highlighted differ-ences in organization and management offirms in the two sectors relating to:

the balance between centralized anddecentralized decision making, the relative

importance of organizational and establishmentscale economies, the degree of spatial dispersionin the multi-establishment enterprise, therelative size of the establishment to the size ofthe firm, the relative exit costs if decisions arereversed, the speed with which an incomestream can be generated after an investmentdecision is made, different cash flowcharacteristics, the relative value of stock andhence importance of sourcing . . . [which] serveto differentiate the manufacturing firm and theretail firm . . . in the internationalization process.(Dawson, 1994: 270)

He also drew attention to the difficulty ofprotecting knowledge (for example throughpatents and copyright) in the retail interna-tionalization process where ‘there generally islittle secrecy and no copyright’ plus extensivecopying of ideas (Dawson, 1994: 267), butwhere competitive advantage, as Doherty(1999) stresses, is largely built upon intangibleassets such as retail formats and managementsystems, and know-how in the form ofexpertise on logistics, supplier negotiations,merchandising, financial management, adver-tising and so on.

Revisiting the issue more recently, Dawsonand Mukoyama (2003) have identified eightkey differences in the organization and man-agement of firms in the two sectors whichthey believe impact on transnational opera-tion. First, the multi-establishment nature ofthe retail TNC implies that retailing has thecharacteristics of being spatially disaggregatedand more essentially networked than is thecase in manufacturing where operationalefficiencies are more in the control of man-agement at the local unit level. Secondly,retailers have far larger numbers of suppliers,implying that relationships with suppliers maybe a larger intangible asset and may attract agreater level of investment by retailers thanmanufacturers. Thirdly, retailing exhibits fun-damentally different cost structures whichresult in differing sources of operating effi-ciencies compared to production activitiesand, in turn, have important implications formanaging supplier relations and transnationaloperations. Fourthly, the essentially local

nature of the market experienced by retailersimplies that transnational retailers mustremain sensitive to local cultures of consump-tion. Fifthly, the retail outlet represents auniquely assembled/configured bundle ofservices consumed by the customer, unlikemanufacturing where the factory is clearlynot seen as the manufacturer’s product.Sixthly, and associated with the previous twodifferences, retailers experience high levels ofconsumer contact compared to manufactur-ing firms, creating an important imperative toparticularize/localize rather than standardize‘product’ offerings. Seventhly, transnationalretailers experience different forms of marketimperfections, in particular through the highlevels and multiple forms of regulatory inter-vention. Finally, the copying of knowledge orintellectual capital is much easier in retailingthan in manufacturing.

Several of these issues are echoed in ourconceptualization of the retail TNC. Wechoose to begin, however, by stating that, inour view, the key feature of the retail TNC isthat it must simultaneously stretch both itsdistribution and sourcing activities – and theassets and employment linked to those activ-ities – over multiple national boundaries. Inturn, this implies the need for an unusuallyhigh level of investment in embeddedness inhost markets, and it is this high degree ofembeddedness which, in our view, is critical indistinguishing the retail TNC from its manu-facturing counterparts. In particular, weidentify three key areas in which retail TNCsare unusually ‘close’ to host economies andsocieties. First, as consumption is clearly asociocultural process as much as it is aneconomic interaction, retailers need to beresponsive to local variations (both nationaland intranational) in cultural tastes, normsand preferences. Secondly, retailers need tosink capital into physical assets in marketssimply to access them, i.e., to ‘ground’ capitalin a store base and distribution/logisticsinfrastructure, with all the associated vulner-abilities that brings (Wrigley, 1996). Retailersare thus are intricately connected to the


property markets and planning systems ofhost countries. Unlike manufacturers, there isalso an intrinsic relation between the locationof a retailer’s sales and an important com-ponent of its variable costs (particularly its labour costs). Thirdly, even where an ele-ment of regional or global sourcing exists (asconceptualized in the global commodity chainapproach described above), food retailers inparticular still source the vast majority of theirproducts from within the national territorythat they are serving (see Coe, 2004b). Theretailer is therefore intimately intertwinedwith the local supply base and the necessarylogistics infrastructure (e.g., distributioncentres) to access suppliers.

Taken together, these dimensions ofembeddedness imply that a retail TNC islikely to have a rather different experience ofhost market regulation – affecting manyaspects of its activities – from that of a typicalmanufacturing TNC. As a result, all transna-tional retailers localize their operations (albeitto differing degrees) in host economies. Thisis particularly the case where internationalexpansion has taken place through mergerand acquisition, or joint venture, activities, inwhich different organizational cultures arenecessarily brought together. Bianchi andArnold (2004), drawing on institutional theo-ries, describe how extensive localization iscritical to achieve ‘organizational legitimacy’in host markets in both the sociocultural(consumption trends, family structures,understandings of corporate responsibility)and economic domains (relations with suppli-ers, competitors and consumers).

Notions of embeddedness, then, areclearly at the heart of an effective conceptu-alization of retail TNCs. But what exactlydoes this term mean? The work of Hess(2004) has brought much needed clarity tothe debate, identifying three specific, yetinterrelated, forms of embeddedness. Societalembeddedness connotes the importance foreconomic action of the cultural, institutionaland historical origins of the economic actor inquestion. For example, when a company

invests overseas it takes with it some of thesocial and cultural attributes that it hasacquired in the process of its evolution within the context of its home base. Thesemight include attitudes towards labour-management relations, working conditionsand welfare benefits, and how supplier net-works should be organized. Network embed-dedness refers to the composition andstructure of the network relations of a giveneconomic actor. It encompasses aspects suchas the degree of functional and social connec-tivity, the stability of relations, and the impor-tance of the network for its participants. Inaddition to interfirm relations, networkembeddedness also takes account of thebroader institutional networks includingnonbusiness agents (e.g., government andnongovernment organizations such as tradeunions) that are often involved. Territorialembeddedness deals with how economicactors are ‘anchored’ in different places atspatial scales from the nation state to thelocal level. TNCs, for example, do not merelylocate in particular places. They may becomeembedded there in the sense that theyabsorb, and in some cases become con-strained by, the economic activities and social dynamics that already exist in thoseplaces. A key element of territorial embed-dedness is the extent and nature of therelationships formed between transnationalcorporations and local firms, consumers andregulators.

Recast in this light, the argument weadvance above essentially highlights theexceptionally high levels of territorial embed-dedness – from the national scale down to the‘microscale’ of the individual store – of retailTNCs in comparison to any other sector ofthe globalizing economy. Within this generalthesis, individual retailers will vary in theextent to which they territorially embed theirvarious activities. Some will endeavour todraw heavily on their network embedded-ness in transnational intrafirm relations to offer a standardized operation acrossdifferent markets. Others will adopt a more


decentralized approach that is more heavilyterritorially embedded.

In taking the discussion forward, we followDicken (2000: see also Dicken and Malmberg,2001; Dicken, 2003b) in suggesting that twokey questions provide a useful framework fordiscussion. The first is what Dicken (2000:276–82) refers to as the ‘placing firms’ ques-tion. That is to say, in what way is the natureof retail TNCs related to specific places/markets within which they are embedded? InHess’s terms, the key here is to explore theterritorial embeddedness of the retail TNCand the extent to which that is influenced bythe societal embeddedness or home countryorigins of the firms in question. The second iswhat Dicken (2000: 282–87) terms the ‘firm-ing places’ question, and relates directly toHess’s notion of network embeddedness.That is to say, how are places ‘inserted’ intothe organizational spaces of the retail TNCsand used as part of their competitive strate-gies, and to what effect?

III ‘Placing firms’: intersecting thesocietal/territorial embeddedness ofretail TNCsA key issue in recent (and implicitly produc-tion-orientated) discussion of TNCs and theirinternational investment has been how tocapture in a sensitive way: ‘the complexity ofthe embeddedness process in which both the place of origin and the other places inwhich TNCs operate influence the ways in which such firms behave and how they, inturn, impact upon such places’ (Dicken, 2000:282). As stressed above, this issue seems tobe especially pertinent in the context of theretail TNC. How then can we best addressit? One particularly useful way forward is tointerrogate, from the perspective of retailTNCs, a framework proposed by Whitley(2001) as part of his sustained attempt tounderstand what makes TNCs different kindsof organization: more complex than domesti-cally focused firms, and with the capacity todevelop novel forms of organization and com-petitive capabilities (see also Whitley, 1999).

That framework, shown in Table 1, essentiallycross-relates three different types of enter-prise with three distinctive kinds of businessenvironment in which those firms are seen todevelop. It also explores (via a series of ques-tions relating to likely levels of FDI, character-istic risk-management strategies, extent andmode of control of subsidiaries, likely extentof integration of subsidiaries into the localeconomy and development of distinctivecapabilities, and extent of organizationallearning from subsidiaries) how firms fromthose contrasting business systems are likelyto manage their international investment. Putanother way, the table presents firm strate-gies that might be expected to result from theintersection of different kinds of societalembeddedness (for which ‘firm type’ is aproxy) and territorial embeddedness (forwhich ‘type of foreign business environment’is a proxy).

The foreign business environments areviewed as being ‘dominated by different insti-tutional arrangements controlling access tocapital and skills’ which, in turn, encourage‘different ways of coordinating and control-ling economic activities’ allowing quite differ-ent sorts of firm to emerge and dominate(Whitley, 2001: 38). The three environmentsare termed: particularistic – ‘combining aweak and/or predatory state . . . with weakcollective intermediaries and norms governingeconomic transactions, and predominantlypaternalistic authority relationships’ (e.g.,emerging economies of Latin America, cen-tral and eastern Europe, and some countriesin East Asia); collaborative – in which the‘state plays an important coordinating anddevelopment role’ or ‘encourages privateassociations to coordinate a range of activi-ties’ and which have ‘a number of importantinstitutions that together lock key actors intoeach others’ destinies’ (e.g., continental west-ern Europe, Japan and South Korea); andarm’s length – in which ‘the state acts more as a regulator than coordinator, financeflows through competitive capital marketsrather than banks, and training is more a


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matter for individual investment than forcoordinated collaboration between stateagencies, employers and unions’ (e.g., theUSA, Canada and the UK) (Whitley, 2001:39). The latter two environments are often referred to elsewhere in the ‘varieties ofcapitalism’ literature (Hollingsworth andBoyer, 1997) as ‘coordinated’ and ‘merchant’economies respectively (Christopherson,2002).

Associated with these business environ-ments are particular types of firm whichrange from opportunistic – products of adver-sarial, unpredictable environments in whichthe state is ‘poorly integrated and controlledby private rent-seeking elites’, where corpo-rate decision-making usually involves ‘gainingpolitical or related forms of support . . . sub-ject to radical change at short notice’, andwhere control of firms is frequently direct and personal by owners whose dominantobjective is often family wealth creation(Whitley, 2001: 39–41), through cooperativehierarchies – generated in environmentswhere there is ‘considerable interdependencebetween the providers and users of capitaland labour power’ and strong ‘lock-in effectsbetween banks, employers, employees andbusiness partners’ (Whitley, 2001: 41), toisolated hierarchies – produced within environ-ments characterized by separation of majorinstitutional arenas and regulatory conven-tions, and where ‘owners tend to be remotefrom managers and capital is typically man-aged in investment portfolios with financialclaims traded on highly liquid markets’(Whitley, 2001: 42).

As the highlighted areas of Table 1 show,the processes of retail globalization over thelast decade have chiefly been characterizedby investments in ‘particularistic’, and to alesser extent ‘collaborative’, business envi-ronments by ‘isolated hierarchy’ firms in partdriven by, but also intensely scrutinized by,home country capital markets (Wrigley,2000; Wrigley and Currah, 2003). Theframework outlined in Table 1 would suggestthat in ‘particularistic’ environments the

dominant mode of FDI management can beexpected to be through highly controlledsubsidiaries, weakly integrated into hosteconomies, and with little potential for devel-oping unique capabilities and organizationallearning. To what extent, however, does thishypothesis derived from a largely manufac-turing-TNC focused approach appropriatelycapture the characteristics of the emergingretail TNCs? In what ways have retail TNCsmanaged significant investment since themid-1990s in unpredictable, weakly institu-tionalized, ‘particularistic’ business environ-ments, and how have they managedinvestment in ‘collaborative’ business envi-ronments which are more predictable but inwhich gaining access to the established net-works and alliances that dominate sucheconomies, at least initially, may be difficult?To what extent has the need for the retailTNCs to be territorially embedded in theseenvironments generated new competitivecapabilities and organizational structures rela-tive to their previously domestically focussedorganizational forms?

In the case of uncertain ‘particularistic’economies, we begin by drawing attention tosome immediately apparent differencesbetween Whitley’s hypotheses and the caseof the transnational retailers. In this caseTable 1 suggests the likelihood of a low com-mitment of resources by firms, coupled withstrong parental control of subsidiaries, limiteddevelopment of distinct organizational com-petencies, limited integration into localeconomies, and the unlikely nature of TNCschanging their organizational routines as aresult of investing in such economies. In con-trast, we note that retail TNCs have commit-ted considerable resources to access thegrowth potential and cost-of-operationadvantages of ‘particularistic’ economiesacross Latin America, China and parts ofeastern/southern Europe and East Asia,prompted by the success of early entrantsinto those markets and their achievement ofextremely high returns on investment. AsWhitley (2001: 51) himself notes, this reflects


the fact that the risks associated with invest-ing in such economies may be overridden by‘the large potential market and/or major costreductions’ on offer.

The essential investment in embeddednessof the retail TNC frequently inhibits thespeed of market exit from these types ofeconomies relative to other kinds of TNC.While production-based TNCs can use mod-ular factory design and imported machineryto manage entry and exit costs (both plantand equipment can be rapidly shipped in andout of a country) and can use knowledge ofthe exit-cost flexibility as a credible threat innegotiation with the state over various taxesand charges, retail TNCs, more constrainedby the timelag experienced between set-upand generation of profit streams and by the‘exit sunk costs’ (Clark and Wrigley, 1997) ofwithdrawing from their investments inembeddedness, are less able to respondflexibly and rapidly to changes in markets byadjusting the spatial configuration of theirsubsidiaries. As a result, retail TNCs, espe-cially in their engagement with volatile‘particularistic’ economies, are unusuallyexposed to changing market conditions.1

Relatedly, we note that retail TNCs havedeveloped complex strategies to manage riskin uncertain environments – which may becharacterized by endemic monetary crisis,hyperinflation and devaluation. Tokatli andEldener (2002: 229–33), for example,describe how in Turkey leading retailers havedeveloped a range of financial strategies (e.g.,use of spot markets, currency exchange andshort-term capital financing) to cope with ahigh inflation and interest rate environment.We can also observe significant impacts onthe organizational and logistical structure ofthe wider distribution sector in sucheconomies which results from the need ofeven the most strongly centrally controlledand technology-dependent retail subsidiariesto integrate themselves into local supply sys-tems to ensure competitiveness (Davies,2000; Da Rocha and Dib, 2002; Coe, 2004b).The transfer of what broadly might be

termed ‘lean retail’ distribution skills by theretail TNCs to their subsidiaries has impacts,both directly and via emulation of those ‘backregion’ practices of the TNCs by indigenousplayers (Goldman, 2000; Lo et al., 2001).Finally, we note, in contrast to the suggestionof Table 1, that there is emerging evidence ofthe transfer from subsidiaries of distinctiveorganizational competencies – from styles of marketing attuned to local cultures ofconsumption through to novel store formats –into the domestic operations of the retailTNCs to provide new competitive capabili-ties (see Wrigley and Currah, 2004, forexamples drawn from Tesco’s internationaloperations).

In less risky ‘collaborative’ business envi-ronments, Table 1 suggests that both ‘isolated’and ‘cooperative’ hierarchy type firms arelikely to proceed via the development ofalliances and partnerships – with the formerbeing more likely ‘to rely on market power toshort circuit the process of building alliancesas well as on their firm-specific competitiveadvantages to attract local business partners’(Whitley, 2001: 54). Confident in their abilityto manage via formal control systems, ‘iso-lated hierarchy’ type firms are seen as likely togrant considerable autonomy to subsidiariesin such environments to develop their ownways of dealing with local conventions, aslong as they meet financial and other targets.However, if those subsidiaries do becomedistinctive kinds of organization, with rou-tines that are different from those of theparent company, Whitley (2001: 56) believesthat it may prove ‘difficult to integrate thesemore collaborative ways of coordinatingeconomic activities’ into the wider enterprise.

The varying experiences of the retailTNCs in collaborative economies such asSouth Korea and Japan certainly confirmsthe importance of well-chosen alliances andpartnerships in this type of business environ-ment.2 However, partnerships and jointventures have also been widely used by theretail TNCs during their entry into ‘particu-laristic’ economies – not least to attenuate


some of the risk of entering those markets.3

As a result, the distinctive nature of the‘collaborative’ economy partnerships of theretail TNCs relative to those in ‘particularis-tic’ economies awaits case-study evidence(although see Christopherson’s, 2002, consid-eration of Wal-Mart’s attempted transfer of its ‘lean retailing’ methods from their ‘arm’s length/merchant’ economy origins tothe ‘coordinated’ economy of Germany).Moreover, it is likely that distinctive organiza-tional competencies which emerge within‘collaborative’ business system subsidiaries of the retail TNCs may be transferredback/integrated into the wider enterprise in the same way as those which have emerged from subsidiaries in ‘particularistic’economies.4

Useful as Whitley’s framework is, there-fore, in addressing the dialectical relationshipat the heart of Dicken’s ‘placing firms’ ques-tion, there are clearly subtle, and possiblymore profound, differences in the manner inwhich retail TNCs become ‘more complexand differentiated organizations as the resultof investing considerable resources in differ-ent kinds of business system’ (Whitley, 2001:63). Three further points should be made indrawing this section to a close. First, the‘placing firms’ question as Dicken (2000: 282)has stressed should not be confined solely to the national scale – the embeddednessprocess also operates at the subnational scalesof region and local community. This is partic-ularly the case for the retail TNCs who have,during the last five years, become increasinglymultiformat international operators, with theconsequence that in any single country theyface very different embeddedness issues (plusa very different regulatory topology) in devel-oping and operating small-format local-storechains compared to regional-market orien-tated large-format hypermarket chains(Aoyama, 2001). The ‘placing firms’ questionfor retail TNCs is clearly multiscale andmultidimensional.5

Secondly, these discussions also need to berefracted through the lens of corporate

culture (Schoenberger, 1997). As the global-ization of retailing is currently being driven bya relatively small group of companies, thismay well hamper attempts to theorize acrossthe sector as a whole. In other words, firmsemerging from similar contexts, and investingin similar types of foreign markets, may dothings rather differently due to variations infirm-specific cultures. Shackleton (1996;1998) is one of the few researchers thus far tohave applied notions of corporate culture toretailer internationalization, through her workon Sainsbury’s expansion into the US marketin the late 1980s and 1990s. Her argument isthat the entrenched nature of corporateculture – thought of in terms of the socialdynamics through which internal power rela-tions are resolved – will shape the strategicdecisions made by executives. Corporatestrategy should be seen as a socially and cul-turally determined process, with managerialidentities playing a key role. Such an interpre-tation has many implications, but particularlyfor international expansion operationalizedthrough mergers and acquisitions, and jointventures. Shackleton demonstrates how sucha notion is important for understanding whathappens in the post-acquisition phase, andalso as new retail practices diffuse throughhost markets.

Thirdly, it is critical that notions of societaland territorial embeddedness are not seen instatic terms. Instead, we need to develop aspatially and temporally dynamic approach tothe internationalization of retailing (Coe,2004a). Temporally, we need to look at howthe degree and nature of territorial embed-dedness develops over time after the initialpoint of entry. Although in many cases it willincrease, we also need to chart the circum-stances on which it may decrease, and, insome circumstances, lead to divestment, i.e., a relative withdrawal of investment from overseas markets (see, for example,Alexander and Quinn, 2002; Burt et al.,2002; Burt et al., 2003; Wrigley and Currah2003; Benito, 2005). Spatially, it is importantto appreciate the organizational complexity


and variability of the operations of the retailTNC. On the one hand, individual retailTNCs will do things differently in differentmarkets – for example, in terms of mode ofentry, store expansion programmes or supplychain management – even if the markets fallinto the same metacategory of ‘particularis-tic’ or ‘collaborative’. On the other hand, it isvital to recognize that developments in differ-ent markets are interlinked, and that theinternationalization process is characterizedby what Burt et al. (2002: 214) term ‘compli-cated activity switching’. In this perspective,investment – in terms of both stores andsourcing – is constantly redirected betweennational subsidiaries based on decisions aboutrelative returns and profitability.

IV ‘Firming places’: relationalnetworks and organizational learning in the retail TNCThe converse of our previous focus on the embeddedness of TNCs in particularplaces/markets is a focus on the ‘insertion’ ofplaces and their local economies into theorganizational spaces of the TNCs. By beingconnected into the global networks of theTNCs, with particular roles in those net-works, places can in that sense be thought ofas being ‘firmed’ (Dicken, 2000: 283). Theconsequence is that we can pose questions,first, about the nature of those network con-nections and their impacts and, secondly,about the way places might be used by TNCsas part of their competitive strategies.

TNCs have been described by Nohria andGhoshal (1997) as ‘differentiated networks’or, more recently, by economic geographers(Dicken et al., 2001) as complex relationalnetworks – that is to say networks of ‘internal-ized, intra-firm relationships embeddedwithin networks of externalised, extra-firmrelationships . . . woven across geographicalspace’ (Dicken, 2000: 282). From thisperspective, the global economy in this per-spective is viewed as being constituted by‘spaces of network relations’ with the keytask being to understand those networks as

both ‘social structures and ongoing processes. . . constituted, transformed and reproducedthrough asymmetrical and evolving powerrelations’ (Dicken et al., 2001: 105; see alsoHenderson et al., 2002; Yeung, 2005). Thequestion here, however, is how, and to whatextent, can these perspectives be applied todevelop our conceptualization of the retailTNC?

The advantages of viewing retail TNCsthrough the lens of three sets of relationalnetworks –intrafirm, interfirm and extrafirm(see Yeung, 1994) – connecting the compo-nent parts of firms, and firms and the places in which they operate, appear to us to be over-whelming. Studies of intrafirm relationshipswithin the retail TNCs, for example – as partsof those firms strive to maintain or enhancetheir position vis-à-vis other parts of theorganization (Dicken, 2000: 285) – are almostnonexistent, reflecting not only a lack of focuson the internal dynamics of the retail TNCbut also the extreme difficulty researchershave encountered in gaining appropriate lev-els of access to these organizations. As yet,there are simply no equivalents in terms ofthe retail TNCs of Kristensen and Zeitlin’s(2001: 192) long-term, detailed microprocessorientated study of the ‘making’ of a singleTNC, in which that TNC ‘rather than impos-ing an ethnocentric logic on subsidiaries’ isshown to have become a battlefield with‘subsidiaries representing and mobilizing their own regional capabilities and nationalinstitutional means against the rest’.

Conceptualizing the differing impacts ofthe intra-, inter- and extrafirm linkages thatretail TNCs establish in host economies is acrucial part of revealing how ‘firming places’occurs. In terms of inter- and extrafirm net-works, following Dawson (2003) and Coe(2004a) we can delimit several broad areas ofimpact.• Retail competitiveness (interfirm networks):

transnational retailers entering emergingmarkets bring with them new formats andpricing structures, improved informationmanagement processes, new marketing


and merchandising methods, and highlevels of investment capital, thereby dra-matically altering the retailing landscape.The rapid acquisition of market share byforeign retailers in these markets hassqueezed many local retailers out, andcreated a pressure towards consolidationfor the large retailers that remain (Tokatliand Boyaci, 1998). More specifically, localindependent stores, department storesand fresh markets have been adverselyaffected by loss of market share to foreign-owned or controlled supermarkets andhypermarkets.

• Supply network dynamics (interfirm net-works): there have been significant impactson local supply networks from the pur-chasing activities of transnational retailers.While there is a tradition of retailer-supplier relation investigations in both the marketing and economic geographyliteratures (e.g., Dawson and Shaw, 1990;Fernie, 1995; Hughes, 1996; 1999; Doel,1996; 1999), there has been limited focuson examining contrasts which might exist inthese relations across the internationalmarkets in which retail TNCs operate.Furthermore, very little research has beenundertaken on processes of supply chainrestructuring in the emerging market hosteconomies. It is known, however, that thepurchasing decisions and supply networkrequirements of foreign retailers are lead-ing to rapid and dramatic consolidation inthe distribution, wholesale and manufac-turing/agricultural production sectors ofhost economies. Preliminary studies havecharted the ways in which retailers areimposing centralized procurement sys-tems, logistical system upgrading, shortersupply networks, new forms of inter-mediaries, quasi-formal contractual sys-tems and private/international quality and safety standards on supply chains(Reardon et al., 2003; Coe, 2004b;Wrigley and Currah, 2004). While well-capitalized firms are profiting, manysmaller firms are being displaced by these

new competitive pressures (Reardon andBerdegué, 2002).

• Consumption practices (extrafirm networks):transnational retailers have become a con-stituent part of processes of socioculturalchange in host markets with respect toshopping and consumption patterns.These have been altered dramatically bythe arrival of new retail formats. Initially,new formats such as hypermarkets andconvenience stores occupied small nichesin major cities, serving primarily the richand middle class, but they have now spreadrapidly both socially and spatially – albeithighly unevenly (Reardon et al., 2003).6

• Regulatory frameworks (extrafirm net-works): the competitive success of foreignretailers has impacted on the regulatoryframeworks in host countries, which havefrequently become tighter as a result.Areas of particular significance for retailersare restrictions on the amount and type ofinward investment, format controls, land-use planning/zoning legislation, competi-tion policy and import restrictions. RetailTNCs, as huge employers, are also inti-mately tied into local labour markets in avariety of ways (see Christopherson,2005, on the labour practices of Wal-Martand IKEA in an era of global labour stan-dards). Once again, the overwhelmingimpression is of the relatively underdevel-oped nature of studies of the regulatoryimpacts of retail TNCs – although tighten-ing regulation across East Asia is beginningto prompt an increased level of interest inthese issues (Mutebi, 2003), and attemptshave also been made, in the context ofmature market entry by retail TNCs, tointerrogate the regulatory impacts of Wal-Mart’s entry into Europe (see Burtand Sparks, 2001; Christopherson, 2002;Hallsworth and Evers, 2002).

In addition, both Coe (2004a) and Dawson(2003) identify another set of impacts of retailglobalization, namely those on the retailTNC’s own intrafirm networks. The transfer-ring of investment, people and knowledge


between different sites represents anotherway in which the firm shapes the variousplaces in which it has invested. Given thedegree and extent of territorial embedded-ness described in the previous section, it isclear that intrafirm innovation managementposes particular problems and possibilities inretail TNCs. For that reason, we choose tofocus on that topic in the remainder of thissection.

We begin by noting that, while the produc-tion-based TNC is argued to have entered a‘new paradigm of transnational innovation’(Gerybadze and Reger, 1999) over the pastdecade, characterized by a progressive shifttowards a more polycentric architecture oflearning (Cantwell and Janne, 1999; Zanfei,2000), the notion of ‘dispersed learning’ thatthis implies seems to fit particularly closelywith the experiences of the retail TNC,which routinely operates a differentiatednetwork of ‘interactive learning centres’(Nohria and Ghoshal, 1997; Amin andCohendet, 1999). That is to say, each retailstore is potentially an autonomous centre ofinnovation, embedded in (and shaped by) aunique local context, with the capacity tolearn how to adapt its format in a variety ofways (and within constraints, less or morerigidly applied) to attain market leadershipwithin its own catchment area. Indeed, a keychallenge for the retail TNC is how best tocapture and protect this potential source ofinnovation, and to transfer it through itsintrafirm network – thereby fostering aprocess of what might be termed ‘reflexive’ or‘hybridized’ retail globalization – while at the same time concealing ‘back-region’ or‘process-based’ knowledge (Teece, 1998)from the gaze of their rivals. Any effectiveconceptualization of the retail TNC mustincorporate, therefore, an understanding ofthe creation and/or identification, appropria-tion, absorption and transfer of intangibleassets embedded in its intrafirm processes.

While the question of how, or whether,firms learn to adapt their operations to foreignmarkets has fuelled a long-running debate

in organizational theory (e.g., Doz andPrahalad, 1993), recent theoretical develop-ments have aided our ability to conceptualizethese complex interactions. The fundamentaldilemma facing any TNC is how to balancethe unique needs of global operations to reapimproved efficiencies arising from economiesof scale and scope, and how to transferknowledge within the firm to develop dis-tinctive, placed-based organizational com-petencies. Amin and Cohendet’s (2004)approach to the latter aspect is to develop atheory of knowledge that challenges strate-gic-management and evolutionary economicsapproaches that see knowledge as ‘pos-sessed’. Instead, they advocate a ‘socialanthropology of learning’ approach thatfocuses on ‘practices of knowing’. From thisperspective, knowledge is seen as practisedrather than possessed, as innately embodied,distributed and transhuman, and as primarilybeing formed through communities. Theyargue that this stance overcomes severaltrenchant obstacles to understanding knowl-edge in organizations. It challenges the viewthat knowledge is a simple stock divorcedfrom individuals that can be accumulated inlinear fashion. Rather than emphasizingcodification, it reveals that much knowledge isunarticulated and context-dependent (seealso Beccera-Fernandez and Sabherwal,2001). This is significant for, whereas codi-fied/explicit knowledge can be objectified and recorded, tacit/implicit knowledge is less amenable to any such textualization,given that it is accumulated through everydaywork practices (Nonaka and Takeuchi, 1995).It brings into view the collective aspects ofknowledge formation, and the importance oforganizational routines of different kinds.Finally, it emphasizes the need for manage-ment devices that recognize the notion ofknowledge communities, or what they term‘management by community’ rather than‘management by design’.

Central to this theorization are knowledgecommunities, which are seen to provide a crit-ical intermediate level of social connectivity


and interaction through which new knowl-edge is forged by drawing on the collective‘cognitive unconscious’. The account drawsheavily on the ‘communities of practice’approach (Wenger, 1998) that sees learning asa (sometimes unintentional) byproduct ofworking together, drawing upon combinationsof tacit and codified forms of knowledge. Thenotion captures the way in which organiza-tional innovation is arguably driven throughthe ‘ongoing interactions and improvizationsthat . . . employees undertake in order toperform their jobs’ (Nidumolu et al., 2001:119). In communities of practice, employeesare informally bound together by a sharedarea of expertise and/or an operational prob-lem related to that area, which they seek toresolve by exchanging knowledge during per-sonal, subtle and relatively unstructuredsocial interactions (Leonard and Sensiper,1998). However, communities of practiceneed not be geographically proximate to fos-ter bottom-up creativity (Bunnell and Coe,2001; Coe and Bunnell, 2003), as the organi-zational or relational proximity afforded byintrafirm networks (through varying combi-nations of physical, virtual and mental spaces)may be far more important in constituting the‘soft architecture’ of learning in the globaliz-ing firm than spatial propinquity (Amin,2002). In particular, recent research hasrevealed how the transfer of tacit expertisethrough face-to-face interactions can now be achieved at a distance in the TNC due to the capabilities of telecommunicationstechnologies such as Groupware and web-cameras (Leamer and Storper, 2001). Assuch, virtual communities of practice are now emerging from a dense web of ‘peer-to-peer’ (P2P) computer connections whichenhance the permeability of knowledgeacross intrafirm networks (Lurey andRaisinghani, 2001). That being said, it isimportant to note that the transfer of bestpractices through spatially dislocated commu-nities of practice is constrained (albeitunevenly) by nationally divergent institutionaland regulatory structures, reinforcing the

path-dependent nature of geocorporatechange (Gertler, 2004).

The task for the TNC, then, is to generateand/or discover best practices rooted in par-ticular places/communities and, secondly, tocirculate this tacit knowledge throughout itsorganizational space. Due to this cross-scalarimperative, knowledge management in theTNC cannot simply be about enablingcommunities of practice, but is essentially a‘balancing act’ between bottom-up creativityand top-down coordination (Brown andDuguid, 2000). Put another way, the eliteactors within TNCs must still coordinate‘know-how’ within the firm to foster a‘shared passion for a joint enterprise’(Wenger and Snyder, 2000). Bottom-up cre-ativity must be complemented by adequatetop-down investment in ‘infrastructural capa-bilities’, which formalize and sustain thecross-border transfer of best practices: first, a technological architecture for capturing,storing and communicating knowledgethroughout the firm; secondly, a corporateculture which promotes cooperation, par-ticipation and knowledge sharing (Gold et al.,2001).

These conceptual tools are extremelyuseful for exploring the nature of knowledgegeneration and transfer within retail TNCs. Akey observation to be made here, however, isthat it is certain kinds of retail knowledge thatare of particular strategic importance, asGoldman (2001) alludes to when distinguish-ing between:

the offering and the know-how parts of the[retail] format. The first includes the externalelements (e.g. assortment, shopping-environment, service, location and price)delivering the functional, social, psychological,aesthetic and entertainment benefitsattracting customers to stores. The second,the internal part, determines a retailer’soperational strength and strategic direction. Itconsists of the retail technology dimensioncontaining the systems, methods, proceduresand techniques the retail company uses and ofthe retail culture, that includes the repertoire of concepts, norms, rules, practices andexperiences. (Goldman, 2001: 223)


Due to the inherently ‘open’ nature of thestore and the retail offering, the former ele-ments are constantly at risk of imitation andappropriation by competitors. Consequently,as the embryonic retail TNCs have pene-trated new markets since the late 1990s,often adapting their formats to complex and differential economic and regulatorylandscapes, they have primarily sought toexploit and derive competitive advantagefrom management of ‘know-how’ in theirback regions.

The work of den Hertog (2002) allows usto be more specific about the kinds of knowl-edge involved. His four-dimensional model ofservice innovation can be applied to the retailsector to distinguish between new serviceconcepts (e.g., new store formats, diversifica-tion into financial services), new clientinterfaces (e.g., e-commerce, self-scanningcheckouts, client specific product offerings),new service delivery systems (e.g., logisticalchain innovations, home delivery, employeecompetencies and skills) and technologicaloptions (e.g., inventory control systems,electronic tagging, client profiling and datamining). He also considers the ways in whichsuch knowledges are transferred in tacit andcodified forms, in embodied and nonhumanstates, and through contractual and noncon-tractual relationships. To give one example,when a retailer hires a management consul-tancy to train its supply chain managers face-to-face, we can think about how certainforms of embodied knowledges associatedwith the service delivery system are beingtransferred through a contractual relation-ship. Another strength of den Hertog’sapproach is that it reveals the range of exter-nal firms – or knowledge-intensive businessservices – that may be involved in helping tofacilitate knowledge dynamics within a retailTNC (e.g., management consultants, soft-ware firms, market researchers). In this way,another range of important interfirm networkrelations are brought into view. Approachessuch as this are necessary to help explorewhich kinds of knowledges are transferred

between different sites within the retailTNC, and through which mechanisms.

Building on the analysis in the ‘placingfirms’ section, what characterizes the know-ledge management dynamic in the retail TNCis the sheer range of potential sites of innova-tion. Communities of practice within thestore environment and distribution/logisticsnetwork are the principal mechanism throughwhich tacit knowledge of more efficientoperating procedures and improved merchan-dising techniques is initially discovered andnurtured. To give some idea of the potentialcomplexity this generates, in 2003 Tesco hadover 2300 stores worldwide, Wal-Mart over4600 and Carrefour over 6000. Given thatthe geography of learning in the retail TNC isinherently store- and distribution-centrebased, it is clear that a major constraint onknowledge management in this type of firm isthe coordination of intangible assets spreadout across hybrid communities, each of whichis situated in a different culture and geogra-phy of consumption. This is likely to limit thecapacity for retail TNCs to transfer bestpractices across different business environ-ments in a number of ways (Currah andWrigley, 2004). The capacity and motiva-tional disposition of corporate units to‘absorb’ best practices from other locationsmay vary greatly across different contexts.There is also the potential for conflictbetween divergent corporate cultures ‘on the ground’ in different subsidiaries aftermerger/acquisition (Schoenberger, 1997;Shackleton, 1998; Burt and Sparks, 2001).Relatedly, intrafirm bargaining processes mayhave a mediating effect upon the transfer ofknowledge between those units. The latterpoint is significant because valuable know-how may be used (or, in fact, hoarded) bysubsidiaries as ‘currency’ to serve their ownplace-based interests and acquire power vis-à-vis other units, either by winninginvestment or autonomy from the centre(Gupta and Govindarajan, 2000; Phelps and Fuller, 2000). These parent-subsidiaryand subsidiary-subsidiary relations may be


complicated by the social and discursiveconstructions created by elite actors in differ-ent parts of the retail TNC as they seek to impose their own visions and personalambitions upon processes of organizationallearning at various sites and scales (Yeung,2000).

Thus the nature of the retail TNC createsdistinct opportunities and constraints forprocesses of organizational learning. Whilework in this area is in its infancy, Currah andWrigley’s (2004) research has started toreveal the ‘top-down’ mechanisms beingimplemented by retail TNCs to try to capturethe potential benefits of dispersed innovationprocesses. One mechanism is the ‘interna-tional support office’, a common element inmany of the retail TNCs, and which in thecase of Tesco supports the diffusion and cap-ture of knowledge in the key areas of ‘retailskills’ (e.g., store-based practices and produc-tivity issues), ‘commercial and sourcing capa-bilities’ (e.g., regional and global sourcing,own-label development), ‘marketing and con-sumer focus’ (e.g., customer-insight-drivenmarketing and loyalty initiatives) and ‘humanresources’ (e.g., firm-wide policy transfer andmanagerial succession planning). Another isthe development of ‘technological architec-tures’ for knowledge management, such as acorporate intranet which might use a stan-dard vocabulary of intrafirm processes togenerate target benchmarks and performanceratings for various activities on a regular basis.Such systems are designed to improve accessto tacit knowledge within the firm, and tofacilitate networking groups as a means ofknowledge exchange. Such systems interact,however, with face-to-face mechanisms ofknowledge transfer such as storytelling – asevidenced in the variety of mechanismsthrough which employees are encouraged toadhere to the ‘Wal-Mart way’ (Schneider,1998) – and mentoring – as seen in, for exam-ple, in transnational mentoring systems whichpair up management in newly acquiredbusinesses with management from existingsubsidiaries (van der Hoeven, 1999). Best

practice teams provide another tool, visitingcorporate sites to identify and transfer bestpractices to other parts of the organizationalstructure. These teams are constituted bysmall groups of highly mobile specialists(‘knowledge activists’) whose job it is todiffuse tacit forms of knowledge acrossboundaries within the TNC, a process whichquite often requires at least partial codifica-tion (Gertler, 2003).7 Each of these forms offace-to-face interaction offer important‘corporate socialization mechanisms’ (Guptaand Govindarajan, 2000) for transferring richamounts of tacit information throughout acompany (Swap et al., 2001).

In summary, it appears that the retailTNCs have been developing, albeit at varyingspeeds and from multiple directions, an adap-tive style of globalized operation with respectto knowledge dynamics. This attempts toextract and blend innovative capabilities from the ‘back region’ of their operations – in‘particularistic’, ‘collaborative’ and ‘arm’slength/merchant’ environments – to tailor thefront region of their retail format to differen-tial consumer preferences. Clearly moreresearch is needed into the mechanismsthrough which knowledge transfer is enacted.Moreover, we also note that there are nostudies of what happened to the networks,mentoring and best-practice systems of theretail TNCs as some of the emerging marketinvestments by these firms came underintense pressure during a phase of globaleconomic slowdown and equity marketweakness in the early 2000s. The robustnessof intrafirm networks of organizationallearning in these firms during periods ofretrenchment, strategic reappraisal of theinternationalization process and selectivedivestment and market exit is an issue whichalso demands both conceptualization andempirical evaluation.

V ConclusionOur purpose in this paper has been to beginthe task of scoping the conceptual challengeposed to economic geography by the rise of


the distribution-based TNC. We see it asessential to position a conceptualization ofthe emerging retail TNC within a frameworkwhich is sensitive to the institutional andregulatory conditions of the markets in whichthe retail TNCs are attempting to embedthemselves, and also to the way thoseplaces/markets are, reciprocally, being‘inserted’ into the organizational spaces ofthe retail TNCs. That draws us, followingNohria and Ghoshal (1997), Dicken et al.(2001), Morgan (2001) and Henderson et al.(2002), to view these firms as complex rela-tional networks, and to ask in what ways theemergence of new transnational spaceswithin the emerging retail TNCs is leading tothem becoming different kinds of organizations– more complex than their previously domes-tically focused forms, and with the capacity todevelop novel forms of organization and com-petitive capability (Whitley, 2001).

Unlike many treatments of the process inthe retail marketing literature, we take a farless negative position on the value of linkingstudies of retail internationalization to thesebroader conceptualizations of the distinctivenature and management of the multinationalfirm, despite those conceptualizations beingproductivist in orientation and application tothis point. However, like those treatments,we recognize that the distribution-basedTNC is both subtly and, in many respects,profoundly different from the production-based TNC. Indeed, its necessarily dispersedmulti-establishment form, the peculiar extentto which it must invest in territorial embed-dedness (with the vulnerabilities ‘grounding’capital into store networks and logistics infra-structures brings), the intrinsic relationshipbetween the location of a retailer’s sales andan important component of its variable costs,the openness of retail formats to scrutiny andrisk of imitation and appropriation, and thelack of patents and copyright to protectcompetitive advantage all pose importantquestions about how, most appropriately, thecharacteristics and operations of the emerg-ing retail TNC can be captured.

However, it is a task which we believe isnow essential for economic geography. Aneconomic globalization literature whichremains rooted in a productivist position andlargely ignores a group of the world’s largestindustrial corporations, or restricts their treat-ment simply to a buyer-driven commoditychain perspective, risks missing somethingprofound in the evolution of the global econ-omy. Conversely, a retail internationalizationliterature, which in its frustration withproductivist treatments of globalization turnsits back on the insights now flowing fromrelational network approaches, debates onknowledge and learning in the social regula-tion of firms, and from regarding firms astransnational communities, guarantees intel-lectual isolation – not least for the vitallyimportant questions which it might otherwisecontribute to debates on how retail TNCsorganize themselves across different nationaland institutional contexts.

AcknowledgementsThis paper draws on two wider researchprojects supported by the ESRC underawards R022250204 and R000238535. Theauthors are grateful for ongoing discussions ofthe global retail industry with analysts atMerrill Lynch, Credit Suisse First Boston,ABN-AMRO and Deutsche Bank and for theopportunity to participate in meetings withthe management of the leading firms in theindustry organized by those investmentbanks. They would also like to thank PeterDicken and the anonymous referees for their helpful comments on an earlier versionof this paper.

Notes1. Wal-Mart, for example, despite incurring con-

siderable start-up losses and/or having to waita considerable period to generate a profit flowfrom some of its international operations, hasonly actually exited one international market:Indonesia. The Indonesian exit was dueessentially to political circumstances, but,because a ‘licensing’ arrangement rather than


acquisition/organic growth had been neces-sary to enter the market, embeddedness wasalso critically less pronounced.

2. Tesco’s partnership with Samsung to developits South Korean operation is regarded as hav-ing been critically important in establishingcompetitive advantage vis-à-vis Carrefour, anearlier entrant to that market, and Wal-Marthas specifically chosen to enter the Japanesemarket via this route.

3. In Latin America, for example, Promodès(prior to its merger with Carrefour in 1999),Ahold and Casino all followed this route,while the difficulty of finding an appropriatepartner was frequently cited by Tesco as a sig-nificant obstacle to its entry into China priorto its entry into that market in July 2004.

4. Tesco developed and evolved its organiza-tional competency in large-format hypermar-ket retailing almost entirely (and by default)within its central European operations, andsubsequently integrated that competency intothe wider enterprise (including its domesticUK operations) to provide new competitivecapabilities.

5. As an illustration, Carrefour’s developmentand expansion (into Greece, Turkey,Argentina and China) of its Dia chain of small-format hard-discount stores has been addedto its existing large-format hypermarket andmedium-format supermarket operations.Carrefour increasingly views its growthopportunities across its 30-country networkas a matrix of 90 (30 x 3) possibilities, eachposing its own embeddedness/regulatorychallenge.

6. In Thailand, for example, from an initial baseof 13 hypermarkets acquired in 1998, Tescohas now developed a national network of 50hypermarkets, infilled in the metro area ofBangkok with 47 ‘Express’ conveniencestores and in smaller, low-income ‘up country’towns with a rapidly expanding chain (cur-rently 11 stores) of low-build-cost, stripped-down-hypermarket format ‘Value’ stores.

7. This can be seen in the way in which Tesco’shypermarket team – composed of manage-ment involved in the company’s entry into theparticularistic economies of central Europe –was responsible for the circulation of bestpractices related to that format across thecompany as a whole.

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