Multinationals and Global Capitalism from the Nineteenth to the Twenty-first Century (review)

With Multinationals and Global Capitalism, Geoffrey Jones, of the Harvard Business School, begins where all attempts to understand "globalization" must begin: with capitalism and with the most powerful actors within capitalism. As noted in the preface, Multinationals and Global Capitalism is a "radically revised" (p. v) edition of his 1996 book, The Evolution of International Business, the only textbook of its kind. And we need to keep in mind that Multinationals and Global Capitalism is a textbook. Divided into five sections and eleven chapters, this 300-page book was written for undergraduate courses in international business, management, and the social sciences, and for nonspecialist scholars who want an introduction and overview to the academic study of multinationals in the fields of business history and international business. Spread throughout the book are sixty text boxes containing 200–400-word vignettes and case studies to supplement the main narrative. The book also includes, as appendices, a glossary of key terms that are emboldened when they first appear in the text, a list of the world's top fifty nonfinancial corporations for 2001, and a time line of "decisive events in the evolution of global capitalism over the past two centuries" (p. v).

"Frameworks," the first section of the book, consists of two chapters. In "Concepts," the first chapter, Jones defines a multinational as a firm "that controls operations or income-generating assets in more than one country" (p. 5) and introduces the reader to key terms and concepts associated with the study of such firms (for example, "home economy," "host economy," "Foreign Direct Investment" [FDI], "greenfield investment," and so forth).

In this chapter as well, Jones provides an overview of the various, largely ahistorical, theories and explanations that have been offered to account for the existence of multinationals. As Jones notes, at first blush their existence would seem to require little explanation beyond the commonsense observation that capitalist firms are about making profits, and that sometimes investing in more than one country is one way to increase profits. But, as the saying goes, you can't explain variation with a constant, and while all capitalist firms are under more or less constant pressure to turn a profit, not all firms are multinational; some industries are flush with multinationals while in others we find few, and nations vary a great deal in how many multinationals they host and how many multinationals they house. So, since multinationals are clearly not the only route to profitability, theorists of the multinational firm have spent some effort, since at least the 1960s, trying to explain their advantages and disadvantages, and the conditions under which they arise.

Jones first dispenses with mainstream economic theorists because they see nothing special about multinationals per se, viewing them simply as "arbitrageurs of capital, moving equity from countries where returns were low to those where it was higher" (p. 7). Jones then moves on to discuss approaches that treat multinationals as something special indeed, including those that focus on how firms weigh the choice between remaining a national firm and exporting commodities to other countries and becoming a multinational by setting up production itself in those countries; those theories that focus on the transaction costs associated with buying inputs to production versus taking over, or controlling, the production of those inputs directly; as well as those theories that focus on the cross-border knowledge-diffusion function of multinationals and the role of multinational entrepreneurs in the management of rapid social change.

As clever and useful as all these different approaches are, they strike me as almost entirely focused on the means to that end that the "nothing special" mainstream economists had right, or at least partially right, in the first place: making a profit. People don't go into business to diffuse knowledge or manage rapid social change. If in the pursuit of profit they happen to find themselves needing...