Title VI and the Global Competitiveness of U.S. Firms Michael A. Hitt Texas A&M University March 2009 Introduction German Engineering, Swiss Innovation, American Nothing Daimler Advertising Slogan to Promote its Smart For Four Compact Auto (Friedman, 2008) Partly Explains Why Daimlers Acquisition of
Chrysler Failed despite the Complementarities Present and the Potential (Hitt, Harrison & Ireland, 2001) Understanding Different Cultures and Country Institutional Environments Is Critical for U.S. Firms to Be Competitive in Global Markets (Hitt, Keats & DeMarie, 1998; Hitt, Holmes, Miller & Salmador, 2009) History Title VI and Global Competitiveness Cold War, Sputnik, Title VI and Fulbright Hays
There Were Several Addendums in the 1960s and 1970s U.S. Firms International Expansion in 1950s and 1960s Coca-Cola Pepsi-Cola History Contd U.S. Firms Dominance in Global Markets in 1970s McDonalds Automobile Companies
Many U.S. Companies Primarily Used a Global Strategy Emphasized U.S. Brands/Styles with Some Local Adaptation History Contd Major Trade Legislation Passed by Congress in 1979 Rationale for Legislation: Concern about U.S. Role in World Economy and U.S. Firms Losing Market Share to Nimble Foreign Competitors (National Research Council, 2007) Added New Section to Title VI Business and International Education Program
(BIE) Internationalize Business School Curriculum Develop Specialized Educational Materials for Faculty and Students Student and Faculty Fellowships History Contd 1980sGlobal Competition Increased Japanese Firms Presented a Major Challenge to U.S. Firms Gain Global Market Share Identified U.S. Firms Deficiencies in Domestic and Foreign Markets
History Contd Trade and Competitiveness Act of 1988 Goal: To Increase and Promote the Nations Capacity for International Understanding and Economic Enterprise Supports International Education and Research and Language Training to Serve the Human Capital and Knowledge Requirements of U.S. Businesses Enhances Cultural Understanding and Knowledge of Different Country Institutional
Environments and their Effects The The1990s 1990s U.S. Firms Learned from Foreign Competitors, Built New Capabilities, and Enhanced their Competitiveness in Domestic and International Markets Global Economic and Competitive Environment Began to Change Increasing Interdependence Enhanced Technology (e.g., Internet)
Growing Internationalization Learning New Capabilities Greater Innovation Higher Performance (Hitt, Hoskisson & Kim, 1997) Increasing Global Competition Cultural Legacies Matter Cultural Legacies Have an Impact on Our Twenty-first Century Intellectual Tasks (Gladwell, 2008) If We Had a Math Olympics and Each Country Sent 1000 of Its Brightest 8th Grade Students, Which Countries
Would Place at the top? China Hong Kong Japan Singapore South Korea (Boe, May, Barkanic & Borrich, 2002) Cultural Legacies Contd Each Have Cultures Shaped by Long, Hard, and Meaningful Work (Persistence) No One Who Can Rise Before Dawn Three Hundred Sixty Days a Year Fails to Make His
Family Rich. (Blinco, 1991) 2000s Increased Number of Cross-Border Mergers & Acquisitions (Zhu, Hitt, Eden & Tihanyi, 2009) More Outsourcing of Functions and Offshoring (Lei & Hitt, 1995; Lewin, 2005; Holcomb & Hitt, 2007) Global Competition Became Fierce (Growing Capabilities of Emerging Economies) 2000s Continued
BRIC Countries Four Major Emerging Economies Become Global Players China Projected as Largest Economy by 2040-42 India Projected as Third Largest Economy by 2050 Brazil Projected as the Fifth Largest by 2050 Russia Projected as Ninth Largest by 2050 (Hitt & He, 2008) Need to Learn from International Markets (Li & Hitt, 2006; Miller & Hitt, 2009)
Institutional Environments Three Bases of Formal and Informal Institutions (Scott, 1995; 2005) Rules (Regulative) Norms (Normative) Culture (Cognitive) Meyer and Rowan (1977) Suggest that Institutions Establish the Rules of the Game for Organizations (Firms) North (1990) Suggests that Institutions Influence Economic Exchange. Laws and Regulations Direct Economic Transactions
Institutional Environments Contd The Varied Nature of Firm Strategies around the World Arise in Part from the Influences of Institutional Forces (Dunning, 1988; Porter, 1990; Ghemawat, 2001; Hitt, Ahlstrom, Dacin, Levitas & Svobodina, 2004; Ahlstrom, Levitas, Hitt, Dacin, & Zhu, 2009) Regulatory, Economic, Political Institutions and Institutional Infrastructure (Boddewyn, 1988; Burdekin & Weidenmier, 2001; Matten & Crane, 2005; Khanna & Palepu, 1997; 1999)
Institutional Environments Contd Research Has Shown that Institutional Environments (Culture and Formal Institutions) Affect the Amount of Foreign Direct Investments in Countries from Foreign Firms (e.g., Hitt et al, 2009) Countries Institutional Environments Affect Firms Strategic Decisions--What Foreign Markets to Enter (e.g., Arregle, Miller, Hitt & Beamish, 2009) Country Institutional Environments Affect the Outcomes of Major International Strategies such as the Performance of Cross-Border
M&As (Zhu et al, 2009) and Innovation (Miller & Hitt, 2009) Conclusions We Cannot Expect Our Country or U.S. Businesses to Compete and Lead in a World that We Do Not Understand The U.S. Council on CompetitivenessU.S. Firms Must Emphasize Innovation to Remain Leaders in Global Markets (Council on Competitiveness, 2005) To Be Leaders in Global Innovation Requires a Substantial Knowledge AdvantageUsing Multicultural Knowledge
Conclusions Contd Kauffman Foundation Report Noted that Highly Skilled Kauffman Foundation Report Noted that Highly Skilled Immigrants Historically Have Contributed to Competitive Immigrants Historically Have Contributed to Competitive Advantages (e.g., High Technology Sector) Advantages (e.g., High Technology Sector) Those Who Return to their Home Country Often (50+%) Those Who Return to their Home Country Often (50+%) Start New Businesses, Contributing to the Local Start New Businesses, Contributing to the Local Economies (Wadhwa, 2009)
Economies (Wadhwa, 2009) Recent Research Shows U.S. Entrepreneurs Have Institutional Recent Research Shows U.S. Entrepreneurs Have Institutional Advantages over Entrepreneurs in Major Emerging Advantages over Entrepreneurs in Major Emerging EconomiesMore Successful (Batjargal, Tsui, Hitt, EconomiesMore Successful (Batjargal, Tsui, Hitt, Arregle, Webb & Miller, 2009) Arregle, Webb & Miller, 2009) Conclusions Contd We Need to Have Comprehensive Knowledge of Cultures
and Institutional Forces in the Global Environment and Use the Intellectual Capital throughout the World to Remain Leaders in the Global Competitive Landscape the future is our choice, not our fate, there is nothing in the universe as powerful as six billion minds wrapping around one problem We have exactly enough time starting now. (Friedman, 2008)
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