The Tortuous Evolution of Multinational Enterprises.

Article on the Howard V. Perlmutter’s text ‚The Tortuous Evolution of the Multinational Corporation – A drama in three acts…‘ by Tobias Lentzler

Introduction

Howard V. Perlmutter’s text ‚The Tortuous Evolution of Multinational Corporation – a drama in three acts‘ was first published in 1969 and written for the Columbia Journal of World Business. Howard Perlmutter, who died in 2011, was trained as an engenieer as well as an psychologist and spent a long time at the M.I.T.‘s Center for International studies. He mainly was interested in the theory and practice of institution building and especially the development of international corporation. The given text deals with the different perspectives on multinationality and the strategies to create this new transnational cooperation. I will briefly summarize the main important aspects of the text.

Multinationality explained by four executives

In the beginning Perlmutter introduces four senior chiefs of companies who have a lot of holdings outside their countries. They all refer to themselves as ‚multinational‘. The executive of Company A describes his company as multinational because the production of goods is spread all over the world as well as they look for new investment projects in their home country and abroad while Company B claims to be multinational because of the high rate of locals working in their oversea’s offices. The executive of Company C says that his company can refer to themselves as multinational because of their worldwide operating production division workers who have a responsibility to make profit worldwide. Company D which is non-american actually says that they are a multinational firm because they have about 30 percent of foreigners represented at their headquaters and that most oft he senior executives speak at least to languages. All this, Perlmutter says, are only aspects on the way of reaching multinationality. Every executive in his examples uses different ‚yardsticks’ to measure multinationality. Howard V. Perlmutter develops the so called EPG-model in this text.

What does EPG actually stand for?

E – ethnocentric: In the eyes of Perlmutter ethnocentrism can be described as a home-country oriented policy in a company. What works in the homecountry must also work in ‚your country’.

P – polycentric: Though there still is a close connection tot he homecountry this bond starts to become weaker. There are some important workers from the affiliate firms represented in the headquaters though they have little to say.

G – geocentric: Every affiliate firm develops rules for their countries. Important workers in the headquaters are representing the affiliates with a lot of influence. There is a lot of variation in the firm’s structure.

Why Perlmutter wrote his text

When Perlmutter wrote his text multinationality became increasingly important. It was a kind of a fashion to be multinational because it promised a long life for the company as well as status. – Perlmutter himself refreshed his model in the seventies. Though it seems to be an obvious idea for us today, Perlmutter was a pioneer in giving each firm’s structure a name.

Reference

Howard V. Perlmutter: ‚The Tortuous Evolution of the Multinational Corporation – A drama in three acts…‘, in: Columbia Journal of World Business 1 (1969), pp. 9-18.