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.

Featured Works

Article | Review of Accounting Studies | December 2014
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;

Citation:
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
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Article | American Journal of Sociology
Spanning the Institutional Abyss: The Intergovernmental Network and the Governance of Foreign Direct Investment
Juan Alcacer and Paul Ingram
Global economic transactions such as foreign direct investment must extend over an institutional abyss between the jurisdiction, and therefore protection, of the states involved. Intergovernmental organizations (IGOs), whose members are states, represent an important attempt to span this abyss. IGOs are mandated variously to smooth economic transactions, facilitate global cooperation, and promote cultural contact and awareness. We use a network approach to demonstrate that the connections between two countries through joint-membership in the same IGOs are associated with a large positive influence on the foreign direct investment that flows between them. Moreover, we show that this effect occurs not only in the case of IGOs that focus on economic issues, but also on those with social and cultural mandates. This demonstrates that relational governance is important and feasible in the global context and for the most risky transactions. Finally we examine the interdependence between the IGO network and the domestic institutions of states. The interdependence between these global and domestic institutional forms is complex, with target-country democracy being a substitute for economic IGOs, but a complement for social and cultural IGOs.
Keywords: Globalization; Market Transactions; Foreign Direct Investment; Government and Politics; Risk and Uncertainty; Networks; Culture; Complexity; Public Administration Industry;

Citation:
Alcacer, Juan, and Paul Ingram. "Spanning the Institutional Abyss: The Intergovernmental Network and the Governance of Foreign Direct Investment." American Journal of Sociology 118, no. 4 (January 2013). View Details
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Article | Management Science | July 2013
Ethnic Innovation and U.S. Multinational Firm Activity
C. Fritz Foley and William R. Kerr
This paper studies the impact that immigrant innovators have on the global activities of U.S. firms by analyzing detailed data on patent applications and on the operations of the foreign affiliates of U.S. multinational firms. The results indicate that increases in the share of a firm's innovation performed by inventors of a particular ethnicity are associated with increases in the share of that firm's affiliate activity in their native countries. Ethnic innovators also appear to facilitate the disintegration of innovative activity across borders and to allow U.S. multinationals to form new affiliates abroad without the support of local joint venture partners. Thus, this paper points out that immigration can enhance the competitiveness of multinational firms.
Keywords: foreign direct investment; Technology Transfer; patents; innovation; Research and Development; Ethnic Networks; diasporas; Patents; Diasporas; Ethnicity; Multinational Firms and Management; Competitive Advantage; Research and Development; Foreign Direct Investment; Innovation and Invention; United States;

Citation:
Foley, C. Fritz, and William R. Kerr. "Ethnic Innovation and U.S. Multinational Firm Activity." Management Science 59, no. 7 (July 2013): 1529–1544. View Details
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Chapter | Business Ethics | 2013
Multinational Enterprises and Incomplete Institutions: The Demandingness of Minimum Moral Standards
Nien-he Hsieh
Multinational enterprises (MNEs) operate across countries that vary widely in their legal, political, and regulatory institutions. One question that arises is whether there are certain minimum standards that ought to guide managers in their decision making independently of local institutional requirements, especially when institutional arrangements are incomplete. This chapter examines what follows if managers recognize two kinds of duties of forbearance in their decision making that are commonly held to be among the most minimal of moral duties: the duty not to harm and the duty not to violate the liberty of others. The chapter concludes that the standards for MNEs may be more demanding than what the minimalist nature of duties of forbearance initially would suggest.
Keywords: Multinational Firms and Management; Decision Making; Standards;

Citation:
Hsieh, Nien-he. "Multinational Enterprises and Incomplete Institutions: The Demandingness of Minimum Moral Standards." In Business Ethics. 2nd ed. Edited by Michael Boylan, 409–422. Hoboken, NJ: John Wiley & Sons, 2013. View Details
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Working Paper | HBS Working Paper Series | 2014
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;

Citation:
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
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Recent Publications

Article | Strategic Management Journal | February 2019
The Ethnic Migrant Inventor Effect: Codification and Recombination of Knowledge Across Borders
Prithwiraj Choudhury and Do Yoon Kim
Ethnic migrant inventors may differ from locals in terms of the knowledge they bring to host firms. We study the role of first-generation ethnic migrant inventors in cross-border transfer of knowledge previously locked within the cultural context of their home regions. Using a unique dataset of Chinese and Indian herbal patents filed in the United States, we find that an increase in the supply of first-generation ethnic migrant inventors increases the rate of codification of herbal knowledge at U.S. assignees by 4.5%. Our identification comes from an exogenous shock to the quota of H1B visas and from a list of entities exempted from the shock. We also find that ethnic migrant inventors are more likely to engage in reuse of their prior knowledge, whereas knowledge recombination is more likely to be pursued by teams comprising inventors from other ethnic backgrounds.
Keywords: skilled migration; ethnic migration; first-generation migrant; cultural context; knowledge flows; knowledge reuse; knowledge recombination; recombinant creation; H1B visas; Knowledge Sharing; Knowledge Use and Leverage; Knowledge Dissemination; Immigration; Ethnicity; Cross-Cultural and Cross-Border Issues;

Citation:
Choudhury, Prithwiraj, and Do Yoon Kim. "The Ethnic Migrant Inventor Effect: Codification and Recombination of Knowledge Across Borders." Strategic Management Journal 40, no. 2 (February 2019): 203–229. View Details
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Case | HBS Case Collection | December 2018
The Global-Local Tension: Vodafone CEO Vittorio Colao Leading with “International Values and Local Roots" (A)
Tsedal Neeley
Vittorio Colao, CEO of telecommunication giant Vodafone, must respond to reports of disturbing accounting practices at two of Vodafone’s operating companies. In one case, €60 million have been misreported due to a series of failures to check manual accounting processes. The situation has been escalated to Vodafone’s audit committee, which expects Colao and his team to act drastically. In the second case, €7 million have been misreported through deferred recognition of costs into the future. The two cases challenge Colao’s organizational model of International Values and Local Roots that aims to maintain productive tension between global mandates and local practices. Colao meticulously designed his model based on the key value of trust, his unwavering convictions earning him the moniker of the ‘benevolent dictator.’ Colao is acutely aware that his response to the accounting discrepancies will be a referendum on his leadership for over 120,000 employees worldwide. If he doesn’t make the right decisions, the consequences will reverberate throughout the organization and erode confidence in the value of trust that he relentlessly worked to establish.
Keywords: GLOBAL-LOCAL; organization culture; global identity; local identity; accounting discrepency; Globalization; Leadership; Trust; Organizational Culture; Organizational Design; Organizations; Identity; Local Range; Global Range; Values and Beliefs; Accounting Audits;

Citation:
Neeley, Tsedal. The Global-Local Tension: Vodafone CEO Vittorio Colao Leading with “International Values and Local Roots" (A)." Harvard Business School Case 419-031, December 2018. View Details
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Case | HBS Case Collection | November 2018
Zespri Grows
David E. Bell and Natalie Kindred
Controlling about a third of global kiwifruit exports by volume and nearly half by value in 2018, Zespri was a grower-owned “corporatized cooperative” with the exclusive right to export New Zealand-grown kiwifruit (except to Australia). Zespri did not grow fruit, but rather managed an integrated marketing system across the value chain. This coordinated structure enabled Zespri to control quality, build a brand, and command premium prices in export markets. In 2018, Zespri had a strategic goal of marketing the world’s leading portfolio of kiwifruit year round, with a target of nearly doubling sales, to NZ$4.5 billion, by 2025. This would require Zespri to vastly increase its kiwifruit supply in New Zealand, as well as from overseas suppliers, who currently accounted for a relatively small portion of its volume. Rapid growth presented several challenges, including the need to preserve product quality and consistency while working with new growers, prioritizing customers and markets as demand outpaced supply, considering Zespri’s position vis-à-vis the crucial China market, and developing new capabilities as Zespri transformed from New Zealand-centric into a global organization. At the same time, the Zespri team aspired to launch new products that met consumer demand for sweeter taste and convenience—an increasingly urgent priority as global competition in kiwifruit intensified. Zespri had been the first to introduce a high-quality proprietary gold kiwifruit to the global market, and it continued to dominate the gold segment. Could it do the same in the emerging red-flesh category? As with many questions facing Zespri in 2018, there are risks of moving too fast as well as too slow.
Keywords: Agribusiness; kiwi; kiwifruit; Agriculture; Global Supply Chain; branding; produce; coordinated industry structure; industry coordination; countercyclical supply; New Product Development; Product Strategy; differentiation; Food; Quality; Trade; Brands and Branding; Marketing; Strategy; Global Strategy; Change Management; Organizational Change and Adaptation; Globalization; Globalized Firms and Management; Competitive Strategy; Resource Allocation; Agriculture and Agribusiness Industry; Consumer Products Industry; Food and Beverage Industry; New Zealand;

Citation:
Bell, David E., and Natalie Kindred. "Zespri Grows." Harvard Business School Case 519-047, November 2018. View Details
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Case | HBS Case Collection | October 2018
Everybody Knows: Russia and the Election
Rawi Abdelal and Rafael Di Tella
Following a contentious presidential race, Donald Trump’s 2016 election destabilized America’s status quo. Academics, journalists, politicians and the public at large examined why Trump had won. Many Americans, inside and outside the government, asserted that a state-led Russian disinformation campaign had influenced the election’s outcome. The leaders of major social media companies, including Twitter and Facebook, also conceded that state actors had probably gamed their platforms to influence American politics. Trump himself made conflicting statements, while Russian politicians asserted that American elites had rhetorically weaponized the issue of election interference to justify an unwillingness to work with their country internationally. It was hard to parse where reality ended and political rhetoric began. Post-election, the future of U.S.-Russia relations remained unclear, and the United States grappled with how to regulate cyberspace. Analyzing the 2016 election and its aftershocks helps students confront interrelated questions about business regulation, international relations, cultural identity, strategic communications, political will and the Internet. The case encourages students to consider the boundary between narrative and reality, and examine subjectivity, objectivity and power in the public and private sectors.
Keywords: Strategic industry; strategic alliances (business); Business and Government; business and public policy; business and society; Media Businesses; media content; media slant; media regulation; social media; internet of everything; government policy; politics; political campaigns; political strategy; political turmoil; government; Government Regulation; Security; international business; International Relations; National Security; Political Elections; News; Media; Internet; Rights; Problems and Challenges; Globalization; Business and Community Relations; Business and Government Relations; Government Legislation; Risk and Uncertainty; Cognition and Thinking; Conflict and Resolution; Identity; Civil Society or Community; Culture; Public Opinion; Social Issues; War; Online Technology; Public Administration Industry; United States; Russia;

Citation:
Abdelal, Rawi, and Rafael Di Tella. "Everybody Knows: Russia and the Election." Harvard Business School Case 719-012, October 2018. View Details
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Working Paper | HBS Working Paper Series | 2018
Sustainability and Green Business in Latin America During Globalization Waves
Geoffrey Jones
This working paper examines the impact of modern business enterprise on the natural environment of Latin America during the globalization waves between the 19th century and the present day. It argues that although global capitalism created much wealth for the region, this was at the cost of massive ecological destruction in Latin America. During the first global economy considerable wealth was created from the exploitation of natural resources for the land-owning elite in Latin America, at the cost of large-scale ecological destruction. During the Great Reversal in the mid-20th century, public policies aimed at “catching up” resulted in the co-proliferation of hydro-electric schemes and resulting co-creation of ecological damage by firms and governments. In the new global economy since 1980, renewed economic growth and consumerism resulted in mountains of waste in increasingly polluted mega-cities. Biodiversity and the natural environment have been challenged across the subcontinent. However, there were interesting positives as these ecological horrors also created opportunities for a surprising cohort of green businesses across sectors ranging from beauty and health to ecotourism. In the 21st century, both business and governments in the region needed to address sustainability issues far more seriously, before a point of no return was reached.
Keywords: Globalization; Natural Environment; Outcome or Result; Business History; Pollution and Pollutants; Environmental Sustainability; Green Technology Industry; Beauty and Cosmetics Industry; Tourism Industry; Latin America;

Citation:
Jones, Geoffrey. "Sustainability and Green Business in Latin America During Globalization Waves." Harvard Business School Working Paper, No. 19-009, August 2018. View Details
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Case | HBS Case Collection | July 2018
LIXIL Group Corporation: Building a New Company in an Old Industry
Boris Groysberg and Akiko Kanno
In the spring of 2018, Kinya Seto, president and CEO of LIXIL Group Corporation, a major housing and building products and services company, called a meeting at the company’s head office in central Tokyo to discuss how to implement the new three-year strategic plan. LIXIL had been established in 2011 through a merger of five of Japan’s major companies across a broad spectrum of building materials and other housing-related businesses. The company had subsequently acquired established international brands such as American Standard and GROHE and had become a global company of over 70,000 employees operating in more than 150 countries. Its business lines included manufacturing and marketing construction materials and products for both commercial buildings and private houses, with subsidiary home-building and renovation franchises. The predecessor companies that formed LIXIL had each had a long history of business success, some dating back a hundred years. To accelerate the implementation of LIXIL’s global strategy, Seto and his senior management team had expressed ideas about creativity and innovation centered around differentiated products, services and business models. How could Seto position LIXIL for success? How much integration was needed at LIXIL? How could Seto build one LIXIL brand that would be recognized globally? Could design, new products, and a shift in business model from B2B to B2C be the drivers of growth? How should Seto execute LIXIL’s three-year plan? What is or are LIXIL’s source(s) of competitive advantage?
Keywords: consolidation; turnaround; Leadership and Change Management; Consolidation; Change; Leadership; Global Strategy; Business Model; Consumer Products Industry; Manufacturing Industry; Japan;

Citation:
Groysberg, Boris, and Akiko Kanno. "LIXIL Group Corporation: Building a New Company in an Old Industry." Harvard Business School Case 419-009, July 2018. View Details
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Working Paper | HBS Working Paper Series | 2018
Gifts of the Immigrants, Woes of the Natives: Lessons from the Age of Mass Migration
Marco Tabellini
In this paper, I show that political opposition to immigration can arise even when immigrants bring significant economic prosperity to receiving areas. I exploit exogenous variation in European immigration to US cities between 1910 and 1930 induced by World War I and the Immigration Acts of the 1920s, and instrument immigrants’ location decision relying on pre-existing settlement patterns. Immigration increased natives’ employment and occupational standing, and fostered industrial production and capital utilization. However, despite these economic benefits, it triggered hostile political reactions, such as the election of more conservative legislators, higher support for anti-immigration legislation, and lower public goods provision. Stitching the economic and the political results together, I provide evidence that natives’ backlash was increasing in the cultural differences between immigrants and natives, suggesting that diversity might be economically beneficial but politically hard to manage.
Keywords: immigration; Political backlash; Age of Mass Migration; cultural diversity; Immigration; History; Economy; Attitudes; Cross-Cultural and Cross-Border Issues; Diversity; United States;

Citation:
Tabellini, Marco. "Gifts of the Immigrants, Woes of the Natives: Lessons from the Age of Mass Migration." Harvard Business School Working Paper, No. 19-005, July 2018. (Revised October 2018; Revise and Resubmit, Review of Economic Studies.) View Details
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Article | Economic Journal (Royal Economic Society) | July 2018
Global Collaborative Patents
Sari Pekkala Kerr and William R. Kerr
We study the prevalence and traits of global collaborative patents for U.S. public companies, where the inventor team is located both within and outside of the United States. Collaborative patents are frequently observed when a corporation is entering into a new foreign region for innovative work, especially in settings where intellectual property protection is weak. We also connect collaborative patents to the ethnic composition of the firm’s U.S. inventors and cross-border mobility of inventors within the firm. The inventor team composition has important consequences for how the new knowledge is exploited within and outside of the firm.
Keywords: patents; innovation; Research and Development; Ethnic Networks; migration; diasporas; foreign direct investment; Technology Transfer; globalization; mobility; Technology; Globalized Firms and Management; Diasporas; Patents; Ethnicity; Entrepreneurship; Research and Development; Foreign Direct Investment; Innovation and Invention; United States;

Citation:
Kerr, Sari Pekkala, and William R. Kerr. "Global Collaborative Patents." Economic Journal (Royal Economic Society) 128, no. 612 (July 2018): F235–F272. View Details
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Case | HBS Case Collection | June 2018
Forta Furniture: International Expansion
John A. Quelch and Karthik Easwar
The Forta Furniture case highlights the need to consider new market expansion to grow a firm. It demonstrates that simply doing what has always been done is not sustainable when other competitors enter the market with differentiated or potentially superior offerings. In addition, the case suggests there are many routes to global expansion; a firm could look to build a brand in these new markets or compete as a private label. Further, the case addresses the need to combine quantitative and qualitative analyses for making superior decisions. Additionally, this case touches on the need to understand differences in resources and customer preferences in different countries and how a company should consider these factors when defining its growth strategy in deciding whether, where, and how to expand internationally. This case can be used in an introductory marketing management course for undergraduates or MBA students that discusses new market expansion and/or global or multi-market marketing strategy. In addition, it could be used in an elective course on international marketing. The case could also be used as an example of sales forecasting when a firm launches in a new market.
Keywords: Market Entry and Exit; Global Range; Decision Making; Analysis; Cross-Cultural and Cross-Border Issues; Growth and Development Strategy; Brands and Branding; Expansion;

Citation:
Quelch, John A., and Karthik Easwar. "Forta Furniture: International Expansion." Harvard Business School Brief Case 918-547, June 2018. View Details
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Case | HBS Case Collection | June 2018
Global Brand Management of Anheuser Busch InBev's Budweiser
Jill Avery
Brian Perkins, chief architect of the $6 billion Budweiser brand, was excited about 2018, in which the company would launch Budweiser into several new markets in Africa and Latin America. He was also feeling the pressure to finalize a global brand strategy that would define Budweiser’s value proposition and guide its development and execution around the world. The problem was that Budweiser actually had two distinct brand realities that differed across geographies and that often interfered with each other. He worried whether the company could keep selling a premium brand proposition abroad as the brand's reputation faced challenges at home in the U.S. and whether he needed to force a monolithic global brand strategy everywhere or allow for local market customization. Could Budweiser simultaneously accommodate two or more brand realities?
Keywords: brand management; global brands; brand positioning; brand extension; brands and branding; marketing; marketing strategy; consumer behavior; Marketing communications; Marketing; Marketing Strategy; Brands and Branding; Advertising; Global Strategy; Cross-Cultural and Cross-Border Issues; Consumer Products Industry; Food and Beverage Industry; Advertising Industry; Africa; China; United States; North America; South Africa; Nigeria; Kenya; Cameroon; Canada;

Citation:
Avery, Jill. "Global Brand Management of Anheuser Busch InBev's Budweiser." Harvard Business School Case 518-105, June 2018. View Details
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