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 / Autumn 2007 / Issue 48(originally published by Booz & Company)


The Statecraft of Business

A corporate strategy informed by hegemonic stability theory follows the lead of the hegemonic nation and maintains substantial parts of its operations inside its big consumer markets. The hegemon offers extra advantages for corporations located within it or protected by it, advantages not accorded by market forces but obtained through political pressure. A company following a hegemony strategy makes sure that its branding borrows heavily from the symbols and images that the hegemon displays around the world. Its management structure fits with the hegemon’s, employing an often dominating leadership style.

Many American corporations — Halliburton is the most visible example — sought to gain from U.S. hegemony in Iraq after Saddam Hussein was deposed. Similarly, Chinese natural resource companies are benefiting from their government’s expanding hegemony in parts of Africa.
Institutionalism: Global Rules
Institutionalists favor rules, negotiation, and strong governance. Instead of competing against each other, states settle for cooperative arrangements. Under this approach, the United Nations Security Council manages peace and war; the World Trade Organization enforces rules of free trade; the Kyoto Protocol guides climate change regulations; the World Bank fosters global economic development; and the International Monetary Fund, among other things, promotes currency stability and cooperation.

The institutionalist corporate organization prefers to play by rules established by strong international regulators. It is a strong proponent of multilateral trade arrangements, international protection of intellectual property rights, and standardization of labor and environmental regulations. This type of company has a global supply chain and standardized products throughout the world. Its management structure is based on strong central administration and command structures.

Pharmaceutical, bioscience, and high-tech industries, which depend on consistent innovation and rigorous intellectual property rights, tend to view the world through the lens of institutionalism. They participate in shaping and championing international rules.

Liberalism: Social Order
Liberal thought assumes that societies, pressure groups, trade organizations, corporations, innovative entrepreneurs, and all the other actors that constitute civil society play an important role in shaping the global order. Societies engage in complex transnational interdependencies, driven by decreasing transaction costs, while the use of military force and power balancing — the realm of government — becomes less important. Liberals argue that the decline of military might as a policy tool and the rise in economic interrelationships should improve the chances for cooperation among states, a cooperation supported by increasingly powerful societal actors. Indeed, the information revolution has had a substantial impact on how nonstate actors, such as NGOs, can readily influence the beliefs of people in other jurisdictions and thus affect the global order.

Liberal corporations could be viewed as loose-knit “movements,” usually with flat management structures in which managers act as visionaries, setting the principles, but letting colleagues negotiate the details. In these companies, workforce diversity, cultural diversity, gender diversity, and social diversity are considered strategic assets, en­abling the business to respond to the heterogeneous demands of a global society. Liberal corporations produce global brands targeted at customer segments based on in­come position, rather than cultural identity.

Google is an apt illustration of a liberal company, because it enables Web users from any national background to search a culturally neutral database for information that suits their specific needs. Interestingly, Google and other electronic content providers are being strong-armed into compromising their liberal principles when they operate in hegemonic environments, such as the censored Chinese Internet.

Postmodern Anarchy: Fatalism
In this chaotic world view, the nation-state as anchor for global order ceases to exist, and political disorder is endemic. Government fails because it can no longer meet its core responsibilities — controlling its territory, providing safety and security, managing public re­sources, delivering services, and protecting the poor. Fragile states abound. The rule of law is nonexistent and corruption is widespread.

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