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Multinational Strategies and Developing Countries in Historical Perspective Geoffrey Jones

Working Paper
10-076

Copyright © 2010 by Geoffrey Jones Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author.

Overview This working paper offers a longitudinal and descriptive analysis of the strategies of multinationals from developed countries in developing countries. The central argument is that strategies were shaped by the trade-off between opportunity and risk. Three broad environmental factors determined the trade-off. The first was the prevailing political economy, including the policies of both host and home governments, and the international legal framework. The second was the market and resources of the host country. The third factor was competition from local firms. The impact of these factors on corporate strategies is explored, as shown in Fig. 1, during the three eras in the modern history of globalization from the nineteenth century until the present day. The performance of specific multinationals depended on the extent to which their internal capabilities enabled them to respond to these external opportunities and threats.

Copyright © 2010 by Geoffrey Jones Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author.

   

Fig. 1 Multinational Strategies in Developing Countries in the Three Eras of Globalization Opportunity/Risk First Global Economy 1850-1929 De-Globalization 1929-1978 Expropriation; Import Substitution; exchange controls Second Global Economy 1978 -

Political Economy

High receptivity; international law and imperialism support Western firms

Liberalization, but sovereign and assertive governments

Markets and Resources

Low income; cultural differences; vast natural resources

Limited convergence; foreign ownership restricted. State-owned companies; private enterprise curbed

Globalization; tribalization; low cost labor Growing privatesector

Competition

Embryonic

Strategies

Co-opt local elites as partners; seek home country support; overcome logistical challenges

Divest; invest in West; forced negotiations; joint ventures and local participation

Access low labor costs; adapt to local markets and politics

Although important insights can be obtained from long-run perspectives, it should be noted from the outset that it presents major definitional issues. Countries have shifted between Copyright © 2010 by Geoffrey Jones Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author.

   

the “developing” and “developed” categories over time. Japan is the most obvious example, given its progression from developing status in the first global economy to the world’s second largest economy in the contemporary global economy. However in the second global economy, the terms “developing” and “emerging” are used loosely, with countries such as Singapore and South Korea typically included in the category despite their level of economic development. For the purposes of this paper, developing countries are defined simply as beyond the West and (after 1950) Japan. It is readily acknowledged that deeper analysis would require a typology of countries to be employed. Multinational Strategies in Developing Countries in the First Global Economy, c1850-c1929. If we use a broad definition of globalization such as that proposed by Guillen – “as a process leading to greater interdependence and mutual awareness….among economic, political and...
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