National Business Systems Variations And Comparative Economic Performance Economics Essay

To what extent can Porter’s Competitive Advantage of Nations and Chandler’s Scale and Scope serve as guides for understanding the performance of national economies?

You are asked to write a report as a consultant, and to recommend whether to expand business or investments in particular economies overseas. You can choose ONE from the US, China, Japan, Germany or Britain as the home economy where the report is commissioned, and you can select TWO host economies from the remaining four countries.

You can choose the style and format of your assignment or report, but you should:

(1) An introduction or point by point summary;

(2) analyse the main issues, literature, debates or ideas for each question chosen, i.e. national competitive advantage, managerial enterprise, national culture, government, transnational corporations, and R&D;

(3) compare the competitive advantages and disadvantages of the two host economies and assess the lessons to be learnt with regard, depending on the question, to national competitive advantage, managerial enterprise, national culture, government, transnational corporations, and R&D;

(4) the relevant circumstances and evidence for the home economy in formulating a policy towards leading host economies;

(5) your specific conclusions and recommendations for the home economy’s response, including the prospects for extending investment and business relationships with host economies.

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Guidance on the main debates and issues in national competitive advantage, managerial enterprise, national culture, government, transnational corporations, and R&D:
The question contains 2 workshop topics below.
Presentation and Assignment Themes
The following is designed to assist you with content by pointing out the major issues, debates, and recurrent errors made by students.

For every topic, you are advised to answer the question directly and to outline in an introduction your suggested answer through an analytical structure.

Important Note: In every case, students are advised to refer to the guidance and analysis available in the relevant lecture.

1. Porter and National Competitive Advantage

What are the key issues, debates and problems with the ideas about the Competitive Advantage of Nations and the national diamond? What ideas challenge the Porter thesis, or what alternative theories provide better answers?
National competitiveness is not a theory but a check list that is a tautology. I.e. if you do certain economic activities well, you will do well economically. Or German chemical companies succeed because of Germany’s R&D base. But where did this base come from? Do national factors just appear in the diamond or do we have a theory of how differing factor and demand conditions arise?
Is there a lack of the historical dimension, supplied in part by Late Development Theory? How might this add to missing dimensions in Porter?
Why does Porter downplay the role of the state, given the historical importance of the developmental state in industrialisation and improving national competitiveness?

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Are factor and demand conditions purely national in their creation? Note Canada or Hong Kong, plus the role of the international economy and global webs (see Reich). How do we account for ideas about globalisation? The increasing role and success of MNEs/TNCs operating in various markets suggest that it is their ability to operate across borders and their scale and their resources that bring success, not the fact that they may be based in one country or region. MNEs are arguably more foot-loose and can choose between locations. Why else would governments now have policies to attract inward FDI?
Clusters do not evolve nationally and then gain international advantages, but develop in national and international markets in tandem. Clusters inherit global as well as national characteristics?

2. Transnational Corporations and Globalization

i. The notion of national clusters and the geographical locality of business fits uneasily with the ideas of globalization and footloose international capital. What are the current arguments about globalisation and its implications? You don’t have to argue that all industries and firms have global rather than national loyalties, or vice versa, as there will be variations. So, you can use real evidence to test the concepts and the breadth of their applicability.
ii. How truly international or global are multinationals? How much do they still trade in their home base? How much are they regional to Europe or Asia rather than truly global? Note here the recent work of Rugman.
iii. Why do MNEs/TNCs have a greater control of cross-border commerce, and why does FDI stock as a ratio of world output continue to grow? Why are the activities of TNC subsidiaries or their global value chains replacing exports from the home country? Why is inter-trade becoming increasingly important?
iv. How footloose is international business, or to what extent can they be controlled by the actions of nation states? The death of the nation state (Ohmae) is surely exaggerated. How powerful are TNCs by comparison? How is this related to ideas about the International Division of Labour?
v. To what extent do the advantages of operating in specific nations or clusters continue to influence the operations and strategies of international industries and TNCs? Growing importance of cross-border capabilities? Role of WTO and other IGOs, and role of international chambers of commerce and standards agencies and other NGOs?
vi. Is the paradox of clusters versus internationalisation a false one? Trade and FDI occurs because national systems and clusters do have varying strengths and specialisations that raise productivity but require exchange (as in traditional trade theory or ideas of comparative advantage).

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3. The State and Economic Policy

i. Business is influenced by each nation’s most important institution, the state. The state carries out important functions, such as education, macro-economic policy, legislation and regulation, and the building of infrastructure. In addition to these, the concept of the developmental state concerns the means by which governments have sought to improve national competitiveness, including protectionism, and (strategic) industrial policies. How however has the spread of market based policies and globalization constrained the abilities of governments to influence national economies? Or was their role previously exaggerated?
ii. Important tip: the focus is not on comparative government, but on comparative business and the ways in which the state shapes business organization, management, strategy and performance. You can mention areas of government action that are common or non-contentious in order to focus on areas of dispute or difference.
iii. Protectionism and non-market policies. Why have these declined in usage? Were they ever effective? Role of WTO, IGOs and free trade agreements in regulating economic relations between states?
iv. Education and training policies: do they have important outcomes?
v. Technology and R&D policies: have these become more important?
vi. Industrial policy and the developmental state: is this the major cause of difference? Is its usage now in decline and why?

4. Chandler and Managerial Enterprise

i. Keep the description of Chandler to a minimum, and focus on the key strengths and weaknesses. What is theory that suggests a relationship between strategy and structure? How do national patterns of managerial enterprise arise? Why is understanding this trend important to most of the 20th Century? Is Chandler’s analysis best suited to the US, and to the decades before the 1980s? Does Chandler have a one-best way approach that ignores different national contexts?
iii. Personal capitalism. Is this really something especially British? Does family ownership prevent the emergence of complex managerial hierarchies?

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iv. Business groups and networks. Chandler focuses on management and internal characteristics of firms. Yet business groups and networks have been important in the development and competitiveness of business in Japan and Germany, although the networks are very different.
v. Chandler is also critical of holding company structures in Britain, but not every industry encourages managerial enterprise as an alternative. Holding companies also give some of the advantages of business groups, and remain important to Europe generally. They are returning in Japan.
vi. Chandler believes that internal managerial characteristics in big business have national patterns, although this is questionable, and ignores the idea that national factors can shape management as well as management shaping national characteristics. Chandler ignores the state, financial systems, and labour. Moreover, the large size of the US economy gave greater returns to scale, and so increased capital intensity and outside shareholding, professionalization, and company size. In Britain, Germany and Japan historically, the size of the national market produced smaller sized enterprises, and therefore smaller teams of professional management.
vii. Manufacturing and market trends reveal changes in strategy and structure. For most of the 20th century, returns to scale and scope encouraged integrated managerial enterprises. Do more flexible technologies and segmented markets since the 1980s require different business structures? Why have Chinese firms been slow to adopt the Chandler model?

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5. Finance and Corporate Governance

i. To what extent are finance and governance systems converging and to what extent is the Anglo-US system becoming dominant? Have differences in the system, past and present, been able to explain comparative performance? How do you explain the success of the Japanese and German systems before 1990, and their comparative failure since? How do you explain trends in the UK and USA since the 1990s? How does the banking system operate in China, and how much has it transformed? What is the relationship between finance and corporate governance, and can we find a link between performance and governance? What do crises such as that of 2008 tell us?
ii. Think about stock markets, bank systems, ownership, business strategy and objectives, power/authority of management, long termism, investment in technology, machinery and people, or organizational capabilities generally and so on.
iii. Nature of ownership, governance and business strategy, corporate objectives
iii. Power/authority of management, nature of strategic decision making, nature of decisions on building corporate capabilities
iv. Investment in and management of technology, long versus short termism
v. Investment in plant and machinery, relationship to productivity
vi. Investment in and management of people, nature of HR systems
vii. Changes from before 1990 and after 1990, degree of relationship between performance and finance systems, forces of convergence and internationalization. Extent to which the crisis of 2008 has transformed the nature of the debate about finance systems and types of capitalism.

6. Late Development Thesis

i. What are the major differences in national business systems and institutions? What are the key issues in Late Development Theory? Outline quickly the main ideas and the mechanisms that lead to differences in national systems over time. What are the links conceptually between key institutional differences and LD Theory? Remember in this question to directly link the features of late industrialization (eg reliance on banks, role of banks, business groups) with specific institutional characteristics (stock markets versus bank financing, industrial policy, market relationships, long and short termism, etc). It’s a difference too between the evolution of different national institutions or business environments that encourage different approaches to strategy, organization and investment opportunities. Also, demonstrate an impact on performance, using statistics and arguments on how institutions favour/do not favour competitiveness.
ii. Remember too that the question is comparative, not just on Japan or China: but Germany as well as Japan; the so-called early industrializers like US and UK and the historical influences on them. Then, of course, how relevant are these ideas in a globalised economy, or to mature/developed economies such as Japan and German today, rather than yesterday; or how good an explanation now for China?
iii. Key difference in nature of business systems and in LD: the role of the state; the role of banks versus shareholding (impact of 2008 crisis?); business groups and vertical linkages.
iv. All the above concern national institutional differences or the context/environment/external characteristics in which businesses and managers are able to make decisions. How do they affect management, organization, and performance, or the internal characteristics of the firm? How does e.g. the nature of finance affect the planning of R&D, and therefore performance? Or long versus short termism? Impact on employment systems, management skills, education, investment, training, marketing systems, etc, as well as R&D? Does China fit the pattern?
v. The 1990s watershed. If business systems in the 1960s were effective, why do they fail in the 1990s, or vice versa? Does this mean that other factors are more important than the effects of LD? Or that what is true for the initital stages of economic development are completely irrelevant at a later stage? Why is China still booming as against Japan or Germany? The impact of 2008?

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7. Research and Development

i. R&D and technology as the engine of economic growth and the creator of new industries? How important is its role, or are there other institutional factors, such as management, finance, etc? Are there national R&D systems, or are large companies the focus of R&D systems? You need detailed industry level evidence, a notion of how technology becomes commercial innovation, and a sense of comparative differences, including outcomes. Focus on a key list of analytical topics: innovation versus invention, first mover advantages and strategy, government, national innovation systems, role of financial systems and corporate governance, managerial systems and corporate investment and strategies, nature of national industries, FDI and MNEs, but clearly you can’t cover all these topics one by one.
iii. Importance of technological borrowing against invention
iv. R&D and the large corporation (Chandler argument): case evidence?
v. R&D and the state: case evidence?
vi. Role of TNCs/MNEs and international transfer?
vii. Institutional environment, financial systems, education systems?
vii. Variations between sectors and firms more important than between nations?

8. Culture

i. The point is to understand various cultures and the literature on Protestantism and Confucianism, but to deal with it quickly, and focus on attributes with specific business implications (work ethic, education/training, thrift and finance systems/investment, emphasis long termism etc). Use real case examples to prove your points of differences. This is never a question just about Japan, or Confucianism, but must be comparative. Students must also be aware of criticisms of culture as an explanation of economic success. This is question with difficult concepts and a clear analytical structure and precision in argument are vital. The point is to show very quickly how vaguer ideas about national culture shape specific national business cultures and how these are linked to particular business systems and management, and the last should be the focus of your discussion.
iii. Work ethic. HR systems, hours of work, entrepreneurship and rewards. In this section, always give specific case/management examples. Don’t talk vaguely about culture or work ethic. The same applies to the following sections.
iv. Education/training systems – by state and firms.
v. Thrift. Saving ratios, finance systems, investment patterns, attitudes to waste.
vi. Long Termism. Are some systems of capitalism more long termist than others? Is this due to culture?
vii. Counterargument. Does economic growth and technological/organizational needs, as well as factory/office work and urbanization, change national/business cultures, and not vice versa?

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9. Human Resources, Education and Training

i. Human resources – investment or cost? Have HRs been a weakness in some countries? To what extent are systems converging? To what extent embedded, and what lessons are there from the transfer of systems? How do they explain competitive differences? Are there functional equivalents? The question demands case/company examples. What represents best practice, if there is such a thing. Are there national differences in HRM and training systems, or are differences more complex? Focus on key topics, such as industrial relations versus employment relations versus training/education, and, within them, topics such as collective bargaining/unions (IR) and life time employment (ER).
ii. Reforms in US and UK since 1980s? In Germany since 2000? Japan since mid 1990s? Reforms and recent employment laws in China, and increasing use of markets and migrant labour in China?
iii. Employment relations – management structures, job security, welfare/bonus schemes. Size of firms, and managerial enterprise. Internal labour markets. Life time employment systems.
iv. Industrial relations – trades unions, labour markets, works councils, company/enterprise unions, employer associations, and representation rights.
v. Work relations. Production and operations management. Line management and organization.
vi. Skills, training, education, productivity.
vii. HR as strategy by firms. HRs as investment. Institutional environment.
ix. How easy to relate HR and training systems to national economic success?

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By admin in Essays on November 21, 2016