Globalization

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 six Global Research Centers that facilitate our contact with global companies and the collection of international data, HBS faculty today continue to shed light on questions that are critical to our understanding of international business and global markets. Key areas of investigation include:
  • The effectiveness of management practices in global organizations
  • Cross-country and cross-cultural learning and adaptation processes
  • The performance consequences and organizational challenges of taking companies global
  • The creation of emerging-market companies with global potential
  • Questions of international political economy and its impact on economic development
Informed by detailed company case studies and large-sample empirical investigations, HBS global research yields insights that help inform business practice and public policy. As an example, a case study by Michael Tushman of the Organizational Behavior unit investigates a high-tech Taiwanese firm’s cross-cultural transformation as it transitions into a global company. Or take Fritz Foley of the Finance unit and William Kerr of Entrepreneurial Management and their in-depth analysis of U.S. patent filings to understand how immigrant innovators impact the competitiveness of multinationals. These and many other research projects produce insights that can shape how global businesses are managed.
 
  1. Firms and Global Capitalism

    This chapter forms part of the two-volume Cambridge History of Capitalism, a definitive new reference work that traces the history of capitalism from its origins to the present day. The chapter focuses on the role of business enterprises as powerful actors in the spread of global capitalism after 1848 and up the present day. It shows how multinational firms have created and co-created markets and ecosystems through their ability to transfer financial, organizational, and cultural assets, as well as skills and ideologies across borders. The chapter argues that capitalism proved much better than political leaders in building institutions that coordinated activities across borders, but also points to the historical evidence concerning disappointing and sometimes negative outcomes in knowledge and technology transfer. Business enterprises emerge both as important drivers of international economic growth and as significant agents in the divergent patterns of wealth and poverty that have characterized the last two centuries.

    Keywords: political economy; American History; Economic History; business history; labor history; slavery; numeracy and quantification; science and technology studies; History of the Book; globalization; international investment; international business; international marketing; Globalization; History;

    Citation:

    Jones, Geoffrey. "Firms and Global Capitalism." Chap. 6 in The Cambridge History of Capitalism: Volume 2. The Spread of Capitalism: From 1848 to the Present, edited by Larry Neal and Jeffrey G. Williamson, 169–200. New York: Cambridge University Press, 2014.
  2. Jurlique: Globalizing Beauty from Nature and Science

    Considers the marketing and strategic challenges faced by natural beauty brands using the case of Australian-based Jurlique, which was acquired by Pola of Japan in 2011. The case opens two years later in July 2013 when Sam McKay, the chief executive officer, on a visit to Pola’s head office in Tokyo, heard news of critical comments about the company and animal testing in a Facebook post from a group in South Australia, where the brand had been founded as a small biodynamic farm in 1985. The discussion of Jurlique’s involvement with animal testing was a sensitive issue as it contradicted the brand’s strong environmentally-friendly and ethical positioning. The matter had already arisen during the Pola acquisition as Pola, like all Japanese cosmetics companies, traditionally tested products on animals. The animal testing issue is put in context by a discussion of how during Jurlique’s growth as a successful premium brand there had been substantial changes in market position, in part associated with shifts of ownership. At times the brand had been focused on core green consumers, but McKay had sought to broaden the consumer base by repositioning it as making “the most effective products as natural as possible.” The company lost few existing customers, and found that Jurlique’s image was an asset in attracting Chinese consumers who liked the story of the Australian farm which produced most ingredients. However, Chinese regulations refusing to allow the firm’s stores to use recycled wood, and mandating of animal testing, were challenging to the brand’s global natural brand position. The case can be taught both in marketing classes concerned with green business and in strategy classes exploring the challenges faced by global brands.

    Keywords: "Australia; "China; "environmental strategies, green business; "Marketing; Entrepreneurship; Globalization; Beauty and Cosmetics Industry; China; Australia; United States;

    Citation:

    Jones, Geoffrey, and Andrew Spadafora. "Jurlique: Globalizing Beauty from Nature and Science." Harvard Business School Case 314-087, March 2014.
  3. Ukraine: On the Border of Europe and Eurasia

    In the fall of 2013, the people of Ukraine disagreed passionately whether their country should intensify ties with the European Union or Russia. After President Yanukovych rejected the free trade agreement with the EU in November, thousands of Ukrainians peacefully protested. But the protest movement morphed into a violent, deadly confrontation in January, culminating in February in mass slaughter, an overthrow of government, foreign invasion, and international crisis. The four months that shook Ukraine is a case study on the interrelated problems of geopolitical struggle, politics of economic pacts and clash of regional economic blocks, post-imperial disintegration and trade, and identity and interdependence.

    Keywords: Decision Making; Cost vs Benefits; Decision Choices and Conditions; Decisions; Forecasting and Prediction; Judgments; Geopolitical Units; Country; Globalization; Cross-Cultural and Cross-Border Issues; Global Strategy; Globalized Economies and Regions; Globalized Markets and Industries; Government and Politics; International Relations; National Security; Growth and Development; History; Europe; Ukraine; European Union; Russia;

    Citation:

    Abdelal, Rawi, Rafael M. Di Tella, and Sogomon Tarontsi. "Ukraine: On the Border of Europe and Eurasia." Harvard Business School Case 714-042, March 2014.
  4. Vision 2020: Takeda and the Vaccine Industry

    In 2014, Yasuchika Hasegawa was orchestrating the transformation of Takeda from a Japanese pharmaceutical company with a global footprint into a global company with a Japanese heritage. A 33-year veteran of Takeda, Hasegawa-san was appointed president of Takeda in 2003 and chief executive in 2009. By 2013, Takeda was in the midst of implementing its new Vision 2020 plan, a strategic plan for the evolving global corporation, which included developing a global vaccine business.

    Keywords: health care; global; NGO; public health; pharmaceutical industry; Japan; GSK; "vaccine,"; supply chain; Market entry; Health; Health Care and Treatment; Trade; Market Entry and Exit; Global Strategy; Health Industry; Pharmaceutical Industry;

    Citation:

    Quelch, John A., and Margaret L. Rodriguez. "Vision 2020: Takeda and the Vaccine Industry." Harvard Business School Case 514-084, March 2014.
  5. Novartis' Sandoz: Between Generics and Pharma

    Sandoz, which made a significant investment in bio-similars as a way to differentiate itself from its generic drug industry peers, has to negotiate with its parent company and the innovative pharma division on how best to commercialize its bio-similar portfolio. What is the best way to balance the parenting advantage of Novartis with the unique demands of the generic drug industry?

    Keywords: Global Strategy and Leadership; Managing Within a Multi-Business Organization; Generic Pharmaceuticals; Global Strategy;

    Citation:

    Palepu, Krishna, and Carin-Isabel Knoop. "Novartis' Sandoz: Between Generics and Pharma." Harvard Business School Case 114-033, March 2014.
  6. Babcock International Plc.

    In 2013, Babcock International Plc (Babcock) was the largest engineering services provider in the UK with sales of over £3 billion. Under the leadership of CEO Peter Rogers, Babcock had grown revenues and profits nearly tenfold over the previous decade as it benefited from increased public sector outsourcing. In 2012, for the UK’s Ministry of Defense (MOD), Babcock trained over 50,000 troops, maintained the nuclear submarine fleet, provided engineering support for military vehicles, and managed numerous facilities at military bases. On the civil side, the company decommissioned aging nuclear plants, maintained the Metropolitan Police auto fleet and other emergency services fleets, and was the UK’s leading trainer of engineering apprentices. Babcock’s leadership team believed that continued pressure on public spending would provide opportunities for double digit growth in the UK for at least five years. However, this might not come from Babcock’s primary customer, the Ministry of Defense. What other national and local government agencies might the firm target? On the civil side, the resurgence of the salience of nuclear power generation in the mid 2000s had appeared to be good news for Babcock with its long-standing nuclear expertise, but the April 2011 Fukushima nuclear leak in Japan had shed doubt on future construction, while the fracking of shale deposits to extract natural gas promised a much lower cost supply of abundant energy. Nevertheless, decommissioning nuclear power stations promised steady and growing work. What other opportunities might Babcock pursue in the UK? Meanwhile, analysts were pushing for more international expansion but efforts at building business in South Africa, Canada, and Australia had been slow, with only 16% of revenues coming from outside the UK in 2013, a figure little changed since 2005. What would drive Babcock’s long term future growth? Growth itself also posed challenges. Babcock relied heavily on informal processes to extract synergies across its portfolio. Would this continue to be effective as the scope of operations continued to expand? Meanwhile, analysts were concerned about succession. Rogers and many of the leadership team were approaching retirement. Where would the next generation of Babcock leaders come from?

    Keywords: strategic change; strategy and leadership; diversification; United Kingdom; military; nuclear power; nuclear; Engineering and construction; conglomerates; Strategic Planning; Competitive Strategy; Global Strategy; Corporate Strategy; Construction Industry; Energy Industry; United Kingdom;

    Citation:

    Wells, John R., and Galen Danskin. "Babcock International Plc. ." Harvard Business School Case 714-496, March 2014.
  7. Opting Out of Good Governance

    Cross-listing on a U.S. exchange does not bond foreign firms to follow the corporate governance rules of that exchange. Hand-collected data show that 80% of cross-listed firms opt out of at least one exchange governance rule, instead committing to observe the rules of their home country. Relative to firms that comply, firms that opt out have weaker governance practices in that they have a smaller share of independent directors. The decision to opt out reflects the relative costs and benefits of doing so. Cross-listed firms opt out more when coming from countries with weak corporate governance rules, but if firms based in such countries are growing and have a need for external finance, they are more likely to comply. Finally, opting out affects the value of cash holdings. For cross-listed firms based in countries with weak governance rules, a dollar of cash held inside the firm is worth $1.52 if the firm fully complies with U.S. exchange rules but just $0.32 if it is non-compliant.

    Keywords: Financial Markets; Globalization; Corporate Governance;

    Citation:

    Foley, C. Fritz, Paul Goldsmith-Pinkham, Jonathan Greenstein, and Eric Zwick. "Opting Out of Good Governance." NBER Working Paper Series, No. 19953, March 2014.
  8. Bio-Piracy or Prospering Together? Fuzzy Set and Qualitative Analysis of Herbal Patenting by Firms

    Since the 1990s, several Western firms have filed patents based on medicinal herbs from emerging markets, evoking protests from local stakeholders against 'bio-piracy'. We explore conditions under which firms and local stakeholders share rents from such patents. Our theoretical model builds on two distinct strategy literatures: firms appropriating rents from new technologies and firms managing stakeholders. We predict that a win-win outcome emerges when the patent strength is moderate and when local stakeholders form a coalition with larger national stakeholders to initiate litigation against the focal firm. We test our predictions using a two-pronged empirical strategy. Our empirical context relates to herbal patents from emerging markets and given that we have a small sample (N=17), we employ a fuzzy set QCA methodology. In addition, we develop four in-depth qualitative case studies to support our predictions.

    Keywords: Rents from New Technology; Local Stakeholders; Herbal Patents; QCA; Fuzzy Set Analysis; Qualitative Case Studies; Plant-Based Agribusiness; Patents; Emerging Markets; Health Care and Treatment; Business and Stakeholder Relations; Cross-Cultural and Cross-Border Issues; Agriculture and Agribusiness Industry; Pharmaceutical Industry;

    Citation:

    Choudhury, Prithwiraj, and Tarun Khanna. "Bio-Piracy or Prospering Together? Fuzzy Set and Qualitative Analysis of Herbal Patenting by Firms." Harvard Business School Working Paper, No. 14-081, February 2014.
  9. Return Migration and Geography of Innovation in MNEs: A Natural Experiment of On-the-Job Learning of Knowledge Production by Local Workers Reporting to Return Migrants

    I study whether return migrants and their direct reports facilitate knowledge production and transfer across borders for multinationals. Using unique personnel and patenting data for 1315 inventors at an emerging market R&D center for a Fortune 50 technology firm, I exploit a natural experiment where the assignment of managers for newly hired college graduates is mandated by rigid HR rules and is uncorrelated to observable characteristics of the graduates. Given this assignment protocol, I find that local employees who report to return migrants file disproportionately more U.S. patents. I also find evidence that return migration facilitates knowledge transfer across borders.

    Keywords: Return migration; knowledge production; multinational enterprise; internal labor markets; Demographics; Multinational Firms and Management; Cross-Cultural and Cross-Border Issues; Innovation and Invention; Knowledge;

  10. Toward Resource Independence—Why State-Owned Entities Become Multinationals: An Empirical Study of India’s Public R&D Laboratories

    In this paper, we build on the standard resource dependence theory and its departure suggested by Vernon to offer a novel explanation for why state-owned entities might seek a global footprint and global cash flows: to achieve resource independence from other state actors. In the context of state-owned entities, the power use hypothesis of standard resource dependence theory can be used to analyze the dependence of SOEs on other state actors, such as government ministries and government agencies that have ownership and control rights in the SOE. Building on Vernon, we argue that the SOE can break free from this power imbalance and establish resource independence from other state actors by becoming a multinational firm and/or by generating global cash flows. We leverage a natural experiment in India and outline both quantitative and qualitative evidence from 42 Indian state-owned laboratories to support this argument.

    Keywords: Multinational Firms and Management; Research and Development; State Ownership; Technology Industry; India;

    Citation:

    Choudhury, Prithwiraj, and Tarun Khanna. "Toward Resource Independence—Why State-Owned Entities Become Multinationals: An Empirical Study of India’s Public R&D Laboratories." Harvard Business School Working Paper, No. 14-076, February 2014.
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