Firms and global capitalism

Abstract

This chapter examines the role of business enterprises as actors in the spread of global capitalism since 1848. Since the middle of the nineteenth century, firms have been the strongest institution to operate across national borders, with the possible exception of the Roman Catholic Church. Multinational firms, defined broadly as firms owning and controlling assets in more than one country, have been major drivers of the trade flows which characterized globalization waves. During the second half of the nineteenth century, they were the principal agents behind the discovery and exploitation of natural resources around the world. Large vertically integrated corporations controlled the value chains of many commodities. They were characterized by high levels of intra-firm trade, or trade flows across national borders but between affiliates of the same company, as when the same oil company drilled for petroleum, transported it along pipes and on ships, refined it into different products, and sold it to final consumers. As globalization intensified again during the late twentieth century, such intra-firm trade, now concentrated in manufacturing, was a dominant actor in the world trade system. Although global data are patchy for many countries, it is known that intra-firm trade accounted for 48 percent of US manufactured goods imports in 2009, and about 30 percent of US manufactured goods exports. The share of intra-firm trade is especially high in the automobile, pharmaceuticals, and transport equipment industries (Lanz and Miroudot 2011). Multinational firms were more than creators and drivers of trade flows. They impacted the spread of capitalism in many other ways. As suggested by the quantitative measure most frequently used as a proxy for their size – foreign direct investment (FDI) – they transfer capital across borders, although this function has often been less important than it seems, as firms have often preferred to raise capital locally and plough back profits into subsidiaries. More significantly, as multinationals build factories and distribution networks, dig mines, and open plantations, they transfer technology and knowledge, and the managerial and organizational capabilities in which they are embedded. These capabilities are, in turn, embedded in cultural value-systems. As critics have complained and scholars have asserted, Coca Cola soda is not merely a consumer product, but in some sense, a symbol of American values (Giebelhaus 1994; Kuisel 1991).