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Stephen Herbert Hymer is the leading figure of the theory of the multinational enterprise (MNE), enjoying a near cult status. All major theories/contributions on the
MNE today, see for example Buckley and Casson (1976), Dunning and Rugman
(1985), Caves (1996) deal explicitly with Hymers contribution. One can speculate on
the reasons that gave rise to such prominence. The failure of MIT to publish his 1960
thesis, until 1976, by which time the thesis was enjoying a notoriety and an underground existence (Kindleberger, introduction to Hymer, 1976, p. xiv) is one. Hymers
cathartic commitment to Marxism, in 1967-68, the (resultant?) refusal of tenure and
promotion at Yale, and the alleged break in his work between his pre- and postMarxist eras could arguably be another. His tragic death in a car accident in 1974, at
the age of only 39 and when he had just become an editor of one of the professions
* I am grateful to numerous colleagues for discussion, feedback and useful suggestions pertaining to ideas
discussed in this paper, notably Keith Cowling, John Dunning and Roger Sugden. Errors are mine.
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most eminent journals, the American Economic Review, could be a third. The saga
around the unearthing of Hymers 1968 article, published in French, where he drew
and built on Ronald Coases classic 1937 article on the nature of the firm, to develop
explicitly an internalisation theory based on transaction costs arguments, is certainly
a fourth. Most important, however, are his extraordinary powers of analysis, his
insight and foresight and his unprecedented power of extrapolation and prediction.
During the short span of his life, Hymer published over 40 articles and reviews, in
some of the professions top journals (the American Economic Review, The Journal of
Political Economy, The Review of Economics and Statistics and The Economic Journal)
and was actively involved in policy-making and the political movement of his time, for
example, as a member of the Union of Radical Political Economics. He travelled extensively, spent time in developing countries, became an influential figure in academia and
policy-making and an editor of the American Economic Review. What would his continued
contribution, influence and ideas have been had he still be alive at 67 is anyones guess.
The aim of this introductory paper is to celebrate Hymers contribution. The next
section provides a brief account of Hymers life and career, as well as his own perception of the relation between his life, ideas and works. Following on from this, there is a
brief account of Hymers contribution to the theory of the MNE. This paper attempts
to place Hymers contribution within the context of todays extant theory of the MNE
and compare and contrast it to the last mentioned. The conclusion is that on the
MNE Hymer has almost said it all. Section II, focuses on Hymers contribution to
the political economy of multinational corporate capital. This part of Hymers work
is less well known albeit not necessarily less important. Section III points to some
limitations of Hymer and to ways of dealing with (some of) these.
I. LIFE AND CONTRIBUTION TO THE THEORY OF THE MNE
Ia. Life1
Hymer was born in Montreal (Canada) on 15 November 1934 and died tragically in a
car crash in 1974. His father, a Jewish immigrant from eastern Europe, ran a small
clothing store in which his mother worked as a bookkeeper.
His undergraduate studies were at McGill from where he graduated with first class
honours in politics and economics. He then moved to MIT with his wife Gilda and
their two sons. At the suggestion of his PhD supervisor, Charles Kindleberger, he
decided to combine his interests in industrial and international economics, by working
on the area of the MNE. His now famous PhD thesis on The International Operations
of National Firms: A Study of Foreign Direct Investment, though completed in 1960,
was not published until 1976 due to MITs original refusal to sponsor its publication.2
1
This subsection draws heavily on Cohen et al.s (1979) account of Hymers life. It also makes use of Hymers
CV in Hymer (1976) and of two of Kindlebergers articles (introduction to Hymer, 1976; Kindleberger, 1984).
2
According to Kindleberger in the introduction to Hymer (1976), (one member of) the committee found
that the argument was too simple and straightforward. That was despite Kindlebergers own argument that to
make clear a field in which theory had long been confused was a first-class contribution to scholarship (ibid).
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Following the completion of his thesis, Hymer spent a year in Ghana, returned to
MIT and Yale where he taught for two years and then went back to Ghana in 1963.
Returning to Yale in 1964, he worked at the Economic Growth Center there until
1969. During this time he was also appointed to the Canadian Task Force in 1967 to
examine the structure of Canadian industry and visited Cambridge (UK) where he
worked with Bob Rowthorn in 1968. The following year he received a research fellowship at the University of West Indies (Trinidad), worked at the summer Institute
for International Studies of the University of Chile, made a public commitment to
Marxism, and was refused tenure and promotion at Yale.1 From autumn 1970 until
his death in 1974 he worked as a professor of economics at the New School for Social
Research in New York. In 1973 he separated and divorced and spent several months
in the Max Planck Institute in Starnberg (FDR). During his last years he acquired
substantial acclaim, testifying before the UN study group on MNEs and appearing on
CBC several times. In January 1974 he was appointed editor of the American Economic
Review. His death left an unfinished book where his various contributions to economics
were to be brought together. A collection of 11 of his best papers was published in 1979
by a number of his friends and colleagues, entitled The Multinational Corporation: A
Radical Approach.
By his own admission (see Cohen et al., 1979), Hymers work and more general
perceptions of capitalism were shaped by his family background during the early
depression years. During his childhood he recalls how they felt like aliens in a land
controlled by big business and government, coming to understand the importance of
money as a social power. At McGill he and his fellow Canadians were also beginning
to realise the special status of Canada as more than a colony but . . . less than a
nation. In Ghana he experienced problems relating to the British colonial legacy;
in particular he entertained the possibility that Britain constrained Ghanas development. His experience in Chile reinforced a feeling that less-developed countries (LDCs)
needed more than the regulation of MNEs for survival.
Hymers ideological attitudes developed in parallel with his experiences. From
mainstream but liberal criticism of the MNE in his thesis, through his nationalist
radical proposals to curb US MNEs in Canada, in his Task Force study, he developed
his cathartic commitment to Marxism and an associated focus on overthrowing
rather than regulating the multinational corporate capitalist system.
Ib. Hymers contribution to the theory of the MNE
Hymers contribution can be seen to fall into two major categories. First, the theory of
the MNE, the focus in this section. Second, the political economy of multinational
corporate capital, the focus in Section II. Concerning the MNE his main argument
appeared in the 1960 thesis, published as Hymer (1976), in the 1968 article in French
in the Revue Economique and in his 1970 American Economic Review article. From then
1
There is a discussion in the literature as to the exact timing of his change of heart towards Marxism
Kindleberger places this around 196667.
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on he kept drawing on his earlier ideas but with an eye to dealing with broader political
economy issues. His 1972 article on the law of uneven development is a clear attempt
to bring his two concerns togetherby relying on two laws of economic development;
The Law of Increasing Firm Size and the Law of Uneven Development (Hymer,
1972, p. 113).
The following looks at Hymers contribution to the MNE in three stages. First, the
PhD thesis, second, the 1968 article, third, his 1970, 1972 and subsequent works. By
so doing it aims to show that whilst much of extant theory was already there in the
PhD, adding on the 1968 article and the subsequent works, clearly confirms the idea
that on the issue of the MNE, Hymer almost said it all.
Extant theory of the MNE. Following on from Hymers thesis and major contributions
notably McManus (1972), Buckley and Casson (1976), Williamson (1981), and
others (see below) extant theory of the MNE can be usefully summarised by drawing
on Dunnings (1988, 2000) OLI paradigm. In this, O stands for ownership advantages.
It draws expressly on Hymers claim that firm ownership advantages are a prerequisite
for offsetting the disadvantage of being foreign. I stands for internalisation, the idea
that for advantages to be internalised, there must be efficiency savings of so doing, in
terms of transaction (vis--vis internal organisational) costs. L stands for location; it
aims at explaining the choice of location in terms of locational advantages.
Dunnings perspective serves as a useful framework that encapsulates most of the
main ideas. Related ideas build on Hymers focus on control and oligopolistic interaction to propose market power and/or oligopolistic rivalry factors, see for example
Knickerbocker (1973) and Graham (1978). A variant of these theories also deals with
Hymers focus on MNEs abilities to divide and rule labour, see notably Cowling
and Sugden (1987). Internalisation theories come in a number of variants. Buckley
and Casson (1976) focus on internalisation advantages resulting from problems
associated with protecting the quasi-rents from intermediate products e.g. knowledgerelated, mainly intangible, assets, due to market failures related to public goods
aspects of knowledge. Williamson (1981) focuses on transaction costs resulting from
ex-post bilateral monopoly problems related to firm investment in specific assets.
Hennart (2000) goes back to Coase, pointing to differential ability by MNEs to control
foreign labour, leading to internalisation driven from transaction costs reduction.
Kogut and Zander (1993) maintain the focus on differential abilities by firms and
suggest that knowledge can be tacit, thus far from being a public good. If so, what
explains internalisation in their view is not market failures per se, but firms differential
capabilities, vis--vis both markets and other firms, in transferring tacit knowledge
across borders.
There are various other theories and views, notable between these is another idea
present in Hymer, that of diversification advantages of MNEs, see Lessard (1982).
To these Hymer (1979) himself added later the benefits of multinationality per se, to
include increased bargaining power vis--vis states. While the present list does not
intend to be exhaustive, it does cover most major ideas present in extant theory. A
notable critique of all such theories is that of Edith Penrose (1987) that theories that
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draw upon and develop Hymer-type and Coasean ideas, fail to differentiate between
multi-domesticity and multi-nationality. More recently Penrosean ideas have resurfaced in the context of the resource-based perspective on the theory of the firm and
attempts have been made to provide Penrosean insights into the determinants of FDI
and the MNE, see for example, Pitelis (2000).
Where does Hymers contribution stand in relation to these contributions? His
1960 PhD thesis is the natural starting point.
Hymers views on the MNE. (i) The Thesis: Hymer starts on page 1 of his thesis with a
direct and explicit focus on control. He distinguishes between foreign direct investment (FDI) and portfolio investment in terms of the presence of control in the former
case, and absence in the latter. He goes on to suggest that FDI is treated in the then
extant theory as portfolio investment, trying to explain FDI in terms of cross-border
differentials in interest rates. Besides failing to explain some stylised facts of FDI (like
MNEs borrowing in host countries, tending to bunch in particular industries as well as
cross-investments within industries), an important theoretical failing of the interest
rate theory is that it does not explain control (p. 23). Hymer explicitly distinguishes
between different types of foreign operations, joint ventures, licensing, tacit collusion
and FDI, and asks the question of the circumstances that cause a firm to control an
enterprise in a foreign country (p. 33).
He advances three. The first major reason is the profitability associated with
removing competition between firms in different countries. The second is that some
firms find it profitable to exploit their existing advantages by establishing foreign
operations. The third (minor) reason is diversification. For Hymer the latter is minor
because control is not necessarily involved (p. 33). Hymer goes on to discuss his now
famous disadvantages of being foreign and the three reasons why firms despite the
disadvantages find it profitable to have foreign operations (p. 36).
Despite claims by e.g. Kindleberger (1984), Yamin (1991) and Pitelis (1991, 1992)
that aspects of Hymers thesis could read transaction-costs-internalisation-type, and
Hymers explicit statement that the firm internalises the market (p. 48), the dominant
view is that Hymers emphasis was on structural, not transaction-costs-related market
failures, see Dunning and Rugman (1985). While this is agreed it now appears to have
been a matter of choice, not ignorance of transaction-costs-related reasoning, see
Pitelis (2002A) for an extensive discussion. This is confirmed by the 1968 paper.
(ii) Hymer (1968): In the 1968 paper Hymer explicitly dealt with internalisation and
transaction costsindeed most variants of it, and more. The article is also resourcebased in places, but concludes with standard oligopolistic interaction-control-based
ideas.
Hymer starts by considering Coasean and mainstream oligopoly theory as extant. In
this sense he sees no new original insight in his own contribution other than the fact
that the theory of the firm and oligopoly theory have not been applied to the problems
of trade and international investment yet (p. 9).
The first section is explicitly Coasean. It has a summary of Coase (1937), to include
two extensive quotes, the idea that the make or buy decision is a function of market
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and (so) would not be undertaken in the absence of large firms), Hymer goes on to
introduce his law of increasing firm size, which he justifies by drawing on the analysis
of Chandler (1962). Building on Chandler, Hymer suggests that firms have developed
from their Marshallian origins to nationwide oligopolies, to multidivisional conglomerates, to MNEs. Bigness, however, is paid for, in part, by fewness, and a decline in
competition, since the size of the market is limited by the size of the firm (p. 54).
Hymer devotes the rest of the 1970 paper to international trickle down, the
international hierarchy of decision-making the relationship between MNEs and
small countries, and the issue of supra-nationality.
The 1972 paper is in three parts. First the evolution of the MNE, second uneven
development and third the political economy of the MNE. In Part 1, Hymer recapitulates and extends ideas from 1968 and 1970. As in these two papers, Hymer (1972)
concludes by pointing to a period of rivalry, leading to a new equilibrium between
giant US firms and giant European and Japanese firms . . . based on a strategy of
multinational operations and cross-penetration (p. 122).
Hymer then applies location theory to the analysis of the evolution of the large firm
of Chandler, with an eye to identifying the relationship between the structure of
microcosm and the macrocosm albeit not the choice of location of MNEs, a hugely
topical issue, see Dunning (1958, 1998). Other than this, it is however, fair, I feel,
to agree with both Kindleberger (1984) and Casson (1990) that in effect Hymer
anticipated and indeed dealt in some detail with much of extant theory, in fact more
than suggested by the aforementioned authors, notably the Williamsonian and, up to
a point, resource-based theories. Importantly, he did so in a way that emphasised the
complementarity of these theories, not their apparent differences.
Given the above, perhaps less clear is why Hymer delegated references to
internalisation-type arguments and even the whole of the 1968 analysis to occasional
summaries and footnotes (e.g. the 1972, p. 121 reference and note 12) and why he so
clearly chose to emphasise control, monopoly and dominance over efficiency. It is not
possible to provide a definitive answer to this. Some possibilities are discussed in
Pitelis (2002B). For our purposes here suffice it to note that his emphasis on control
and dominance was the result of choice.
II. HYMER AND THE POLITICAL ECONOMY OF THE MNE
Hymer built on the ideas already described in order to analyse a number of important
issues, to include economic development, the relationship between MNEs and labour,
MNEs, the state, and international state apparatuses, and the possibility for an
alternative economic system. The main sources of these ideas are the 1970 and 1972
articles, and the 1979 collection of 11 articles by Hymer in Cohen et al. (1979) which
includes the 1970 and 1972 ones. The last two focus on similar issues, the
international trickle-down, the core-hinterland concepts, the relationship between
MNEs, nation states, and international organisations, uneven development and
alternative economic planning. In 1970, Hymer first dealt with the Schumpeterian
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MNE and use it to further improve their infrastructure and growth. Concerning
(uneven) development and industrialisation of the LDCs. Hymer (1972, 1979)
observed that, unlike the earlier years of capitalist development when LDCs were
banana republics, MNEs now needed industrialised LDCs in order to create new
markets and extend their productive base globally. New markets are very important
for MNEs for three reasons. First, the existence of fixed costs in the production of new
products implies high marginal profits when these are sold in new markets. Second, in
contrast to what income statistics suggest, a relatively wealthy middle class exists in
MNEs with similar aspirations and tastes to their counterparts in the developed
countries, thus providing a ready clientele. Third, MNE operations in LDCs can serve
as a device to preempt potential rivals from entering these markets.
The importance of LDCs for MNEs, however, need not imply development and/or
equality: rather it implies uneven development and inequality. To the extent that
MNEs control the process of development, LDCs will tend to lose their economic
independence and enter a condition of self-perpetuating dependency. The benefits
moreover will be spread between the core and the hinterland, unevenly.
Although the hinterland might have been better off choosing an independent path
to development, the chances of this happening through a national capitalist class are
grim. According to Hymer, middle classes in the LDCs prefer to seek promotion
within the multinational corporate capital system to independence and for good
reason! Local capitalists are better off becoming shareowners of an MNE (possibly
even running the local branch) than trying to compete. An obvious reason is that they
are no longer locked into their firms and can thus join the international wealthy in
diversifying their portfolios so as to share in the general social surplus. This results
in a branch plant outlook in LDCs. It is not technology, but rather the centralisation of
control by TNCs that leads to dependency. This centralisation in turn increases
TNCs control over the labour aristocracy at home, since they can always threaten to
draw on the reserve army of labour in the LDCs.
Concerning the relationship between MNEs and labour, Hymer agreed with both
Marx and Marshall that the division of labour was the key to solving the economic
problem. He observed that the latter stemmed from the principle of divide and rule
and was based on the division between mental and manual labour. Control over
labour was through spatial, horizontal, vertical and temporal divisions. Sexism, racism
and hierarchical divisions among occupations extended this control. He regarded the
MNE as a means of achieving a more productive division of labour, thus unleashing
great sources of latent energy, by eliminating anarchy in international markets.
Simultaneously, MNEs further reduced the power of labour through extending its
spatial division.
Hymer (1979) claimed that market economic power grows out of the barrel of a gun.
In his mind, the subjugation of labour to capital was originally achieved through an
alliance between the merchants (the emerging capitalist class) and the feudal monarchs,
based on mutual benefit. Ever since then, the capitalist class and the state have grown
hand in hand. The emergence of Galbraiths (1967) new industrial state helped to
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complete the process of primitive accumulation, and led to the strengthening of the
nation-state. This gave rise to national rivalries externally and the use of the visible
hand of the state, along with the invisible hand of the market, internally.
However, the MNE put an end to the symbiotic relationship between capital and
the ability of nation-states to pursue autonomous policies. This erosion of power
applies to all states, but asymmetrically. Strong states, such as the USA, are in a better
position in relation both to their own and to foreign MNEs. For example, Hymer
observes, the USA can stop its MNE from trading with the enemy whereas a less
developed country cannot hold a USA firm hostage for actions of its parent company.
Concerning the bargaining power of MNEs vis--vis small, weaker nation-states (in
DCs or LDCs), the MNE is always dominant both because of its locational flexibility
of operations and its superior organisation. More generally, MNEs may no longer
operate under the state, but alongside it, or even above it!
The erosion of the power of nation-states generates a need for MNEs to mobilise
new power bases to fill the vacuum. This implies a need for international institutions,
such as the UN. Still, it is not a foregone conclusion that MNEs will supersede the
state. Hymer with Rowthorn (1970) ask the question whether France or IBM will
have survived in a hundred years. They observe that MNEs and/ or international
organisations still need to find an effective substitute to good old nationalism. The
struggle between nation-states and MNEs is thus an ongoing one.
From regarding the MNE as an institution of capitalism, Hymer gradually moved
towards the view that the MNE was simply an institutional form of the tendency
towards the internationalisation of capital, the tendency arising from the interest/
needs of capital to expand its productive base, the source of potential profit (labour
power). Internationalisation, Hymer observed, reduced national capitalist competition,
through interpenetration of investments. He specifically stressed the concept of interpenetration (rather than US imperialism) due to the growing power of European and
Japanese capital. The former, he suggested, had had the opportunity to choose selfsufficiency but chose interpenetration; Japan was facing a similar situation, with all the
pressures being for it to choose the same road. One such pressure was its stake in trade
with the US. This interpenetration did not serve the national interest of any country;
rather it served the interest of the one per cent of the worlds wealthy who invest their
money in the international social surplus. Unlike earlier periods, the wealthy had
realised that their interest lay not in war, but rather in international market sharing
and collusion, in particular the maintenance of the capitalist order through the MNE.
Concerning the LDCs, Hymer observed that the developed countries competed in
providing loans but presented a united front in collecting debt repayments.
The new emerging world system, Hymer suggested, tended to create an international
capitalist market, international production and international government. Competition
and credit were the two levers of concentration of capital. Credit in particular was the
prerequisite for expansion on a world scale. He regarded the joint stock company as a
means of enhancing the ability of capital to obtain access to social saving without on the
whole sacrificing control. By exchanging shares, he observed, the wealthy form a
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common front, thus generalising their interests. Similar to the national corporation
abolishing private property, the MNE was now abolishing national capital. Although
rivalry among capitals to obtain above average rates of return still existed, a dominant
common interest for the general profit rate had emerged. While European and
(probably) Japanese capital, together with the middle classes of the LDCs, became
partners in this new world system, trade unions promised little challenge due to the
exclusive interest with their members. An important implication of this new world
system was a tendency towards the globalisation of the concentration and centralisation of capital.
Hymer (1979) predicted a shift of emphasis in the new world order, away from
production as such and towards marketing and new product development. This would
allow MNEs to move away from production (thus allowing small firms to own the
plants and take the risks) but still to control the intangibles. This independence of
small firms, would increase both the flexibility of the MNEs and their planning
capacity, thus extending their control of the market (through externalisation rather
than internalisation!). The relevance of this for current debates on the MNE and the
recent observed increase of outsourcing should be obvious. A further means of
enhancing control over the market, Hymer suggested, was an attempt by MNEs to
extend the duration of their product cycles by having projects in all stages, moving to
cheap places, controlling marketing and so on.
It will come as no surprise that Hymers feelings for capitalism were not sympathetic. He quoted approvingly Keyness views on capitalism (that it is not beautiful,
not just, not virtuous and that it does not deliver the goods) and self-sufficiency. His
proposed alternative to multinational corporate capitals strategy to integrate one
industry over many nations was the integration of many industries over one nation and
the use of socialist planning. Regarding in particular the issues of efficiency, Hymer
claimed that these hinged not on the rate of change but rather on the direction of
change, pointing to too much (rather than too little) innovation under the system;
the absence of consumer sovereignty, dependency and the international trickledown; and the social, political and environmental costs of MNEs control of the
system. A way out of the LDC, he suggested, was to try and change the flow of
information and to pursue a strategy of producing sufficient basic goods.
Hymers predictions for the future of the MNE and the multinational corporate
capital system were gloomy. He foresaw a tendency for wage rates in the LDCs not to
grow in the future, partly due to the increasing costs of administering the empire. This
would lead to workers disillusionment with the system, as well as to a realisation on
their part of the need to control the investment process, thus provoking a politicisation
of the class struggle. Although the possibility of international trade unionism was
there, the fact that most of labours historical gains were country-specific implied a
tendency for labour to become more nationalist and possibly socialist. Further, difficulties arose from the increased emancipation of LDCs capital and thus their increased
claims to a share of the social surplus, an example of which was OPEC. In this sense
Hymer anticipated that the MNE might well be the swan song of capitalism.
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Ideology arguably creeps in, with regards to Hymers idea of eventual dominance,
by MNEs, through market sharing, collusion and interpenetration of investments, an
apparently Marxist view. Even this, however, is debatable. First, the above ideas of
Hymer were present in the PhD thesis. In addition, while Marx felt that competition
and monopoly were dialectically linked, with competition leading to monopoly, and
with monopoly being able to maintain itself only by continuously competing, there was
no final state of rest in Marxs argument. The process of monopolistic big-business
competition could go on and on. While some Marxist authors, notably Baran and
Sweezy (1966) have adopted the monopoly view, others, e.g. Clifton (1977), have
taken the view that competition increases in advanced capitalism. Hymer refers to
Baran and Sweezy in his 1968 paper, and it is arguable that his views might have been
influenced by this monopoly capitalism variant of Marxism. In the above context
if ideology did influence Hymer, that was one particular variant of Marxism. This
variant is sometimes termed neoclassical Marxism, in that it views the world in terms
of the neoclassical model of monopoly, see Pitelis (1986) for a discussion.
The above leads to the third point, that Hymers limitations could owe as much to
his strong neoclassical training and background as to his classical views. To illustrate
this statement, two modern classical contributors, Allyn Young (1928) and Edith
Penrose (1959) are used to explore implications from their writings on Hymers work.
In his classic article Young (1928) put to test Adam Smiths famous dictum that
the division of labour is limited by the extent of the market, proposing that it is also
the size of the market that is limited by the division of labour. Put this differently,
Young proposed that it is in effect the division of labour in the market that (also)
determines the size of the market. This is a dramatically more dynamic view of the
world than allowed by neoclassical thinking, that relies on static equilibrium. As already
mentioned, Hymer adopted Smiths dictum for the case of the firm, and claimed that
the size of the firm limits the size of the market. In this perspective it follows inevitably
that increasing firm size will imply reduced scope for the market, thus concentration
and potential firm dominance. However, and in line with Young, it is the actions of
firms that extend the size of the market. In this context concentration, only follows if
firm actions increase their size by a higher rate than they increase the size of the
market. This is not self-evident.
Another limitation of Hymers work concerns his failure to look inside the firm,
unlike for example Penrose (1959). This might have had important implications on
his analysis of firm ownership advantages, the direction of expansion and the issue of
competition, efficiency, market power and monopoly.
In Penrose, firm growth is an endogenous, efficiency-based process by definition;
advantages resulting from this process are efficiency-based advantages; to the extent
that the direction of expansion is linked to such advantages it also has efficiency
properties; even apparently monopolistic-type actions, such as the building of dynamic
barriers to entry, like relatively impregnable bases can, and do, have efficiency properties in terms of innovations; the existence of interstices (of small firms) and the
possibility for public policy questions and inevitability of a final state, characterised by
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global collusion. Instead, big business competition, small firm growth and anti-restrictive
practices public policy could be the best system yet, at least in terms of innovativeness
and productivity.
Another potential limitation of Hymers concerns his views on firm cooperation.
Building on Penrose, George Richardson (1972) criticised the neoclassical view of
cooperation as collusion, and pointed to the varying forms of firm cooperation as well
as their potential efficiency advantages, in terms of productivity. Richardson suggested
an efficiency-based division of labour between markets, integration (hierarchy) and
cooperation, on the basis of similarity and complementarity of activities. For example,
similar (in terms of underlying resources) and complementary activities will favour
integration, while dissimilar but complementary activities will lead to cooperation. In
this context, firm cooperation involves far more than collusion as it can have important efficiency advantages.
That Hymer has chosen to stress monopoly and collusion, is arguably explicable as
much in terms of his neoclassical as it is in terms of his classical (Marxist) training.
The failure to look inside the black box, the static perspective on the relationship
between firms and the size of the market and the focus on firm cooperation as
collusion, are all neoclassical, not classical themes. Hymer could have benefited from
the classical insights of Young, Penrose and Richardson.
Related to the above is Hymers failure to deal with small firms. This is a contrast,
for example, to Penroses (1959) focus on interstices, to recent literature on
cooperation between small firms, and the focus of networks, clusters, webs, etc, see
e.g. Martin and Sunley (2003) for a critical survey. Small firms in interstices enjoying
themselves the benefits of growth, and clusters of small firms enjoying some of the
advantages of large size (notably unit costs economies) can be seen as an extra source
of innovation, knowledge, and competition and even an alternative to multinational
corporate capital, especially when supported by suitable public policy actions.
Interstices, clusters, anti-restrictive practices and pro-cluster public policies can
make the realisation of Hymers vision of global dominance and collusion by MNEs
problematic.
The above is not to say that Hymers prediction have been proven wrong. For
example, on the issue of dominance, the evidence is not conclusive. Evidence on
aggregate concentration at the global level by the top e.g. 500 MNEs, is subject to the
problem of defining the firm and control. Moreover, concentration need not imply
collusion, etc. Indeed, some of the difficulties in measuring global concentration is
associated with Hymers other impressive prediction that over time firms will tend to
outsource. It appears that this has come true, yet there is the remaining issue whether
one should consider subcontractors as part of the firm or as independent firms, see
Cowling and Sugden (1987). Clearly the answer to this affects the measurement of
concentration. To conclude, while Hymer seems to have been right in predicting a
tendency for a handful of large global MNEs from the USA, Europe and Japan with
their headquarters concentrated in a few large metropoles, vying for global dominance,
whether concentration has stifled big-business competition is an open question.
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In all, Hymers analysis, predictions and prescriptions, were limited from neoclassical and Marxist ideology. His neoclassical training has led him to a rather static
final equilibrium perception of the world, characterised by global collusion, global
monopoly and thus both inefficiency and inequality. His later, Marxist, ideology has
led him to an uncritical acceptance of centrally planned socialism as the answer to the
problem of multinational corporate capital. He showed too little faith in the possibility
of public policy in capitalism and too much in public-state policy under socialism.
While all these do not question his unique contribution, they point to the challenge
of devising an economic system that can replicate the advantages of big business
competition, without suffering from its downsides.
Building on the classical tradition, drawing on Young (1928), Penrose (1959) and
Richardson (1972), and in line with Pitelis (1998) it could be suggested that an economic organisation that combines the benefits of big business competition, with the
creation of small firm (clusters), of competition and cooperation (co-opetition) and
which is supported by public policy actions that thwart restrictive practices, could be
both more feasible and realistic and yet radical in its implications and with potential
for perennial innovativeness, productivity and convergence. Practical applications of
such policies at the national and global levels, are possible, but beyond the scope of
this paper.
CONCLUDING REMARKS
Hymers contribution to the theory of the MNE and multinational corporate capital is
arguably the best yet. On the MNE, he has predated most major theories. On the
political economy of multinational corporate capital, he both raised and attempted to
answer todays most pressing problems(under)development, (in)equality, convergence, the microfoundations of globalisation and alternative economic organisation.
His analysis, predictions and prescriptions were of the highest standard, insight and
foresight. Limitations in his analysis cannot detract from such an achievement. Such
limitations concern a failure to appreciate the dynamism and potential of big business
competition, the underplaying of small firms, a distrust of public policy under capitalism, accompanied by a little analysed faith in centrally planned socialism. In contrast to
conventional thinking, Hymers main limitations may have as much to do with his neoclassical as with his classical (Marxist) training. This is particularly the case concerning
the relationship between firm actions, the size of the market, the possibility of intrafirm generation of advantages and non-collusion-related inter-firm cooperation, to
include cooperation (and competition) of small firms in the form of clusters. Hymers
Marxist ideology played a role mainly on his prediction of collusion by MNEs and
his prescription for central planning. A reliance on classical thinkers, such as Young,
Penrose and Richardson, could help provide remedies to some of Hymers less accurate
predictions. This does not detract from Hymers outstanding contribution.
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