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strategy and business
 / Summer 2004 / Issue 35(originally published by Booz & Company)


Recent Studies

Reversing the current wave of mistrust, the authors argue, requires profound changes in both corporate and management attitudes and behavior. Companies must move away from jealously managing corporate image or spinning the truth to influence public opinion and, instead, practice open and honest dialogue to build “trust equity” with the public. In addition, they must get beyond a singular focus on maximizing near-term shareholder value no matter the cost to society. Companies need to accept the idea that creating social capital boosts shareholder value in the long run. Companies should recognize that they are increasingly reliant on the goodwill and commitment of their most talented workers. In this environment, command-and-control leadership is ineffective, and listening to different viewpoints from every level of the corporation is required.

The report recommends three practical steps companies can take to begin to build their social capital, to help restore public confidence in business, and to use integrity as a competitive weapon:

  • Work with Wall Street analysts to develop new performance metrics that quantify a company’s trust equity.
  • Overhaul leadership development programs to reflect the new skills needed by top executives, including the ability to quickly understand the interests of diverse stakeholders — among them, employees, investors, the media, suppliers, communities, nongovernmental organizations, and regulators.
  • Systematically engage key employees and stakeholders in strategic dialogues that push people outside their “comfort zones” and encourage them to challenge standard ways of operating.

A World of Ideas
Daniel F. Spulber ([email protected]), “Competing in the Global Marketplace of Ideas,” December 2003. Click here.

Everyone knows intuitively that the globalization of business is rapidly expanding the marketplace for ideas. Yet academic research that quantifies this trend and explores some of its implications is only beginning to surface.

In this paper, Daniel F. Spulber, Elinor Hobbs Distinguished Professor of International Business at Northwestern University’s Kellogg School of Management, tries to quantify what he terms “global technology trade” by examining the number of patents taken out in the United States by non-U.S.-based organizations and individuals. Developed countries, in particular Japan and Germany, dominate most of the activity. In 2002, the Japanese registered 34,859 patents in the United States, and Germany registered 11,277. China registered only 289 patents, India 249, and the Russian Federation 201. Most African countries, which are struggling to join the global economy, are barely represented in this list of U.S. patents; only South Africa is noticeable, with 114 patents.

Professor Spulber has also tracked the increased globalization of corporate R&D. Intel, Motorola, and General Electric are among the corporate giants he cites that are performing major R&D activities in India and China. Ventures like these spur technology trade in licenses, blueprints, and industrial processes. In fact, the internationalization of R&D is partially responsible for new pacts protecting intellectual property, such as the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement.

Professor Spulber presents a three-stage model involving inventors from two different countries to better understand the growing international competition in technology ideas. In the first stage, the inventors introduce their innovation in their respective domestic markets and develop competing processes and technology. In the second stage, the two inventors either sell their discoveries to companies in their domestic markets, or if an international market exists for their invention, they compete to sell their discoveries globally. In the third stage, the companies produce differentiated, rival products based on the original inventions. The purpose of the model is to show the international competition among individual inventors, and how it eventually affects global technology trade among corporations.

What Professor Spulber describes is a free-for-all. Indeed, there is likely to be a host of similar or identical competing inventions emerging from different countries. And with knowledge being transferred rapidly and inexpensively to multiple suppliers of products and services, making sense of the market risks and opportunities becomes as much of a challenge as is actually conceiving the inventions themselves. For corporations, one of the new critical tests of creating value from innovation, posits Professor Spulber, is being able to manage and coordinate R&D globally to harness its full potential in this exciting but complex marketplace of ideas.

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