Title VI and the Global Competitiveness of U.S. Firms

1. Title VI and the Global Competitiveness of U.S. Firms Michael A. Hitt Texas A&M University March 2009

2. Introduction “German Engineering, Swiss Innovation, American Nothing” Daimler Advertising Slogan to Promote its “Smart For Four” Compact Auto (Friedman, 2008) Partly Explains Why Daimler’s 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)

3. 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

4. History Cont’d 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

5. History Cont’d 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

6. History Cont’d 1980s—Global Competition IncreasedJapanese Firms Presented a Major Challenge to U.S. Firms Gain Global Market Share Identified U.S. Firms’ Deficiencies in Domestic and Foreign Markets

7. History Cont’d Trade and Competitiveness Act of 1988Goal: To Increase and Promote the Nation’s 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

8. The 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

9. 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)

10. Cultural Legacies Cont’d 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)

11. 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)

12. 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)

13. 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

14. Institutional Environments Cont’d 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)

15. Institutional Environments Cont’d 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)

16. 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 Competitiveness—U.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 Advantage—Using Multicultural Knowledge

17. Conclusions Cont’d Kauffman Foundation Report Noted that Highly Skilled Immigrants Historically Have Contributed to Competitive Advantages (e.g., High Technology Sector) Those Who Return to their Home Country Often (50+%) Start New Businesses, Contributing to the Local Economies (Wadhwa, 2009) Recent Research Shows U.S. Entrepreneurs Have Institutional Advantages over Entrepreneurs in Major Emerging Economies—More Successful (Batjargal, Tsui, Hitt, Arregle, Webb & Miller, 2009)

18. Conclusions Cont’d 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)