Corporations and national competitiveness

Citation

Ali, A.J. (2012), "Corporations and national competitiveness", Competitiveness Review, Vol. 22 No. 4. https://doi.org/10.1108/cr.2012.34722daa.001

Corporations and national competitiveness

Article Type: Editorial From: Competitiveness Review: An International Business Journal, Volume 22, Issue 4

Debating the role of corporations in national competitiveness has been the focus of business executives, policy makers, and researchers. Though the debate is evolving, increasingly there is an understanding among various global actors that corporations are instrumental in advancing the well-being of people across the globe. In their pursuit of economic opportunities and attempts to meet ever-changing customers’ needs, corporations have created wealth and jobs, making it possible for millions of people to live decent lives and engage in creative and productive activities. More significantly, corporations over the last two centuries have enhanced connectivity, eased communications, and facilitated the development of human ingenuity even in remote areas of the globe. In turn, these activities have enabled corporations to thrive and gain influence and power over states in both developing and developed countries.

Indeed, in many parts of the world, corporations have assumed an unrivaled role both economically and politically. During the 1960s and up until the late 1980s, corporations faced various obstacles and challenges. However, rapid economic globalization since the early 1990s has enhanced the reach of corporations and many have aggressively promoted themselves as global citizens. The latter is reflected not only in ownership and top management composition, but also in the espousing of issues that were taboo a half a century ago (e.g. promoting human rights, intentionally participating in the development and formation of human capital, and in improving the innovative capacity of host countries, etc.).

However, corporations have a long way to go in matters of aligning their goals with that of the society in which they operate, including viewing customers’ and employees’ well-being as a top priority. In 2000 and 2010 we reiterated that there should be “no dichotomy between competitiveness of the firm and its societal non-economic role, profit motive and human dignity, and between customers and employees”. This proposition was driven by the fact that for corporations to thrive, they must be concerned with the input and output of competitiveness.

For corporations, competitiveness encompasses all those factors that are essential for coping with global competition, predicting market trends, satisfying changing and evolving customer needs, and enhancing their capacity to effectively leverage resources to shore up productivity and innovation. Competitiveness input includes skilled labor, alertness, foresightedness, responsible senior managers, capital, research and development facilities, information systems, etc. The outcome by necessity includes economic performance, especially profit, along with improving the welfare of employees and customers, while safeguarding the natural environment.

In today’s environment, customers and employees are critical for the success and vitality of any corporation. Writing in the Harvard Business Review, Reich (1990) argued that the nationality of a corporation is irrelevant. What is relevant and essential, he asserted, is whether or not a corporation invests heavily in US-based production facilities and their workers. Porter and Rivkin (2012) reaffirm what was pointed out in 2000: that to regain US competitiveness companies have to reinvest in the workforce and tackle problems in the business environment and the local communities. It is essential that corporations in order to grow maintain a balance of satisfying the needs in the marketplace, be they economic or social. This requires that corporations rethink their purpose and broaden it beyond economic goals.

Two interrelated issues must top the list of priorities of competitive corporations: speeding up human capital formation and contributing to improving the well-being of citizens. While the first centers on creating opportunities for the local workforce to acquire knowledge and new skills, the second encompasses improving the overall living standards and prosperity of the general population. This includes corporations, in their pursuit of economic goals, not intentionally violating human dignity. While human dignity may not appear to be an element of corporate social responsibility, in the new economic dynamic, losing jobs or experiencing displacement for a considerable period is not a trivial matter.

In recent years, it has become clear that investing in the workforce and hiring employable workers cannot be perceived as merely a charitable undertaking. In fact, this is a strategic move of economic and technological significance that enables corporations to adapt to the realities of the global marketplace and sharpen market alertness and their ability to imagine the future. Indeed, as corporations align their goals with that of their immediate stakeholders, the employees and the community, they acquire a competitive edge in sensing changing needs and capturing popularity in the marketplace. Beside the economic necessity for growth and expansion, investing in the workforce demonstrates that corporations are competitive and proactively engaging in shaping the destiny of the society. For this reason, we wholeheartedly agree with Porter and Rivkin (2012) who argue that boosting productivity over the short term by firing workers is a manifestation of weakness rather than competitiveness. Gomory (2010), former IBM executive, asserts that national prosperity is characteristically linked to productivity and creating high-wage jobs. He states:

The sole focus on profit maximization, which leads to offshoring and holds down wages, does not serve the nation. This must change. And it must change before the damage to our economic ability is irreversible.

Kochan (2012) observed that, in the context of the USA there is a two-dimensional job crisis: a persistent deficit in the number of jobs being created and an insufficient percentage of high-quality jobs. In the US manufacturing sector, for example, US-based MNCs between 1999 and 2009 cut jobs by about 2,122,200 (Slaughter and Tyson, 2012). Furthermore, the Wall Street Journal reported (Thurm, 2012) that large US-based companies have emerged from the deepest recession since Second World War more productive, more profitable, flush with cash, and less burdened by debt. The Journal noticed that this performance has neither translated into significant gains in US employment nor are the $1.2 trillion added to corporate treasuries held in the USA. In contrast, during the last ten years, majority-owned subsidiaries of foreign MNCs have employed between five and six million workers, supported two million manufacturing jobs, and granted its workers about 30 percent higher pay than those who work at national corporations (Payne and Yu, 2011).

In a global business environment where nations compete to attract corporations to invest in national markets, priorities should be focused on improving the skills of the national workforce and on creating high wage jobs. These will enable the nation to offer its citizens decent living standards and enhance future prosperity. While nations and corporations might have divergent interests, the state should steer its activities and programs to attracting corporations which are willing to optimally serve its goals in fostering economic progress and national competitiveness.

The message is clear: corporations can be instrumental in improving the well-being of citizens. However, the nationality of these corporations is not as important as the degree of their contributions to human capital formation and the improvement of citizens’ living standards because the ultimate measure of competitiveness of any nation is the well-being of its people. Corporations which foster innovative capacity of the workforce, create high-quality jobs, and continuously improve living standards should be encouraged and rewarded, irrespective of their official nationality. It is these corporations that enhance business sophistication and confidence at home and sustain competitiveness in the long run.

Abbas J. Ali