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. Market Competition, Earnings Management, and Persistence in Accounting Profitability Around the World

    Paul M. Healy, George Serafeim, Suraj Srinivasan and Gwen Yu

    We examine how cross-country differences in product, capital, and labor market competition, and earnings management affect mean reversion in accounting return on assets. Using a sample of 48,465 unique firms from 49 countries, we find that accounting returns mean revert faster in countries where there is more product and capital market competition, as predicted by economic theory. Country differences in labor market competition and earnings management are also related to mean reversion in accounting returns—but the relation varies with firm performance. Country labor competition increases mean reversion when unexpected returns are positive, but dampens it when unexpected returns are negative. Accounting returns in countries with higher earnings management mean revert more slowly for profitable firms and more rapidly for loss firms. Thus, earnings management incentives to slow or speed up mean reversion in accounting returns are accentuated in countries where there is a high propensity for earnings management. Overall, these findings suggest that country factors explain mean reversion in accounting returns and are therefore relevant for firm valuation.

    Keywords: Performance; Corporate performance; valuation; Equity Valuation; Persistence; competitive advantage; institutions; earnings management; labor market; capital markets; competition; Profit; Performance; Supply and Industry; Financial Statements; Government and Politics; Globalized Markets and Industries;


    Healy, Paul M., George Serafeim, Suraj Srinivasan, and Gwen Yu. "Market Competition, Earnings Management, and Persistence in Accounting Profitability Around the World." Review of Accounting Studies 19, no. 4 (December 2014): 1281–1308. View Details
  2. The Global Agglomeration of Multinational Firms

    Laura Alfaro and Maggie Xiaoyang Chen

    The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? 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. Our analysis presents new stylized facts that suggest the emerging offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including capital-good market externality and technology diffusion play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we address potential reverse causality by exploring the regional pattern and process of agglomeration.

    Keywords: Multinational Firms and Management; Manufacturing Industry;


    Alfaro, Laura, and Maggie Xiaoyang Chen. "The Global Agglomeration of Multinational Firms." Journal of International Economics 94, no. 2 (November 2014): 263–276. (Revised April 2014. Also NBER Working Paper Series, No. 15576. See Harvard Business School Working Paper, No. 10-043. for longer version.) View Details
  3. Finance and Social Responsibility in the Informal Economy: Institutional Voids, Globalization and Microfinance Institutions

    Hao Liang, Christopher Marquis and Sunny Li Sun

    We examine the heterogeneous effects of globalization on the interest rate setting by microfinance institutions (MFIs) around the world. We consider MFIs as a mechanism to overcome the institutional void of credit for small entrepreneurs in developing and emerging economies. Using a large global panel of MFIs from 119 countries, we find that social globalization that embraces egalitarian institutions on average reduces MFIs' interest rates. In contrast, economic globalization that embraces neoliberal institutions on average increases MFIs' interest rates. Moreover, the proportions of female borrowers and of poorer borrowers negatively moderate the relationship between social globalization and MFI interest rate, and positively moderate the relationship between economic globalization and MFI interest rate. This paper contributes to understanding how globalization processes can both ameliorate and exacerbate challenges of institutional voids in emerging and developing economies.

    Keywords: Institutional voids; microfinance institutions; economic globalization; social globalization; Microfinance; Globalization; Developing Countries and Economies;


    Liang, Hao, Christopher Marquis, and Sunny Li Sun. "Finance and Social Responsibility in the Informal Economy: Institutional Voids, Globalization and Microfinance Institutions." Harvard Business School Working Paper, No. 15-029, October 2014. View Details
  4. Sanford C. Bernstein Goes to Asia

    Linda A. Hill, Dana M. Teppert and Allison J. Wigen

    Sanford C. Bernstein, a premier sell-side research firm, is expanding globally. Three years after launching Bernstein's Asian business, senior management has appointed Ghislain de Charentenay, a six-year sales veteran of the firm, as director of Asian research in Hong Kong. He is the first director of research Bernstein has put on the ground in Asia. As the firm faces the challenging realities of scaling its Asian business and meeting growing client demand for global products, de Charentenay must figure out how best to support the senior research analysts in leveraging their franchises. And with a recent wave of attrition among Bernstein's research associate ranks in Hong Kong, de Charentenay and the management team must also consider where to focus their recruiting efforts.

    Keywords: collaboration; leadership; globalization; organizational design; talent management; Leadership; Talent and Talent Management; Organizational Design; Emerging Markets; Globalization; Hong Kong;


    Hill, Linda A., Dana M. Teppert, and Allison J. Wigen. "Sanford C. Bernstein Goes to Asia." Harvard Business School Case 415-037, October 2014. View Details
  5. International Trade, Multinational Activity, and Corporate Finance

    C. Fritz Foley and Kalina Manova

    An emerging new literature brings unique ideas from corporate finance to the study of international trade and investment. Insights about differences in the development of financial institutions across countries, the role of financial constraints, and the use of internal capital markets are proving central in understanding international economics. The ability to access financial capital to pay fixed and variable costs affects choices firms make regarding export entry and operations, and, as a consequence, influence aggregate trade patterns. Financial frictions and the use of internal capital markets shape decisions that multinationals make regarding production locations, integration, and corporate governance. This article surveys this recent research with the goal of highlighting the main themes it explores, the key results it establishes, and the leading open questions it raises.

    Keywords: Multinational Firms and Management; Trade; Corporate Finance;


    Foley, C. Fritz, and Kalina Manova. "International Trade, Multinational Activity, and Corporate Finance." NBER Working Paper Series, No. 20634, October 2014. View Details
  6. Governments as Owners: State-Owned Multinational Companies

    Aldo Musacchio, Alvaro Cuervo-Cazurra, Kannan Ramswamy and Andrew Inkpen

    The globalization of state-owned multinational companies (SOMNCs) has become an important phenomenon in international business (IB), yet it has received scant attention in the literature. We explain how the analysis of SOMNCs can help advance the literature by extending our understanding of state-owned firms (SOEs) and multinational companies (MNCs) in at least two ways. First, we cross-fertilize the IB and SOEs literatures in their analysis of foreign investment behavior and introduce two arguments: the extraterritoriality argument, which helps explain how the MNC dimension of SOMNCs extends the SOE literature, and the non-business internationalization argument, which helps explain how the SOE dimension of SOMNCs extends the MNC literature. Second, we analyze how the study of SOMNCs can help develop new insights of theories of firm behavior. In this respect, we introduce five arguments: the triple agency conflict argument in agency theory; the owner risk argument in transaction costs economics; the advantage and disadvantage of ownership argument in the resource-based view (RBV); the power escape argument in resource dependence theory; and the illegitimate ownership argument in neoinstitutional theory. After our analysis, we introduce the papers in the special issue that, collectively, reflect diverse and sophisticated research interest in the topic of SOMNCs.

    Keywords: multinational corporation; state-owned enterprises; State capitalism; FDI; internationalization; government and business; national oil companies; State Ownership; Multinational Firms and Management; Business Subsidiaries; Acquisition; Pharmaceutical Industry; Energy Industry; China; India; Europe;


    Musacchio, Aldo, Alvaro Cuervo-Cazurra, Kannan Ramswamy, and Andrew Inkpen. "Governments as Owners: State-Owned Multinational Companies." Special Issue on Governments as Owners: Globalizing State-Owned Enterprises edited by Alvaro Cuervo-Cazurra, Andrew Inkpen, Aldo Musacchio and Kannan Ramaswamy. Journal of International Business Studies 45, no. 8 (October–November 2014): 919–942. View Details
  7. International Strategy: Context, Concepts and Implications

    David J. Collis

    This book is designed for every student who will be involved in managing and advising companies that compete internationally or face international competitors. Designed around the course at Harvard Business School, Collis' new text takes the firm that operates across borders as a unit of analysis and the senior manager in a multinational as the typical decision maker. Illustrated with examples from companies of all sizes from around the globe, this text provides students with the means to navigate their way through the decisions they will face and formulate an effective business strategy. This is a much-needed guide to the common strategic issues that arise when firms compete internationally.

    Keywords: Cross-Cultural and Cross-Border Issues; Global Strategy; Globalized Economies and Regions; Globalized Firms and Management; Multinational Firms and Management; Globalized Markets and Industries; Alignment; Business Strategy; Competitive Strategy; Competitive Advantage; Corporate Strategy; Diversification; Horizontal Integration; Vertical Integration;


    Collis, David J. International Strategy: Context, Concepts and Implications. Chichester, UK: John Wiley & Sons, 2014. View Details
  8. Doing Business in Morocco

    Jill Avery, Tonia Junker and Daniela Beyersdorfer

    This case examines the challenges and opportunities of doing business in Morocco. It highlights Morocco's ongoing economic transformation in the decades leading up to 2014 in the context of its historical, political, and cultural background. The case summarizes some of the main obstacles faced by businesses operating in the country—changing regulations and insufficient access to credit, infrastructure and talent constraints, and a large informal sector—contrasting these with the benefits of operating in a market that provides access to the African continent and proximity to Europe, has relatively low labor costs, and has created a series of investment incentives. Some of these challenges are illustrated through the discussion of an investment decision by French car maker Renault, which opened a new manufacturing facility in Morocco's free trade zone near Tangier. Now a few years into operating the facility, the case zooms in on some of the obstacles that Renault encountered, such as scarcity of trained staff and of local suppliers, and on the progress that was made, in order to evaluate the potential of the investment going forward.

    Keywords: emerging market; emerging economies; Africa; business history; strategy; global strategy; operations management; Development Economics; Geographic Scope; Globalization; Business History; Emerging Markets; Market Entry and Exit; Operations; Strategy; Auto Industry; Africa; Morocco;


    Avery, Jill, Tonia Junker, and Daniela Beyersdorfer. "Doing Business in Morocco." Harvard Business School Case 315-007, September 2014. View Details
  9. Business History and the Impact of MNEs on Host Economies

    Geoffrey Jones

    Business history has long been recognized as providing an important dimension in international business studies. Much of this historical work has focused on mapping historical growth patterns of multinationals and exploring the determinants of their growth. However, there is also growing literature on the long-term impact of multinational investment in host economies, and this chapter reviews this research. The focus is primarily on developing country host economies and more broadly on the global distribution of wealth and poverty. This chapter suggests three major arguments. First, it is necessary to take a long-time horizon when assessing impact on host economies. Second, it is necessary to incorporate societal and cultural impacts alongside more traditional measures of economic impact. Third, there is weak historical evidence that multinationals have had a substantial positive impact over the long run on the development of host developing countries. A hypothesis is suggested that, given adequate domestic growth-supporting institutions and human capital development, developing countries achieve more sustained development from excluding foreign-owned multinationals rather than hosting them.

    Keywords: multinational; international business; business history; culture; Globalization; History; Africa; Asia; Europe; Latin America; North and Central America;


    Jones, Geoffrey. "Business History and the Impact of MNEs on Host Economies." In Multidisciplinary Insights from New AIB Fellows. Vol. 16, edited by Jean J. Boddewyn, 177–198. Research in Global Strategic Management. Bingley, UK: Emerald Group Publishing, 2014. View Details
  10. How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay

    Sorapop Kiatpongsan and Michael I. Norton

    Do people from different countries and different backgrounds have similar preferences for how much more the rich should earn than the poor? Using survey data from 40 countries (N = 55,238), we compare respondents' estimates of the wages of people in different occupations—chief executive officers, cabinet ministers, and unskilled workers—to their ideals for what those wages should be. We show that ideal pay gaps between skilled and unskilled workers are significantly smaller than estimated pay gaps, and that there is consensus across countries, socioeconomic status, and political beliefs for ideal pay ratios. Moreover, data from 16 countries reveals that people dramatically underestimate actual pay inequality. In the United States—where underestimation was particularly pronounced—the actual pay ratio of CEOs to unskilled workers (354:1) far exceeded the estimated ratio (30:1), which in turn far exceeded the ideal ratio (7:1). In sum, respondents underestimate actual pay gaps, and their ideal pay gaps are even further from reality than those underestimates.

    Keywords: inequality; fairness; justice; income; wage; cross-cultural; Wages; Equality and Inequality; Fairness; Income Characteristics; Employees; Management Teams; Cross-Cultural and Cross-Border Issues;


    Kiatpongsan, Sorapop, and Michael I. Norton. "How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay." Perspectives on Psychological Science 9, no. 6 (November 2014): 587–593. View Details
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