Book Review for Transnational Corporations

2 May 2002

John A. Mathews (2002), Dragon Multinational: A New Model for Global Growth, Oxford: Oxford University Press, xiv+258 pp. ISBN 0-19-512146-5

This book is clearly a masterpiece on transnational corporations (TNCs) from developing economies and will remain so for many years to come. In the past, studies of this group of TNCs often emanated from the so-called “Third World multinationals” literature that viewed these “unconventional” TNCs from the perspective of established giant corporations from advanced industrialized economies. What distinguish this book from this Third World multinationals literature are its novel arguments and original insights that purport to explain the emergence of these TNCs from developing economies in their own right. Many of the book’s ideas are refreshing for anyone interested in global business. Through his carefully articulated and often highly critical theoretical perspective, Mathews has produced an excellent treatise on transnational corporations in general and globalizing firms from Asian newly industrialized economies (NIEs) in particular.

The book starts by questioning the conventional wisdom in the strategy-structure analysis in international business studies. Mathews argues that the rise of Dragon Multinationals (TNCs from the Asian NIEs) cannot be traced to “conventional sources of success, such as product or process innovation, but instead to innovations in strategy and organization” (p.9). Through their novel strategies and organizational adaptations to the new global economy, he notes that these Dragon Multinationals are able to leverage external resources and competitive advantages embedded in global networks. They are not constrained by path dependencies that shape so much the growth trajectories of existing giant corporations.

After setting up these novel arguments against the backdrop of existing theoretical perspectives in international business studies, Part I of the book proceeds to paint a broad picture of what Mathews calls the “new zoology” of the global economy. Here, we are introduced to the newcomers and latecomers to the global economy -- rapidly globalizing firms from Asia (and elsewhere). The specific case of Taiwan’s Acer Group is then described in detail to showcase how a selected sample of Asian firms just did it -- internationalizing and succeeding rapidly in the new global economy.

Part II of the book is concerned with the characteristics of these new global latecomers. Mathews first describes meticulously the incremental expansion of Dragon Multinationals that culminates in their extensive global coverage within a short period of time. He then contends that this successful expansion in global coverage cannot be achieved without two significant innovations: strategic innovation and organization innovation. On strategic innovation, he notes that Dragon Multinationals do not start with capitalizing on their internal resources and advantages -- a process of internationalization commonly found among today’s giant corporations. Rather, these Dragon Multinationals tap into external resources and network advantages through engaging and managing linkages, leverage, and learning with other firms in innovative ways. This strategic innovation, however, does not mean that Dragon Multinationals do nothing internally to achieve this leapfrogging in their internationalization processes. Internally, these Dragon Multinationals constantly (re)organize to adapt to new challenges arising from their rapid globalization. In particular, the book identifies “cellular clusters” -- a kind of differentiated networks among strategic units of Dragon Multinationals -- as a key organizational innovation underscoring the success of these firms. In fact, Mathews goes so far to argue that Dragon Multinationals are truly global corporations because of their adoption of these cellular clusters in organizing their global activities.

In the final Part III of the book, Mathews revisits existing theoretical perspectives in international business studies. He finds inadequacy in most leading theories of TNC growth and expansion. He offers a process-oriented account of Dragon Multinationals’ internationalization in which three key elements are emphasized -- outward orientation, leverage through building linkages, and achieving organizational efficiency through integration. The book ends with a critical evaluation of our conventional wisdom of globalization as an unstoppable gale force orchestrated by giant global corporations to wipe out all national differences. In his usual reflexive manner, Mathews shows how Dragon Multinationals are indeed key players in globalization precisely because they are global in their outlook and strategic organization.

I particularly like the book for three reasons. First, it offers a non-essentialist reading of globalization. To Mathews, globalization allows for “other futures, other pressures, other designs, that are generated not at the center but from the periphery” (p.7); it is “an open-ended process, creating multiple outcomes rather than the single, convergent global system” (p.11); and it creates “opportunities for the newcomers and latecomers, and these players in turn are now helping to shape the global trends that will create yet more opportunities in the future” (p.223). This measured view of globalization certainly represents an important correction to the ultra-globalist view of the single global economy on the one hand and the pessimist’s resistance to the alleged evil spirits of global forces.

Second, Mathews does not take for granted existing theories in international business studies. What is so wonderful about this book is that it confronts and interrogates these theories from the perspective of the internationalization of Dragon Multinationals. This comparative evaluation of leading theories shows vividly their situatedness in particular historical moments (e.g. the Uppsala School of incremental internationalization process and the Harvard product life-cycle model) and geographical contexts (e.g. the Reading School of the eclectic framework and the internalization theory of TNCs). Through these critical engagements, Mathews makes an explicit commitment to the “resource-based view” (RBV) of the firm that has risen to prominence in the strategic management literature during the 1990s. Even so, he does not stop short of offering new theoretical insights for the RBV literature. Grounded in his case studies of Dragon Multinationals, Mathews argues that the RBV of TNCs must be revised to take in account strategic targeting of external resources for leverage by these latecomers to the global economy. In this way, the book significantly advances our understanding of the strategic accumulation of resources -- internal or external -- by Dragon Multinationals. This revised RBV framework should be highly useful for future research into the globalization of TNCs from any economy.

Third, the book offers very detailed and sometimes repetitive case studies, albeit largely limited to the Acer Group from Taiwan and the Li & Fung Group from Hong Kong. Acknowledging the small sample of Dragon Multinationals, Mathews notes that “a reasonable case can be made that they capture many of the most striking and original features of the new ‘species’ of firm in the changing ‘zoology’ of the international economy” (p.179). This reflexive mode of reasoning and case-study approach is much worthy of praise, particularly because the mainstream literature in international business studies and strategic management tends to be oriented towards “number crunching” in their self-fulfilling prophecy for scientific rigor and predictability. I wish more future management studies would follow the spirit of this exemplary work. That indeed might be one of the most desirable unintended outcomes of this tour de force. I will not hesitate even for a second to recommend this lucid and easy-to-read book to all students and practitioners of international business, strategic management, global political economy, and development studies.

Henry Wai-chung Yeung

Department of Geography

National University of Singapore