INTERNATIONALISATION,
MULTINATIONALISATION,
TRANSNATIONALISATION
AND GLOBALISATION:
A CONTRIBUTION TO DEBATE
Hubert Bonin,
Bordeaux Political Sciences Institute
and Montesquieu Centre for Economic History
(Bordeaux 4 University)
One current assertion of present times
settles that the world economy of the beginning of the 21st century has much to do with that of the
beginning of the 20th century, along the shape of its internationalisation; it should be now therefore:
“Globalisation II. The sequel”! We aren’t sure anyway that such assertion is so much the reflect of
reality – but our short essay intends especially to precise the dualist way along which globalisation has
to be defined, in order to avoid misunderstanding. Some definitions have to be set up beforehand,
but themselves should be discussed and precised owing to that very book… Internationalisation may
be understood simply as the openness of firms to international markets and flows. Worldwide expansion
requires a large development abroad through commercial or productive links so as that a strong
minority or a majority of a firm’s turnover relies on international activities; in that sense globalisation,
as Anglo-Saxons generally speaking understand it, assumes that companies manage strategies of internationalisation
to conquer markets shares on any continent and market area. That leads to multinationalisation:
multinationalisation or, more and more used, transnationalisation, took shape through
the dispatching of subsidiaries or productive and services units in foreign countries, whereas the core
of the firm’s activities kept their basis in its original country. Management is getting more and more
international owing to the composition of its leaders’ teams, the choice of an official language for the
company, the centralised supervision of treasury and information systems. Anyway, along a restrictive
meaning and to stick to pure management, globalisation is a somehow recent trend that pushes
companies to reorganise their internal structures across borders and ‘national’ entities (becoming thus
‘regional’ at a world scale) and along managerial units that gather plants, services, laboratories, etc.
into sectorial entities managing skills and markets on a world level.
1. Companies’ internationalisation in the 1900-1930 years
Of course the Belle Epoque (about 1900-1914) and the roaring twenties benefited from a worldwide
expansion which provided numerous opportunities to firms to take part to the scramble
for new markets. A well known activity consisted with the importing of commodities and raw
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materials, which explains the trend of enterprises to invest abroad or even to launch specialised firms
to assume that task. A lot of trade companies were still active in these branches, especially British,
German, Belgian or French firms. Many more enterprises had developed broad exporting schemes;
wholesale traders – sometimes the same as the commodities importers, especially in Black Africa –
of course managed already large networks, in Black Africa, in China (Inchcape, Jardine &
Matheson, Swire) or in South America (Greenhill & Miller, Balfour Williamson, Antony Gibbs,
etc.) for instance. More discreetly but efficiently most large big industrial firms did entertain an
exporting policy – even if, within their country, they were sometimes adamant defenders of protectionist
lines… Great Britain, the ex-workshop of the world, and Germany exported thus consumers
goods and equipment items, and even complete plants. Schneider, Krupp, Vickers and Armstrong,
were main exporters of armaments; French firm Batignolles was a specialist in railway engines or
iron bridges; services firms had spread over their networks to many ports, railways, gas plants, electricity
plants, etc.
Foreign direct investment was more and more gathering momentum: Singer (sewmachines) and
Giraud (silk weaving) had plants in Russia; Belgian, French and British firms controlled several metallurgic
plants in Russian territories (Poland, Russia or Ukraine). French firms settled plants for consumer
goods in several countries: Citroën, the carmaker, was equipped in the 1920s-1930s with (lightly
equipped) plants in Great Britain, Italy, Spain (up to 1931 in both countries) and Germany, in
order to overpass trade barriers or reduce its transport costs – and the firm itself was importing numerous
car equipments from the USA (from Budd). Some industrial firms entertained true transnational
strategies, like Schneider in Central & Eastern Europe in the interwar. AEG, through Electrobank
and Deutsch-überseeische Elektrizität Gesellschaft, and else, was a leading internationalised firm;
Thyssen dared install plants in France itself just before the First World War (in Normandy, near Caen,
with iron mines). Besides exports of capital which will not be studied here, some banks got beyond
simple representative offices or branches abroad, earmarked to sustain import-export flows and
exchange operations, as they had developed ambitious programs of spreading networks abroad, generally
through subsidiaries or sister banks, like (French) Société générale in Russia with Banque russoasiatique,
the first Russian bank between 1910 an 1918. The dynamic strategy of French metallurgy
and electrotechnics Schneider company during the interwar does reveal the intensity of foreign
direct investment: after losing its links with Russian firm Putilov, its still controlled in central Europe
companies, in Poland and Czechoslovakia (Skoda) through a financial subsidiary, Union européenne
industrielle & financière, a holding entity and some kind of a bank too. Exports and imports, foreign
direct investment, were thus signs of the early internationalisation of the business world.
A. A real worldwide expansion?
Questions can be raised anyway about the patterns of that international strategy. First was it a
real worldwide expansion? In fact, what is striking is the fragmentary aspect of firms’ entities abroad:
a few countries were privileged, whereas others were somehow neglected, ever ignored. Key strongholds
or bridgeheads were established, without any ‘global’ point of view; opportunities were seized,
there and here, but rarely is it possible to pick up a worldwide and general strategy to prospect
systematically broad geographical and commercial areas; companies were specialist in some areas
(Black Africa, Latin America, South East Asia, Central Europe, for instance) but were not strong
enough to drive large amounts of foreign direct investment towards several of these areas at the same
time; perhaps only some German groups or alliances endeavoured such a strategy through financial
holding/bank subsidiaries but the effects of the First World War sanctions hindered that move.
Businessmen’s intents were to scramble for specific territories, along their company’s speciality,
abilities and history. Société générale (from Paris) chose Russia, for instance, Lloyds South America,
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Barclays Black Africa; Schneider central Europe but not Spain, Canada or American countries –
except for case by case exports of equipments. French firms were much active in the Ottoman
Empire, Egypt, some areas of China (Shanghai) but not systematically in Middle East or Southeast
Asia areas. Our perception might thus be more that of a puzzle than of a global map. It was an unfinished
“économie-monde” – a worldwide economy – if we consider the spreading of firms’ influence.
Our feeling might be reinforced all the more than some countries, in fact, trusted some of their
companies to be their paramount representatives abroad: French bankers left Banque de l’Indochine
assume the task of representing Paris in Asia, Banque de l’Afrique occidentale in Black Africa; overseas
banks like the ‘chartered banks’ bore the British flag abroad, like Hong Kong & Shanghai Bank
or BOLSA. Rarely was it that several firms of a single sector of any large industrialised country entertained
simultaneously a competitive struggle in many countries abroad – except perhaps for the
Mittelstand of the various early industrialised districts of Great Britain. We might pretend that is was
a limited worldwide expansion all the more than, up to the 1950s, a very few companies in each
country were in fact concerned with exports or foreign direct investments: still in 1957 only 6% of
the 2 800 American firms entertaining activities abroad controlled almost 80% of foreign assets and
turnover of that sample! In the 1950s-1960s a very light layer of French companies had set up some
strategy of exports or foreign direct investment, as many medium-sized firms were not yet interested
by such a move, conversely with many German counterparts.
Transitional moves can be detected anyway: some businessmen did sketch a multinational path
for their company. Besides some British and (up to 1918) German banks, such firms as Bosch, for
instance, Henkel, for Germany, like Philips or Unilever, several Belgian groups (Empain, Société générale
de Belgique’s sister or ‘godfathered’ companies in railway, electrotechnics or tramways), Solvay, did
maintain a strong line towards a real multinationalisation, through export networks or moreover
plants or subsidiaries – often hidden under local brandnames, owing to the purchase of companies
here and there. Some American firms began to spread over all over Europe and Asia – owing to oil
activities, to banks, to electrotechnics (in Poland for instance) – without evoking here their exports
and transfers of technology to U.S.S.R. in the 1920s… since the 1920s I.T.T. disposed thus of two
sister firms in France to produce telephone central equipments (C.G.C.T. and L.M.T.) as a way to
appear as a national producer and respect the concerns of French State towards national production.
French glass firm Saint-Gobain entertained a parallel strategy with sister companies in Italy, Belgium
and Germany since the second half of the 19th century, there too to overpass tariff barriers and transport
costs. Patterns of multinationalisation thus were already available, but they might appear as scattered
among a very few companies. And themselves were not structured along a strategic exploitation
for any markets available: here too the puzzle might look incomplete.
B. A rehearsal for globalisation?
This leads to the conclusion of that part: what about globalisation? In fact, only a very few clues
of globalisation are available among the business worldwide expansion of these times – if we do stick
to a managerial meaning of ‘globalisation’ and not only a geographical one. The Schneider group
could provide some of them: its internal money flows were structured under the umbrella of Union
européenne industrielle & financière; complementary activities were promoted between western and
eastern Europe plants and subsidiaries for some equipments, for instance in order to lower cost of
production sugar refinery plants were built in Czechoslovakia but sold by Schneider in western
Europe. One might imagine that the management of oil companies was early established along an
international way, for instance by Royal Dutch Shell or any American firm active in Europe, in
Africa or in the Middle East; the oil flows and the refinery process had to be managed on an international
level to prevent overinvestment or overstockpiling. Some international mood araised here
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and there through electrotechnics financial holdings which supervised international expansion in
Germany, Belgium or Switzerland; the German chemicals group IG Farben established in 1928 IG
Chemie Swiss as an umbrella for its activities abroad, helped by a new holding subsidiary in the
United States, American IG Chemical Corporation, whilst General Electric set up such a worlwide
subsidiary as soon as 1919. But IBM waited up to 1950 to imitate that way through its IBM World
Trade Corporation.
But it has been proven that in fact Ford and General Motors entities established in western Europe
in the 1910s-1920s had been for a long while (up to the 1960s) managed along a specific local point
of view, either in Great Britain, in Germany or in Spain, with very little economies of scale, without
an tough supervision from the US headquarters, except for transfers of technology, engineers and
money, and of course without any management on a West-Europe level; in the midst of the 1930s
Ford Germany severed its managerial and strategic ties with Ford Great Britain as it longed for a
stronger autonomy and because the new Nazi regime required a more nationalistic position from the
firms from foreign origins. In Western Europe IBM entities themselves kept their autonomy for a
long time and the sister company in Germany (Dehomag) played its own game in the 1930s-1940s.
Some globalised management could be detected through the development of cartels which tried to
organised capitalism sector by sector in Western Europe and sometimes on a transatlantic level, for instance
through the international steel agreements of the 1920s. Of course one example of globalisation
was the tempting management of productive resources within Nazi Europe in 1940-1944 owing to
Sauckel and Speer’s prospects – but along a very exceptional war line... Conversely the victorious Allies
set up the European economic cooperation system afterwar in order to manage and rationalise the
Marshall Plan money flows; but each country kept its own track to define the rebuilding strategy of its
industry, and no cooperation between firms themselves was imagined. Mergers and cooperations were
designed only within border (for French steel industry, for instance) without any crossborder schemes,
besides the single-minded tactics of firms which controlled subsidiaries over the border, like a few
Belgian companies in France. That splendid isolation was then all the more reinforced that protectionism
barriers reappeared strongly between 1945 and 1953 – the very date paving the way for the dismantling
of tariff barriers within the new European Community for coal & steel (C.E.C.A.).
2. Towards transnationalisation and globalisation (since the 1960s)
To assert thus that the 1900-1930 period of booming economy could be the rehearsal for our present
worldwide expansion or even globalisation might appear as somehow risky, of not deceptive…
Since the 1960s one might first assert that the main move toward globalisation had been undertaken
within the COMECON, as production and combines were somehow specialised among eastern
Europe countries: bus and coaches in Hungary, agricultural tractors in Poland, machine-tools
in Bulgaria, etc. But that rationalisation goes far beyond our present analytical prospect…
A. Transnationalisation without globalised integration
In Western Europe countries in fact, internationalisation and transnationalisation were led
without any globalisation on a first step. Big groups did scatter their plants and subsidiaries on any
key market as they completed a now systematic strategy to conquer market shares of the consuming
waves and the investment programs. But on most cases each subsidiary assumed its own tasks of
marketing and sales strategy, managed its own local trade-marks due to the purchase of local enterprises,
and, if plants had been established or bought, the management of production was generally
led on a local level. It was national management within transnationalisation – and Ford itself went
on likewise up to the 1970s.
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The respect of local habits of consuming, of nationalist mentalities, explained such habits, altogether
with the necessity to comply with tariff barriers, before the emergence of the Common
Market and its progressive enlargement. Unilever, Philips, Procter & Gamble, Shell, Esso, etc., for
instance, were managed along a fragmented strategy as any subsidiary was largely responsible of its
own management, of its insertion into the local specificity of the markets’ organisation, the national
networks of relationship with local authorities, with competitors and co-organisers of the real
market – among cartels or such informal entities, etc. For instance, the French group Rhône-
Poulenc’s subsidiary in Great Britain, May & Baker, lived its own life up to the 1980s and had lived
it since its purchase in 1927 and the other subsidiary in Brazil, Rhodia, seems to have floated the
same way of life since its creation in 1919 (with 12 % of Rhône-Poulenc’s turnover and 13 000
employees at the beginning of the 1980s). One might appraise similarly Saint-Gobain’s subsidiaries
in Germany (26 % of its global (glass) turnover in 1970), Italy (22 %), Spain (7 %) and Belgium
(6%) – the group itself providing 22 % of the world capitalist market. Along the same pattern each
of Chrysler’s subsidiaries in Spain (Barreiros), Great Britain (Rootes) and France (SIMCA, since the
1970s) followed its own path without any real integration of the productive processes or any economy
of scales. Whereas the German chemicals and pharmaceuticals group Hoechst possessed an
important subsidiary in the USA (launched as soon as 1953) and bought French familial firm
Roussel-UCLAF in 1968-1973 – whilst Hoechst France was still preserved –, no real integrated
management seems to have be developed to split activities and specialities all over the worldwide
company. Weak integration at the process level was thus the rule in numerous companies.
Within a majority of groups, from European or from North-American ownership, this way of
life perdured up to the end of the 1970s, sometimes up to the 1980s, generally speaking. Companies
had to be perceived as local companies and not as bridgeheads of so called (and often denounced)
“multinationals firms”, which could appear more as entertaining a nature of ‘financial holdings’ than
a substance of integrated and thus ‘globalised’ groups. Esso Standard France committed itself to
serve French causes – investing in equipments designed for the French market itself and trying to
discover local ‘Texas’ or oil deposits for instance in south-western France as it had to reinvest some
of its benefits in oil research in order to get taxes reductions. The specificity of commercial networks
had to be taken into account in each country, because of the structure of the distribution economy,
the habits of relationship between industrialists and retail traders, the management of a trademarks
portfolio, mixing international brandnames and local ones, as companies bought more and more
local middle-sized enterprises and kept alive their brands which met deep attractiveness among
consumers.
Moreover numerous cases show that firms had rather export patents than products as they didn’t
dare yet to launch huge commercial direct networks on some foreign markets: they sold patents to
alter ego firms whilst generally gaining from that latter rights for patents on exchange too: French
firm Rhône-Poulenc international development for pharmaceuticals followed that path for instance,
especially in the USA in the 1960s-1970s, even it exported in fact two thirds of its production
in the 1970s towards markets where it had acquired a good knowledge of local habits (Africa,
Middle East, Western Europe).
Of course intense sharing of technology, selling and marketing skills, exchanges of parts or semiproducts
were more and more developed. But no systematic industrial integration was to be set up;
in large countries each subsidiary or sister company used to encompass a broad range of products –
even if we may suppose that an important part of that range was fostered by imports from a sister
company from a neighbouring country. That was the case of IBM: its various large subsidiaries covered
too a large range of hardware products – among them ‘local products’ built in some large countries
and exported in some countries around: IBM France became thus one of the main French
exporters in the 1970s owing to its plants in Montpellier, Bordeaux and Corbeil (near Paris); IBM
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gathered its foreign activities under the umbrella of IBM World Trade Corporation in 1950 and its
revenues were raised from 40 % from these entities abroad in 1970; but no complete specialisation
occurred yet between the numerous plants of IBM all over the world or even western Europe as each
big plant entertained its own ‘regional’ outlets: “During the 1950s IBM’s foreign subsidiaries were
hardly co-ordinated at all. They were primarily concerned with tabulating machines rather than
computers, and they developed and produced different types of machines for their markets, as well
as manufacturing American models”, underlines G. Jones. The process of managerial globalisation
didn’t accompany yet the process of geographical globalisation.
As productive integration prevailed (against externalisation) at that times as production grew
rapidly, it explained their expansion of the number of plants all over Europe for several American or
paneuropean groups – these plants themselves exporting towards eastern Europe countries and
Middle East or Africa areas. Economies of scale were thus somehow not a priority within multinational
firms because the conquest of market shares prevailed, tariff barriers and non-tarriff barriers
(technical standards, etc.) still resisted – even if they began to be more and more dismantled (within
the Common Market) or lowered (because of the G.A.T.T. rounds) – for instance in chemicals,
pharmaceuticals or electronic appendages or systems. And huge forces resisted to transnational
agreements : in the 1970s for instance Citroën and Fiat failed to preserve their alliance; Philips,
Siemens and French Compagnie internationale pour l’informatique didn’t succeed in achieving their
Unidata project of merging their computer activities, whilst banks ‘clubs’ set up to prospect international
finance lost rapidly momentum…
B. Paths towards transnationalised flows
Since the 1960s and the 1970s some countries or regional areas appeared as privileged bridgeheads
for such a multinationalised system – as they were useful platforms with easy access for transport
and flows of raw materials and commodities, rich with skilled and available workforce.
Northwestern Europe ports harboured huge industrial platforms and welcomed many important
plants set up by multinationals subsidiaries: Besides its plants in Germany (Köln) and England
(Dagenham), Ford managed a large plant in Belgium (Genk) and Renault itself opened a factory in
Belgium (Vilvoorde). Of course some specialisation did take shape as exchanges between multinationals
units were intensified more and more – and it is well known that since the second half of the
1960s these exchanges among transnational companies provided international trade with a more
and more heavy share (about 2/5th). A way of internal division of tasks is supposed therefore to have
emerged at that time, which might appear as the ‘proto-history’ of globalisation – along our precised
meaning of integrated management of production processes and sales organisation. But the
degree of integration can’t be really assessed owing to the date available in that very book. G. Jones
notices the growing change within IBM managerial habits: “IBM’s System 360 computers, which
were designed to be manufactured and sold worldwide, required a far greater degree of international
coordination. The domestic company took overall responsability for development engineering
and manufacturing. Responsibility for the development of specific processor or peripherals in the
360 line was assigned to different laboratories in Europe and the United States. The introduction of
product development and manufacturing planning on a world scale enabled IBM to offer its most
current technologies to customers in all markets, and to make major cost savings from the elimination
of overlapping products.” That was therefore some kind of the prehistory of globalisation! Ford
followed that path too in the 1970s owing to the creation of Ford of Europe in 1967, whose headquarters
were moved thereafter from Great Britain to West Germany, with the design of paneuropean
models (the Capri in 1969).
More and more North-American corporations launched a worldwide offensive since the 1960s,
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especially in chemicals, petrochemicals, pharmaceutics, semiconductors, all the more than the
United States were then a key innovation center – and some European firms transformed themselves
into multinationals too (like the Swiss and German giants in chemicals and pharmaceutics) – before
consumers products firms (homekeeping, food processings) became hugely multinational owing
to the consumption spree in Western countries. Transnational companies got profit from the technological
advantages, on fees on technological transfers and royalties on patents; they intended to
aggregate market shares and thus turnover revenues, which helped their global turnover to grow; and
of course they gathered the profits they drew from their subsidiaries and thus piled up cash to foster
dividends and cash flows used to fresh investment and development. More reviews of the internal
way of life of such Europeanised multinationals had to be available in order to gauge the degree
of the respective specialisation of the plants and laboratories, thus fulfilling targets of economies of
scale. One effect of that transnationalisation was somehow the fallback of numerous wholesale trade
companies in Asia or in South America as large firms could henceforth develop by themselves commercial
networks abroad around key bases in some emerging countries.
Worldwide expansion took shape as more European countries entered the growth momentum:
Spain, central and southern Italy, Flanders in Belgium, Ireland, some local areas in Greece or Turkey,
and some bridgeheads in countries here and there in Africa or the Middle East, those which tolerated
‘capitalist’ foreign direct investment conversely with then a majority of nationalistic anti-imperialist
countries. In the meanwhile large order of plants ‘keys at hand’ and of broad transfers of technology
occurred from the Central and Eastern European countries in the 1960s and in the 1970s
(like Poland under Gierek). Therefore numerous pieces of evidence lead us to conclude that worldwide
expansion was deepening, networks of subsidiaries were being reinforced and extended within
transnational companies. An internationalised economy of ‘geographical globalisation’ – “économie
monde” – was thus more and more set up, but we are not convinced that the ‘managerial globalisation’
– along the management meaning, that is an integrated productive and commercial system
favouring huge economies of scale and workforce divisions – was still taking shape…
SOME BIBLIOGRAPHICAL REFERENCES ON THESE TOPICS
Geoffrey Jones, The evolution of international business. An introduction, Routledge, London, 1996.
Alice Teichova, Maurice Lévy-Leboyer & Helga Nussbaum, Multinational enterprise in historical perspective,
Cambridge University Press, 1986.
Mira Wilkins, The emergence of multinational enterprise, Harvard University Press, 1970.
Mira Wilkins (ed.), The growth of multinationals (a collection of articles), Edwar Elgar, 1991.
Geoffrey Jones (ed.), Coalitions & collaborations in international business, Edwar Elgar, 1991.
Marc Humbert (ed.), The impact of globalisation in Europe’s firms and industries, Cassell, London, 1993.
Jacques Adda, La mondialisation de l’économie (2 volumes), La Découverte, Paris, 1996.
Robert Fitzgerald & Christopher Rowley, Human resources and the firm in international perspective, Edwar Elgar (2
volumes), 1997.
James Foreman-Peck (ed.), Historical foundations of globalisation, Edward Elgar Publishing, England, 1998 (an
anthology of articles).
Jean-Louis Mucchielli, Multinationales & mondialisation, Seuil, Paris, 1998.
Carl Dassbach, Global enterprises and the world economy, Garland, New York, 1989.
Christos Pitelis & Roger Sugden, The nature of transnational firm, Routledge, London, 1991.
Edward Graham, Strategic management & transnational firm behaviour: a formal approach on the theory of transnational
firm, 1999.
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