Critique on Rugman’s ‘Regional Strategy and the Demise of Globalization

Introduction

Rugman had written a few papers about the myth of globalization, foreign direct investment and regionalization with great details. However, in 2003 he published an article which focused on critical details from his previous works to show that little globalization evidence available from top 500 multinational enterprises (MNEs) and their strategies inclined towards regionalization instead. With the data presented, only nine companies can be regarded as ‘global’ company and the rest merely focus on regional inside its own ‘triad’ such as North American Free Trade Agreement (NAFTA), Asia and European Union (EU) hence, Rugman pointed out that globalization too big a word to define the activity. Also, at the end of the paper, Rugman commented on three different works on existence of globalization. Even though this article seems promising and influencing, a further break down of globalization and the wider perspective needs to be taken to strengthen the argument.

Summary

The trend towards regionalization can be illustrated with two levels; the aggregate level and microlevel. At aggregate level, the number of trade within each region has been increasing for the past 20 years with current standing at 62% in EU, 56.7% in NAFTA, and 56% in Asia. In addition to that, there is little Foreign Direct Investment (FDI) on a multilateral basis. At microlevel, taking sales data from the largest 500 corporations in the world showed that 320 companies have 80% of their sales in the home region of the triad (out of 500, only 380 sales data available). Only nine of them considered truly global which mainly electronic industry. Data presented clearly shown that most of the world’s largest company is not global but home-based region; Wal-Mart has 94.1% of its sales in North America. With the above snapshot, it is evident that only a handful of MNEs are ‘global’ and most of them are either regional or at maximum bioregional.

This regionalization supported by the...