Dynamisms of financialization: Circuits of power in globalized production networks

Introduction

Financialization is a dominant rationality that drives the dynamics of global production networks (Coe and Yeung, 2015; Epstein, 2005; Sawyer, 2013; Van der Zwan, 2014) and has created an international division of labour based on the power of financial resources (Froud et al., 1998, 2014; Palpacuer et al., 2011). However, certain questions remain. How does a financial economy operate at the firm level? How does it wield power? The literature has begun to investigate managerial power (Andersson et al., 2007; Mudambi and Navarra, 2004) and political strategies in headquarter-subsidiary relationships (Becker-Ritterspach and Dörrenbächer, 2011; Blazejewski, 2009; Bouquet and Birkinshaw, 2008; Dörrenbächer and Geppert, 2009; Levy, 2008; Morgan and Kristensen, 2006). Focusing on interactions, scholars generally understand such relationships as bodily embedded. However, calculative devices – ‘objects with agency’ (Muniesa et al., 2007: 2) – that sustain the continuity of power relations receive less attention. Indeed, the literature has focused more on interpersonal politics than on the technical mechanisms that render dominant ideological rationalities operable and durable in global production networks.

This article seeks to explore how a dominant rationality such as financialization is made operational and deployed in political games. Operationalization happens both as the social and organizational categorization of human actors and organizations, and by attributing value to these categories via accounting and other calculative devices. Although political games occur in episodes, they are realized in relation to rationalities that tie episodes together. On one side, categorization is important because it assigns specific social positions to people and organizations, and on the other, accounting devices help imbue categories with certain financialized rationalities and values, thus provoking specific organizational conduct (Cooper and Ezzamel, 2013; Ezzamel et al., 2008; Froud et al., 2006; Morgan and Kristensen, 2006; Piotti, 2009). Accounting devices are particularly relevant for understanding translations between the macro- and micro-politics of financialization, because they make translations durable and actionable at a distance (Cerny, 1997; Clegg et al., 2011; Gill, 1995; Piven and Cloward, 1997; Ruigrok and Van Tulder, 1995). Thus, the research question concerns how political processes are informed and conditioned by categorization and accounting devices that mediate financialization processes at both the level of the global production network and the intra-organizational level of a multinational corporation (MNC).

Drawing on the idea that categorization and accounting devices are related to key circuits of power (Baunsgaard and Clegg, 2012), this article explores how a French MNC framed its relationships with its suppliers through two main types of accounting devices related to performance and risk, respectively. Performance was operationalized as a continuous drive to reduce costs, and risk was operationalized as the probability of supply-chain disruptions caused by the suppliers’ potential bankruptcy owing to their poor financial performance. This rationality weighted the MNC’s financial concerns. As the case study will show, those financial concerns tended to be oriented towards capturing value, which, however, built risk by neglecting the industrial mode of rationality concerned with interdependencies, technology, innovation and skills. Performance requirements pushed suppliers into accepting high levels of risk. In a strange twist, the success of financialization practices challenged the suppliers’ sustainability and, in turn, the French manufacturer’s global production network was put at costly risk.

The following section discusses the literature on political processes in global production networks. Stewart Clegg’s framework of circuits of power is the lens proposed for understanding the roles of accounting devices within circuits of power. The empirical setting is then presented and the article discusses the role of categorization and accounting devices in an MNC’s relationships of power when its financialized systemic and dispositional powers confronted the competing, but hidden, industrial rationality of the network in which it operated.

Politics in global production networks

It is common to conceptualize MNCs as inter-organizational networks ‘embedded in an external network consisting of all the other organizations with which the different parts of the multinational have to interact’ (Ghoshal and Bartlett, 1988: 365). An MNC is a ‘network orchestrator’ (Parkhe and Dhanaraj, 2003) and:

. . . through their decisions on how to organize value chains at the global level, firms generate multiple socio-economic impacts in the countries where they invest (both directly and through outsourcing strategies). They shape opportunities and hurdles for suppliers to upgrade, while also facing the risk that successful functional upgrading turns suppliers into potential competitors. (De Marchi et al., 2014: 479)

Consequently, MNCs’ boundaries extend beyond their legal delineations (Holm et al., 2005), increasing the level of value chain interdependencies – and vulnerabilities – among agencies.

Interdependencies and vulnerabilities seed the potential for conflicting political processes. One possibility is the rational type of micro-politics that, through agency theory, ascribes different but alignable interests to principals and agents in the agency relationship. Mudambi and Navarra (2004) theorize headquarter (HQ)-subsidiary relationships as principal-agent relationships, and micro-politics is understood as the propensity of subsidiaries to become self-serving ‘as a defensive reaction to rent-seeking by headquarters’ (Mudambi and Navarra, 2004: 386) against relations between top managers and owners that are aligned through financial mechanisms such as stock options (Goyer, 2001; Morin, 2000). Nevertheless, this financialization of organizational relationships deepens the disconnection of member categories, such as top management and labour, and the disconnection from production concerns in local markets (Boyer, 2005; Froud et al., 2000). Bouquet and Birkinshaw (2008) suggest that HQ-subsidiary bargaining power is related to actors’ network centrality and control over resources. This relationality focuses on strategies of co-optation, representation and coalition building, all of which involve building potentially antagonistic relational positions within global production networks. As Morgan and Kristensen (2006) argue, this network positioning and reordering of control over resources requires some measure of ability to act at a distance through various devices, many of which are operationalized via accounting calculations:

For the senior managers of multinationals . . . various and often changing benchmarks become the means for senior managers to judge performance across sites and to leverage local managers and employees to higher levels of performance. It is at this point that subsidiary managers receive these pressures and evolve their responses. (Morgan and Kristensen, 2006: 1482)

At this juncture, political processes between HQ and subsidiaries likely involve suppliers in global production networks. Research has primarily focused on the consequences of HQ-subsidiary power dynamics on the management of (local) production networks (Andersson et al., 2007). However, political processes are not just episodically relational; they are also embedded in institutional reproduction (Becker-Ritterspach and Dörrenbächer, 2011). The institutional reproduction of political processes concerns how ‘forms, outcomes, and dynamics of economic organisation (firms, networks, markets) are influenced and shaped by other social institutions (e.g., training systems, legal systems, political systems, educational systems, etc.)’ (Heidenreich, 2012: 565). Here, power is related to hierarchical positions (Pettigrew et al., 2003), professional backgrounds (Fligstein, 1993) and social capital (Kostova and Roth, 2003). Combinations of various institutional resources are understood to shape agencies’ strategizing activities and negotiation strategies in pursuit of career ambitions (Dörrenbächer and Geppert, 2009: 108) through the ‘politics of intra-firm competition’ (Becker-Ritterspach and Dörrenbächer, 2011). This institutional view focuses on ‘certain psychological states, perceptions, and behavioural expectations that social agencies form as a result both of their being part of social structures and the nature of their relationships in these structures’ (Kostova and Roth, 2003 in Becker-Ritterspach and Dörrenbächer, 2011: 548).

The HQ-subsidiary political processes considered in the literature cannot be separated from wider on-going processes of financialization, because many contradictions arise from managers’ concerns directed at restructuring and reordering the firm to capture value based on the demands of capital markets (Froud et al., 2000, 2006, 2014). Accounting is one particularly interesting device because it articulates abstract notions of performance at all levels and in all situations in which middle managers may be set against one another (Cooper and Ezzamel, 2013; Ezzamel et al., 2004a, 2004b, 2008; Mueller, 1996; Mueller and Purcell, 1992). For instance, when accounting numbers are used to rank managers, political games tend to focus attention on people’s movements within and across hierarchies, sometimes in contrast to attention towards matters involving the rationale of the type of industry in which the MNC is operating. ¹ Such political processes concern the circulation and mobility of people in their attempts to reach higher echelons of the firm and fuel attempts ‘to put the best light on one’s own achievements and move on before longer-term problems might emerge’ (Morgan and Kristensen, 2006: 1477). Therefore, MNCs may become ‘battlefields’ (Kristensen and Zeitlin, 2001) in which political processes between agencies are organized according to the range of dominant meanings and goals produced and reproduced by means of devices found in performance measures developed by accounting systems (Cooper and Ezzamel, 2013; Miller and Power, 2013; Quattrone and Hopper, 2005). In general terms, the rules fixed by accounting facilitate broader techniques of discipline and the reproduction of dominant financial-ideological modes of rationality to flow through global production networks. However, given that financialization empowers some agencies to the detriment of others, it provides resources for political processes and conflict. It is unlikely that this process will result in an unproblematic equilibrium (Clegg, 1989: 215); indeed, it is more likely that the reproduction of the firm’s dominant ideological mode of rationality might undermine its own agenda (Courpasson et al., 2012).

Moreover, political processes occur not only within MNCs but also within their increasingly diverse global production networks, which tend to use benchmarking and performance mobilized by accounting devices to increase global management (Morgan, 2011). Such developments find expression in the processes of appropriating and distributing value (Bair, 2009), in which agencies influence outcomes by exercising their ‘buyer-power’, e.g. by establishing product specifications, standards, logistics, volume, etc., or their ‘normative power’, e.g. by shaping expectations regarding how business should be organized or how quality should be assessed (De Marchi et al., 2014; Ponte and Sturgeon, 2014). Therefore, global production networks allow less space for market competition or value-adding chains and more space for ‘complex political economic systems in which markets – and their associated distribution of resources and authority – are constructed within and actively shaped by their socio-political context’ (Levy, 2008: 943). Thus, global production networks are contested inter-organizational fields in which agencies struggle over the construction of economic relationships, governance structures, institutional rules, and norms and discursive frames (Hardy et al., 1998; Maguire et al., 2004).

Dominating rationality, categorization and framing

Clegg’s (1989; Clegg et al., 2006) theory of circuits of power relates episodic power, dispositional power and facilitative power. Through episodic processes, agencies deploy strategies and negotiate circumstantial organizational rationalities that will reproduce or transform rules of practice. Dispositional processes of power inform and condition central agents’ developments and interpretations of rules of practice, which are applied by mechanisms of facilitative power. Such processes are underwritten by a dominant ideological mode of rationality being ‘an overwhelming mentality that penetrates an organisation or parts of it, and provides meaning in a more or less conscious manner to its members so vigorously that social practice is primarily based on it. Such practices, in turn, influence processes recursively related to it’ (Baunsgaard and Clegg, 2012: 206).

This conceptualization of dominant rationalities echoes Foucault’s ‘regimes of truth’ (1981), in which ‘subjectivity is designed as something that creates, assembles and transforms the relations it has with its own truth . . . The truth is designed essentially as a system of obligations, regardless of the fact that from any point of view one can regard it as true or not true’ (Foucault, 1981: 134). Dominant rationalities help fixing the relations of meaning and membership mobilized in social practices such as members’ categorization activities discipline meanings, relations and memberships (Clegg, 1989: 205; Baunsgaard and Clegg, 2012). They are those categories in the language in terms of which persons may be classified. For example, the categories: “a woman”, “a Catholic”, “a psychiatric social worker”, etc. (Sacks, 1995: 42; Sacks, 1972). Such categories are understood as ‘normal to use in constituting their sense of the world . . . [they are] discursive devices of legitimacy . . . [that] deliver the particular meaning of specific dominant modes of rationality as they are wrapped in specific projects . . . they sustain specific power relations and rationales for action’ (Baunsgaard and Clegg, 2012: 208–209). Such an ‘identity-giving’ connotation highlights how different agencies are empowered or disempowered by this categorization process. Thus, categorization is not a single act, but part of the on-going creation of rules of practice that express how ideology objects are mobilized in and made material by specific techniques of power (Sacks, 1995).

In Clegg’s model, categorization devices are key components in the dispositional circuit of ‘social integration’ in which ‘rules of the game’ and stabilized meanings and memberships are fixed or re-fixed through social integration (Clegg, 1989: 233), which gradually solidify and become stronger through their continual application in the intersection of strategies of power, dominant rationalities and practices. They are constituted of ‘those rules and techniques that have succeeded in becoming fixed within the network’ (Oliveira and Clegg, 2015: 443). In other words, several processes can be expected to occur at the intersection of the episodic and dispositional levels of circuits of power.

Considerations about such processes bring questions about techniques of power, typically embedded in administrative arrangements of facilitative power. Callon et al. (1986) and Latour (2005) repeatedly stress how the substantial activity of devices often underwrites such arrangements and makes society durable (Latour, 1991). When a device ‘works’, it bends the world around it. It does not have intention like that of humans, but it may help stretch power when it can force others – both humans and non-humans – out of their way.

As conduits of power, devices help produce durability. There are many types of devices including not only material technologies, such as production machinery and physical materials, but also visualization technologies, such as accounting, that inscribe the world and enhance its visibility in certain respects, making action at a distance possible (Latour, 1986). These devices are important because firms use them en masse (Ezzamel et al., 2004a). They visualize dominant rationalities by framing them; that is, by allowing those rationales to be present in a particular form. This framing, however, is incomplete and partial. Devices, even when they confer meaning and subjectification, do not contain the complexities of the entire world because they frame only parts of it. As Callon (1998: 255) says:

framing . . . ensures that certain courses of action are followed and at the same time generate externalities; this costly framing process is necessarily incomplete: first, because a wholly hermetic frame is a contradiction in terms, and second, because flows are always bidirectional, overflows simply being the inevitable corollary of the requisite links with the surrounding environment.

Therefore, it is not only possible but also likely that the coordination expected by framing is challenged by overflows, things that ‘cross or break through’ (Callon, 1998: 256) the boundaries of the frame and which have positive or negative consequences, especially for entities outside the frame. A typical example of overflow is the activity of a chemical plant poisoning a neighbouring village via their emissions of toxic fumes. ² Evidently, overflows will then orbit around their associated controversial forums in which heterogeneous circuits of power could become enmeshed. In other words, framing produces boundaries by separating some things from other things, providing each with an independent status such that they stand out as coherent and different from their external features. This distinction between the inside and the outside creates clarity, reduces ambiguity and enables decision-making, since framing priorities are more important than other matters. Framing produces clarity and focus and frees action from its complex context. However, the crucial point is that even if action may be freed from its context, the effects of that action cannot be freed from the context that the framing has placed outside of its boundaries. Therefore, overflows become the rule rather than the exception.

The following study of the French MNC, Mondialmaker, shows that the power of financialization is contradictory. With its dominant mode of rationality made operational by the framings constructed by accounting devices, it wants to extract rent from suppliers by putting pressure on costs, but neglecting that suppliers’ potential insolvency would threaten the viability of the entire global production network, which the MNC operates. In this case, financialization neglects the industrial mode of rationality in the form of technology, skills and capabilities that dominates Mondialmaker’s global production network operations.

Methods and methodology

The study of Mondialmaker, a French manufacturer, focuses on the operationalization of the dominant financial-ideological rationality into calculative devices and their informing and mediating role in circuits of power of a global production network. It examines how ‘ideology objects’ are constructed, and mobilized in and made material through specific power techniques contained in managerial disciplines of accounting (Clegg et al., 2011).

The empirical field research was conducted as an ethnography, which drew on interviews, observations and analyses of MNC archives on internal control documents. These sources of evidence were used because power is enacted via practices, techniques and procedures (Townley, 1993). Data collection occurred primarily during and after the economic crisis of 2009, which revealed tensions of the system of action more clearly, issues, ideas and processes that ‘normally’, as Wieviorka (2009) notes, are invisible.

The overall research methodology aims at capturing the various dynamics of circuits of power. Seven months were spent at the HQ of Mondialmaker. We were based at a desk in the purchasing department, where immersion was facilitated as the entire floor was organized as an open-plan office. From the beginning, we were authorized to explore the firm’s intranet. Our presence on-site allowed us to participate in informal relations of episodic power. During the first enquiry phase, we were authorized to attend any meetings we considered helpful in terms of understanding how risk and performance devices were used in everyday operations and strategic sourcing decisions.

Overall, 53 interviews were conducted from 2009 and 2011 within Mondialmaker and with three of its strategic suppliers and non-government and regulative authorities. They were reflexive (Alvesson, 2003) and analytical (Kreiner and Mouritsen, 2005) interviews. We began with broad interviews and then moved on to more focused interviews about political processes within the MNC’s global production network. The interviews were conducted in three rounds to illuminate how risk and performance devices were used in strategic sourcing decisions, and how accounting devices and dynamic relations of episodic power resulted in overflows during critical times. To narrow the focus of the study, these interviews focused on outsourced components made by strategic suppliers that were already facing financial difficulties. The data analysis began at the end of the exploratory phase and continued with the second round of interviews, which also allowed us to collect more specific tags as well because it contributed to the collection of more specific documents so that we could code our primary and secondary data. The third and last round of interviews was done one year after the seven months of fieldwork. They contributed to following up on the developments of the coded outcomes of formally considered political processes.

Understanding, structuring and delineating circuits of power within the Global Production Network not only required insight into the network of interdependencies that were recognized by the organization but also the interdependencies created within the relationships of episodic power. We therefore analysed the supply risk files of the chosen strategic suppliers and the associated use of accounting devices that gave the relationships a sense of empowerment/disempowerment.

Financialization as a dominant ideological mode of rationality in Mondialmaker

Circuits of power and the story of a struggling supplier

The key difficulty in Mondialmaker’s relationships with Globastic was that performance and risk devices contradicted each other: they were consistent with financialization only if the hypothesis of efficient markets, where suppliers could be easily substituted, was in place. The contradiction was that in order to fulfil Mondialmaker’s financial demands, suppliers would have to be highly specialized in their clients’ manufacturing activities but as low-cost producers. However, due to the reduced size of the market, if market demand decreased, suppliers were exposed to bankruptcy, and Mondialmaker would be exposed to supply disruptions in turn. The dominant rationality of financialization pursued through Mondialmaker’s sourcing strategies made managers the controllers of suppliers at a distance rather than managers of production and innovation. This social categorization made suppliers objects rather than subjects of production networks, but surprisingly, this put Mondialmaker in a vulnerable situation since this mechanism emptied out its own competency in production matters via outsourcing. A quality manager explained:

When you externalised your expertise . . . you become relatively weak in production techniques although you are technically competent . . . But because you are relatively weak in components production techniques, you need a supplier who is accustomed to your mode of operation; otherwise you cannot supervise them!

As the financialization mode of rationality expanded, Mondialmaker pursued the externalization of its expertise (as described above), while still wishing to control the resulting outsourced tasks, but suppliers became aware of their power over Mondialmaker from their innovation and production capabilities. In this sense, Mondialmaker moved from an innovation-centric organization to one focused on ruling others through financialized devices. This attention to financial rather than industrial concerns was clearly sensed by one manager of Globastic:

They are gradually suffocating us! They are leaving us absolutely no resources! . . . First, this is a system in which buyers are people who are there for a short period . . . and they [have] an objective! So you are confronted with buyers who are ready to do anything to get their bonuses! Even if . . . this would mean that in 18 months, Globastic would be dead! [Because at the end of the day] they still will receive their bonuses!

The cost reductions enacted by performance devices flowing through Mondialmaker’s sourcing activities would result in price reductions that Globastic could not sustain; they would suffocate the supplier financially not only in relation to then current tasks but also for new possible tasks in the future. Once price reductions had become significant, the risk device changed Globastic’s category and prevented it from getting high-value component orders. A manager from Globastic explained:

When you have a technical problem in a factory . . . and this problem has consequences for our customers because we cannot deliver, Mondialmaker will first send you an invoice, and then they will send a team to take over . . . Then, they tell us to . . . do this and do that! It will cost you an astronomical sum, and they will definitely not help you!

Over time, such practices intensified and one of Globastic’s competing suppliers faced financial default, and this became a problem for Mondialmaker who could not afford losing the technology, skills in innovation and production processes possessed by the defaulted supplier; industrial knowledge might be lost in the exclusive pursuit of financialization.

When Mondialmaker realized such industrial risk, it attempted to fix the overflow by shifting work to Globastic from the supplier that by that time had already gone into liquidation. This happened even if the supply risk committee was ‘not particularly enthusiastic about it’. Unfortunately, there was no other supplier that could take over the liquidated supplier’s operations. There was no efficient market for this supply, as financialization would have predicted. The committee was in a difficult situation because it knew that Globastic might not be financially capable of delivering the operations in question, but they needed Globastic’s industrial expertise; hence, they suddenly placed industrial concerns over financial concerns. Thus, the committee was required to make the strange strategic choice of giving Globastic new innovation tasks to help it improve its financial viability. However, these new innovation tasks avoided the obligatory passage point of ROIC and Globastic taking on unprofitable orders. A quality manager explained:

The price of parts was defined based on the innovation . . . costs supported by the strategic supplier . . . These are high costs! [So when] Globastic said: ‘For these parts, I will require 2000 hours of (innovation) resources’ . . . and thanks to our experience, we were aware that these parts required 3000/3500 hours of (innovation) resources . . . I did not know how Globastic could manage!

Engineers overlooked these industrial concerns since expressing their suspicions about Globastic would have been inconsistent with the demands of KPI Eng. In contrast, the performance device encouraged engineers to manage Globastic from a distance and to trust its capabilities to solve technical problems. Globastic was not a partner; it was a medium of short-term cost reduction.

Despite the risk that Globastic represented, it obtained new innovation tasks. Table 1 shows Globastic’s risk ratings from 2003 to 2007 before and after negotiations, during which Globastic’s managers agreed on producing unprofitable low-value components that, in return, would be compensated by projected forecast profits from high-value new orders. Globastic’s negotiated risk rates were lower than those calculated by the risk devices.

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Table 1.

Globastic’s calculated and negotiated risk ratings 2003–2007.

□	□ 2003	□ 2004	□ 2005	□ 2006	□ 2007
□ Calculated Globastic risk rates	□ 3	□ 2	□ 3	□ 4	□ 4
□ Negotiated Globastic risk rates	□ 2	□ 2	□ 2	□ 3	□ 3

As an obligatory passage point, ROIC was enacted via performance targets and via risk rates used as a resource to negotiate postponement (Table 1). Relations of episodic power about sourcing decisions discarded industrial considerations of supply disruption from financialization judgements, creating friction and overflows within the network. They did so by requiring financial performance on the part of contracting suppliers that decreased those suppliers’ profits, rendering them financially vulnerable and leading to industrial risk for the entire network. This tension will be considered more in the following section.

Circuits of power in critical times: Financialization and the disruption of the global production network

Mondialmaker’s actual final demand dropped and, therefore, Globastic could not realize forecasted profits from newly awarded innovation tasks, but more problematically, it could not recover the investments made to develop the associated production tools. Globastic’s CEO explained as follows:

Now if you wonder why we were in a delicate situation, well, we had invested astronomical amounts in international development, and then customers told us they would give us millions [of profits] from sourcing plans. Clearly, the crisis was coming, and we had the issue of re-financing our investments. When I say re-financing, I mean that every time we take on a new high value component we must ask ourselves if we have enough money to . . . make the production tool investments while only seeing a return on this investment in five years’ time.

Globastic’s difficulties increased because Mondialmaker did not compensate Globastic for losses arising from investments that never transformed into actual orders. Globastic’s CEO continued:

When you have a contract, [you have] a minimum amount of orders [that] guarantees that you put [some investments]; [however] the manufacturer absolutely not contractually commits [to these] volumes. As I told you, on the contrary, suppliers must be fully engaged in terms of production capacity! . . . Finally, we invested xx million euros for a new production tool . . . [that] was never needed! . . . They call this industrial risk!

Final demand was under pressure, and categorization and accounting devices collapsed when Mondialmaker was confronted with the problem of maintaining network flows while suppliers were defaulting. Financialization insisted on assuming that there would be a market for highly specialized suppliers, but there was not. It would have been excessively disruptive if Mondialmaker had simply allowed Globastic to go bankrupt.

Mondialmaker could not insource Globastic’s activities since it was now devoid of its own competencies in production matters. Therefore, as explained by a purchasing manager, Mondialmaker’s supply risk committee had to deal with heavy overflows that made categorization and accounting devices weak. The success of the performance devices led to decreased costs, but risk devices responded by categorizing Globastic as a level three or four risk (see Table 1). This categorization would require blocking Globastic as a supplier. Instead, the committee ignored the risk device and considered investing economic resources in Globastic’s operations. Obligatory passage points shifted. The industrial rationality of network interdependencies substituted ROIC as the obligatory passage point of circuits of power for a while.

Circuits of power: The cost of restoring the global production network

In the face of immediate financial collapse, Mondialmaker sustained Globastic’s operations by means of extraordinary capital expenditures until other sourcing alternatives were found. Following Mondialmaker’s financialized rationale when faced with a bankrupt supplier, the supply risk committee began looking for a new supplier willing to take over Globastic’s operations. This process became intertwined with other wider macro processes whereby governmental agencies concerned with national economic attractiveness sought to maintain the national manufacturers’ operations. The government established an investment fund through which the state and French MNCs, such as Mondialmaker, invested their capital to buy the equity of financially unstable suppliers. Globastic benefitted from such capital in exchange of 80 percent of its equity. An officer of Globastic explained that the fund was ultimately used by its clients to take part in Globastic’s corporate governance. Consequently, the outcome of these wider episodic processes categorized suppliers as peripheries, reproducing shareholder rules of practice. The participation of Mondialmaker – via the fund – in corporate Globastic’s governance decisions facilitated the tightening of the application of financialized rules of practices within Globastic.

Discussion: Dynamisms of financialization

Since the beginning of the century, rather than coordinating assembly operations, Mondialmaker regulated a decentralized production process within the global production network it operated. Its managerial devices – governed by accounting numbers – enacted obligatory passage points, ensuring the reproduction and stability of financialized relationships of episodic power (Clegg, 1989: 224–225). Financialization was made operational via the MNC’s performance and risk devices. While performance devices demanded continuous sourcing efficiencies, leaving aside suppliers’ need to make margins to survive, risk devices demanded financially robust suppliers. The devices contradicted each other, and they would be consistent with financialization only if the hypothesis of effective markets, in which suppliers could be easily substituted, was in place. Instead, pursuing financialization led to a crisis related to the network’s competing, but hidden from performance devices, industrial-ideological rationality concerned technology, skills and competencies, which Mondialmaker had excluded from its devices but which turned out to be the Achilles heel of the arrangement. Table 2 recounts the circuits of power that explain this.

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Table 2.

Circuits of power in Mondialmaker’s global production network. Adapted from Clegg’s circuits of power framework (1989).

□ Systemic power	□ Dispositional power□ Flowing from Mondialmaker		□ Relationships of episodic power
□ Dominant ideological Modes of□ Rationality	□ Rules fixing relationships of meaning and membership	□ Obligatory passage points	□	□ Agencies	□ Means controlling resources	□ Outcomes
□ Financialization □ Capital economy	Accounting devices □ defining performance □ and risk □ + □ categorization devices establishing hierarchical links that overlap with functional link	□ MNC’s ROIC	Intra- organizational conflicts and negotiations about sourcing costs	□ Purchasing managers concerned with sourcing costs of low-value components □ KPI Purch	Control over suppliers’ relationships. Control over suppliers’ risk rates	□ Sourcing costs of low-value components: corporate controllers power over purchasing managers
				□ Engineers and quality managers concerned with high-value components costs □ KPI Eng	Expertise, control over information of production processes, power over validations of high-value components sourcing	□ In risked sourcing episodes of low-value components: engineers and quality managers power over purchasing managers
				Corporate controllers concerned with products’ total costs □ KPI Comm	Initiative to begin and close product budget processes	□ In sourcing episodes of high-value components: controllers and purchasing managers power over engineers and quality managers
			Inter- organizational conflicts and negotiations about component costs	□ Suppliers □ concerned with high-value components orders	Technology, innovation, skills, production tools	□ In risked sourcing episodes: risky suppliers power over manufacturer on low-value components sourcings so that suppliers get cost increases and new high-value components orders
Capital economy and Industrial economy frictions	□ Industrial devices concerned with interdependencies, technology and skills within the global production network.	Network interdependencies		□ Governmental agencies concerned with the Economic attractiveness of its national production network	□ Regalian functions of the state	□ In risked sourcing episodes: the State and French MNCs – via an investment fund – obtain corporate governance rights in suppliers’ firms in exchange for equity capital.

The circuits of power in Globastic’s case were that financialization, as a mode of rationality, pressured Globastic but only in the sense of economic performance results; there was only limited concern about the industrial means that would be required from Globastic to achieve these results. The financialized system, therefore, had a blind spot, producing the tension that when it worked ‘best’ or ‘as intended’ it tended to fall apart and fail.

The case of Mondialmaker shows how an MNC is more than a ‘network orchestrator’ (Parkhe and Dhanaraj, 2003), and how processes of appropriation and distribution of value (Bair, 2009) in financialized systemic and dispositional power turns an MNC into a regulator of a decentralized production process within the global production network it operates (De Marchi et al., 2014; Ponte and Sturgeon, 2014). The MNC’s financialized systemic and dispositional powers mobilized obligatory passage points through which flows of episodic power had to pass. These financialized passageways made from accounting devices (Morgan, 2011) in which financial returns were the main target emptied Mondialmaker of its own competencies in production matters, leaving it to its network. This happened because the industrial rationalities of the network were left aside: suppliers were not categorized as competing entities (Ponte and Sturgeon, 2014) but as mute objects. The space for market competition or value-adding chains shrunk to the benefit of complex political economic systems in which socio-political contexts shaped markets (Levy, 2008: 943).

For mainstream research on power and politics in MNCs, political processes were not just relational (Bouquet and Birkinshaw, 2008) but also embedded in institutional reproduction (Becker-Ritterspach and Dörrenbächer, 2011), flowing through both macro (Heidenreich, 2012) and micro conduits of circuits of power where each agency operated – among many others – in a highly complex environment of standing conditions and relationships that constituted them as actors in the same system (Clegg, 1989: 215). The case shows how the reproduction and discipline of financialized modes of rationality were made possible through fixed and stabilized fields of force mobilized by accounting devices (Cooper and Ezzamel, 2013; Miller and Power, 2013; Morgan and Kristensen, 2006; Quattrone and Hopper, 2005) that enacted obligatory passage points (Clegg, 1989: 224–225) within the network. These passageways frequently created relationships of episodic power (Becker-Ritterspach and Dörrenbächer, 2011) that were concerned with actors’ categorization within their networks (Dörrenbächer and Geppert, 2009; Fligstein, 1993; Kostova and Roth, 2003; Pettigrew et al., 2003).

However, as the case shows, global production networks were contested inter-organizational fields in which agencies struggled over the construction of economic relationships, governance structures, institutional rules and norms and discursive frames (Hardy et al., 1998; Maguire et al., 2004). Performance and risk devices made passageways ‘contingent upon what flows through the circuits’ (Clegg, 1989: 224), so when overflows flew out of political processes, fixed and stabilized financialized fields of force were challenged by a competing, yet to financialization, invisible and hidden mode of industrial rationality concerning network interdependencies, innovation and technological needs. Instead of reproducing rules fixing collaborative relationships of meanings and membership, accounting devices produced tensions. They did so through risk devices that required economic performance on the part of contracting suppliers, which decreased those suppliers’ profits, rendering them financially vulnerable and leading to industrial risk for the entire supply chain. While power over suppliers may be on the side of Mondialmaker, it is not clear that they controlled the network. Dispositional and facilitative powers are uncertain prerequisites for controlling activities. Control is more than, or at least different from, power.

Conclusion

So, how are political processes informed and conditioned by categorization and accounting devices that mediate financialization processes in the global production network?

The case of Mondialmaker shows that financialization is a practice that reproduces rules of meanings and memberships; it requires framing and the operationalization of techniques of discipline to make its dominant modes of rationality pervasive across episodes. However, there is a limit to this domination of financialization. It creates overflows because it cannot completely dominate a hidden industrial rationality that focuses on innovation, materiality and production. The financialized system, therefore, has a blind spot, producing the surprising observation that when it works ‘best’ or ‘as intended’, it tends to fall apart and become difficult. Therefore, dispositional and facilitative powers are unruly resources. As shown in the case of Mondialmaker, when financialization functions well, suppliers are treated as ‘competitors’ and are pressured to reduce costs. However, this is at the detriment of the survivability of suppliers whose bankruptcy will disrupt the entire global production network that the MNC depends on to survive. This disruption, in turn, is costly.

The paradox is that financialized accounting devices developed to contain costs may, since risk increases, increase costs. The costs of operating financialization are not accounted for by fixing meanings and memberships. These costs are removed from political processes, even if people are privately aware of them. Therefore, accounting devices underscore the financialization mode of rationality only under conditions where contradiction has not turned into crisis. However, when crisis occurs, these accounting devices have little power, and costly processes that primarily take technology, skill and capability into account rectify the situation.

Hence, financialization devices are ambiguous; they are not inherently facilitative of systemic powers but gain power only when their overflows and tensions can be rectified and silenced as a practical matter. When overflows become heavy, financialized devices are much weaker. When overflows are small or non-existent, financialization may fix ambiguous political processes; when overflows are significant, then financialization is pitiful and may be substituted by other devices, such as those from the industrial economy that will operate at least for a time. This substitution is why political processes can assume many different shapes and directions, as the case of Mondialmaker shows.

Consequently, the case of Mondialmaker shows how systemic power is never eternal (Clegg, 1989: 215), but instead is dynamic when overflows appear in the outcomes of episodic political processes. Perhaps the real irony is that the two accounting devices contradicted each other, and this contradiction added fuel to the processes of contradiction and conflict. Thus, financialized accounting devices may contribute to tensions and disruption rather than mediate and resolve them.