23 Things They Don't Tell You About Capitalism

In the event, Cerberus failed to turn the company around and Chrysler went bankrupt in 2009. It was restructured with US federal government financial aid and a major equity investment by Fiat, the Italian car-maker. When Fiat became the leading shareholder, it made Sergio Marchionne, the CEO of Fiat, also the new CEO of Chrysler and appointed another Fiat manager to Chrysler’s nine-member board of directors. Given that Fiat has only a 20 per cent stake at the moment but has the option to increase it to 35 per cent and eventually to 51 per cent, it is highly likely that the proportion of Italians on the board will increase over time, with the increase in Fiat’s ownership share.

So Chrysler, once one of the quintessential American companies, has in the last decade come to be run by Germans, Americans (again) and (increasingly) Italians. There is no such thing as ‘nationless’ capital. When taken over by a foreign company, even mighty (former-)American firms end up being run by foreigners (but then that is what takeover means, when you think about it). In most companies, however transnational their operations may seem, the top decision-makers still remain the citizens of the home country – that is, the country where ownership resides – despite the fact that long-distance management (when the acquiring company does not dispatch top managers to the acquired firm) can reduce management efficiency, while dispatching top managers to a foreign country is expensive, especially when the physical and the cultural distances between the two countries are great. Carlos Ghosn is very much an exception that proves the rule.

It is not just in terms of the appointment of top decision-makers that corporations have a ‘home bias’. Home bias is also very strong in research and development, which are at the core of a company’s competitive strengths in most advanced industries. Most of a corporation’s R&D activities stay at home. Insofar as they are relocated abroad, it is usually to other developed countries, and at that with a heavy ‘regional’ bias (the regions here meaning North America, Europe and Japan, which is a region unto itself in this respect). Recently an increasing number of R&D centres have been set up in developing countries, such as China and India, but the R&D they conduct tends to be at the lowest levels of sophistication.

Even in terms of production, arguably the easiest thing that a company does and therefore the most likely candidate for relocation abroad, most transnational corporations are still firmly based in their home countries. There are odd examples of firms, for instance Nestlé, which produce most of their outputs abroad, but they are very much the exception. Among US-based transnational corporations, less than one-third of the output of manufacturing firms is produced overseas. In the case of Japanese companies, the ratio is well below 10 per cent. In Europe, the ratio has risen fast recently, but most overseas production by European firms is within the European Union, so it should be understood more as a process of creating national firms for a new nation called Europe than as a process of European firms going truly transnational.

In short, few corporations are truly transnational. The vast majority of them still produce the bulk of their outputs in their home countries. Especially in terms of high-grade activities such as strategic decision-making and higher-end R&D, they remain firmly centred at their home countries. The talk of a borderless world is highly exaggerated.[1]

Why is there a home-country bias?

Why is there a home-country bias in this globalized world? The free-market view is that nationality of capital does not – and should not – matter, because companies have to maximize profit in order to survive and therefore that patriotism is a luxury they can ill afford. Interestingly, many Marxists would agree. They also believe that capital willingly destroys national borders for greater profits and for the expanded reproduction of itself. The language is radically different, but the message is the same – money is money, so why should a company do less profitable things simply because they are good for its home country?