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Über dieses Buch

About 10 years ago, the first very small steps towards this book were taken. The starting point was marked by the deep and sudden slump of the Swiss economy in the mid-seventies: a crisis wiping out about 10 percentage points of GNP and employment within just two years. To this writer, it was clear from the beginning that neither the exogenous shocks nor the struc­ tural changes were in fact exogenous or structural. They were given and sha­ ped by global forces. They were part and parcel of capitalist development. There is no other highly developed country in the world which is so ex­ tremely and integrally exposed to world-wide currents of financial and economic changes as Switzerland. The degree and dimensions of open­ ness ofthe Swiss economy led to the formulation of our research approach for studying the internationalization of the economy, a topic theoretically and politically developed in this book. Empirical evidence relates to our study of Swiss experience. A well-known Swiss-American economist offered the following com­ ment on our previous work on the internationalization of industry: "You are very good in raising interesting questions ..." What was undoubtedly meant as a criticism was received as a compliment. Too much talent and too many research efforts are, in my opinion, wasted by research programs which place technique over substance. This unfortunate development in our profession has already greatly reduced the social utility of economists.

Inhaltsverzeichnis

Frontmatter

Interdependency Through Internationalization in an Historical and Global Perspective

Frontmatter

Chapter 1. The “International Disorder”: Some Historical Digressions on the Structure of Global Interdependencies

Abstract
The highly visible political phenomenon which motivated the author of this book to undertake, structure, and carry out this study was the “growth of protectionism” in the global economy. We want to emphasize at the outset, however, that this investigation is not a study about protectionism in the traditional sense. While the general aim of our work was to examine the circumstances surrounding government policies which are aimed at protecting domestic economic activities from foreign competition, the specific goal was to study entrepreneurial response to these policies. Thus the particular object of our detailed research is New Forms of International Investment (NFII) and New Forms of Export Financing (NFEF), what is referred to jointly as New Forms of Internationalization (NFI). The rise and utilization of these new forms cannot be understood without reference to the current employment of protectionist policies by national governments in both the industrialized and the developing countries. At the same time our approach (moving from protectionism to new forms of entrepreneurial behaviour) enables us to situate political conflicts within a long-term historical context. Thereby we are able to identify dogmatic, ideological, and out-dated theories for what they really are and thus to identify patterns of inconsistency between domestic policies and global realities.
Silvio Borner

Chapter 2. Dimensions and Perspectives of Interdependence: Exports, Multinationals, and New Forms of Internationalization

Abstract
In the first chapter we demonstrated how the intensity and the nature of international interdependence has undergone radical and partly cyclical changes. This stands in sharp contrast to the basic tenets of the theory of “comparative advantage” as developed by Ricardo some 150 years ago. This paradigm is still not fundamentally questioned by main-stream economists — despite the following trends, which obviously fly in the face of its main assumptions:
  • The replacement or supersession of spot transactions at arm’s length by transactions within hierarchically structured international organizations and/or by contracts with mutual influence on the behavior of the “transactors” cum “partners”.
  • The replacement or supersession of international transactions with final goods and primary inputs such as raw materials, foodstuffs, energy, etc. by intermediate inputs (parts, semifinished goods, information, technical know-how, etc.) on the one hand and assets or rights to assets on the other (patents, licenses, capital equipment with embodied know-how, human and financial capital).
  • Fundamental changes in the political environment and thus the climate of national policy-making (dramatic increase in the number of trading partners, new industrial competitors from the NICs and the LDCs, the rise of protectionism and neomercantilism, etc.), as well as in the behavior of interest groups affected by international forces within different types of countries.
Silvio Borner

Chapter 3. Global Forces behind New Forms of Internationalization

Abstract
The transition process within the world economy has been dubbed a phase of “international economic disorder” (Helleiner, 1980) or a “non-system” (Williamson, 1985). This phase, following the break-down of the Bretton Woods exchange-rate system on the one hand and the weakening of the GATT-related free trade arrangement on the other, is leading to a new kind of world order. This new order, of course, resembles neither the phantom of the propagandists of a “New Economic Order” nor the ideals of free world markets for goods, services, capital, and resources of all kinds. Since both camps — “the new economic order propagandists” as well as the “free trade champions” — carry a heavy ideological cargo, some systematic clarification is badly needed. This is quite clearly recognized in the case of the first group, but quite often covered up behind the tenets of scientific objectivity in the case of the latter. At the government level there is a wide cleavage between the rhethoric and the deeds, but this is even more true of private entrepreneurs, many of whom are protectionist — if not in their minds then at least in their hearts. Specifically, some representatives of multinational corporations have shown strong resentment against “New Forms of Internationalization”, arguing that NFI are Trojan horses destined to serve socialist-inspired changes in the world economic order: away from a free and open market and towards bilateral bureaucratic arrangements. Do these entrepreneurs not see what is so evident and so aptly phrased by Caves (1982:36) that “forces restricting trade encourage foreign investment”? In a world of purely free trade, there would simply be no need and no room for multinational corporations. Their very existence is the consequence of market imperfections (mostly government restrictions on trade) and strategic potential (mostly monopolistic advantages). Caves’ verdict can be equally applied to the new forms. Forces restricting trade and foreign investment encourage NFI. NFI are the symptoms of these new forces, not exogenously imposed modes of international operations. Inasmuch as these forces are — from the point of view of the firm — detrimental to their interests, it is quite understandable that the managers affected resent these developments. But such a point of view does not suffice to reshape company strategy or to redirect economic policy.
Silvio Borner

Chapter 4. The Structural Adjustment Problems of the National Economy: Views on the “Competitiveness Debate” of Swiss Executives

Abstract
Before probing more deeply and more systematically into theoretical and empirical analysis, we close this introductory part with some views on the structural adjustment problems faced by Swiss industry. The views presented here were expressed by top managers from industry, banking, trading and consulting.1
Silvio Borner

A Taxonomy of New Forms of International Investment and Export Financing

Frontmatter

Chapter 5. New Forms of International Investment

Abstract
Our conceptual framework for research on New Forms of Internationalization (NFI) rests on a basic distinction between two fundamentally different forms. On the one hand we investigated New Forms of International Investment (NFII) and on the other hand New Forms of Export Financing (NFEF). Both are aimed at reducing the transaction costs of internationalized entrepreneurial activities, that is, at reducing the transaction costs of the two classic forms of internationalization: exports and direct foreign investment (DFI). In fact, exports and DFI can be conceptualized as polar opposites on a continuous spectrum of forms of internationalization which in some way or the other are a combination of these two “pure” forms. More specifically, all New Forms of Internationalization are designed to serve the following purposes:
  • — internationalizing profitability of the core skills of a particular entrepreneurial unit or firm
  • — internationalizing various business activities and services
  • — internationalizing marketing strategies
  • — overcoming protectionist regulations and other barriers to trade.
Silvio Borner

Chapter 6. New Forms of Export Financing

Abstract
Barter is certainly the oldest form of international economic exchange. The following definitions of barter serve to situate barter as one form of minimizing the higher transaction costs of bilateral exchange in comparison with monetized exchange. (For the legal aspects cf. Fontaine 1982 and Jackson 1969.)
  • — “Barter is the direct exchange of goods between an East European and a Western partner. There are two important differences between barter and all otherforms of countertrade: no money changes hands and no third party is involved.” (Business International 1984 a: VI-3).
  • — Barter is the “échange direct et simultané de marchandise de valeur équivalente qui ne donne lieu à aucun réglement financier ou transfert de fonds et fait l’objet d'un contract unique.” (Aceco 1983:27).
  • — “Barter is the exchange of goods or services between two parties without resort to money-swapping.” (R. Weigand 1980:34).
  • — “‘Classical’ barter denotes a once-only transaction which is bound by a single contract that specifies the goods to be exchanged to an equivalent value. Of all forms of countertrade it is the closest to the traditional pure barter, except that today money is normally used.” (G. Banks 1983:160).
Silvio Borner

Economic Theory and New Forms of Internationalization: Toward the Synthesis of a General Model

Frontmatter

Chapter 7. Introduction: Synopsis of Theoretical Development with Regard to Trade, Foreign Direct Investment (FDI), and New Forms of Internationalization (NFI)

Abstract
Vis-à-vis the problems raised in Part I and the great variety of international business operations described in Part II, the state of the art in economic theory is highly underdeveloped and therefore unsatisfactory. The main reason for this is the nature of the research strategies which currently dominate mainstream economics. These strategies deviate from a useful approach to theory building in the following ways:
  • by trying to transform political economy into an axiomatically based hard science
  • by setting standards of rigour and relevance which are based on the sophistication of the statistical methods applied and the robustness of the results obtained
  • by squeezing history as well as the study of institutions out of the research agendas.1
Silvio Borner

Chapter 8. The Transaction Cost Approach to New Forms of International Investment (NFII)

Abstract
“It can be assumed that the distinguishing mark of the firm is the supersession of the price mechanism.” (COASE 1937:389). This is a very pragmatic position and does not mean that the existence of firms is a response to market failures. Rather “the main reason why it is profitable to establish a firm would seem to be that there is a cost of using the price mechanism.” (COASE 1937:389). In other words, the utilization of the market simply has its own costs. ALIBER (1983:248) argues that COASE has identified the motive for a firm’s growth: “Firms expand and grow because the costs of avoiding the use of the market are less than the costs of using the market.”
Silvio Borner

Chapter 9. The Transaction Cost Approach to New Forms of Export Financing (NFEF)

Abstract
In this chapter it is our aim to show that New Forms of Export Financing (NFEF) are not merely an inefficient inversion of the long-term historical trend away from barter and toward a monetarized economy. Rather, it is our task to show that NFEF can be explained rationally by the transaction cost structure of the international market economy. Analogous to the theory of MNE, most economists interpret the existance of NFEF as the result of so-called structural market imperfections, such as protectionist measures. Though it is impossible to draw a sharp line between structural market imperfections and efficient barter arrangements, it is essential to recognize that — unless we ignore all transaction costs — NFEF are not a priori a second best solution. In the context of the international market economy contractual arrangements — NFEF — must be seen as one element of a coordinated and rational entrepreneurial strategy to maintain and increase competitiveness.
Silvio Borner

Chapter 10. Competitive Advantage and Technological Change from the Strategic Perspective of the Firm

Abstract
So far, we have analyzed fundamental changes in the nature of global economic, political, and technological forces which are leading to multidimensional interde-pendencies cum internationalization. We also looked closely at the theoretical interpretations of international business operations, ranging from classical exports to classical FDI and in-between including the whole spectrum of NFII and NFEF. At this point, we want to focus on the concepts developed to explain NFI from the strategic perspective of the firm. We see the firm as the main actor in the field of technological change on the one hand and of international business operations on the other. It is obvious that our synthesis of NFI theory has rather severe implications for the concept of “competitiveness” as well as for policies to foster competitiveness.
Silvio Borner

Empirical Research on the Impact of New Forms of Internationalization on Swiss Industry

Frontmatter

Chapter 11. Empirical Research Concept and Data Base of our Swiss Study

Abstract
The empirical part of our study follows an even more modest approach than that followed in the previous theoretical and conceptual chapters. In our modern age of statistical sophistication and ready-made data-bases, empirical research has become even more routine than theory building. The weakness of theory in the field of international entrepreneurial operations is not only a consequence of the high degree of complexity and the rigidity of dogmatic-axiomatic model structures. Probably the most important impass to research is the almost total lack of data, or simply, of information. Modern technologies of computation and “informatics” have taught us how to build, service, and use existing data. But they remain more or less mute when confronted with the task of generating information, especially of generating from scratch data on new phenomena.
Silvio Borner

Chapter 12. Case Study Results

Abstract
Our case studies were not designed to provide a representative profile of the internationalization process in Swiss industrial firms. Rather, we focussed on single forms of foreign operations carried out by individual firms and examined why these forms were strategically selected and how they were put into practice. The case study sample consists of 13 firms, representatives of which had already filled out our postal questionnaire: one from the textile branch, five from chemicals and pharmaceuticals, and seven from machinery and electrical goods, whereby four of the latter produce electronic or telecommunications equipment. There were 10 medium-size firms — with between 50 and 499 employees — and three large companies — with over 500 employees. One of the firms could be considered to be a small multinational. The export share of our case study sample differed from that of the written survey: for chemicals and machinery it was lower, while for the textile firm it was above average.
Silvio Borner

Chapter 13. Results of the Survey on New Forms of International Investment (NFII)

Abstract
Of the 272 firms which returned the questionnaire, 230 firms - 85% of the respondents — reported export activity. An additional 4% were planning to export in the near future. 94% of the exporting firms made sales in Western Europe and/or North America, 37% in the developing countries, 15% in the NICs and Japan, and 14% in Eastern European countries. The unweighted average of exports as a percentage of total turnover (1983) was 56%. A fourth of the firms which returned the questionnaire showed an average export level of under 20% and another fourth of over 80%. 29% of the small firms, 48% of the middle-sized firms, and 63% of the large firms exported over 60% of sales. The intensity of export activity clearly increases with the size of the firm. Table 13–1 compares the export activity of firms in our sample and the export activity of Swiss industrial firms as a whole.
Silvio Borner

Chapter 14. Results of the Survey on New Forms of Export Financing (NFEF)

Abstract
In this chapter we present, analoguously to the preceding chapter on NFII, the empirical findings on countertrade as derived from the answers to our written questionnaire. The data is presented in both graphic and tabular form.
Silvio Borner

Chapter 15. Results of Surveys of Swiss Multinationals

Abstract
Switzerland is not only a country with an extremely high export share of 40% but also a very important home country of multinational corporations with very high levels of FDI. In blatant contrast to the extensive export activities carried out by all sizes and types of Swiss firms, Swiss Foreign Direct Investment consists almost entirely of the foreign operations of only about 50 multinational corporations whose headquarters are located inside Switzerland. With our first survey (1980) of the 15 largest Swiss industrial corporations — all with total sales in the billions of Swiss francs — at least 80% of Swiss industry’s foreign personnel and production was accounted for.1
Silvio Borner

Synthesis: Conclusions and Recommendations for Economic Policy and Business Strategy

Frontmatter

Chapter 16. A Framework for the Evaluation of New Forms of Internationalization (NFI)

Abstract
At this point of our analysis, we reach a crucial crossroads — if not a dark and blind alley. We should take the step from analysis to evaluation — and this poses very different but very difficult problems. The first is related to the question of perspective or point of view. From what perspective and with whose particular values and interests in mind do we evaluate NFI? A second major difficulty arises when we have to decide on the measuring rod for the efficiency and equity of NFI. What are the alternatives to NFII and NFEF in the world in which we are living?
Silvio Borner

Chapter 17. Recommendations for Private Business Strategies

Abstract
Our main theme has been the disintegration of global structures and worldwide institutions, primarily at the political level. But the other side of the coin is the multidimensionally increasing internationalization of MNE and SME business operations. At various points in our report we pointed out how internationally operating firms display innovative and efficient modes of organization, modes of organization capable of transferring technological knowledge and firm-specific ownership and internalization advantages abroad — despite the rising barriers to classical trade and investment. The constituent elements of a corresponding NFI strategy are summarized under the following four headings:
  • Transactors: Enterprises of various characters and sizes, equipped with specific skills and trying to create value via a multitude of activities/functions.
  • Object of transfer: Complex bundle of goods, assets, rights, financial capital, and human capabilities.
  • Form of transaction: Spot exchange on open markets (export sales), transfer of capital and technology within property-controlled MNE (FDI), and/or contractual forms of sharing firm-specific competitive advantages (NFI).
  • Strategic options: The basis of firm-specific competitive advantages (core skills), their functional and geographical internalization within a structure of market relations, hierarchies, contractual ligatures (scope), and modes of effecting value-creating (profit-maximizing) transactions within and without the managerial organization (form).
Silvio Borner

Chapter 18. Recommendations for Economic Policies at the National and International Levels

Abstract
Internationalization is a complex phenomenon with cultural, geographic, technological, social, political, and economic dimensions. English is becoming the global language; western mass media represent (and even create) the global tastes of consumers; modern technology produces global products (such as cars), as well as global threats to the natural environment and to world peace. In this concluding chapter only the social and political consequences of the internationalization of firms will be analyzed.
Silvio Borner

Backmatter

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