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Thursday, June 15, 2006

End of Colonial Empire Companies, At Last?

IBM's Sam Palmisano calls for a change in the structure of multinational companies - stop being colonial East India type companies in order to reduce anti-globalizers ire. The classical colonial companies are multinational companies that currently do research and development in developed countries and make and sell wares - cars to TVs - in developing countries. He gives GM, Ford, and IBM as examples. But there are plenty more - from European to Japanese companies.

Palmisano wants companies to be full integrated globally with R&D everywhere and manufacturing everywhere – in a globally integrated model. Justifying his recent announcement of spending $6 billion in R&D in India, Palmisano thinks that is the only way big business can keep both the anti-globalizers and developing countries protectionist instincts at bay.

“The globally integrated enterprise is an inherently better and more profitable way to organise business activities – and it can deliver enormous economic benefits to both developed and developing nations." Link

Palmisano also had an assay in May/June 2006 issue of Foreign Affairs on Globally Integrated Enterprises.

In many ways, this is already happening. Intel and other major IT companies are designing small part of chips and software in India, China, Russia, and Israel. But there are many more companies, such as pharamacutical and biotech, that do not. Hopefully Palmisano's call will embolden these companies to distribute R&D and manufacturing more evenly based on their geographical markets.

Also, I wonder what he plans to do about the protectionist instincts of developed countries already in full force in Europe and budding in US. And what about the protectionist instinct of developing countries like China and India if their companies want to design and do research in developed countries - this probably is less of a concern because so little of it happens now in their own countries.

National barriers are breaking down, at least in business world. May be not for too long. Naill Ferguson, that Harvard and Oxford economic historian, the British historians (apparently most other British professors) love to hate, has written a book, The War of the World: History’s Age of Hatred, that tries to show there may be signs that all the globalization hoopla may be coming to end with nation state reigning supreme once again in the near future (a not so favorable Economist of the book is here - link). More about that latter...