ASSIGNMENT 5
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LESSON5READING1.pdf
87F E A T U R E A R T I C L E
Published online in Wiley Online Library (wileyonlinelibrary.com)
© 2015 Wiley Periodicals, Inc. • DOI: 10.1002/tie.21679
Correspondence to: Jenny Berrill, School of Business, Trinity College, Dublin, Ireland, +353 1 896 2632 (phone), +353 1 679 9503 (fax),
Are the World’s
Largest Firms Regional
or Global?
I n t r o d u c t i o n
T he pace of globalization over the past quarter cen-
tury has been widely documented and analyzed
by international business (IB) and management
analysts, practitioners, researchers, and policymakers.1
The world’s largest multinational enterprises (MNEs)
have been well placed to avail of these opportunities, and
they have responded by internationalizing their activities
across greater geographic, cultural, and psychic distances
by trading, licensing, and forming strategic alliances and
joint ventures, and via foreign direct investment (FDI).
The Forbes Global 2000 list of the world’s largest MNEs—
based on assets, sales, profits, and market values—shows
that in 2013 these firms collectively owned $159 trillion in
assets, earned $38 trillion in revenues and $2.43 trillion
in profits, and employed about 87 million people. Many
of them are recognizable household names in the bank-
ing, electronics, entertainment, food, oil, and transport
industries. Using gross domestic product (GDP) data
from the World Bank and firm-level sales data from the
Fortune 500 list, White (2012) shows that of the world’s
175 largest economic entities, 64 are countries and 111
are MNEs! This conjures an image of a business world
dominated by gargantuan companies with operations in
every corner of the globe.
But are the world’s largest firms global in their
operations, strategy, and vision? This continues to be a
hotly debated topic2 and is the subject matter of many
recent papers, including Xue, Zheng, and Lund (2013);
Ibeh, Wilson, and Chizema (2012); Lattemann, Alon,
Chang, Fetscherin, and McIntyre (2012); and Ning and
Sutherland (2012). Although many IB scholars such as
Yip (2002) and Govindarajan and Gupta (2008) argue
There has been vigorous debate about whether the world’s largest fi rms are regional or global in their
operations and strategy. Some authors argue that global vision and strategy are essential for most
fi rms in today’s interconnected world, while others claim that even the largest multinational fi rms are
mostly confi ned to their home regions—and that global strategy is a myth. Using a novel data set of
over 1,000 of the world’s largest fi rms, we provide a new perspective on this debate. We show that
these fi rms range from domestic to regional, transregional, and global, with the implication that global
strategy is alive and well in international business. © 2015 Wiley Periodicals, Inc.
By
Jenny Berrill
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Thunderbird International Business Review Vol. 57, No. 2 March/April 2015 DOI: 10.1002/tie
the extent to which it implies that global strategy is a
myth.
In assessing the merits of these competing findings, it
is important that the meanings attributed to key concepts
are clear and unambiguous, and that terms are appropri-
ately defined. This is not always the case in IB and man-
agement research. The definition of regional, for example, shapes the conclusions that emerge about international
reach and strategy (Tallman & Phene, 2007; Vives &
Svejenova, 2007), and this is confounded by the variety
of approaches used to measure firm-level multinational-
ity. In their review of the regionalization- globalization
debate, Flores and Aguilera (2007) highlight the need for
“an improved definition and operationalization of MNE
activities and regions” (p. 1189).
We take up this challenge by using the classification
scheme for firm-level multinationality of Aggarwal, Berrill,
Hutson, and Kearney (2011) (hereafter AHBK) and a
novel data set to address the regional/global debate. In
ABHK’s scheme, firms are classified on the basis of the
breadth and depth of international engagement across
six regions that encompass all countries of the world:
Africa, Asia, Europe, North America, Oceania, and South
America. We construct a sample of 1,289 firms from the G7 countries: Britain, Canada, France, Germany, Italy,
Japan, and the United States. Our sample, which we refer
to as the G7-1289 list, comprises all constituent firms of
these countries’ main stock indexes (the FTSE 100, the
TSX 60, the SBF 120, the HDAX 110, the MIB-SGI 174,
the Nikkei 225, and the S&P 500) for which we have the
full set of data. This data set is more than three times
the size of others used by the researchers referred to
above,3 and it contains many more firms from each of
the G7 countries than the Fortune 500 list (which is the
most common data source used in similar studies). Its
constituent firms comprise an eclectic mix of industry sec-
tor, country of headquarters, size, age, and international
reach. Using the G7-1289 list, we determine each firm’s
degree of multinationality using the depth dimensions
sales and subsidiaries. We find that the world’s largest firms range from purely domestic to global and that most are
transregional. It follows that with respect to the world’s
largest firms, global strategy is not a myth but a reality of
international business in the third millennium.
Our findings have important practical as well as
academic implications. A detailed and robust investiga-
tion into the location of a firm’s sales and subsidiaries is
required to adequately assess the true exposures under-
taken when investing in a stock. Our analysis can help
in this regard. This point becomes even more important
as firms become more international in their operations.
that global business strategy is paramount, others such
as Ghemawat (2001, 2003) argue the case for semiglobal
strategy, pointing to escalating costs of international-
izing over greater geographical and cultural distances.
Doremus, Keller, Pauly, and Reich (1998) argue that
we have not achieved anything remotely close to glo-
balization, that state sovereignty remains strong, and
that the world’s largest MNEs retain a national and
regional focus. Rugman (2000, 2003, 2005), Rugman
and Brain (2003), Rugman and Girod (2003), Rugman
and Hodgetts (2001), Rugman and Verbeke (2003, 2004,
2007, 2008), and Collinson and Rugman (2008) argue
the case for the regional dimension in international busi-
ness and strategy. Borrowing from the “triad” analysis of
Ohmae (1985), these authors divide the world into three
regions—North America, Europe, and Asia-Pacific—and
argue that most of the world’s largest MNEs are regional
rather than global, that globalization is a myth, and that
regional rather than global strategy is paramount in IB.
The evidence assembled by Rugman and his co-authors
in favor of regionalization rather than globalization of
the world’s largest firms has been scrutinized by Aharoni
(2006); Osegowitsch and Sammartino (2007, 2008); Dun-
ning, Fujita, and Yakova (2007); and Asmussen (2009).
These researchers have introduced refinements to the
data analysis to show that the evidence in favor of region-
alization is not overwhelming, and they have questioned
These researchers have introduced refinements to the data analysis to show that the evidence in favor of regionalization is not over- whelming, and they have questioned the extent to which it implies that global strategy is a myth.
Are the World’s Largest Firms Regional or Global? 89
DOI: 10.1002/tie Thunderbird International Business Review Vol. 57, No. 2 March/April 2015
economic events, and that sales—the principal metric
used by the regionalists—does not adequately capture the
richness of MNEs’ international activities (Bird & Stevens,
2003; Clark & Knowles, 2003; Clark, Knowles, & Hodis,
2004; Stevens & Bird, 2004).
Proponents of the triad approach to studying the
geographic reach of the world’s largest MNEs base
their analysis on the observation that North America,
Europe, and Asia-Pacific dominate international busi-
ness (Ohmae, 1985; Rugman, 2003). These researchers
use various sets of countries to define alternatively the
“core triad” (United States, European Union [EU], and
Japan), the “triad” (North American Free Trade Agree-
ment [NAFTA], the EU-15, and Asia), and the “extended
triad” (NAFTA, the expanded EU-25, and Asia). In so
doing, they explicitly recognize that their approach
should be considered as a starting point for a regional
component in IB research, and that other delineations
could be useful depending on the context. In the triad
studies, however, it is not always clear which triad is being
analyzed. Perhaps the clearest definition is in Rugman
and Hodgetts (2001), where footnote 4 defines NAFTA
as comprising Canada, Mexico, and the Unites States;
the EU-15 comprises Austria, Belgium, Britain, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Lux-
embourg, the Netherlands, Portugal, Spain, and Sweden;
and the Asia-Pacific-12 comprises Australia, China, India,
Indonesia, Japan, Malaysia, New Zealand, the Philippines,
Singapore, South Korea, Taiwan, and Thailand. In other
papers, definitions of the triad are less clear.4
Rugman and his co-authors apply thresholds to deter-
mine the degree of multinationality using four categories:
home-regional, biregional, host-regional, and global.
The thresholds are as follows: Home-regional firms have
at least 50% of their sales in their home region, and
biregional firms have less than 50% of their sales in any
one region and at least 20% in each of two triad regions.
Host-regional firms have at least 50% of their sales in
a triad region other than the home region, and global
firms have less than 50% of their sales in any one region
and at least 20% in each of the three triad regions. Their
benchmark data set is the Fortune 500 list, which ranks
firms on the basis of absolute sales figures in any given
year. Rugman (2003) shows that most firms in the For-
tune 500 lack global sales activity; 72% of sales are within
the home region. He classifies only 9 firms as truly global
in that they have at least 20% of their sales in each region
of the triad, and most of these are in the computer,
telecom, and high-technology sectors. Fifty-eight have
no sales outside the home region. Rugman concludes
that most firms are regional or, at best, are biregional.
The more multinational a firm is, the more diversified it
is in relation to geographic exposure and the less likely it
is to be exposed to domestic events. A global firm, there-
fore, provides diversified geographic exposure regardless
of its country of origin. A regional firm is more likely
to provide exposure only to a specific region. There-
fore, the question as to whether firms are regional or
global has important implications for optimal portfolio
construction.
The remainder of our article is structured as follows.
In the next section, we review the debate about the extent
to which the world’s largest firms are regional or global.
In the third section, we use ABHK’s multinationality
classification scheme to classify two samples of firms: the
G7-1289 and the 2005 Fortune 500. The fourth section
compares our findings to those of Rugman and Verbeke
(2003, 2004), Dunning et al. (2007), and Osegowitsch
and Sammartino (2008). In the fifth section, we repeat
the analysis using alternative regional groupings. We
present our concluding comments in the final section.
T h e D e b a t e t o D a t e : R e g i o n a l , T r a n s r e g i o n a l , o r G l o b a l ?
Although the trends toward enhanced international inte-
gration are widely recognized, interpretations and opera-
tional definitions of the terms globalization, regionalization, and regionalism vary depending on the contexts in which they are used. The new regionalism theory described by
Hettne, Inotai, and Sunkel (1999) analyzes regional and
global interdependencies at multidimensional levels in a
historical context. International integration increasingly
has involved production, distribution, and consumption
systems, and it has also seen economic and political ideol-
ogies, knowledge, and cultural identities being expressed
and manifested in global rather than country-specific
contexts. The process is not unidirectional, however,
because international regionalism has emerged in many
dimensions as a counterforce to globalization. Marchand,
Boas, and Shaw (1999), for example, show that while
regionalization can be seen as part of the globalization
process, it can also be seen as the reaction by stakeholders
to protect their perceived interests in the face of global-
ization. The regional actions of governments on issues
such as international finance (managed floats, fixed pegs,
currency unions, and regulation of institutions), trading
agreements (preferential tariffs, free trade areas, and eco-
nomic unions), and security agreements (such as NATO
and SEATO) form the complex landscape within which
MNEs operate and compete. Other researchers have
argued that globalization is about more than trade and
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operations within its region, R is further delineated into
three categories: R1 (penetrating less than one-third
of the countries in the region), R2 (between one-third
and two-thirds of the countries) and R3 (more than two-
thirds). For example, a Brazilian firm headquartered in
Sao Paulo that sells its products in one or two countries
in South America would be classified as R1 in sales,
whereas if it exports throughout South America (but not
elsewhere), it would be classified as R3. If a firm conducts
business in more than one region (but not globally), it is
defined as transregional (T); T2 denotes two regions, T3
three regions, T4 four regions, and T5 five regions. A firm
is classified as global (G) if it conducts business in all six
regions. Figure 1 depicts this system.
To implement the depth dimension, we use sales and
investments (subsidiaries). The simple matrix illustrated
in Table 1 shows how the depth dimension operates in
conjunction with the breadth dimension. For ease of
exposition, we initially use the four broad dimensions of
In a similar analysis, Rugman and Verbeke (2004) define
the triad as NAFTA, the expanded EU, and Asia, and
also conclude that most of the Fortune 500 firms do not
operate globally. For the 320 firms for which geographic
sales data were available, they found an average of 80%
of sales are in their home regions. Rugman and Collinson
(2005) use the same Fortune 500 list and extract its 118
European firms. They find that only three firms—LVMH,
Philips, and Nokia—are global,5 and that an average of
63% of their sales are in the home region of Europe.
While these studies use sales data as the sole measure
of multinationality, Rugman and Collinson (2008) use
data for both marketing (sales) and production (assets).
They analyze 64 Japanese firms from the Fortune 500 list
(2003) and they find that only 3 firms operate globally,
whereas 57 firms have an average of 81% of their sales in
their home region. Both sets of data (on sales and assets)
confirm the regional nature of the activities of Japanese
MNEs, and Rugman and Collinson conclude that most
Japanese firms are regional, not global. Rugman and
Brain (2003) show that even the 20 most international
firms on the Fortune 500 list—those with the highest ratio of foreign to total sales—are mainly home-region
based. Extrapolating from this body of evidence, Rugman
and his co-authors conclude that MNE strategy is regional
rather than global, and they suggest that MNE CEOs
should “encourage all [their] managers to think regional,
act local—and forget global” (Rugman & Hodgetts, 2001,
pp. 341).
C l a s s i f y i n g t h e M u l t i n a t i o n a l i t y o f F i r m s
We classify firms using the multinational classification
scheme of Aggarwal et al. (2011). ABHK measure the
multinationality of each firm along two dimensions:
breadth and depth. To implement the breadth dimension, they divide the world into six regions based on the inhab-
ited continents: Africa, Asia, Europe, North America,
Oceania, and South America.6 Depth of international
engagement ranges from the “shallow” engagement asso-
ciated with exports and imports, to the deep commitment
of FDI—which involves a much greater engagement with
foreign markets and higher exposures to foreign business
and economic and political risks than, say, exporting or
licensing. Along a particular depth dimension, each firm
is classified as follows. A firm whose business activities
take place entirely within its home country is defined
as domestic (D), and a firm with business activities in
the region in which it is headquartered is referred to as
regional (R). To shed more light on the extent of a firm’s
Depth of international engagement ranges from the “shallow” engagement associated with exports and imports, to the deep commitment of FDI—which involves a much greater engagement with foreign markets and higher expo- sures to foreign business and economic and political risks than, say, exporting or licensing.
Are the World’s Largest Firms Regional or Global? 91
DOI: 10.1002/tie Thunderbird International Business Review Vol. 57, No. 2 March/April 2015
and domestic in investments (SR-ID), and regional in
both (SR-IR). Third, transregional firms have either sales
or investments beyond their home region (but not in
all six regions), and there are five types of transregional
firm (5 to 9). Finally, there are seven categories of global
corporation (10 to 16), which have either sales, invest-
ments, or both in all six regions. The most global are
those with sales and subsidiaries in all six regions of the
world (16: SG-IG).
Classifying the Sample Firms
In our analysis we classify firms on the G7-1289 list, which
comprises 1,289 firms listed on the stock exchanges in
Canada, France, Germany, Italy, Japan, the United King-
dom, and the United States that are constituent firms of
the following stock market indexes: the TSX 60, the SBF
120, the HDAX 110, the MIB-SGI 174, the Nikkei 225, the FTSE 100, and the S&P 500. This list was compiled from
the website of each country’s stock exchange in 2006. To
facilitate a more direct comparison with prior research,
we also classify firms on the Fortune 500 list (2005). The
geographic breakdown of firm-level sales was obtained
breadth: domestic (D), regional (R), transregional (T),
and global (G).
In Table 2, we combine these four breadth dimen-
sions with our two depth dimensions—sales and subsid-
iaries—to identify 16 types of firm. The first is the purely domestic firm (SD-ID) that operates entirely within its
home country. Second, there are three types of regional
firm—with sales or investments, or both sales and invest-
ments in their home region, but not beyond. They are
numbered 2, 3, and 4: consecutively, domestic in sales
and regional in investments (SD-IR), regional in sales
TABLE 1 Matrix of Multinationality
Breadth of Geographic Spread
Depth of Engagement Domestic Regional Transregional Global
Sales SD SR ST SG
Investments ( subsidiaries)
ID IR IT IG
Note: This table illustrates the matrix of multinationality as originally pro- posed by Aggarwal et al. (2011).
Note: This fi gure depicts the breadth and depth dimensions of fi rm-level multinationality. The breadth of geographical spread contains four categories: domestic (D), regional (R), transregional (T) and global (G). The regional (R) category is further divided into three subcategories. Firms with operations in up to one-third, between one-third and two-thirds, and in over two-thirds of the countries in their home regions are categorized as R1, R2, and R3, respectively. The transre- gional category (T) has fi ve subcategories. Firms with operations in only their home regions are categorized as R. Firms with operations in up to two, three, four, and fi ve of the six world regions are categorized as T2, T3, T4, and T5, respectively. Firms with operations in all six regions are classifi ed as G. The six world regions divide the world into the inhabited continents of Africa, Asia, Europe, North America, Oceania, and South America. The depth dimension contains two categories: sales (S) and investments in subsidiaries (I). This fi gure is created by the author based on the classifi cation system originally proposed by Aggarwal et al. (ABHK) (2011).
FIGURE 1 The Breadth and Depth of Firm-Level Multinationality
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Thunderbird International Business Review Vol. 57, No. 2 March/April 2015 DOI: 10.1002/tie
mean incorporation date of 1927, implying an average
age of about 80 years. The oldest is over 500 years old
(UniCredito Italiano, incorporated in 1473), and the
two youngest date from 2003 (China Life Insurance and
Japan Post). The largest firm is again Exxon Mobil, with
annual sales of US$340 billion, and the smallest is Nike,
with US$13.7 billion; the average size is US$38 billion.
Firms are headquartered in 32 countries in five of the
six geographic regions in our system: North America
(189), Europe (177), Asia (121), Oceania (8), and South
America (5).
In Table 2 we provide information on the number of
firms from our G7-1289 and Fortune 500 data sets in each firm type category. In this analysis, we include only firms
for which both sales and subsidiary data are available; 351
Fortune 500 firms and 1,015 G7 firms. The Fortune 500
firms populate 12 of the 16 categories. An illuminating
finding from this analysis is that nearly half of the For-
tune 500 sample firms are transregional in both sales and
subsidiaries (ST-IT). Twenty-seven are fully domestic in
from Worldscope and is drawn from company accounts for the year ending December 31, 2005. The geographic
breakdown of each firm’s subsidiaries was obtained from
Dun and Bradstreet’s Who Owns Whom (2005–2006), which lists the parents and subsidiaries of firms and the
country of each subsidiary.
Our G7-1289 data set includes firms in 10 broad
Industry Classification Benchmark (ICB) industries:
industrials (237 firms), financials (231), consumer ser-
vices (195), consumer goods (174), technology (109),
basic materials (106), health care (88), oil and gas (65),
utilities (62), and telecommunications (22). The mean
incorporation date is 1922—Banca Monte dei Paschi
dates from 1472, while NYSE Euronext was incorporated
in 2007. The largest firm is Exxon Mobil, and average
size by sales is US$14 billion. The Fortune 500 firms
span seven broad ICB categories: financials (126 firms),
consumer goods (123), consumer services (118), indus-
trials (53), basic materials (38), utilities (27), and health
care (15). They are on average rather elderly, with a
TABLE 2 Firm Types by International Reach
Symbol MNE Type Fortune 500 G7-1289
Purely Domestic Firm
1 SD-ID Domestic trading, domestic investments 27 (7.7) 107 (10.5)
Regional and Transregional Firms
2 SD-IR Domestic trading, regional investments 5 (1.4) 28 (2.8)
3 SR-ID Regional trading, domestic investments 2 (0.6) 14 (1.4)
4 SR-IR Regional trading, regional investments 4 (1.1) 14 (1.4)
5 ST-ID Transregional trading, domestic investments 3 (0.9) 17 (1.7)
6 ST-IR Transregional trading, regional investments 3 (0.9) 17 (1.7)
7 SD-IT Domestic trading, transregional investments 20 (5.7) 73 (7.2)
8 SR-IT Regional trading, transregional investments 2 (0.6) 41 (4.0)
9 ST-IT Transregional trading, transregional investments 171 (48.7) 538 (53.0)
Global Firms
10 SG-ID Global trading, domestic investments 2 (0.2)
11 SG-IR Global trading, regional investments
12 SG-IT Global trading, transregional investments 12 (3.4) 53 (5.2)
13 SD-IG Domestic trading, global investments 4 (0.4)
14 SR-IG Regional trading, global investments 4 (0.4)
15 ST-IG Transregional trading, global investments 89 (25.4) 87 (8.6)
16 SG-IG Global trading, global investments 13 (3.7) 16 (1.6)
Total 351 1,015
Note: In this table we use a simplifi ed matrix of our two-dimensional measure of multinationality to describe 16 types of MNE, ranging from purely domestic to fully global fi rms. The right-hand columns show the number of fi rms from the Fortune 500 list (2005) and the G7 1289 in each category. Figures in parentheses are percentages.
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the sales and subsidiary dimensions, and another 30 are
domestic in at least one dimension. Thirteen are global
in both dimensions (including such firms as JPMorgan
Chase, Volkswagen, Nestlé, British American Tobacco,
and 3M), and 114 firms (32% of the Fortune 500) are
global in at least one dimension.
The G7 firms are more varied in the extent of their multinationality, populating all but one of our 16 multina-
tionality categories. Similarly to the Fortune 500 firms, the
majority of the G7 firms—53%—are transregional in both
the sales and subsidiaries dimensions. In fact, the propor-
tion of firms in each category is similar for both samples.
Another feature common to both samples is that there is
little evidence of firm-level regionality. This provides an
interesting counterpoint to Rugman’s contention that
TABLE 3 International Breadth of the Fortune 500 and G7-1289 Firms
Fortune 500
G7-1289
Canada France Germany Italy Japan United Kingdom United States Total G7
Panel A: Sales
D 53 (14) 13 (23) 6 (6) 5 (5) 46 (30) 16 (9) 7 (8) 136 (29) 229 (20)
R1 8 (2) 7 (12) 8 (7) 3 (3) 7 (5) 5 (6) 10 (2) 40 (4)
T2 76 (20) 17 (30) 16 (15) 26 (27) 37 (24) 33 (20) 22 (24) 110 (23) 261 (23)
T3 70 (19) 10 (18) 23 (21) 19 (19) 16 (11) 45 (27) 16 (18) 78 (17) 207 (18)
T4 78 (22) 7 (12) 27 (25) 15 (15) 20 (13) 49 (29) 19 (21) 78 (17) 215 (19)
T5 61 (16) 3 (5) 21 (20) 24 (24) 17 (11) 25 (15) 14 (15) 48 (10) 152 (13)
T 285 (77) 37 (65) 87 (81) 84 (85) 90 (59) 152 (91) 71 (78) 314 (67) 835 (73)
G 28 (7) 6 (6) 7 (7) 9 (6) 7 (8) 10 (2) 39 (3)
Total 374 57 107 99 152 168 90 470 1143
Panel B: Subsidiaries
D 47 (10) 5 (12) 19 (18) 5 (5) 50 (36) 20 (9) 6 (7) 87 (18) 192 (17)
R1 28 (6) 20 (20) 13 (13) 31 (23) 6 (3) 13 (15) 34 (7) 117 (10)
R2 1 (1) 3 (3) 4 (3) 8 (1)
R 28 (6) 21 (21) 16 (16) 35 (26) 6 (3) 13 (15) 34 (7) 125 (11)
T2 55 (12) 16 (37) 9 (9) 19 (19) 19 (14) 29 (14) 11 (12) 75 (16) 178 (15)
T3 72 (16) 11 (25) 15 (15) 17 (17) 13 (10) 58 (28) 12 (14) 70 (15) 196 (17)
T4 64 (14) 8 (19) 14 (14) 9 (9) 6 (4) 53 (25) 14 (16) 67 (14) 171 (15)
T5 86 (19) 2 (5) 5 (5) 7 (7) 4 (3) 28 (13) 13 (15) 85 (18) 144 (12)
T 277 (61) 37 (86) 43 (42) 52 (52) 42 (31) 168 (80) 50 (57) 297 (63) 689 (59)
G 103 (23) 1 (2) 19 (19) 26 (27) 10 (7) 16 (8) 19 (21) 58 (12) 149 (13)
Total 455 43 102 99 137 210 88 476 1155
Note: This table details the number of Fortune 500 and G7 1298 fi rms in each breadth category, by sales (Panel A) and subsidiaries (Panel B). Sales data are available for 1,143 of our G7 1289 sample and for 374 fi rms in the Fortune 500; and subsidiaries data are available for 1,155 G7 fi rms and 455 of the Fortune 500 fi rms. The four main breadth categories—domestic, regional, transregional, and global—appear in bold. Each cell details the number of fi rms in
that category, and in parentheses, the percentage of fi rms in that category. For example, sales information is available for 168 fi rms on the Nikkei index; 16 fi rms (9 percent) are classifi ed as domestic and 49 fi rms (29 percent) as T4.
MNEs are regional entities. In a later section of this article,
we classify the Fortune 500 firms using the triad approach
in order to investigate in greater detail why our findings
differ so substantially from those of Rugman and his co-
authors.
Table 3 presents our findings for the multinational
classification of our Fortune 500 and G7 firms. It differs from Table 2 in three ways. First, we use the full range of
breadth categories: D, R1, R2, R3, T2, T3, T4, T5, and G.
Second, we detail the breakdown of multinationality by
sales (Panel A) and subsidiaries (Panel B) separately; and
third, we separate our G7 findings by country. The per-
centage of firms that are domestic in sales ranges from
5% in Germany to 30% in Italy, and overall 20% of firms
do not sell their products or services beyond their own
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sample firms’ home region. The situation is similar when
the extent of multinationality is measured by subsidiaries;
only eight of the G7 firms (1% of the overall sample) are
classified as R2, meaning that they have subsidiaries in
between one-third and two-thirds of the countries in their
home region. Not only do we find that only a small pro-
portion of our sample firms are regional; it is clear that
few have a genuinely regional scope in the sense that they
operate in few countries in the home region.
C o m p a r i n g O u r F i n d i n g s t o T h a t o f t h e T r i a d S y s t e m
In this section, we categorize the Fortune 500 (2005)
sample firms using Rugman and Verbeke’s (2004) triad
grouping. Of the 349 firms for which sales data are
available,7 we find that 283 (81%) are classified as home-
region orientated, 9 (3%) are host-region orientated,
50 (14%) are biregional, and 7 (2%) are global. The 7
firms classified as global are Christian Dior, Coca-Cola,
HSBC Holdings, Henkel, Mazda Motors, Schlumberger,
and Sony. Using our system, these 7 firms are classified
as transregional in sales. Sony, for example, has sales in
four of the six regions, with 21% of its sales in Europe,
30% in North America, and 31% in Asia. Another exam-
ple is HSBC, which we classify as T4. It has 35% of its
sales in Europe, 36% in North America, and 24% in Asia.
We classify 28 firms as global in sales.8 Using Rugman
and Verbeke’s (2004) system, 13 of these firms would be
seen as home-region orientated because they have at least
50% of their sales in their home region; another 13 would
be biregional, and 2 cannot be classified.9 There are no
firms common to Rugman and Verbeke’s (2004) global
and ABHK’s G category. Of the 53 firms that we classify as
domestic in sales, 52 would be classified by Rugman and
Verbeke’s (2004) system as home-region orientated, and
the remaining firm (J. Sainsbury) is host-region orientated.
When we take the 283 firms classified as home-region
orientated by Rugman and Verbeke (2004) and reclassify
them using our system, we find that 52 are domestic firms,
6 are regional, 211 are transregional, and 13 are global.
The main reasons for the substantial difference in
our findings and Rugman and Verbeke’s (2004) is that
they apply a stringent activity threshold, and that they use
a different and rather restricted delineation of regions—
the triad. The claim by Rugman and his co-authors
that the world’s largest firms are mostly home-region
orientated and that very few are global in their reach
and strategic vision has been scrutinized by a number of
researchers, including Aharoni (2006), Asmussen (2009),
Westney (2006), Osegowitsch and Sammartino (2007,
border. Similar numbers are apparent in the subsidiary
data. Again, the extremes are to be found in Germany
and Italy; 5% of German firms have only domestic sub-
sidiaries, compared to 36% of Italian firms, and 17% of
overall sample firms have no foreign subsidiaries. At the
other end of the multinationality spectrum, the propor-
tion of firms with global sales ranges from 8% for the
United Kingdom to none for Canada and Japan. By sub-
sidiaries, only 2% of Canadian firms are global, whereas
German firms in general have a very strong global pres-
ence, with just over a quarter having a global spread of
subsidiaries.
Consistent with the information summarized in
Table 2, across all countries (and in the Fortune 500
group), the majority of firms are transregional. Seventy-
six percent of G7-1289 firms are transregional or global in
their sales, and 72% are transregional or global in subsid-
iaries. Similar proportions are apparent for the Fortune
500 sample; 77% are transregional in sales and 61% in
subsidiaries. Adding these transregional firms together
with the global firms, the vast majority (313 firms or 84%)
of the Fortune 500 firms trade beyond their home region,
and the same proportion (380 firms or 84%) of them
have subsidiaries beyond their home region. However, if
a firm is classified as global, it is more likely to be on the
investment rather than the sales dimension.
An illuminating and novel finding is that all of the
regional firms are R1 in sales (Panel A of Table 3); that is, there are no firms with sales in more than one-third of the
Not only do we find that only a small proportion of our sample firms are regional; it is clear that few have a genuinely regional scope in the sense that they operate in few countries in the home region.
Are the World’s Largest Firms Regional or Global? 95
DOI: 10.1002/tie Thunderbird International Business Review Vol. 57, No. 2 March/April 2015
analysis. While business activity is at present concentrated
in these regions, there is no certainty that this will con-
tinue to be the case. Internationalization at the level of
the firm, industry, and country evolve continuously over
time, and the geographic distribution of production, invest-
ment, and consumption are becoming ever more dynamic
(United Nations Conference on Trade and Development
[ UNCTAD], 2006). The emergence of eastern Europe
from communism in the early 1990s, the rapid rise of China
and India during the past two decades and their increasing
engagement with Africa, and more recent trends such as the
rise of the South American economies and increasing flows
of FDI into Africa are all firmly on the research agendas of
IB scholars. These factors, together with the insights to be
gained from longitudinal studies, suggest that a broader
definition of regions would be more appropriate and useful.
Third, as was pointed out by Osegowitsch and Sam-
martino (2008), there is no room in the triad system
for the fully domestic firm because the “home” region
includes the home country, and this category therefore
includes domestic firms. This exaggerates estimates of
regionalism in the triad analysis. Further, the inclusion
of fully domestic firms in the home-regional category
inflates the relative size and importance of the home
region. Eden (2008) points out how the triad analysis is
biased toward home-regional for firms headquartered in
large countries because domestic sales are included in
their home-regional sales.
The ABHK classification scheme provides an alter-
native to the triad system. It has the advantage that it
includes the entire geography of the world and is there-
fore more inclusive than the triad regions. Osegowitsch
and Sammartino (2008) and Dunning et al. (2007) have shown that there are strong trends to greater interna-
tionalization at the firm and country levels in recent
years. The ABHK system allows for changing patterns of
internationalization over time. Regions are based on the
geographic rather than the political map of the world, as
political boundaries and groupings change over time. It is
also noteworthy that ABHK’s system is nonhierarchical in
the sense that categories with increasing degrees of mul-
tinationality do not subsume those with lower degrees of
multinationality. This turns out to be important because
when we apply it to the Fortune 500 firms, no firm has full
regional penetration while most are transregional. This is
consistent with a pattern of internationalization among
the world’s largest firms in which they tend to move from
being domestic to operating within a small number of
countries in their home region, to then taking a signifi-
cant step to being transregional without first spreading
more fully across their home region. In short, we find that
2008), and Dunning et al. (2007). The main issues of
debate concern the appropriateness of the triad regions,
the effects of imposing thresholds on the level of activity
within and across regions in classifying firms, and the
extent to which the conclusions about global or regional
strategic vision are supported by the analysis. We now
discuss each of these in turn.
The Triad Regions
The triad regions used by Rugman and his co-authors
are defined in a manner that compromises the analysis
from the start and restricts its usefulness to a broader set
of issues in international business research. We identify
three main issues. First, the “triad” was advocated by
Ohmae (1985) and expanded upon by Rugman and his
co-authors on the basis that it incorporates the world’s
largest markets and is headquarters to most of the world’s
largest firms. This is indisputable. However, the triad
analysis is narrow in the sense that it explicitly excludes
countries and firms that are of considerable interest to IB
scholars. Many of the emerging economies in Asia, east-
ern Europe, the Middle East, and South America are not
in the triad, and neither is the whole continent of Africa.
A firm cannot be analyzed using Rugman and Verbeke’s
(2004) system if it is headquartered outside the triad
regions. The omitted countries are becoming important
as destination countries for FDI and exports by triad-
based MNEs as well as in global supply chains (Flores &
Aguilera, 2007), and the triad framework cannot be used
for such issues as the strategies used by MNEs from devel-
oped countries to overcome the resource deficiencies
in developing countries (Seelos & Mair, 2007). Further,
it cannot be used to analyze the international activities
of firms based in many developing and emerging coun-
tries—such issues as the strategies of firms in many devel-
oping and emerging countries to help reach their own
and developed markets (Aulakh, Kotabe, & Teegen, 2000;
Hoskisson, Eden, Ming Lau, & Wright, 2000). Flores and Aguilera (2007) show that there is consid-
erable investment by US firms beyond the triad countries.
This point is emphasized in our empirical analysis as 25
firms on the Fortune 500 list in 2005, with a geographic
breakdown of sales information available, cannot be ana-
lyzed using Rugman and Verbeke’s (2004) system. The
Commonwealth Bank of Australia, for example, has all
its sales classified under Oceania and Other. It is classi-
fied as T2 using our system but has zero sales in the triad
and therefore cannot be classified using Rugman and
Verbeke’s (2004) system.
Second, patterns of international business evolve
over time in ways that are not captured within the triad
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threshold excludes alternative patterns of globalization,
whereby firms consolidate within their home region (with
more than 50% of sales located there), and also have sales
throughout the world—but not more than 20% in any one
region. Ruigrok and van Tulder (1995) argue that MNEs
improve their global competitiveness by strengthening
their positions within their home triad or region.
Third, the 50% home-region orientated threshold
biases the system toward defining firms as home-region
orientated and away from the likelihood that any firm
is considered global. A firm classified as home-regional
could have up to 50% of its sales throughout the world,
making it a global firm. Alternatively, all of the sales of a
home-region orientated firm could in fact be in the firm’s
home country—in which case it would be a domestic
firm. This particular threshold is the main driver of the
triad analysis finding that most firms are home-regional,
as demonstrated by Osegowitsch and Sammartino (2008).
Osegowitsch and Sammartino (2008) perform five
robustness tests on Rugman and Verbeke’s (2004) find-
ings by altering the various thresholds in their system.
To carefully replicate Rugman and Verbeke (2004), Ose-
gowitsch and Sammartino (2008) used the Fortune 500
(2001) list. We perform a similar analysis on the Fortune
500 (2005). Our findings are reported in Table 4. We
include, first, the findings of Osegowitsch and Sammar-
tino (2008) on the Fortune list from 2001, and we then
present our replication of their results using the Fortune
list (2005). In the first set of tests, the 20% host-region
threshold is reduced to 15% and then 10%, while retain-
ing the 50% home-region threshold. As can be seen in
Table 4, this results in a shift of firms from biregional to
global. Reducing the threshold to 10%, for example, sees
21 biregional firms reclassified as global.
Next, we eliminate the 50% home-region threshold
and retain the 20% host-region threshold. Similar to the
results of Osegowitsch and Sammartino (2008), we find
a dramatic increase in the number of biregional firms.
We then eliminate the 50% home-region threshold and
reduce the host-region thresholds to 15% and 10%. The
number of global firms increases but remains relatively
few in number overall, but the number of biregional firms
again increases substantially. Our results confirm the find-
ings of Osegowitsch and Sammartino (2008)—that the
case for home regionalization is overstated, and the 50%
home-region threshold is driving Rugman’s conclusions.
ABHK’s system provides a more complete view of
each firm’s breadth of multinationality, and it allows
researchers to set their own thresholds if appropriate to
the context of the study. We suggest that any thresholds
imposed should be lower than those used by Rugman
many of the world’s largest firms tend to skip regionaliza-
tion and proceed directly to transregionalization. This
finding is worthy of further investigation by international-
ization theory builders and empirical researchers.
The Use of Thresholds
The ABHK multinationality classification scheme catego-
rizes firms based on the existence of sales or subsidiaries
in a particular region, rather than the quantity or pro-
portion—thresholds are not used. The use of thresholds
based on sales in these markets presents a highly blink-
ered view of a firm’s international activities. Three points
are worth noting in relation to the use of thresholds by
Rugman and his co-authors.
First, the use of thresholds creates empirical pitfalls
in that some firms cannot be classified using Rugman and
Verbeke’s (2004) system. Anglo American, for example,
has sales in all six regions of the world. It has 33% of
sales in Europe, 4% in Asia, 2% in North America, and
61% in other regions. The complex hurdles of Rugman
and Verbeke’s (2004) system mean that this company is
unclassifiable.
Second, the threshold applied to global firms as hav-
ing less than 50% of their sales in their home region and
at least 20% of their sales in each of the other two regions
of the triad limits the number of firms that are classified
as global. MNEs with a substantial proportion of sales in
their home (triad) regions—particularly the United States
(or North America)—are unlikely to achieve more than
20% of their sales in the other two regions. Further, this
The ABHK multinationality classification scheme categorizes firms based on the existence of sales or subsidiaries in a particular region, rather than the quantity or proportion— thresholds are not used.
Are the World’s Largest Firms Regional or Global? 97
DOI: 10.1002/tie Thunderbird International Business Review Vol. 57, No. 2 March/April 2015
regional and global dimensions are critically important to
international strategy.
Rugman and his co-authors use industry-specific
examples to attempt to refute the validity of global strat-
egy. Using their sales data analysis to show that over 85%
of all North America’s cars are built there by “core triad”
firms, over 90% of cars produced in the EU are sold
there, and over 93% of Japan’s cars are built domestically,
Rugman and Hodgetts (2001) argue that the automobile
industry is “triad-based, not global” and that “there is
no global car” (p. 333). Closer inspection of the world’s
automotive industry, however, reveals that it is very much
global, and that car manufacturers need to have global
strategies. Cars are used in every country in the world.
While it is obviously the case that the triad MNEs are
the biggest producers, the typical car produced in any
of the triad regions, or anywhere else for that matter, is
essentially the assembly of many component parts pro-
duced through a complex global web of supply chains,
licensing, joint venturing, and subsidiaries across many
countries within and outside the triad, however defined.
The statement that there is no global car is a gross simpli-
fication that does not recognize the sophistication of the
industry’s manufacturers. Lampell and Mintzberg (1996)
and his co-authors. Osegowitsch and Sammartino (2008)
also advocate lower thresholds, particularly in the case
in which the researcher wishes to study the process of
internationalization over time. A firm might be rapidly
internationalizing by expanding sales and manufactur-
ing capacity throughout the world, but this trend would
not be picked up for years (if at all) using the Rugman
approach. The higher the threshold, the less likely these
sorts of interesting trends would be detected. ABHK’s sys-
tem can facilitate the study of the fast-changing, dynamic
nature of international business that we observe today
and will continue to observe in the future.
Implications for Firm Strategy
Geography matters in international business because
location is inextricably linked with climate, culture, law,
politics, and trade, and it is central to understanding the
behavior of people as producers and consumers of goods
and services along with the operation of institutions and
markets (Ronen & Shenkar, 1985). In classifying some of
the world’s largest firms using the classification scheme of
ABHK, we have seen that between the extremes of local
and global, there are few regional MNEs and many more
transregional MNEs. Our analysis suggests that the trans-
TABLE 4 Robustness Tests on the Fortune 500 Lists in 2001 and 2005
Home-Regional Biregional Host-Regional Global
Fortune 500 list (2001)
Rugman’s Classifi cation 320 (88) 25 (7) 11 (3) 9 (2)
15% Host Threshold 320 (88) 19 (5) 11 (3) 15 (4)
10% Host Threshold 320 (88) 11 (3) 11 (3) 24 (6)
No 50% Home Threshold 267 (73) 87 (24) 2 (0) 9 (3)
15% Host, No Home Threshold 232 (64) 114 (31) 1 (0) 19 (5)
10% Host, No Home Threshold 200 (55) 122 (33) 1 (0) 42 (12)
Fortune 500 list (2005)
Rugman’s Classifi cation 283 (81) 50 (14) 9 (3) 7 (2)
15% Host Threshold 283 (81) 40 (11) 9 (3) 17 (5)
10% Host Threshold 283 (81) 29 (8) 9 (3) 28 (8)
No 50% Home Threshold 246 (71) 92 (26) 4 (1) 7 (2)
15% Host, No Home Threshold 215 (62) 109 (31) 3 (1) 22 (6)
10% Host, No Home Threshold 187 (54) 114 (33) 2 (0) 46 (13)
Note: This table shows the categorization of the Fortune 500 fi rms for both 2001 and 2005, fi rst using Rugman’s classifi cation, and then altering Rugman’s thresholds. The 2001 results are taken directly from Osegowitsch and Sammartino (2008), and we replicate Osegowitsch and Sammartino’s alterations to thresholds using the Fortune 500 (2005) list. The fi gures show the number of fi rms in each category, and in parentheses the percentage of the fi rms in that particular category. Rugman and co-authors’ classifi cation scheme works as follows. They use four categories: home-regional, biregional, host-regional, and global. Home-regional fi rms have at least 50% of their sales in their home region, and biregional fi rms have less than 50% of their sales in any one region and at least 20% in each of two triad regions. Host-regional fi rms have at least 50% of their sales in a triad region other than the home region, and global fi rms have less than 50% of their sales in any one region and at least 20% in each of the three triad regions.
98 F E A T U R E A R T I C L E
Thunderbird International Business Review Vol. 57, No. 2 March/April 2015 DOI: 10.1002/tie
describe how modern customer-focused manufacturing
specifications have evolved from the more traditional
mass customization, Alford, Sackett, and Nelder (2000)
describe how this has been adopted within the auto-
mobile industry, and Humphry and Memedovic (2003)
document how the automobile industry expanded out-
side the triad during the 1990s into the strongly growing
emerging markets to offset the oversupply and stagnation
within the triad. In addition to these trends, the prices of
important components, such as chemicals, metals, plas-
tics, rubber, glass, and the prices of complementary prod-
ucts such as oil and petrol, ensure that car manufacturers
and component suppliers throughout the world need to
have a clear global strategy and vision that is influenced
and shaped by global issues such as climate change.
Rugman and Verbeke (2004, 2007) argue that firm-
specific advantages (FSAs) are largely bounded within the
firm’s home region and cannot easily be transferred across
regions through trading, forming alliances, or investing in
foreign subsidiaries. MNEs, they argue, tend to focus their
efforts within their home region, and they will expand
further afield—at considerably greater cost and risk—
only when these markets are exhausted. This conjecture,
however, although consistent with high-level international-
ization theory such as the process theory of internationaliza-
tion of Johanson and Vahlne (1977, 1990), is not supported
by a rigorous analysis of the data and an understanding of
its limitations. When the thresholds are reduced, when the
regions of the world are defined more comprehensively,
and when within-region patterns of international activity
are more carefully analyzed, the patterns of internation-
alization that emerge are not necessarily consistent with a
home-region focus. Rather, they are consistent with MNEs
expanding beyond their home regions long before they
have exhausted their home-region markets.
A l t e r n a t e R e g i o n a l G r o u p i n g s
In this section, we examine the robustness of our system
by reclassifying the Fortune 500 firms with available sales
data (374 firms) and subsidiaries data (455 firms), using
several alternative regional groupings. Table 5 presents
the main findings, with Panel A detailing classifications
based on sales and Panel B on subsidiaries. The first row
in Panels A and B presents the numbers for our classifica-
tion system. In the second, third, and fourth rows in each
panel, we reclassify the firms assuming that there are five
instead of six regions, by combining North and South
America, Asia and Oceania, and Europe and Africa,
respectively. The number of firms classified as domestic
and regional change little when the continents are aggre-
gated in this way. The major difference is that more are
classified as global and fewer transregional. In the fifth
row in each panel, we reclassify assuming a three-region
world: Africa/Europe, the Americas, and Asia/Oceania.
Clearly, the number of firms considered global increases
dramatically when there are three “mega-regions.” This is
at odds with Rugman (2003) and Rugman and Verbeke
(2004) because our regions include all countries in the
world and we do not apply thresholds in classifying our
firms within particular regional groupings.
The sixth and seventh rows in Panel B and the sixth
row in Panel A present the results of reclassifying the
Fortune 500 firms using Dunning et al.’s (2007) main
and alternate regional groupings. Dunning et al. divided
the world into six regions using a geographic clustering
originally proposed by Ronen and Shenkar (1985) and
Shenkar (2001): Anglo (Australia, Canada, Ireland, New
Zealand, South Africa, the United Kingdom, and the
United States), Latin European (Belgium, France, Italy, Portugal, and Spain), Nordic and Germanic (Austria,
Denmark, Finland, Germany, the Netherlands, Norway,
Sweden, and Switzerland), Latin American (Argentina,
Brazil, Chile, Colombia, Mexico, Peru, and Venezuela),
Far Eastern (China, Hong Kong, India, Indonesia, Japan,
Korea, Malaysia, Singapore, the Philippines, Taiwan, and
Thailand), and Other (all other countries). We use this system with the subsidiary data (row 7 of Panel B). While
the Dunning et al. system is an intuitive approach that
encompasses elements of cultural and psychic distance,
it has the disadvantage that it cannot be used at the firm
level to classify by multinationality based on sales because
most firms do not report sales or other accounting data
in sufficiently fine geographic detail. For this reason, we
also use Dunning et al.’s (2007) alternate four regions—
the Americas, Europe, Asia, and Other—to reclassify the
Fortune 500 based on both sales and subsidiaries (row 6
of Panels A and B).
Clearly, the number of firms considered global increases dramatically when there are three “mega-regions.”
Are the World’s Largest Firms Regional or Global? 99
DOI: 10.1002/tie Thunderbird International Business Review Vol. 57, No. 2 March/April 2015
TABLE 5 Robustness Analysis Based on Geographic Regions
D R T G Total
Panel A: Based on Sales Data
1: Our six-region system Africa, Asia, Europe, North America, South America and Oceania 53 8 285 28 374
2: Five-region system Africa, Asia, the Americas, Europe, Oceania (North and South America merged) 53 9 273 39 374
3: Five-region system Africa, Asia/Oceania, North America, South America, Europe (Asia and Oceania merged) 53 8 236 77 374
4: Five-region system Africa/Europe, Asia, North America, South America and Oceania (Africa and Europe merged) 53 8 246 67 374
5: Three-region system Africa/Europe, the Americas and Asia/Oceania 53 9 80 232 374
6: Dunning et al.’s (2007) alternative regions The Americas, Europe, Asia, Other 53 9 185 127 374
Panel B: Based on Subsidiary Data
1: Our six-region system Africa, Asia, Europe, North America, South America and Oceania 47 28 277 103 455
2: Five-region system Africa, Asia, the Americas, Europe, Oceania (North and South America merged) 47 30 268 110 455
3: Five-region system Africa, Asia/Oceania, North America, South America, Europe (Asia and Oceania merged) 47 28 249 131 455
4: Five-region system Africa/Europe, Asia, North America, South America and Oceania (Africa and Europe merged) 47 28 223 157 455
5: Three-region system Africa/Europe, the Americas, and Asia/Oceania 47 30 80 298 455
6: Dunning et al.’s (2007) alternative regions The Americas, Europe, Asia, Other 47 30 157 221 455
7: Dunning et al.’s (2007) six regions Anglo, Latin European, Germanic/Nordic, Latin American, Far Eastern, Other 47 25 225 158 455
Note: This Table classifi es the Fortune 500 fi rms in 2005 for which we have sales and subsidiary data, using several alternate regional groupings. The columns titled “D”, “R”, “T”, and “G” denote the categories of multinationality as domestic, regional, transregional, and global. Panel A details the num- ber of fi rms in each regional grouping category based on sales data, and Panel B does likewise for the subsidiary data.
As can be seen in Panel B of Table 5, the number of
firms classified as domestic and regional is similar when
Dunning et al.’s (2007) six-region system is compared
with ours, except that the Dunning system classifies more
firms as global and fewer as transregional. This difference
is explained by Dunning et al.’s (2007) “Other” region,
which is a large and diverse 155- country grouping, and
also by the fact that three of their regions capture Euro-
pean countries. These quirks of the Dunning et al. sys-
tem throw up a few anomalies when using it at the firm
level. For example, a firm with subsidiaries throughout
Europe and in South America and Asia would be classi-
fied as global, and a firm with subsidiaries in Belgium,
Germany, Luxembourg, and the United Kingdom would
be classified as transregional even though all of its subsid-
iaries are in Europe.
S u m m a r y a n d C o n c l u s i o n s
In this article we have provided an alternative perspective
on the regional-global debate. Using the classification
scheme of Aggarwal et al. (2011), we have classified two
samples of firms: 1,289 G7 firms as well as the 2005 For-
tune 500 firms. We have shown that both samples contain a
wide variety of firms, ranging from domestic corporations
to global MNEs, with most being transregional. Contrary
to proponents of the triad analysis—who have argued that
most Fortune 500 firms are regional rather than global—
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Thunderbird International Business Review Vol. 57, No. 2 March/April 2015 DOI: 10.1002/tie
we find that many of these firms, as well as our larger data
set of 1,289 G7 firms, are in fact transregional and global.
Further, the vast majority of firms do not fully penetrate
their home region. Very few are active in more than one-
third of countries in their region, and our findings are
consistent with a pattern of internationalization whereby
firms expand beyond their home region long before they
have exhausted more geographically close markets. Con-
trary to the recommendation of Rugman and co-authors
that firms should think home-regionally, our analysis sug-
gests that transregional and global dimensions are criti-
cally important to international strategy.
A further conclusion to emerge from our analysis is
that the IB literature needs a strong and robust classifica-
tion system for firm-level multinationality in order to pro-
vide clarity on the regionalization/globalization debate.
While we argue in favor of the use of the ABHK model,
it is not without its limitations. One such limitation is
the restrictiveness of the system in classifying firms. For
example, a firm must have sales and subsidiaries in all six
regions of the world to be classified as global. Therefore,
if a firm has sales and subsidiaries in Europe, North Amer-
ica, South America, Asia, and Oceania but not Africa, it is
classified as transregional rather than global. Our robust-
ness analysis in the preceding section details the impact
on results when alternative geographic regions within
this six-region system are combined. We see this as a first
step in considering alternative classification systems and
recommend this as a useful avenue for future research.
N o t e s
1. De Backer and Yamano (2008) describe how trade has outpaced world growth since the 1980s; UNCTAD (2007) discusses how FDI has accelerated since the 1990s; and De Backer and Yamano (2008) describe the increasingly global production networks and supply chains.
2. Peng and Pleggenkuhle-Miles (2009) review the literature on global versus regional diversification in the context of a larger set of debates about global strategy.
3. Rugman and Verbeke (2003, 2004), for example, analyze 364 firms from the Fortune 500 list.
4. For example, Rugman and Girod (2003) refer to the triad as com- prising the United States, the EU, and Japan (p. 28 and Table 5), and they later refer to the triad as comprising NAFTA, Europe, and Asia (p. 29 and Table 6). These alternative regional groupings are potentially very different, and no details of constituent countries are provided. Rugman and Verbeke (2004) refer to the triad as comprising North America, the EU, and Asia (p. 3), but they present their analysis of the “broad triad” comprising NAFTA, the expanded EU, and Asia (p. 5). They do not clarify what countries are in the latter two regions.
5. Eight firms are host-region orientated, 16 are biregional, and 86 are home-region based.
6. Africa and South America include all countries on these continents. Asia includes the Middle East, the Russian Federation, and Turkey; Europe includes countries as far east as Armenia, Azerbaijan, Belarus, and Ukraine; North America includes Canada, Mexico, the United States, and the Central American countries; and Oceania comprises Australia, New Zealand, and the Pacific islands.
7. Twenty-five of our 374 firms cannot be classified using Rugman’s system.
8. They are 3M, Air France–KLM, Anglo American, AREVA, AstraZen- eca, BAE Systems, BHP Billiton, Boeing, Bouygues, British Airways, British American Tobacco, Cemex, Fonciere Euris, General Dynamics, Hochtief, Hutchison Whampoa, JPMorgan Chase, Lufthansa, MAN Group, Merrill Lynch, Nestlé, Nike, Novartis, PPR, Rio Tinto Group, Roche Group, Société Générale, and Volkswagen.
9. The British firm Anglo American has 33% of sales in Europe, 3.6% in Asia, and 1.8% in North America. Another British firm, Rio Tinto, has 30.8% of sales in North America, 3.4% in Asia, and 1.4% in Europe. As a result, neither firm can be classified using Rugman’s thresholds.
Jenny Berrill is assistant professor at the School of Business at Trinity College Dublin, Ireland. She holds a BA degree in economics and fi nance and a master’s degree in economics and fi nance from the National University of Ireland (NUI), Maynooth. She holds a PhD degree in international business and fi nance from Trinity College Dublin.
Her research interests are in the area of multinational companies and their role in the international diversifi cation of
portfolios, the regionalization/globalization debate, and industrial versus international portfolio diversifi cation. She has published articles in the Journal of Economics and Business, International Business Review, and Research in International Business and Finance.
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