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Management article
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Reference no. 99106
Authors: Bruce M. Kogut
Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 1999

Abstract

The current worldwide economic crisis illustrates how global the economy has become. But are global markets creating globally minded companies? Bruce Kogut, a professor of management at the Wharton School of Business, answers this question in his review of The Myth of the Global Corporation. The book, written by Paul N. Doremus, William W. Keller, Louis W. Pauly, and Simon Reich, argues that multinational corporations are still heavily influenced by the characteristics of their home country. It focuses on differences in corporate governance and research and development, and it finds that multinational companies are generally not accessing a global technology base. Kogut agrees that these and other national differences remain a steep hurdle in the way of creating a corporate strategy, but he says they do not imply that national differences are actually undermining the global competitiveness of multinational companies. As goods and people move freely across borders, companies are increasingly able to compete on a worldwide basis without straying far from headquarters. And when countries open up to international trade and investment, the theory of comparative advantage indicates that their companies tend to specialize in whatever the country of operation does best. This specialization can actually strengthen national differences, not weaken them. In this new environment, Kogut says, managers and other leaders face a difficult balancing act. They must meet the demands for global convergence in economic institutions while supporting the national policies that undergird a nation''s distinctive competitiveness.

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Abstract

The current worldwide economic crisis illustrates how global the economy has become. But are global markets creating globally minded companies? Bruce Kogut, a professor of management at the Wharton School of Business, answers this question in his review of The Myth of the Global Corporation. The book, written by Paul N. Doremus, William W. Keller, Louis W. Pauly, and Simon Reich, argues that multinational corporations are still heavily influenced by the characteristics of their home country. It focuses on differences in corporate governance and research and development, and it finds that multinational companies are generally not accessing a global technology base. Kogut agrees that these and other national differences remain a steep hurdle in the way of creating a corporate strategy, but he says they do not imply that national differences are actually undermining the global competitiveness of multinational companies. As goods and people move freely across borders, companies are increasingly able to compete on a worldwide basis without straying far from headquarters. And when countries open up to international trade and investment, the theory of comparative advantage indicates that their companies tend to specialize in whatever the country of operation does best. This specialization can actually strengthen national differences, not weaken them. In this new environment, Kogut says, managers and other leaders face a difficult balancing act. They must meet the demands for global convergence in economic institutions while supporting the national policies that undergird a nation''s distinctive competitiveness.

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