Author Abstract
This working paper explores long-run patterns in the strategies of international business in developing countries. There was a massive wave of Western multinational investment in the developing world during the first wave of globalization before the 1920s. The subsequent decades of de-globalization saw the proportion of world FDI in developing countries sharply decline, and it has remained far below pre-1914 levels during the second global economy beginning in the 1980s. This working paper shows how management strategies were shaped by context in each historical period, which provided a mixture of opportunity and risk. In the first wave of globalization, MNEs sought access to resources, and governments frequently gave them exclusive contracts and favorable deals in order to build businesses. The major management challenge was to overcome logistical challenges to enable minerals and other commodities to be exported into global value chains. During the Great Reversal, the main challenges faced by MNEs were political. Firms needed to build political contacts with assertive host governments and attempt to strengthen their local identities, especially by localizing their managements. There was little need to adjust products to highly protected markets or respond to limited local competition. In the contemporary global economy, political risks partially declined with the spread of liberalization and the abandonment of anti-foreign restrictions. However corporate strategies needed to carefully manage relations with governments. Emerging markets, or at least the larger and more fast-growing ones in Asia and Latin America, were increasingly seen as indispensable by MNEs in every industry. They were both a place to assemble manufactured goods and locate activities in the lower end of global value chains and a fast-growing market. There was a growing need to incorporate local relevance into global products and to respond to local competitors.
Paper Information
- Full Working Paper Text
- Working Paper Publication Date: September 2017
- HBS Working Paper Number: HBS Working Paper #18-020
- Faculty Unit(s): General Management