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Journal of International Business Studies (2008) 39, 10911093

& 2008 Academy of International Business All rights reserved 0047-2506


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BOOK REVIEW

Spikes, blocs and the death of distance


International business scholars have a comprehensive understanding of globalization, so it should come as
no surprise that current academic research contradicts the flat world hypothesis of recent journalistic best
sellers (Friedman, 2005). Careful analysis reveals not a seamless and frictionless world following the
precepts of Ricardian comparative advantage, but rather a world of spikes and blocs.
Examining an economic map of the world, it is inescapable that agglomeration and linkage economies
complement comparative advantage so that economic activity still spikes in the Triad regions of North
America, Europe (including Oceania) and Japan (Florida, 2005; Hirschman, 1977). The spikiness is even
greater for innovation, where by many measures non-Triad countries barely register (Florida, 2008). Where
does all this spikiness come from?
Part of the answer lies in the fact that the Triad regions also function as trading blocs in the form of
NAFTA and the EU. Most firms find that economic activity within their home region remains cheaper,
easier and more efficient than economic activity in other regions. In a fine analysis of Ghemawats timely
work on semi-globalization, Rugman finds resonance with his own research on regional strategies: very few
firms span the entirety of a flat world. Distance is not dead, and most firms discover, like Dorothy in the
Wizard of Oz, that there is no place like home.

Ram Mudambi
JIBS Book Review Editor
REFERENCES
Florida, R. 2005. The world is spiky. The Atlantic 296(3): 4851.
Florida, R. 2008. Whos your city? How the creative economy is making where to live the most important decision of your life. New York:
Basic Books.
Friedman, T. 2005. The world is flat: A brief history of the twenty-first century. New York: Farrar, Straus and Giroux.
Hirschman, A. O. 1977. A generalized linkage approach to economic development with special reference to staples. Economic
Development and Cultural Change, 25(Supplement): 6797.

Redefining Global Strategy: Crossing Borders in


a World Where Differences Still Matter
Pankaj Ghemawat
Harvard Business School Press, Boston, MA, 2007, 304 pages.
ISBN 13: 978-1-59139-866-0

Reviewed by The theme of this book is that the world is not flat, defined as a
Alan M Rugman situation of total integration. The author contends that reality is
characterized by a situation between zero integration and total
Kelley School of Business, Indiana University, USA
integration, which he terms semi-globalization (p. 30). This
Journal of International Business Studies concept is related to (but not identical to) the regionalization
(2008) 39, 10911093. effect, which I have observed in firm-level and country-level
doi:10.1057/palgrave.jibs.8400414 analysis. Professor Ghemawat provides abundant empirical
Book Review Alan M Rugman
1092

evidence to support the existence of semi-globaliza- recognize that its primary audience is the practicing
tion. He also provides substantial theoretical rea- manager and consultant keen to learn and to
soning and insight into the dangers of simplistic implement recent academic thinking.
global strategy and the predominance of intra- In Chapter 1 Ghemawat presents useful evidence
regional activity by the worlds largest firms. He showing that across many industry sectors the
achieves the former with some useful tables of degree of internationalization averages 10 percent
regional data mainly in the three chapters in Part rather than the 100 percent to be expected with
One but also in Chapter 5. He does the latter pure globalization. This work could be improved if
mainly through an interesting set of theoretical Ghemawat were to engage more forcefully with
arguments in the five chapters in Part Two of the firm-level rather than industry-level data. Using
book where he outlines his Triple A model. In this firm-level data he could construct a ratio of
model Adaptation is a form of local (national) regional to total sales, a ratio that represents a
responsiveness; Aggregation is basically the more useful metric for regionalization than the
achievement of economies of scale; and Arbitrage traditional ratio of foreign to total sales used in the
is the exploitation of national differences. The book. Furthermore, firm-level data can be used to
Triple A model is well presented and is based upon test the performance of firms according to their
a clear and incisive understanding of the relevant degree of regionalism or internationalization.
academic literature which is summarized in sets of In contrast, the major strength of the book lies in
abundant footnotes. Ghemawats mastery of cases and practical exam-
Part Two of the book on the Triple A model is ples. The opening example extending over the
stronger than Part One in which Ghemawat Introduction of the book is about the nature of
analyzes his CAGE framework, where C repre- football (soccer). Ghemawat argues correctly that
sents cultural distance; A represents administra- soccer is not a global sport, in line with other recent
tive (government regulatory) distance; G is literature (Rugman, 2000). Ghemawat also dis-
geographic distance; and E is economic distance. cusses many other cases and company examples,
These are linked in a useful manner to the gravity some of which have been well worked over by other
model of international trade. Within the interna- scholars. He always adds value, for example, in the
tional business literature, all four of these would be useful diagrammatic positioning of the profits
considered elements of the country factor. CAGE is of country divisions of Wal-Mart (p. 36). He
used later in Chapter 6 on Arbitrage. Part One also also reprises in detail his excellent Harvard cases
contains in Chapter 3 the so-called ADDING value on Cemex, Star TV, Ericsson in China, Philips,
scorecard, where there are six items in the Wal-Mart, Tricon, Embraer, Ranbaxy, Tata Consul-
ADDING acronym. Again, this scorecard is used tancy, and Philips Medical. He provides an
later in the book. Notwithstanding these caveats, I informed discussion of the problems Google has
am very pleased that this book has been written experienced in emerging markets, similar to Micro-
and published in this readable form, as it should soft in China. Chapter 5 on Adaptation is 30 pages
influence executives and students. Ghemawat of examples, perhaps the most practice-based
brings a major academic name to the camp of chapter. The emphasis here is upon local (country
those critical of flat earth/pure globalization think- level) adaptation, rather than regional adaptation.
ing and the misleading use of uniform global Nearly all of Ghemawats examples complement
strategy. In doing so he provides both empirical the insights to be gained from parallel regional
and theoretical support for research work demon- analysis at the firm level. The cases also bring out
strating that the worlds largest firms perform that the former focus on the globalization of
largely within their home region of the broad Triad markets now needs to be replaced by firm-level
markets of North America, Europe, and Asia Pacific. studies of the globalization of production, where
While Ghemawat does not use the Triad concept or the latter can be partly solved by use of the Triple A
the current regional terminology of the academic model.
literature, this book (and his related publications) Of the five chapters in Part Two of the book, my
produces similar conclusions about the need for favorite is Chapter 5. In this chapter Ghemawat
effective home region strategy, the liability of inter- explicitly discusses regionalization. He presents
regional foreignness, and the danger of the popular data showing that the degree of intra-regional trade
conventional wisdom concerning globalization. As has increased between 1958 and 2003. These data
I assess the strengths and weaknesses of this book, I echo those reported in the other recent studies

Journal of International Business Studies


Book Review Alan M Rugman
1093

(e.g., Rugman, 2000). The most striking point of Most of the examples in Ghemawats book reinforce
commonality among the recent reported data is this finding and support the need for the regional
that intra-regional trade in Asia has increased from solution to strategy and structure. In particular,
35 percent in 1958 to over 54 percent by 2003. Ghemawat argues that a firm does not need to
Ghemawat also examines the nature of Toyotas develop a special organizational structure (like the
strategy. He accepts that even large companies like transnational) to do all three of the As. He says
Toyota need to build upon their home region and managers need to nail down at least one of the As
then expand very cautiously into another region. and, with one in hand, possibly seek another,
Ghemawat also discusses six types of regional but be careful about pursuing the elusive trifecta
strategy archetypes and gives excellent examples (p. 218). Hopefully, Ghemawats work, aligned with
of firms in each of these six categories. the exploding academic literature on regionaliza-
Ghemawats book adds to the recent literature tion, will generate an upsurge of research on
that extends the work of Bartlett and Ghoshal regional strategy and structure similar to that
(1989). Their focus upon the transnational solution produced for global strategy and structure nearly
was based upon an explicit argument concerning 20 years ago by Bartlett and Ghoshal.
global integration. This needed to be offset In spite of some niggling errors (e.g., some data
against national responsiveness with both to be are cited for the Fortune 500 when they are actually
enhanced by worldwide learning. In practice, few the Fortune Global 500) Ghemawats book is highly
firms are potential candidates for the transnational recommended as an excellent popularization of the
solution. Indeed, recent work has identified only new subfield of regionalization, semi-globalization,
nine of the worlds 380 largest firms as truly global, and regional strategy. For this reason I would argue
with 320 being home region based and needing a that this is one of the most important books
regional, rather than a transnational, solution to published by Harvard Business School Press since
strategy and structure (Rugman & Verbeke, 2004). Bartlett and Ghoshal (1989).

REFERENCES
Bartlett, C. A., & Ghoshal, S. 1989. Managing across borders: The Rugman, A. M., & Verbeke, A. 2004. A perspective on regional
transnational solution. Boston: Harvard Business School Press. and global strategies of multinational enterprises. Journal of
Rugman, A. M. 2000. The end of globalization. London: Random International Business Studies, 35(1): 319.
House.

Journal of International Business Studies

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