Multinational Corporations in Political Environments

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Haley makes the argument that extant theories of the multinational firm (1) consider multinationals .... Reviewed by Jay B. Barney, The Ohio State University,.
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gal system, there is less need to keep such nomics. They execute this part of the book quite knowledge within firm boundaries. There is well, and most readers will regard this emphamore willingness to trade because there is less sis as the book's most defining narrative feature. of a concern about one party's exploiting inseThe book also reflects another defining narracure property rights. tive feature: the authors' manifest desire to be Second, the growth of specialized facilitators true to their central phenomenon. Every large enables the international spread of chemical theme is matched by very detailed examples of plants (see particularly Chapters 7 and 8). Third particular transactions and the market circumparties facilitate diffusion of first-world technolstances mediating those transactions. The book ogy into developing countries. For example, spealso contains a generous sampling of data cialized engineering firms contract for the rights about technology markets, which is done well. to build production facilities associated with Finally, as advertised in the title, there is also specific chemical compounds. This contracting some discussion about corporate strategy—that enables the efficient location of chemical plants is, tradeoffs shaping deliberate and observable throughout the world, closer to raw materials or corporate conduct in existing markets. However, end markets. the emphasis on economic analysis takes priorLarge firms with fertile labs, such as Dupont, ity. Analytical description usually trumps strano longer feel compelled to do all their own tegic prescription. To a reader with a consulting production. Broadly, large multinational firms background, the strategic discussions will feel find it profitable to license out the patented inincomplete.. ventions of their R&D laboratories. These are In other words, to get the most from this book, privately profitable transactions, yielding revereaders need to come to it with the right expecnue with only minimal enforcement costs. On a tations. The book arms the reader with analytigrander scale, licensing also facilitates faster cally broad and imaginative insights about ecodiffusion of invention out of the laboratory of nomic conduct in technically intensive markets, origin. but it does not offer precise advice about how a Third, the new industrial structure also firm should align strategic priorities. The auchanges the nature of technical change (see parthors expect the informed reader to decide about ticularly Chapters 4 and 9). Third-party support their own best course of action. facilitates smaller firm development. Venture capitalists, financial intermediaries, and other legal staff support a fluid market structure, comprising many small and niedium-size firms. Re- Multinational Corporations in Political latedly, because firms are freed of an incentive Environments, by Usha C. V. Haley. to vertically integrate in order to exploit technolRiver Edge, NJ: World Scientific, 2001. ogy, upstream economies of scale do not necessarily lead to concentration of supply in adjaReviewed by Candace Agrella Martinez, University of cent segments. Illinois at Urbana-Champaign, Champaign, Illinois. Consequently, many scientists and engineers no longer anticipate working their entire lives In Multinational Corporations in Political Enfor large firms. Their knowledge base is less vironments, author Usha C. V. Haley's stated specific to an organization, and they make their objective is to propose a theory of how different employment decisions with the anticipation of stakeholders' values and ethics shape multinamore future mobility. This results in different tionals' strategic leaving behaviors. Haley R&D investment by both firms and employees. makes the argument that extant theories of the Overall, economists, managers, consultants, multinational firm (1) consider multinationals and business professors who work in R&Dstatic entities that bring about change in host intensive markets will recognize parts of their states and (2) use the multinational's reasons for own experiences in this book. Most will appreentry to explain its reasons for growth, decline, ciate seeing the big picture. To be sure, howand overall relations with stakeholders. Haley, ever, this type of academic work is not to everyhowever, sees a more dynamic role for multinaone's taste. The authors employ the tools of tionals. She proposes that a multinational's bebusiness economics, with an emphasis on ecohavior is more like,a chameleon than a cata-

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yt—that is, it not only causes change in others but also metamorphoses itself in relation to its environment. The book is divided into five parts with a total of nine chapters. In Part I (the Introduction) Haley delineates the scope of the book. In Part II (Chapters 2, 3, and 4) she looks at multinationals as catalysts. Theoretical explanations dominate Chapters 2 and 3. In Chapter 2 the author examines extant theories that explain multinationals' entry modes as they relate to stakeholders, and in Chapter 3 she provides an exhaustive review of the literature on how firms make decisions, using a critical lens as she reassesses scholars' contributions to further understanding how multinationals and the environment change. In Chapter 4 Haley briefly brings the discussion to South Africa. She highlights what she views as the lack of explanatory power of existing theoretical and empirical literature by providing a snapshot of the performance behavior of five U.S. firms in South Africa in 1987, as well as their staying power. The author concludes that past research can account for the exit strategies of only two of the firms, and she claims that theories to date have failed to differentiate multinationals' modes of leaving. She then goes on to describe the five different ways firms divested of their assets in South Africa. These range from total liquidation and sale to South African or European companies, to sale to another U.S. company, sale to local management, and formation of trusts. In Part III (Chapters 5 and 6) Haley begins to flesh out her thesis. Within the conversation of the multinational firm as a dynamic organization that develops over time, she describes, in Chapter 5, the shape this development takes. She derives three forces (technical efficiency, ideological, and political) from theories of environmental determinism, purposeful action, and power. Chapter 6 is pivotal. Here Haley lays the groundwork for her chameleon approach to ascertain why multinationals leave host states, presenting a political action framework, explaining the underlying logic of the theory and its key constructs, and positing twenty-one hypotheses. Haley argues that this framework is an appropriate one to explain how managers act (their perceptions and motivations) and to implement strategies for the development (i.e., including the potential exit) of the multina-

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tional. She introduces the important constructs of voice actions and exit actions, defining them as two categories of stakeholders' actions that are able to capture changes in stakeholders' value structures. Multinational headquarters (HQs) take center stage both in the political action framework and in the posited hypotheses. HQs coordinate the three processes (technical efficiency,, ideological, and political) that provide the inducements for stakeholders. Haley's chameleon theory states that in multinational systems HQs provide the life support that maintains homeostatic equilibrium. As the dependent variable in most of the hypotheses, HQs' actions to increase or to decrease a subsidiary's presence in South Africa form "regulatory mechanisms," which, in turn, spark small changes, inertia, or metamorphic changes. Haley argues that multinationals in South Africa engage in symbolic activities and deception in order to ward off stakeholders' influences. Chapters 7 and 8 compose Part IV. In Chapter 7 Haley describes the study's methodology. She gives a succinct overview of the political, social, economic, and business climate of South Africa in the years of her study (1984-1987), lists the 322 multinationals in the sample (those U.S. multinationals in South Africa that owned 10 percent or more of active South African subsidiaries or affiliates in 1984), defines the operationalization of the main variables in the study, and, finally, explains measurement procedures and identifies the data sources. Twenty-one hypotheses require many tables to illustrate the various correlations, t-tests, logistic regressions, and analyses of variance. Chapter 8 includes them all, presenting a brief explanation of the statistically significant results. In Chapter 9 (Part V) we learn about the study's theoretical and strategic implications, as well as the author's understanding of the meaning of the main findings. Overall, the results were inconclusive. While the study confirmed certain effects that led to influencing whether multinationals stayed in South Africa or not, both in periods of regulation and no regulation, other results were "resounding nonfindings." Haley is to be applauded for tackling such a complex issue head-on. She does a thorough job of explaining the gaps she sees in extant theo-

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ries and cogently posits why she believes these theories fall short both in explaining what mode firms chose to leave South Africa in the mid 1980s and in predicting what mode would be chosen in another empirical testing ground (such as she illustrates in her mini case studies of Nike and Myanmar). A more fertile context in which to highlight the chameleon theory is hard to imagine. One of Haley's most salient contributions is the template she provides in Chapter 5, showing the interaction of stakeholders, stages of a multinational's growth, and the forces for development. At the intersection of these three groups of actors, she has posited a set of rationales for organizational development that can serve as a point of departure for future empirical studies. While Haley's hypotheses are well thought through and the causal relationships, theoretical underpinnings, and underlying assumptions of her theory are duly explained and contrasted with other theories, a few constructive suggestions can be offered. The author dedicates a scant six pages to "decoding the results." I believe a more in-depth discussion of what the various findings mean would have been helpful. The Myanmar example at the end of the book is insightful with respect to South Africa, but I would rather have seen some of its seven pages of narrative go toward more interpretation of some of the study's main findings. Another suggestion is that the author update her references. Over 90 percent of the cited references are pre-1990, and the more recent ones tend to be from the author herself or from the popular press. For example, although the author cites Dunning, she does not cite any of his more recent writings in which he extends the OLI paradigm (e.g.. Dunning, 2000). The author has the habit of peppering her arguments with phrases like "some theories," "most theories," and "the theorists," often without properly citing to whom and to what her references allude. Her discussion of theoretical assumptions (pp. 39-40) is an example. Instead of such sweeping references, it would be helpful for the reader to know exactly which "strategist theorists" and which "theories of the multinational firms" she means in the contexts in which she uses them. And, last, in such a complex and notorious business climate as that defining South Africa

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in the 1980s, there is a thorny undercurrent to the subject matter that the author chooses, perhaps wisely, not to address. It is about political correctness. Although Haley touches on the ethical quagmire that firms found themselves in and mentions the value systems of the stakeholders in their divergent claims in the power struggle to be heard, at the end of the day, we are left wondering about the more overarching, sociological implications of the multinationals' exodus from South Africa and its generalizability to other inhumane governments around the world. Did the choice of exit mode affect the country? Did it play into the hands of the white minority in power? Did it speed up Mandela's release from jail? Were there negative spillover effects for the black majority? Have multinationals historically "done the right thing" in a moral and ethical sense when the sovereign nation where they do business is accused of inhumane treatment? What is the role of the multinational visd-vis injustice? As with any thought-provoking piece of research, one is left with more questions than answers. REFERENCE Dunning, J. H. 2000. The eclectic paradigm as an envelope for economic and business theories of MNE activity. International Business Review, 9: 163-190.

Strategies for Electronic Commerce and the Internet, by Henry C. Lucas, Jr. Cambridge, MA: MIT Press, 2002. Reviewed by Jay B. Barney, The Ohio State University, Columbus, Ohio. Year after year the worriers and fretters would come to me with awful predictions of the outbreak of war. I denied it each time. I was only wrong twice (retired British Foreign Office employee who served from 1903 to 1950; quoted in Hughes, 1976: 48).

For the past ten years or so, technology gurus have been heralding the arrival of a new "golden age" based on the diffusion and wide application of internet technologies and e-commerce. The economy, these gurus tell us, will never be the same after the internet. Firms that were previously winners will become losers, new en-