Proposal preview

Multinationals and the Transformation of the World Economy’

The purpose of this session is to address the gap in the literature on our understanding of the impact of multinational enterprises in the transformation of the world economy from the mid-to-late nineteenth century until the present. It will show how important it is to factor in the multinational enterprise when we think of major developments and the contours of the modern world. Multinationals did not merely contribute capital. They also had a significant impact on a global scale in the management and allocation of human resources, technology, information, intellectual property, research and development, marketing, and other specialist knowledge such as engineering for mines and infrastructure projects. They spread manufacturing globally. Multinationals are neither heroes nor villains. Their contribution has been and continues to be that of a key entrepreneurial role in transforming the modern world, by reshaping economies, and changing social and cultural norms.

Organizer(s)

  • Mira Wilkins Florida International University wilkinsm@fiu.edu USA
  • Teresa da Silva Lopes University of York teresa.lopes@york.ac.uk UK

Session members

  • Youssef Cassis, University of Florence
  • Patrick Fridenson, École des Hautes Etudes en Sciences Sociales
  • Lou Galambos, Johns Hopkins University
  • Niels V. Haueter, Swiss Re
  • Geoffrey Jones, Harvard Business School
  • Matthias Kipping, York University
  • Chris Miller, University of Glasgow
  • Ray Stokes, University of Glasgow
  • Jeff Sturchio, Rabin Martin
  • Heidi Tworek, University of British Columbia

Discussant(s)

  • Andrea Colli Bocconi University andrea.colli@unibocconi.it
  • Pierre-Yves Donzé Osaka University py.donze@gmail.com
  • Ben Gomes-Casseres Brandeis University bgc@brandeis.edu
  • Richard John Columbia University rrj2115@columbia.edu
  • Takafumi Kurosawa Kyoto University kurosawa@econ.kyoto-u.ac.jp
  • David Merrett University of Melbourne dtm@unimelb.edu.au
  • Harriet Ritvo MIT ritvo@mit.edu
  • Espen Storli Norwegian University of Science and Technology espen.storli@ntnu.no

Papers

Panel abstract

The purpose of this session is to address the gap in the literature on our understanding of the impact of multinational enterprises in the transformation of the world economy from the mid-to-late nineteenth century until the present. This session will show how important it is to factor in the multinational enterprise when we think of major developments and the contours of the modern world. Multinationals did not merely contribute capital. They also had a significant impact on a global scale in the management and allocation of human resources, technology, information, intellectual property, research and development, marketing, and other specialist knowledge such as engineering for mines and infrastructure projects. They spread manufacturing globally. Multinationals are neither heroes nor villains. Their contribution has been and continues to be that of a key entrepreneurial role in transforming the modern world, by reshaping economies, and changing social and cultural norms.

1st half

A.1 MULTINATIONALS IN MANUFACTURING

Chair: Mira Wilkins, Emeritus, Florida International University (USA)

1. Pharmaceuticals

Lou Galambos and Jeff Sturchio, Johns Hopkins University (USA), and Rabin Martin (USA)

Multinational firms had a dramatic impact on the modern pharmaceutical industry from a very early point in its development. Like other science-based industries, pharmaceuticals had a knowledge base that was relatively open to all who had the scientific and technical ability needed to make use of new ideas. Successful entrepreneurs in this industry also needed financial support, an enabling governmental framework, marketing experts, and populations in need of their products and able to pay for them. While patents protected certain products and processes, the protection was not permanent, and it could frequently be invented around. The initial core of the modern industry was in nineteenth-century German chemicals and especially organic chemistry. As the industry spread and evolved, multinational firms continued to be at the center of that process. That was true, as well, when new knowledge in virology, biochemistry, and molecular genetics once more revolutionized the industry near the end...

Multinational firms had a dramatic impact on the modern pharmaceutical industry from a very early point in its development. Like other science-based industries, pharmaceuticals had a knowledge base that was relatively open to all who had the scientific and technical ability needed to make use of new ideas. Successful entrepreneurs in this industry also needed financial support, an enabling governmental framework, marketing experts, and populations in need of their products and able to pay for them. While patents protected certain products and processes, the protection was not permanent, and it could frequently be invented around. The initial core of the modern industry was in nineteenth-century German chemicals and especially organic chemistry. As the industry spread and evolved, multinational firms continued to be at the center of that process. That was true, as well, when new knowledge in virology, biochemistry, and molecular genetics once more revolutionized the industry near the end of the twentieth century.

2. Automobiles

Patrick Fridenson and Kazuo Wada, École des Hautes Etudes en Sciences Sociales (France) and University of Tokyo (Japan)

The paper rejects the standard presentation of an all powerful Fordism, only to be replaced by an all powerful Toyotism. It first differentiates the trajectories to globalization of the three branches of the industry: cars, trucks and components makers and emphasizes their limits up to the 1960s. Then it stresses four dynamics of these multinationals' participation to the transformation of the world economy: the partial localization of development and R & D, the management of cadres and of the labor force, the growing impact of information systems, the building of finance capabilities. Finally it focuses on a series of problems which an ahistorical approach of auto multinationals often neglects: the abundance of cases of failures and exits, the growth of co-operation between multinationals and with local firms, the deep changes overtime in the contributions of multinationals to the host countries' economy, society, culture and environment and to their home nations....

The paper rejects the standard presentation of an all powerful Fordism, only to be replaced by an all powerful Toyotism. It first differentiates the trajectories to globalization of the three branches of the industry: cars, trucks and components makers and emphasizes their limits up to the 1960s. Then it stresses four dynamics of these multinationals' participation to the transformation of the world economy: the partial localization of development and R & D, the management of cadres and of the labor force, the growing impact of information systems, the building of finance capabilities. Finally it focuses on a series of problems which an ahistorical approach of auto multinationals often neglects: the abundance of cases of failures and exits, the growth of co-operation between multinationals and with local firms, the deep changes overtime in the contributions of multinationals to the host countries' economy, society, culture and environment and to their home nations. On the whole, the paper aims to make sense both of the generalization of the automobile industry to the planet (with such new homes as China, India or Russia) and of the challenges to the classic auto industry brought about by new providers of mobility.

Discussion - Multinationals in Manufacturing

Takafumi Kurosawa, Kyoto University (Japan); Espen Storli, Norwegian University of Science and Technology (Norway); General Discussion

A.2 MULTINATIONALS IN FINANCIAL SERVICES

Chair: Mira Wilkins, Emeritus, Florida International University (USA)

3. Banks

Youssef Cassis, European University Institute (Italy)

This paper will discuss the contribution of multinational banks and international capital markets to the transformation of the world economy from the late nineteenth century to the present. It will do so from the vantage point of international financial centres. International capital flows require an intermediation process, which is provided by the financial institutions and markets gathered in the leading centres. Another feature of international financial centres is the high concentration of global players that can be found on a fairly small geographical area –a square mile in arguably the most global of all, the City of London. Nowhere else has it ever been possible to find such a great number of multinational enterprises within a few hundred yards of one another. The paper will thus emphasize how, in the course of the last two centuries, multinational banks and international capital markets have played a decisive role not only in...

This paper will discuss the contribution of multinational banks and international capital markets to the transformation of the world economy from the late nineteenth century to the present. It will do so from the vantage point of international financial centres. International capital flows require an intermediation process, which is provided by the financial institutions and markets gathered in the leading centres. Another feature of international financial centres is the high concentration of global players that can be found on a fairly small geographical area –a square mile in arguably the most global of all, the City of London. Nowhere else has it ever been possible to find such a great number of multinational enterprises within a few hundred yards of one another. The paper will thus emphasize how, in the course of the last two centuries, multinational banks and international capital markets have played a decisive role not only in contributing to, but also in enabling the transformation of the world economy.

4. Reinsurance

Niels Viggo Haueter, Swiss Re

Reinsurance supports host economies in three main areas. One main function of reinsurance is to spread risk across the world. While multinational insurers to some degree are able to do so themselves, smaller and locally active insurance companies are more dependent on reducing their exposure through buying reinsurance and thus participating more diversified risk pools. A second important support function is in the transfer of know-how. Reinsurers collect best practice internationally and provide clients, amongst other, with underwriting intelligence, product design, market development, risk management, and financial management. Finally, reinsurers provide financial capacity by allowing insurers to free up risk reserves. This allows insurers to underwrite more risks. The direct impact of reinsurance on underwriting capacity is easy to describe and, in theory, easy to measure. Access to the relevant data, however, is difficult. The measurement of know-how transfer is more difficult as is the effect of risk reduction through...

Reinsurance supports host economies in three main areas. One main function of reinsurance is to spread risk across the world. While multinational insurers to some degree are able to do so themselves, smaller and locally active insurance companies are more dependent on reducing their exposure through buying reinsurance and thus participating more diversified risk pools. A second important support function is in the transfer of know-how. Reinsurers collect best practice internationally and provide clients, amongst other, with underwriting intelligence, product design, market development, risk management, and financial management. Finally, reinsurers provide financial capacity by allowing insurers to free up risk reserves. This allows insurers to underwrite more risks. The direct impact of reinsurance on underwriting capacity is easy to describe and, in theory, easy to measure. Access to the relevant data, however, is difficult. The measurement of know-how transfer is more difficult as is the effect of risk reduction through global pooling. We therefore try out different descriptive approaches and will look at factors that historically caused or supported shifts in global distribution of reinsurance supply and demand. We assume that the main cause for increased demand for foreign (as opposed to local) reinsurance historically came from inflation, sudden or accelerated boosts in economic development which local companies were unable to absorb, as well as from regulatory changes. Because of the international character of reinsurance services, the industry conducted much of its business cross-border rather than setting up shop. We will therefore also briefly consider the rationale for opening business in host economies.

Discussion - Multinationals in Financial Services

Andrea Colli, Bocconi University (Italy); David Merrett, University of Melbourne (Australia); General Discussion

2nd half

B.1 MULTINATIONALS IN INFORMATION SERVICES

Chair: Teresa da Silva Lopes, University of York (UK)

5. Communications

Communications, Heidi Tworek, University of British Columbia (Canada)

This paper considers the creation and spread of communications firms since the mid-nineteenth century. Communications companies both undergirded multi-national enterprises’ activities and were themselves often multi-national enterprises. I will use this paper to tease out these features of communications firms. How far did these firms pioneer methods used by multi-nationals? How did they enable multi-nationals to globalize by enabling information exchanges? Finally, how do communications firms help historians to understand the path-dependency of multi-nationals’ effects on globalization?

This paper considers the creation and spread of communications firms since the mid-nineteenth century. Communications companies both undergirded multi-national enterprises’ activities and were themselves often multi-national enterprises. I will use this paper to tease out these features of communications firms. How far did these firms pioneer methods used by multi-nationals? How did they enable multi-nationals to globalize by enabling information exchanges? Finally, how do communications firms help historians to understand the path-dependency of multi-nationals’ effects on globalization?

6. Consultants

Matthias Kipping, York University (Canada)

Consulting activities have been global since the early 20th century, even before those providing them were called “consultants”. Today, consulting firms employ hundreds of thousands in hundreds of cities around the world and attract millions of business school and university graduates every year. But what makes them truly special is the impact they have had and continue to have on a wide range of organizations, large and small, private and public, secular and religious, near and far. They have shaped the policies and practices of these organizations in multiple ways, affecting not only those working there but also many others connected to them. They universally proclaim to spread “best practices”, though, as a growing body of evidence shows, outcomes have not always been positive for individuals, organizations, societies and the economy as a whole. Moreover, their success has crowded out other forms of less commercially driven knowledge sharing.

Consulting activities have been global since the early 20th century, even before those providing them were called “consultants”. Today, consulting firms employ hundreds of thousands in hundreds of cities around the world and attract millions of business school and university graduates every year. But what makes them truly special is the impact they have had and continue to have on a wide range of organizations, large and small, private and public, secular and religious, near and far. They have shaped the policies and practices of these organizations in multiple ways, affecting not only those working there but also many others connected to them. They universally proclaim to spread “best practices”, though, as a growing body of evidence shows, outcomes have not always been positive for individuals, organizations, societies and the economy as a whole. Moreover, their success has crowded out other forms of less commercially driven knowledge sharing.

Discussion - Multinationals in Information Services

Richard John, Columbia University (USA); Pierre-Yves Donzé, Osaka University (Japan); General Discussion

B.2 MULTINATIONALS' IMPACT ON THE DEVELOPED AND DEVELOPING WORLD - AN HISTORICAL PERSPECTIVE

Chair: Teresa da Silva Lopes, University of York (UK)

7. Environment

Ray Stokes and Chris Miller, both at University of Glasgow (UK)

From their very beginnings in the 19th century, multinational enterprises (MNEs) have been in the business of optimizing value added (and profits) through efficient international exploitation of variable costs of factors of production in order to supply markets in different countries. Carrying out this primary function has inevitably involved impacts on the environment, although the nature and perception of those impacts have changed over time. And these changes in nature and perception of impacts have in turn shaped the strategies and behavior of MNEs. This paper traces these interactions as they developed from the late 19th century to the early part of the 21st century, focusing on particular on the role of MNEs in the evolving relationship between globalization and the environment.

From their very beginnings in the 19th century, multinational enterprises (MNEs) have been in the business of optimizing value added (and profits) through efficient international exploitation of variable costs of factors of production in order to supply markets in different countries. Carrying out this primary function has inevitably involved impacts on the environment, although the nature and perception of those impacts have changed over time. And these changes in nature and perception of impacts have in turn shaped the strategies and behavior of MNEs. This paper traces these interactions as they developed from the late 19th century to the early part of the 21st century, focusing on particular on the role of MNEs in the evolving relationship between globalization and the environment.

8. Multinationals and the Great Divergence

Geoffrey Jones, Harvard Business School (USA)

The growth and spread of the multinational enterprise during the second half of the nineteenth century co-incided with widening income gaps between the West and the Rest. Although multinationals had the potential to diffuse knowledge and organizational skills between countries, in practice little diffusion occurred. Most Western FDI went into primary commodities, which were often enclavist. This was also an important factor in driving the specialization of the South and Asia on primary commodity exports. During the middle decades of the twentieth century host government policies in many post-colonial developing countries discouraged in inward FDI. The great economic successes of the era, such as Japan and later South Korea, were characterized by tight restrictions on foreign-owned companies. In recent decades, MNEs have generated largely low-skill employment in some emerging markets, but most technology transfer has been involuntary. Throughout the ability of multinationals to make a positive impact on developing economies...

The growth and spread of the multinational enterprise during the second half of the nineteenth century co-incided with widening income gaps between the West and the Rest. Although multinationals had the potential to diffuse knowledge and organizational skills between countries, in practice little diffusion occurred. Most Western FDI went into primary commodities, which were often enclavist. This was also an important factor in driving the specialization of the South and Asia on primary commodity exports. During the middle decades of the twentieth century host government policies in many post-colonial developing countries discouraged in inward FDI. The great economic successes of the era, such as Japan and later South Korea, were characterized by tight restrictions on foreign-owned companies. In recent decades, MNEs have generated largely low-skill employment in some emerging markets, but most technology transfer has been involuntary. Throughout the ability of multinationals to make a positive impact on developing economies was constrained by the nature of the host economy and policy framework.

Discussion - Multinationals' Impact on the Developed and Developing World - An Historical Perspective

Harriet Ritvo, MIT (USA); Ben Gomes-Casseres, Brandeis University (USA); General Discussion