Globalization

Globalization is a featured research topic and an initiative at Harvard Business School.
 
The globalization of business has long encouraged Harvard Business School (HBS) faculty to research international business practices and the effects of globalization. Seminal contributions - Christopher Bartlett on managing across borders, Michael Porter on competition in global industries, and Louis Wells on foreign investment in emerging markets - helped pave today’s global research path. Supported by eight Global Research Centers that facilitate our contact with global companies and the collection of international data, key investigations concentrate on the effectiveness of management practices in global organizations; cross-cultural learning and adaptation processes; the challenges of taking companies global; emerging-market companies with global potential; and international political economy and its impact on economic development.
  1. Monitoring Global Supply Chains

    Jodi L. Short, Michael W. Toffel and Andrea R. Hugill

    Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers' conduct. But little is known about what influences auditors' ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all-male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains. Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers’ conduct. But little is known about what influences auditors’ ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all-male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains.

    Keywords: Monitoring; transaction cost economics; industry self-regulation; auditing; Codes of conduct; supply chains; corporate social responsibility; globalization; Corporate Social Responsibility and Impact; Supply Chain; Globalization;

    Citation:

    Short, Jodi L., Michael W. Toffel, and Andrea R. Hugill. "Monitoring Global Supply Chains." Strategic Management Journal 37, no. 9 (September 2016): 1878–1897. (Revised July 2015. Previously titled "Monitoring the Monitors: How Social Factors Influence Supply Chain Auditors.") View Details
  2. Location Fundamentals, Agglomeration Economies, and the Geography of Multinational Firms

    Laura Alfaro and Maggie Xiaoyang Chen

    Multinationals exhibit distinct agglomeration patterns, which have transformed the global landscape of industrial production (Alfaro and Chen, 2014). Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of pairwise-industry agglomeration and investigate the patterns and determinants underlying the global economic geography of multinational firms. In particular, we run a horserace between two distinct economic forces: location fundamentals and agglomeration economies. We find that location fundamentals including market access and comparative advantage and agglomeration economies including capital-good market externality and technology diffusion play a particularly important role in multinationals' economic geography. These findings remain robust when we use alternative measures of trade costs, address potential reverse causality, and explore regional patterns.

    Keywords: multinational firm; economic geography; agglomeration; location fundamentals; agglomeration economies; Geographic Location; Industry Clusters; Multinational Firms and Management; Economics;

    Citation:

    Alfaro, Laura, and Maggie Xiaoyang Chen. "Location Fundamentals, Agglomeration Economies, and the Geography of Multinational Firms." Harvard Business School Working Paper, No. 17-014, August 2016. View Details
  3. Mapping the Economic Grand Tour: Travel and International Emulation in Enlightenment Europe

    Sophus A. Reinert

    As the itinerant wizard (technically one of the Maiar, if not the Istari) Gandalf wrote to the then domestically-inclined hobbit Frodo Baggins in J.R.R. Tolkien’s The Lord of the Rings, “Not all those who wander are lost.” Indeed, as the recent brouhaha over the “wanderlust gene” DRD4-7R testifies to, travel is a constant of human experience, inflected in myriad ways by history, literature, and life, from the Homeric epics and the Jungian archetype of “the wanderer” to Tripadvisor.com and Ibiza stag parties. People have traveled to learn, to conquer, to evangelize, in search of architectural inspiration and for reasons of health, not to mention because other places were “there,” in Edmund Hillary’s famous formulation, but within this spacious swath of human history my interest lies with a particular kind of purposeful travel that I would define as “economic,” by which I do not mean frugal or “low cost,” but pursued to improve the management of the material world—theoretically or practically, individually or collectively; more the Jesuit François Xavier d’Entrecolles discovering the secrets of Chinese porcelain in 1712 than, say, Ryanair.

    Keywords: Behavior; Globalization;

    Citation:

    Reinert, Sophus A. "Mapping the Economic Grand Tour: Travel and International Emulation in Enlightenment Europe." Harvard Business School Working Paper, No. 17-005, July 2016. View Details
  4. The EC Rains on Oracle/Sun (A)

    Lena G. Goldberg

    Oracle's proposed acquisition of Sun was on a fast track until the EC's antitrust concerns about open-source MySQL ignited a transatlantic war of words delaying the deal. Sun's performance suffered and its customers were approached by competitors while regulatory objections were debated and tensions rose between U.S. and EC regulators.

    Keywords: law; antitrust; EC regulation; Mergers and Acquisitions; Multinational Firms and Management; Laws and Statutes; Monopoly; Business and Government Relations;

    Citation:

    Goldberg, Lena G. "The EC Rains on Oracle/Sun (A)." Harvard Business School Case 317-009, July 2016. View Details
  5. Beyond Symbolic Responses to Private Politics: Examining Labor Standards Improvement in Global Supply Chains

    Andrea R. Hugill, Jodi L. Short and Michael W. Toffel

    Worker rights advocates seeking to improve labor conditions in global supply chains have engaged in private political strategies prompting transnational corporations (TNCs) to adopt codes of conduct and monitor their suppliers for compliance, but it is not clear whether organizational structures established by TNCs to protect their reputations can actually raise labor standards. We extend the literature on private politics and organizational self-regulation by identifying several conditions under which codes and monitoring are more likely to be associated with improvements in supply chain working conditions. We find that suppliers are more likely to improve when they face external compliance pressure in their domestic institutional environment, when their buyers take a cooperative approach to monitoring, and when their auditors are highly trained. We find, further, that a cooperative approach to monitoring enhances the impact of auditor training, and that auditor training has a greater impact on improvement when coupled with a cooperative approach than with external compliance pressures. These findings suggest key considerations that should inform the design and implementation of monitoring strategies aimed at improving conditions in global supply chains as well as theory and empirical research on the organizational outcomes of private political activism for social change.

    Keywords: Monitoring; supply chain; supplier relationship; supply chain management; corporate social responsibility and impact; labor; Working Conditions; sustainability; Sustainability Management; Sustainable Operations; sustainable supply chains; NGO; Globalization; Corporate Accountability; Operations; Supply Chain; Supply Chain Management; Business Processes; Corporate Social Responsibility and Impact; Performance Evaluation; Safety; Risk and Uncertainty; Apparel and Accessories Industry; Electronics Industry; China; Indonesia; India; Bangladesh;

    Citation:

    Hugill, Andrea R., Jodi L. Short, and Michael W. Toffel. "Beyond Symbolic Responses to Private Politics: Examining Labor Standards Improvement in Global Supply Chains." Harvard Business School Working Paper, No. 17-001, July 2016. View Details
  6. Why Brexit Is a Big Deal

    John A. Quelch

    The consequences of yesterday's vote by the British people to leave the European Union will be far-reaching, but there is no reason for global markets to panic.
    Brexit is a vote against the European Union. Once heralded as the engine of a one-for-all and all-for-one economic growth, the EU is now seen by many Britons as an expensive, interfering and sclerotic bureaucracy.

    Keywords: British Vote; Brexit; European Union; Impact; Historical Result; Governing Rules, Regulations, and Reforms; Disruption; Transition; Volatility; Decision Making; Globalization; Government and Politics; History; Leadership; Outcome or Result; Risk and Uncertainty; Strategy; European Union; Republic of Ireland; United Kingdom;

    Citation:

    Quelch, John A. "Why Brexit Is a Big Deal." Harvard Business School Working Knowledge (June 24, 2016). (Republished by Forbes.com on June 24, 2016 at: http://www.forbes.com/sites/hbsworkingknowledge/2016/06/24/why-brexit-is-a-big-deal/#2c5e5c587297.) View Details
  7. Global Wine War 2015: New World versus Old

    Christopher A. Bartlett and Sarah McAra

    The case contrasts the tradition-bound Old World wine industry with the market-oriented New World producers in the battle for the Chinese wine market in 2015. China’s wine consumption growth presented a large and fast growing export target that was extremely attractive both to Old World producers burdened with oversupply and declining demand, and to New World winemakers faced with rising costs and a deteriorating image. But changing Chinese market conditions and consumer preferences required both sets of players to devise new strategies to gain share in this fast-growing market. The case allows analysis of the way in which newcomers can change the rules of competitive engagement in a global industry. It also poses the question of how incumbents can respond, especially when constrained by regulation, tradition, and different capabilities than those demanded by changing consumer tastes and market structures.

    Keywords: competition; competitive advantage; consumer behavior; global strategy; Government Regulation; industry analysis; international business; international marketing; Market entry; Exports; Business and Government Relations; China; Europe; France; Australia; Food and Beverage Industry; Trade; Global Strategy; Governing Rules, Regulations, and Reforms; Consumer Behavior; Market Entry and Exit; Competition; Food and Beverage Industry; France; Europe; Australia; China;

    Citation:

    Bartlett, Christopher A., and Sarah McAra. "Global Wine War 2015: New World versus Old." Harvard Business School Case 916-415, June 2016. (Revised August 2016.) View Details
  8. Monetary Policy and Global Banking

    Victoria Ivashina and Falk Bräuning

    Multinational banks use their global internal capital market to respond to local shocks. However, what distinguishes global banks is not only their geographical diversification, but also their funding model: the primary source of stable funding for banks is denominated in their domestic currency. When global banks use their global balance sheets to smooth out local shocks, they need to hedge their foreign exchange exposure. In times when there is limited capital to take the other side of the hedging transaction, this will attenuate the use of internal markets to smooth out local shocks. In this context, tightening monetary policy in the lender’s home country can actually reduce pressure on the swap market, making lending abroad more attractive. Using the changes in interest paid on excess reserves by monetary authorities in six major currency areas between 2000 and 2015, we show that multinational banks reduce their reserve holdings and increase their lending abroad in response to a tightening of domestic monetary policy. This result is robust to the inclusion of a narrow set of fixed effects, and holds at the loan level. Consistent with the proposed mechanism, we show that global banks’ cross-border movement of capital is associated with an increase in foreign exchange swapping activity and its rising cost, as manifested in violations of covered interest rate parity.

    Keywords: Capital Markets; Globalization; Banks and Banking;

    Citation:

    Ivashina, Victoria, and Falk Bräuning. "Monetary Policy and Global Banking." Working Paper, June 2016. View Details
  9. Supply Chain Finance at Procter & Gamble

    Benjamin C. Esty, E. Scott Mayfield and David Lane

    In April 2013, Procter & Gamble (P&G), the world’s largest consumer packaged goods (CPG) company, announced that it would extend its payment terms to suppliers by 30 days. At the same time, P&G announced a new supply chain financing (SCF) program giving suppliers the ability to receive discounted payments for their P&G receivables. Fibria Celulose, a Brazilian supplier of kraft pulp, joined the program in 2013, but was re-evaluating the costs and benefits of participating in the SCF program in the summer of 2015. The firm’s treasury group and its US country manager must decide whether to keep using the program and, if so, whether to keep their existing SCF banking relationship or start a new relationship with another global SCF bank.

    Keywords: working capital; supply chain finance; corporate treasury; consumer packaged goods; Cash flow; value creation; supply chain; supplier relationships; banking; liquidity; accounts payable; accrual accounting; Financial Reporting; Cash Flow; Cost Management; Banks and Banking; Financial Strategy; Multinational Firms and Management; Supply Chain Management; Consumer Products Industry; Forest Products Industry; United States; Brazil;

    Citation:

    Esty, Benjamin C., E. Scott Mayfield, and David Lane. "Supply Chain Finance at Procter & Gamble." Harvard Business School Case 216-039, May 2016. View Details
  10. Olivia Lum: Wanting to Save the World

    Geoffrey Jones and Essie Alamsyah

    This case considers the entrepreneurial career of Olivia Lum, who founded the Singaporean water company Hyflux in 1989. An orphan born in Malaysia, Lum provides a rare case of an entrepreneurial success in a country whose economic success has primarily rested on state-owned and foreign firms. The case describes the formidable challenges she initially faced, her subsequent breakthrough in China, and the subsequent growth as a global water treatment company employing membrane technology. In 2004 the company entered the large Middle Eastern market for water treatment but soon encountered problems, including political turbulence. The case ends with demonstrations and an emergent crisis in Libya in 2011, a country in which Hyflux had recently invested. The case offers opportunities to explore the nature of entrepreneurship in Southeast Asia, the business importance of relationships between overseas Chinese and mainland China, and the challenges faced by female entrepreneurs. More broadly, it serves as vehicle for teaching students about the global water crisis and the role of business in helping to resolve it.

    Keywords: entrepreneurship; industrial organization; Chinitz; agglomeration; clusters; cities; mine; environmental management; operations management; Sustainable Operations; environmental regulation; Entrepreneurship; Globalization; History; Green Technology Industry; Utilities Industry; China; Singapore;

    Citation:

    Jones, Geoffrey, and Essie Alamsyah. "Olivia Lum: Wanting to Save the World." Harvard Business School Case 316-178, May 2016. View Details
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