Indeed, the vast majority of these multinationals are not pursuing a global strategy, instead focusing primarily on sales within their home region, whether it is North America, the European Union (EU) or Japan. And many of them struggle to maintain profitable foreign operations.
For each of the past three years, Professor Rugman has constructed the Templeton Global Performance Index, which ranks the world's leading multinationals according to the profitability of their foreign operations in the previous year.
The index shows that some companies and industries have very profitable foreign operations. The pharmaceutical industry, for example, has topped the global performance rankings by industry every year.
But over the three years, the gap between the best and worst performing companies has widened dramatically, and there is now a trend towards 'de-globalisation' in the face of persistently poor global performance.
The annual Fortune 500 features the 500 biggest multinational enterprises measured by sales. These corporations dominate international business, accounting for over 90 per cent of the world's stock of foreign direct investment and nearly 50 per cent of the world trade. 430 of them are based in the core 'triad' regions of the United States, the EU and Japan.
But according to Professor Rugman's research, very few of them actually have any significant presence in all three parts of the triad. In fact, only a handful, such as Nestlé and Unilever, can really be said to qualify as 'global' multinational enterprises. A somewhat larger subset of the 500 have a strong presence in at least one other part of the triad in addition to the home triad – 'bi-regional' multinationals.
The lack of evidence for an inevitable process of globalisation in international business is particularly stark in the retail sector, which makes up nearly 10 per cent of the world's largest 500 multinationals and which includes Wal Mart, the world's biggest corporation by sales in 2002.
Of the 49 retailers regarded as 'global' in the Fortune 500 list, 18 are purely domestic; 24 are very concentrated in their home triad (with intra-regional sales); only 5 are bi-regional; and only one is global – the luxury goods retailer Christian Dior/LVMH.
For further information, contact Professor Alan Rugman on 001-812-855-5415 (office) 001-812-333-2782 (home) or email: rugman@indiana.edu
Or Lesley Lilley at ESRC, on 01793 413119 or email: lesley.lilley@esrc.ac.uk.
NOTES FOR EDITORS
1. The research report 'UK Competitiveness and the Performance of Multinational Companies' by Alan M. Rugman was funded by the Economic and Social Research Council (ESRC). Alan Rugman is Professor of International Business at the Kelley School of Business, Indiana University, 1309 East 10th Street, Bloomington, Indiana 47405. He is also a Senior Research Fellow at Templeton College, University of Oxford, Oxford OX1 5NY.
2. The ESRC is the UK's largest funding agency for research and postgraduate training relating to social and economic issues. It has a track record of providing high-quality, relevant research to business, the public sector and Government. The ESRC invests more than £53 million every year in social science research. At any time, its range of funding schemes may be supporting 2,000 researchers within academic institutions and research policy institutes. It also funds postgraduate training within the social sciences, thereby nurturing the researchers of tomorrow. The ESRC website address is http://www.esrc.ac.uk.
3. REGARD is the ESRC's database of research. It provides a key source of information on ESRC social science research awards and all associated publications and products. The website can be found at http://www.regard.ac.uk.