Firm Transformation in an Increasingly Integrated World

By Peter C. Evans, PhD

New Developments in Enterprise Analysis

The last significant large-scale dataset to explore how firms operate internationally was the Harvard Multinational Enterprise Project. This project, which began in mid-1960s and ran through the 1970s, carved out an academic research agenda that helped shape a new generation of business school curriculum as well as inform the broader public policy debate over the role of the transnational enterprise. While the project was immensely influential, it was also very labor intensive, requiring pains taking tabulation by dozens of faculty and graduate students.

 

Much has changed in the intervening years, both in terms of the enterprises that operate today and the tools that can be deployed to better understand them. One major change is where some of the largest companies hail from. Thirty years ago, New York claimed the highest concentration of big company headquarters. That distinction has now shifted to Beijing. There are now 48 CEOs based in Beijing running companies with revenues of over $20 billion. By contrast, New York proper now hosts the headquarters of 18 companies falling within the same category. On a global basis, the significance of large enterprises has continued to grow with the 500 largest enterprises generating more than $30 trillion in revenue or approximately 40 percent of world output in 2012. Another significant change is the availability of internet and big data analytic tools that can be applied broadly to the study of these enterprises.

 

revenueByCity

 

Pankaj Ghemawat is among a new generation of scholar’s looking to tap these tools to advance our understanding. He is Professor of Global Strategy at IESE Business School and Distinguished Visiting Professor of Global Management, Stern School of Business, New York University. A prolific writer, his books include Commitment, Games Businesses Play, Strategy and the Business Landscape, Redefining Global Strategy and World 3.0.

 

At a recent event hosted by the Center for Global Enterprise (CGE) and the International Academy of Management (IAM) in New York City, Ghemawat argued that there is a pressing need for robust research that executives can rely on based on a large-scale empirical fact base. However, as he pointed out, most enterprise research today is too narrowly framed to provide broad and clear guidance to executives. A quick scan of HBR’s website confirms that while there is a large amount of research produced on firms every year few drawing on large global data sets.

 

His recent work seeks to correct this gap. One initiative involves studying national diversity across a large number of firms. His analysis finds that only 12% of the world’s Fortune Global 500 are run by a CEO who comes from a country other than the one in which the company is headquartered. The figure for firms’ senior management as a whole is only slightly larger at 15%. This raises to important questions as the world continues to globalize. For example, will the lack of national diversity at the top create disadvantages in terms of missed opportunities and cultural missteps?

 

New computational tools now support more complex analysis, including the ability to explore interlinkages between enterprises involving thousands of data points. The idea that enterprises comprise dynamic networks has been a part of the business literature for some time. One example is the highly cited work by Sumantra Ghoshal and Christopher Bartlett, “The multinational corporation as an interorganizational network,” published in the Academy of Management Review in 1990. While this work provided a valuable conceptual advance, it lacked the visualization and computational techniques required to push the analysis to a point where it could be readily used by executive teams.

 

One scholar working to fill this gap is Rahul Basole. He is an Associate Professor in the School of Interactive Computing at Georgia Tech, Associate Director of the Tennenbaum Institute, and a Visiting Scholar at Stanford University. He impressed the CGE-IAM audience in New York with a demonstration of a visual enterprise intelligence tool that can map enterprise network dynamics. The example he showed of the rapidly changing mobile telecommunications industry illustrates how management science and computer visualization can be brought together to reveal patterns of competition and alliance formation within a particular sector. It also shows the value of moving beyond conventional thinking about enterprise boundaries and linear supply chains and what this can tell us about business models, strategies and innovation.

 

Mapping the Mobile Industry Network
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Source: R. Basole, 2014.

 

These efforts point to a new wave of research that is both relevant to the changing business landscape and new developments in enterprise analysis. The timing couldn’t be better. As the pressure mounts for enterprises to become more globally integrated and to create new value, the demand for new analytic tools and methodologies will only grow.

 

 

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