Global Players – Global Markets
- International Institutions and Global Governance series
Edited by John-ren Chen
Chapter 3: Corporate Governance in Multinational Companies
3. Corporate governance in multinational companies Hans H. Hinterhuber, Kurt Matzler, Harald Pechlaner and Birgit Renzl INTRODUCTION In the last two decades the international business environment has become increasingly competitive, complex and sophisticated. Two basic forces lead companies to internationalise their operations: digitisation of technologies and deregulation of economies (Barkema et al., 2002). Figure 3.1 shows these two forces driving globalisation and identiﬁes the key management challenges that result for multinational companies. Digitisation lowers radically the cost of information storage and transmission and increases dramatically the speed of information transmission; this allows carrying out the different stages of the value chain in low-cost countries or highly effective regional environments. Firms in developing countries manufacture and assemble components as subcontractors of complex products or provide business services for multinational companies. The deregulation of economies together with the privatisation of ﬁrms opens new markets; the opening of new and the globalisation of existing markets is compounded by the digitisation of technologies. Both forces give rise (a) to global small and medium-sized enterprises (SMEs), (b) to global networks between existing and new companies along their value chains, and (c) to large, focused global ﬁrms. The competitive dynamics becoming more and more intense requires all companies not only to learn and to innovate, but to do so better and faster than its competitors. Digitization of technologies and deregulation of markets address new challenges for multinational companies. All competitive advantages erode over time. The performance of multinational ﬁrms depends on their ability to synchronise...
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