WEBVTT Kind: captions; Language: fi 1 00:00:00.000 --> 00:00:05.350 The aim of this video is to provide an introduction to the conceptual lenses 2 00:00:05.350 --> 00:00:10.220 you will utilize in your history project. Let's once more establish what we 3 00:00:10.220 --> 00:00:15.810 already know: the first wave of globalization resulted in an unprecedented 4 00:00:15.810 --> 00:00:20.280 global integration. The free-standing company was one of its main 5 00:00:20.280 --> 00:00:25.610 vehicles. It provided many connections across the globe, linking British 6 00:00:25.610 --> 00:00:30.840 expatriates abroad with home sources of capital. It gave traders 7 00:00:30.840 --> 00:00:35.820 ways of taking advantage of newly identified prospects that they have seen 8 00:00:35.820 --> 00:00:40.590 abroad. In sum, it was a great institutional vehicle for 9 00:00:40.590 --> 00:00:45.550 available capital to be moved to foreign countries. 10 00:00:45.550 --> 00:00:51.250 In this video here, I build on those historical facts and elaborate 11 00:00:51.250 --> 00:00:55.910 a bit more on the historical background of the free-standing company. 12 00:00:55.910 --> 00:01:01.450 Second, I will introduce a conceptual framework based on Wilkins’ work and others 13 00:01:01.450 --> 00:01:06.210 that helps us to study free-standing companies. Also, we will 14 00:01:06.210 --> 00:01:11.240 look at another conceptual lens relevant for 15 00:01:11.240 --> 00:01:16.220 this period of study, namely nationalism. 16 00:01:16.220 --> 00:01:20.550 Last but not least, this video also prepares you 17 00:01:20.550 --> 00:01:24.380 for our first in-class session. 18 00:01:24.380 --> 00:01:29.750 So, the historical narrative that I wish to present 19 00:01:29.750 --> 00:01:34.650 here considers the historical emergence of 20 00:01:34.650 --> 00:01:39.790 the free-standing company as well as its disappearance. Most 21 00:01:39.790 --> 00:01:45.150 importantly, one has to interpret its emergence 22 00:01:45.150 --> 00:01:49.730 against the backdrop of a strong British capital market. 23 00:01:49.730 --> 00:01:54.650 This evolved due to British status as a forerunner in 24 00:01:54.650 --> 00:02:00.500 industrialization which we know is the process of transforming 25 00:02:00.500 --> 00:02:04.280 an agrarian society into one based on 26 00:02:04.280 --> 00:02:09.950 industrial production. The second factor that fed into 27 00:02:09.950 --> 00:02:14.530 the strong British capital market has been, of course, the establishment 28 00:02:14.530 --> 00:02:19.850 of British imperial power, today: colonialism. 29 00:02:19.850 --> 00:02:24.060 And that is something that we tend to view today 30 00:02:24.060 --> 00:02:28.480 more critical than only decades ago. 31 00:02:28.480 --> 00:02:33.400 Besides the capital market, the emergence of the free-standing company 32 00:02:33.400 --> 00:02:38.270 is also related to a legal revolution. So, the status of 33 00:02:38.270 --> 00:02:43.020 the company changed through various policy changes. 34 00:02:43.020 --> 00:02:48.000 For example, the 1844 35 00:02:48.000 --> 00:02:53.350 Joint Stock Companies Registration & Regulation Act 36 00:02:53.350 --> 00:02:57.810 allowed for formation of multiple shareholder businesses with tradeable shares. 37 00:02:57.810 --> 00:03:02.800 Then, the 1855 Limited Liability Act provided 38 00:03:02.800 --> 00:03:07.290 legal protection, so it restricted 39 00:03:07.290 --> 00:03:11.840 the possible losses to the capital of the company. 40 00:03:11.840 --> 00:03:17.470 Then, finally, the 1856 Act extended those 41 00:03:17.470 --> 00:03:22.860 rights to Scotland, the context from which the firms we will study 42 00:03:22.860 --> 00:03:27.240 ventured abroad. Last but not least, 43 00:03:27.240 --> 00:03:32.250 the free-standing company must also be seen in the context 44 00:03:32.250 --> 00:03:37.200 of the emergence of the London Stock Exchange and 45 00:03:37.200 --> 00:03:42.320 more provincial stock exchanges where, of course, 46 00:03:42.320 --> 00:03:47.370 the shares were also traded. So, in all, I want to establish here the 47 00:03:47.370 --> 00:03:52.510 fact that the free-standing company became high risk 48 00:03:52.510 --> 00:03:57.340 but potentially high returns investments that were 49 00:03:57.340 --> 00:04:02.270 attractive for many Brits 50 00:04:02.270 --> 00:04:03.800 in the 19th century. 51 00:04:03.800 --> 00:04:09.810 Let's look at the disappearance. 52 00:04:09.810 --> 00:04:14.970 Similarly as the second wave of globalization 53 00:04:14.970 --> 00:04:19.650 ended in the 1920s, we see the disappearance 54 00:04:19.650 --> 00:04:24.190 of the free-standing firm in the early 1920s. 55 00:04:24.190 --> 00:04:29.880 Reasons include not only the tragedy of the First World War 56 00:04:29.880 --> 00:04:33.640 but there seems to be also relevant 57 00:04:33.640 --> 00:04:38.400 policy changes that influenced the fate of the FC. 58 00:04:38.400 --> 00:04:43.960 One is that the British Government started to restrict capital 59 00:04:43.960 --> 00:04:48.990 exports. Also there has been a change in the tax regime. 60 00:04:48.990 --> 00:04:54.240 It seems as if the investors with shares in a FC became taxed 61 00:04:54.240 --> 00:04:59.520 more heavily. Then one has also to see that the USA 62 00:04:59.520 --> 00:05:04.880 increasingly became the center of the Global Capital. 63 00:05:04.880 --> 00:05:09.880 And that also influenced the fate of FC. 64 00:05:09.880 --> 00:05:14.550 Last but not least there is also a 65 00:05:14.550 --> 00:05:20.670 historical change in the composition of multinational trade and production: 66 00:05:20.670 --> 00:05:24.130 the high tech industry! Think of care manufacturers that grew in importance. 67 00:05:24.130 --> 00:05:28.980 Wilkins note that 68 00:05:28.980 --> 00:05:34.010 that the diffusion of modern industrial processes and products 69 00:05:34.010 --> 00:05:37.950 could NOT be done through free-standing companies, other 70 00:05:37.950 --> 00:05:42.410 corporate structures were better prepared for that. 71 00:05:42.410 --> 00:05:48.190 So all in all scholars have established the fact that alternative 72 00:05:48.190 --> 00:05:53.240 corporate forms developed in that time and those 73 00:05:53.240 --> 00:05:58.140 forms served better as a key vehicle for doing business 74 00:05:58.140 --> 00:06:04.730 on international scale. Better compared to the 75 00:06:04.730 --> 00:06:08.260 organizational form of the free-standing company. 76 00:06:08.260 --> 00:06:13.510 Having now established 77 00:06:13.510 --> 00:06:18.580 the historical context of the FC, we now briefly 78 00:06:18.580 --> 00:06:23.470 touch on the key challenge of the free-standing company, 79 00:06:23.470 --> 00:06:28.570 or we could even say, that it is a challenge that 80 00:06:28.570 --> 00:06:33.090 any other international business company 81 00:06:33.090 --> 00:06:38.190 is likely to encounter. It is what Zaheer called 82 00:06:38.190 --> 00:06:43.720 the “liability of foreignness” which arises when a 83 00:06:43.720 --> 00:06:48.900 foreign firm encounters policies, cultures, languages 84 00:06:48.900 --> 00:06:52.550 and laws that are alien to it. 85 00:06:52.550 --> 00:06:57.540 Therefore, it is one of the key presumptions of the international 86 00:06:57.540 --> 00:07:02.420 business discipline that a firm that ventures abroad requires 87 00:07:02.420 --> 00:07:07.350 an advantage, competitive advantage over local firms 88 00:07:07.350 --> 00:07:12.130 in order to overcome this liability of foreignness. 89 00:07:12.130 --> 00:07:17.190 And here is important to know that there is 90 00:07:17.190 --> 00:07:22.730 even a more specific challenge that is only exclusively 91 00:07:22.730 --> 00:07:27.220 for the free-standing company. It is, as history has 92 00:07:27.220 --> 00:07:32.810 shown, that the free-standing company, by definition, suffered 93 00:07:32.810 --> 00:07:37.160 from a lack of previous experience internal 94 00:07:37.160 --> 00:07:43.180 to the company on which to draw for doing business abroad. So to repeat 95 00:07:43.180 --> 00:07:47.190 in a different way, free-standing companies, as the 96 00:07:47.190 --> 00:07:52.420 name indicates, were established with the purpose of doing business abroad 97 00:07:52.420 --> 00:07:57.670 without a pre-existing firm 98 00:07:57.670 --> 00:08:02.130 in Britain who might have developed 99 00:08:02.130 --> 00:08:07.430 the capabilities to do business before. 100 00:08:07.430 --> 00:08:12.720 So this now brings me to the first preparatory 101 00:08:12.720 --> 00:08:18.320 assignment question that you then find on Moodle. So you will read 102 00:08:18.320 --> 00:08:23.490 Wilkins and reflect upon how FSC’s 103 00:08:23.490 --> 00:08:28.590 could have developed their competitive advantage - and why not. 104 00:08:28.590 --> 00:08:33.600 And this framework can help you to 105 00:08:33.600 --> 00:08:38.860 think about those questions. In this framework, we mainly differentiate 106 00:08:38.860 --> 00:08:43.720 between contextual, organizational, and strategic 107 00:08:43.720 --> 00:08:48.670 advantages that may result in organization capabilities 108 00:08:48.670 --> 00:08:53.120 that help overcoming the liability of foreignness. 109 00:08:53.120 --> 00:08:58.790 So, when you read Wilkins’ article, have those three structural elements 110 00:08:58.790 --> 00:09:03.950 in mind: the context, the organization, and the strategy. 111 00:09:03.950 --> 00:09:09.610 Now we have 112 00:09:09.610 --> 00:09:14.830 discussed a first conceptual lens relevant for this assignment. 113 00:09:14.830 --> 00:09:20.030 The second one is provided when we look more closely 114 00:09:20.030 --> 00:09:25.200 at the experiences and perspectives of the host country. 115 00:09:25.200 --> 00:09:30.720 The important factor here is: nationalism. In this regard, 116 00:09:30.720 --> 00:09:35.690 think about it, it is really anachronistic at best to 117 00:09:35.690 --> 00:09:41.140 talk about international business before the emergence of nation-states. 118 00:09:41.140 --> 00:09:46.570 Right, the concepts of…the concept of nations 119 00:09:46.570 --> 00:09:51.490 does have a history too. So it emerged 120 00:09:51.490 --> 00:09:57.180 from a political ideology of nationalism, and nationalism 121 00:09:57.180 --> 00:10:01.990 does not indicate more than calling 122 00:10:01.990 --> 00:10:07.160 for congruence between people, government, and territory. 123 00:10:07.160 --> 00:10:13.030 Empowered by this ideology, we have experienced a wave of 124 00:10:13.030 --> 00:10:18.360 nation-building processes in the middle of the 19th century. 125 00:10:18.360 --> 00:10:23.520 For example, think of the Unification of Germany in 1871. 126 00:10:23.520 --> 00:10:28.820 Today, however, we often reduce nationalism to the hateful 127 00:10:28.820 --> 00:10:33.110 rhetoric of the far-right. And we often 128 00:10:33.110 --> 00:10:38.270 forget that we take the existence of nations 129 00:10:38.270 --> 00:10:43.040 as a taken-for-granted. We take it for granted 130 00:10:43.040 --> 00:10:47.270 instead of acknowledging its history. 131 00:10:47.270 --> 00:10:52.450 Jensen-Eriksen reminds us, however, that a national 132 00:10:52.450 --> 00:10:57.540 perspective survives in a globalized world. 133 00:10:57.540 --> 00:11:03.150 In preparatory assignment number 1, we invite you to 134 00:11:03.150 --> 00:11:08.890 reflect on Jensen-Eriksen’s quote: ”How do national identities and 135 00:11:08.890 --> 00:11:14.990 borders influence the operation of international business companies?”. 136 00:11:14.990 --> 00:11:19.570 And Jensen-Eriksen fleshens out the concept of 137 00:11:19.570 --> 00:11:24.620 economic nationalism. Perhaps this is a way to think about it. 138 00:11:24.620 --> 00:11:29.870 To sum up, the business history project 139 00:11:29.870 --> 00:11:34.860 will draw on two 140 00:11:34.860 --> 00:11:40.240 potential fruitful conceptual lenses, one is the free-standing 141 00:11:40.240 --> 00:11:44.640 company concept as it was developed by Wilkins and 142 00:11:44.640 --> 00:11:50.210 the other one is this economic nationalism perspective that 143 00:11:50.210 --> 00:11:54.980 more or less states that national perspectives will 144 00:11:54.980 --> 00:11:59.870 remain important even if we are living right now 145 00:11:59.870 --> 00:12:04.860 in a globalized world. So that’s it for the moment. 146 00:12:04.860 --> 00:12:10.490 I very much look forward to discussing with you those 147 00:12:10.490 --> 00:12:14.650 concepts and your ideas on those in the first seminar. 148 00:12:14.650 --> 00:12:15.600 See you then.