Globalization and Regionalization


Globalization and Regionalization are antecedents within the ongoing process of the increasing interrelation of markets, politics and society:


At the core of reality of globalization today are regions and this will remain so for many years to come
Moore/Rugman, McGill International Review, Fall 2005, p. 27

While multinational enterprises drive globalization, their strategy is about regionalization. Entrepreneurial firms, employing most of their employees within their respective host country or host region, operate on a multinational level. Regional policy makers are more concerned with regional than with nationwide wealth effects. Accordingly, their lenses are reduced to regional economic growth – and thus they compete with policy makers from other regions all over the world. On the other hand, the increasing interrelation of markets lead to problems, risks and also chances which are beyond a nationwide (or regional) level. Thus – global business management is also about regional business management!

Our research program is dedicated to the risks, problems, chances and challenges grounded on this gap – the gap between globalization of firms and markets on the one and regionalization effects on the other hand. In particular, we are interested in how firms can access the necessary resources such as financial capital, human capital and knowledge spillovers from their location (Spatial Resource Management), how these resources are transformed into marketable products to exploit strategic advantages in a globalized world (Organizational Capital Management) and how these processes are governed to ensure that all investors with relationship specific investments could be protected within this process (Corporate Governance).

Corporate Governance


Corporate Governance issues are predominant in all types of organizations and all over the world and differ among different types of firms. Governance problems arise when resources cannot perfectly be allocated by market mechanisms or contracts. While a corporation or organization is in general only an empty legal shell, the interactions and transactions of individuals within this shell require authority and hierarchy to coordinate and motivate the interests of the individual members of the organization. Individuals at the top of a hierarchical pyramid could use their power to extract private rents at the cost of a firm’s stakeholders and underinvestment. While this phenomenon or “managerial misbehavior” is often ascribed and reduced to large and public companies with dispersed shareholders, all types of organizations, profit or not-for profit, are characterized by and suffer from the moral hazard and adverse selection problems at the top of their pyramids.


Our research program focuses on three types of firms: Entrepreneurial firms, medium sized and family owned firms, and large and public companies. All three types of firms are faced with an increasing international competition in input and output markets but differ in their size and ownership structures and are thus faced with specific kinds of governance problems.

Large and Public Companies

The problems in corporate governance are often reduced to the separation of ownership and control induced by the dispersion of equity stakes in public companies. Without the control of a large shareholder, managers could follow their own interests at the costs of the owners of the firms – the plenty of unknown shareholders. Influenced by the academic research from Anglo-Saxon countries like the US and UK, it is mainstream to focus only on the shareholder as the most relevant stakeholder of a corporation – treating shareholder value as the single one goal of managers.

Our research program on corporate governance in large and public companies fits in parts into this context. Since corporations in Continental Europe in general and in particular in Germany differ from the “All American Corporation”, we also focus on different and specific issues in Corporate Governance, like the interrelation of different kinds of large shareholders, board composition and co-determination and specific kinds of moral hazard behavior (Crime).

Medium Sized and Family Owned Firms

Medium sized and family owned firms are often cited as being the backbone of the regional and national economy. They differ from other types of firms in their specific governance and ownership structure: Families. This research program is dedicated to the pros and cons of families as the major shareholders in firms, how they differ in their way to govern firms, their innovation activities and performance.

Entrepreneurial Firms

Entrepreneurial firms, young and small firms operating in high technology intensive industries, are associated with high growth but also high failure rates. While few of them are successful in overcoming the barriers in their early stages, most of them fail in early years. Entrepreneurial firms are associated with high risks and thus suffer from difficulties in attracting the necessary resources like financial and human capital. Research on corporate governance in entrepreneurial firms focuses on all stages of their life cycle, from birth via spin-offs or start-ups over the first period of growth until the final stages of their live cycles, being taken over by an incumbent firm (M&A), establishing themselves as independent corporations, or their failure by insolvency or bankruptcy. Thus, corporate governance problems differ and vary along the life cycle of entrepreneurial firms (see Audretsch/Lehmann, Corporate Governance in Entrepreneurial firms, mimeo 2011).

Organizational Capital Management


Organizations accumulate, store and optimize knowledge to enhance their technologies of production. Analogous to financial capital firms may invest in organizational capital, acquire, manage and sell portfolios of knowledge. This knowledge is embodied in the employees’ skills or human capital, the operating capabilities represented through practices, processes and designs as well as by the firms’ readiness to innovate or corporate entrepreneurship. The competitive advantage to be gained by the management of organisational capital lies in its tacitness. The unique bundling of the three aspects cannot be completely codified and hence neither be easily transferred nor imitated. Popular examples of abnormal rents and firm growth created by organizational capital include Wal-Mart in retail, Apple in high-end electronic consumer devices or Google in web-based services.

Human Capital

Human capital can be described as the combination of talents, personality attributes, education, experiences and competencies embodied in an individual. Although the notion of human capital is commonly ascribed to Nobel laureate Gary S. Becker for his works on education the concept itself is as old as the discipline of economics. Adam Smith (1776) wrote: “The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor, and which, though it costs a certain expense, repays that expense with a profit.” Nowadays – almost 250 years later – we are rather concerned with the human capital of the manager or entrepreneur than that of the Smithsonian workman.

Practices, Processes and Designs

Besides the organizational capital represented by individuals there is a firm-specific capital embodied in the way a firm is organized. These include formal organizational designs concerning coordination (e.g. the use of lateral or vertical coordination) and motivation (e.g. incentive systems) as well as efficient workflows within an organization. Moreover organizational practices represent informal ways of coordinating and motivating. These include mentoring and coaching behavior of supervisors, elements of on the job training of new employees or informal and self enforcing rules like organizational culture.

Corporate Entrepreneurship

Corporate Entrepreneurship encompasses all innovative activities of existing firms with the aim of enhancing firm performance. These might be (technological) innovations within the firms’ existing product-market focus or activities concerning strategic renewal or business development. Corporate-Entrepreneurial behavior to achieve those goals is marked by the willingness to take risks, a proactive and aggressive approach to competition and innovativeness.

Spatial Resource Management


Location matters! Recent developments in economics and business highlight the importance of a region’s endowment with scarce resources as a major driver of strategic advantages for every type and size of firms. Thus, policy makers are concerned with providing the infrastructure necessary to attract high potential firms, either multinationals or young and entrepreneurial firms. Within this process, research intensive institutes play the key role by generating knowledge spillover effects for firms located in a short distance to absorb external knowledge. Complementary to research intensive institutions are higher education institutes such as universities as providers of human capital, financial intermediaries like banks and venture capitalists but also all circumstances that shape quality of life to attract and gain high potentials.