Strategy+business interviewed Professor Doz in Paris.
s+b: The proposal of a new corporate model, the metanational, suggests that the old multinational model has run out of gas or is in some other way obsolete. Why?
DOZ: I think it is increasingly true that if you take the more traditional models of multinationals, they are running slightly out of steam. They have become a bit self-defeating, and I think that there are several reasons for it.
One is that there has been growing knowledge dispersion. There are more and more places around the world where interesting things are happening market-wise, where interesting innovations, technologies, and knowledge are being created; and relatively few multinational companies have recognized this growing knowledge dispersion. Most tend to rely too much on their home base as the fount of knowledge and the source of innovations, and to ignore the potential of tapping the world for pockets of specialized knowledge, and of bringing that knowledge together to fuel innovations. It’s a major missed opportunity.
A second reason is that the people who are criticizing globalization, the people who demonstrate in the streets of Genoa or Seattle, have a point, which is that the idea of globalization was basically specialization in trade based on comparative advantage, where everyone would excel in what he or she does best. But instead, increasingly, global companies are really scanning the world for cheaper and cheaper labor sources on the one side, and on the other looking for new markets wherever they develop, and serving them with a relatively undifferentiated approach from the one they use at home. So in that sense, the people who complain about exclusion have a relatively strong point. This centralized global form of multinational expansion is just not going to be able to work forever. The multinationals are going to run into increasing social tensions and increasing political strife.
s+b: You used the term “self-defeating.” Self-defeating because they ignore this dispersed knowledge?
DOZ: No, self-defeating for two reasons. Partly because, albeit unwillingly, they are to some extent agents of dispersion. If you go back to the classical economists who looked at international trade, the whole idea of globalization was more or less reciprocal, where various locations in a circle of exchanges would provide the others with labor and markets on a relatively stable basis. But what you find in lots of industries are companies that are locked into global races and cannot really do much except basically follow a very migratory, and imitative, search for cheap labor. They move from Malaysia to Mauritius to Madagascar.
On the other hand, there are countries and governments that for the most part haven’t really been very strategic in their dealings with these companies. So they themselves are migrating from industry to industry, as each in turn seeks cheap labor. You don’t see these governments upgrading the local educational institutions, or upgrading the local capabilities and infrastructure, so they can move from shirts to consumer electronics, to specialty electronics, to product development, to science, to whatever. So there is this dangerous situation in which high-value innovative activities remain in the home country and the lower-value activities, mostly manufacturing, migrate from one part of the world to another.
That system might still work if the governments involved were competent in terms of raising the knowledge level while the companies lower the cost level. Then the race to the bottom among companies would be matched by a race to the top among countries or locations.
s+b: Is there a company that serves today as an exemplar of the metanational strategy, or do you have to look to multiple companies for multiple elements of it as you do in From Global to Metanational?