‘not one of these can be dubbed truly global, footloose or borderless’. Analysis
of data from the UN’s World Investment Report (2001) suggests little has
changed since Ruigrok and van Tulder’s study was published: the transnation-
ality index, which condenses the ratios of foreign assets to total assets, foreign
sales to total sales and foreign employment to total employment into one ratio,
shows that on average around half of the operations of the largest 100 MNCs
are located in the home base. While there are a small number of MNCs which
have a high degree of global spread – mainly those originally based in small
countries such as Nestlé and those formed through a merger of two firms from
different countries such as ABB – these tend to be the exception.
The influence of the home country over a multinational stems not just
from the concentration of assets, sales and employment but also from other
ways in which MNCs are ‘embedded’ in the country of origin. One such source
of a country-of-origin effect is the dominance of home country nationals in
senior managerial positions. The CEO of the vast majority of MNCs is a citizen
of the original country of the firm, while the management boards are domi-
nated by home country nationals. The significance of this lies in the way that
the managerial traditions of the country of origin shape the nature of key deci-
sions. Another source of the country-of-origin effect relates to the way that
firms are financed and governed. We know that financial systems differ
markedly – for example, the fluid and arm’s-length relationship between share-
holders and management in Britain and the USA contrasts with the stable and
close relationship between the two groups in Germany (O’Sullivan, 2000) – and
that MNCs retain close links with banks, stock markets and other financial
institutions at home (Doremus et al., 1998). The logic of this is that the differ-
ing pressures on firms that the divergent financial systems create are carried
over to the international level in MNCs. A further source of the country-of-
origin effect is the concentration of key activities in the home base. In particular,
R&D activities tend to be very home country focused and since national inno-
vation systems differ this will lead to differences by nationality in the nature
of innovations found in MNCs.
There is considerable evidence of the way in which the ‘institutional con-
figurations’ (Hall and Soskice, 2001) in the country of origin of MNCs influ-
ence the style the firm adopts in managing its international workforce. For
instance, the primacy of the rights of shareholders in the financial system in
the USA and the hostility of management to trade unions have created a clear
orientation at the international level towards shareholder interests and a
related hostility to unions among American MNCs (Edwards and Ferner, 2001).
In contrast, other evidence testifies to the link between the way the German
system of corporate governance accords rights to a range of ‘stakeholders’ and
the more consultative management style and pragmatic approach to dealing
with unions in German MNCs (Ferner and Varul, 1999). Crucially, the influ-
ence of the country of origin also shows up in the preferences of MNCs of dif-
ferent nationalities for particular practices. Japanese MNCs, for example, have
Transfer of Employment Practices Across Borders in MNCs 395