‘PLACING’ FIRMS – ‘FIRMING’ PLACES:
GROUNDING THE DEBATE ON THE ‘GLOBAL’ CORPORATION
Peter Dicken
p.dicken@man.ac.uk
Paper presented at the Conference on ‘Responding to Globalization: Societies, Groups, and
Individuals’,
In
some ways, I am increasingly reluctant to use the term ‘global’ or
‘globalization’. These terms have become so pervasive that they have taken on a
life of their own. They occupy their own etymological space and have, in much
of their usage, become almost meaningless. The same words are used by different
people to mean different things. Like all such popular terms, however, they are
difficult to shake off. I guess we are stuck with them. But, if that is the
case, we need to be careful in how we use them. In this paper, I focus only on
the economic dimension of globalization, and on just one aspect of the
economic: the business organization or firm. My aim is to explore the
relationships between firms and geographical space or territory in the context
of the ongoing debate over the organization of economic activity in the world
economy. Specifically, I want to refute the assertion that we are seeing the
inexorable displacement of a variety of organizational forms by convergence on
a single dominant form - the so-called global
corporation.
I will focus on
two questions. First, I will review some of the evidence for the existence of
‘global’ corporations. Second, and more substantially, I will explore some of
the complex, dialectical relationships between firms and places. This involves
a number of issues. How is the nature of firms related to the specific places
within which they are embedded? That is, do different places ‘produce’
different types of firms? How are place (and space)
‘used’ by firms as part of their competitive strategies? Is ‘placeness’ more
than simply the fundamental need for all economic activities for spatial fixity
(see
One of the central claims of the ‘hyperglobalists’ is that international firms are inexorably, and inevitably, abandoning their ties to their country of origin and, by implication, converging towards a universal global organizational form. Kenichi Ohmae’s infamous exhortation to business managers is usually invoked as the exemplar of such a position:
Country of origin does not
matter. Location of headquarters does not matter. The products for which you
are responsible and the company you serve have become denationalized (Ohmae,
1990: 94)
Ohmae’s position reflects a pervasive view among many writers. It is not a new idea. The US Under-Secretary of State in the 1960s, George Ball, coined the label ‘Cosmocorp’ to denote what he saw as the then emerging global corporation (Ball 1967). Barnet and Muller’s 1974 book Global Reach: The Power of the Multinational Corporations was replete with anecdotal examples of the intentions of US corporate executives to transform their firms into ‘placeless’ global corporations. They quote the musings of a Chairman of the Dow Chemical Company:
I have long
dreamed of buying an island owned by no nation and of establishing the World
Headquarters of the Dow company on the truly neutral
ground of such an island, beholden to no nation or society. If we were located
on such truly neutral ground we could then really operate in the
More recent musings express rather vague ideas as to what is a ‘global’ corporation. For example, addressing the APEC CEO’s Summit Meeting in 1999, the then CEO of General Motors stated:
As for the future, we seem to have little more than the - often bizarre - prognostications of the business and management gurus, most of whom are quite clearly in the snake-oil business. Airport bookstalls are full of such ‘literature’. One example drawn from the pages of Business Week gives a flavour of this kind of prediction:
The global
corporation becomes the leaderless corporation…Success will belong to companies
that are leaderless – or, to be more precise, companies whose leadership is so
widely shared that they resemble beehives, ant colonies, or schools of fish…You
have only to look at biological systems to see that there are no big
hierarchical stacks…Everything is low and flat, very adaptable and very cruel
(Byrne 1999)
The argument underlying all these
positions is, essentially, that technological and regulatory developments in
the world economy have created a ‘global surface’ on which a dominant
organizational form will develop and inexorably wipe out less efficient
competitors who are no longer protected by national or local barriers. Such an organization is, it is argued
‘placeless’ and ‘boundary-less’. The claim that the placeless corporation is,
or is becoming, the norm amongst international business firms received a
substantial boost in the 1990s with the persistence of the Japanese financial
crisis, following the collapse of the bubble economy at the beginning of the
decade, and the equally unexpected East Asian financial crisis of 1997-1998. In
effect, the model of the global corporation is now, to all intents and
purposes, that of the
The notion that the world is now dominated by massive global corporations is not solely confined to the world of business. Many writers on the political left tend to take a similar view (although, of course, with a very different interpretation of the economic, social, and political implications). One of the oldest devices is to compare the size of TNCs with nation-states in order to demonstrate that TNCs have become more powerful than states. For example, a recent survey published by the Institute for Policy Studies (Anderson and Cavanagh (2000) makes the following claims, amongst others:
These are, of course, very striking comparisons. But it is far from clear what they really mean. In particular, as Wolf (2002) has pointed out the comparison is based on totally different criteria:
GDP is a
measure of value-added, not sales. If one were to compute total sales in a
country one would end up with a number far bigger than GDP. One would also be
double-, triple-, or quadruple-counting…if corporations, too, are measured by
value added as national economies are…they tend to shrink by between 70 and 80
per cent. In 2000, sales by General Motors were $185bn but value added was
$42bn; sales by Ford were $170bn but value added was $47bn; and sales by Royal
Dutch/Shell were $149bn but value added was only $36bn…Properly measured,
Denmark’s economy is more than three times bigger than GM. Even impoverished
So, in evaluating the scale of global corporations, such comparisons are not very helpful. They do, of course, perform the extremely valuable function of forcing us to think about the shifting relative power between private and public institutions, with all that this implies politically and economically and that, after all, is the purpose of the Institute for Policy Studies. Such comparisons, therefore, have real value as polemic but they do not tell us much about the ‘global-ness’ of corporations, or even the extent to which corporations are more, or less, oriented to domestic or foreign operations.
This begs the question of how we might define a ‘global’ corporation – a far from simple task. In my view, a global corporation would be a firm that not only has significant operations in a large number of countries (not necessarily all, of course) but also a firm whose geographically-dispersed operations are functionally-integrated, and not merely a diverse portfolio of activities.
Hu (1992) suggests a rather broader set of criteria to assess the extent to which TNCs are global:
On the basis of his empirical analysis of a sample of TNCs, Hu concludes that
these
criteria usually produce an unambiguous answer: that it...[the TNC]...is a
national corporation with international operations (i.e. foreign subsidiaries)
However, it does seem to be the case that most of the world’s largest business corporations think of themselves as either being ‘global’ or, at least, ‘globalizing’. In his analysis of the ‘transnational capitalist class’, Sklair (2001) interviewed senior figures in around 80 of the 500 largest corporations in the world in order to try to establish their use of, and the meaning they attached to, the term ‘globalization.’
The
suggestion that multinationals were ‘national companies with units abroad’ was
roundly rejected as old fashioned and not compatible with the demands of the
contemporary global economy. Most Global 500 executives and managers in the
sample considered their corporations to be in a transitional state between the
multinational corporation and the global corporation, that is, they were to a
greater or lesser extent globalizing. Also clear was the finding that, in order
to fulfil a ‘shareholder-driven growth imperative’, most of the corporations
considered that they had no alternative but to globalize…All of these findings
demonstrate a move to globalization among the Global 500 and a certain level of
success. Nevertheless, few of these corporations considered themselves entirely
globalized (73).
A rather different approach is to analyse quantitatively the relative distribution of individual firms’ assets, sales, and employment between their home country and abroad. This is the approach adopted by Ruigrok and van Tulder (1995) and by recent volumes of the UNCTAD World Investment Report. Ruigrok and van Tulder (1995) analysed Fortune 100 data for the early 1990s and concluded that
of the largest one hundred core firms
in the world, not one is truly ‘global’, ‘footloose’ or ‘borderless’. There is,
however, a hierarchy in the internationalisation of functional areas of
management: around forty firms generate at least half of their sales abroad;
less than twenty maintain at least half of their production facilities abroad;
with very few exceptions, executive boards and management styles remain solidly
national in their outlook; with even fewer exceptions, R & D remains firmly
under domestic control; and most companies appear to think of a globalization
of corporate finances as too uncertain (159).
UNCTAD has taken this kind of approach a step further and developed a composite Trnansationality Index (TNI). This is simply a weighted average of three indicators: foreign sales as a percentage of total sales; foreign assets as a percentage of total assets; and foreign employment as a percentage of total employment. These data have now been published for seven successive years, from 1993 to 1999, allowing some comparison of trends over time. A number of important features can be identified:
Figure 1: The relationship between firms ranked by TNI and by foreign assets, 1999
Source: calculated from UNCTAD World Investment
Report, 2001
Foreign assets
Rank |
Company |
Country |
TNI rank |
1
|
General Electric
|
|
75
|
2
|
ExxonMobil
|
|
22
|
3
|
Royal Dutch/Shell
|
|
43
|
4
|
General Motors
|
|
83
|
5
|
Ford
|
|
77
|
6
|
|
|
82
|
7
|
DaimlerChrysler
|
|
51
|
8
|
TotalFina
|
|
21
|
9
|
IBM
|
|
50
|
10
|
BP
|
|
18
|
11
|
Nestlé
|
|
2
|
12
|
Volkswagen
|
|
45
|
13
|
Nippon Oil Co
|
|
11
|
14
|
Siemens
|
|
41
|
15
|
Wal-Mart
|
|
90
|
Transnationality Index
Rank |
Company |
Country |
Foreign assets rank |
1
|
Thomson Corporation |
|
57 |
2
|
Nestlé
|
|
11 |
3
|
ABB |
|
21 |
4
|
Electrolux |
|
80 |
5
|
Holcim |
|
59 |
6
|
Roche Group |
|
27 |
7
|
BAT |
|
35 |
8
|
Unilever |
UK/Netherlands |
24 |
9
|
Seagram |
|
23 |
10
|
Akzo Nobel |
|
75 |
11
|
Nippon Oil Co |
|
13 |
12
|
Cadbury-Schweppes |
|
96 |
13
|
Diageo |
|
17 |
14
|
News Corporation |
|
31 |
15
|
L’Air Liquide Grp |
|
82 |
(Source: based on
UNCTAD 2001: TableIII.1)
(a)
Although the mean TNI for
(b) Similarly, Japanese firms have a low degree of transnationality, on average. The mean value increased from 33 in 1993 to 38.4 in 1999. Again, around one-third have a TNI less than 50
(c)
Amongst European firms, those
from the
Figure 2: TNIs by country of origin, 1993 and 1999
Source: calculated from UNCTAD World Investment
Report, 2001
Thus,
the results of analysing the UNCTAD data are clear in one respect: the majority
of the world’s leading TNCs still retain more than 50 per cent of their
activities in their home country. In that sense they are, in Hu’s terms,
‘national firms with international operations’, notwithstanding the views
expressed by corporate executives in Sklair’s survey. The major exceptions are
firms from small home countries. But even if the figures did show a greater
degree of ‘transnationality’ they would not tell us very much because the
measure used is simply a dichotomous one: home versus abroad. It can tell us
nothing about the real geographical extent of a firm’s activities. At least in
principle, a firm could have a TNI of, say, 80 (meaning that 80 per cent of its
activities were outside the firm’s home country) but all of those activities
could be in one foreign country. An example would be the significant number of
US firms that operate in
However,
the UNCTAD data do throw light on some specific issues, particularly some of
the conclusions of Anderson and Cavanagh’s comparison of TNCs and nation-states
referred to earlier. In particular, the Anderson and Cavanagh list based on
sales contains a much larger proportion of
So, all the TNI (and similar measures) do is to measure the extent to which a firm’s activities are domestic or foreign-based. They tell us nothing about their geographical spread. This can only really be achieved from company-specific investigation. Examination of firms’ annual reports or websites, although revealing great inconsistency in their degree of geographical specificity, tend to show that only a relatively small number of firms have globally-spread operations. Rather more tend to have strong regional biases in their operations.
The quantitative data discussed in the previous section are useful for my present purposes because they demonstrate the continuing real ties between firms and their home countries. But they do not tell us anything about the nature of those ties: about the qualitative nature of TNC activities and their relationship to place. Neither do they help us to establish whether or not TNCs of different national origins are becoming similar in their modes of operation. It is at least possible that TNCs may retain more of their assets and employment in their home country but still be converging organizationally and behaviourally towards a universal, global form. Equally, some firms may be becoming more global but in non-uniform ways. If so, what role does the firm’s country of origin play in this?
The response of geographers to assertions of the rise of the placeless global corporation has been to re-assert - somewhat reflexively - the importance of place. But we haven’t done very much more either to think through what this involves conceptually or to provide robust empirical evidence. I don’t claim in this paper to do either of these other than in a superficial manner, but what I hope to do is to point to some of the conceptual and empirical issues involved in what is, I believe, an important issue in both academic and policy terms.
The basis of my argument is that firms, just like all other forms of social organization, are fundamentally and intrinsically spatial and territorial. They are spatial in the sense that they are responsive to geographical distance and to spatial variations in the availability of necessary resources and of business opportunities. Such spatiality may have – indeed most often has – a territorial manifestation. Hence, firms are territorial as well as spatial in the sense that the ‘surface’ from which firms originate and on which they operate is most commonly made up of a tessellated structure of territorial entities arrayed along a continuum of variable and overlapping scales, including those of political governance. Firms themselves have territorial extent: the roughly bounded area over which they conduct their operations (e.g. their market area; their labour catchment area, their supply area, etc). For some functions of the firm the territory may be intensely local, for others it may approach the global. Such firm territories, however, are usually temporally volatile, spatially discontinuous, and not clearly bounded. Indeed, firms in competition inter-penetrate each other’s territories in highly complex and contested ways. More particularly from the perspective of this paper, firms are territorial in that they derive some of their characteristics from, and also directly influence, the characteristics of specific territories and places.
The theoretical basis for hypothesising that TNCs ‘produced’ in different places will continue to display a significant degree of organizational differentiation lies in the much used (and sometimes abused) concept of social embeddedness. The most widely-quoted proximate authority on this topic is undoubtedly the economic sociologist Mark Granovetter (see Granovetter 1985, Granovetter and Swedberg 1992, Smelser and Swedberg 1994) but its intellectual origins lie with Karl Polanyi’s (1957) seminal work, The Great Transformation. The intricacies of the embeddedness concept lie beyond the bounds of this paper. Suffice it to argue that all business firms are rooted within specific social, cultural, political and institutional contexts which help to influence the ways in which they develop.
At least in
origin, TNCs are ‘locally grown’; they develop their roots in the soil in which
they were planted. The deeper the roots the stronger will be the degree of
local embeddedness, such that they should be expected to bear at least some
traces of the economic, social and cultural characteristics of their home
country. In other words, they continue to contain elements of the local within
their modes of operation…the local social-cultural milieu is a major influence
on how firms evolve and behave even when their operations are geographically
very extensive. This is not to argue a case for cultural determinism or even to
argue that all firms of a given nationality are identical. Clearly they are
not. But they do tend to share some common features (Dicken, Forsgren, Malmberg
1994:34).
Although such embeddedness may occur at a variety of geographical scales the most significant scale would appear to be that of the national state, the major ‘container’ within which distinctive practices develop. . The term ‘container’ should not be taken too literally. It is used here as a fairly loose metaphor to capture the idea that nation-states are one of the major ways in which distinctive institutions and practices are ‘bundled together’. Of course, such containers are not (except in very rare cases) hermetically sealed off from the outside world. The container is permeable or leaky to varying degrees. It can be argued that the impact of the modern information technology and communications systems has made national containers even more permeable. That’s true – but it does not mean that the container no longer exists at all. Indeed, there is a good deal of compelling evidence to show the persistence of national distinctiveness - although not necessarily uniqueness - in structures and practices which help to shape local, national and international patterns of economic activity.
From an economic