A multinational company is more than a centralised export machine, says José (Joe) Santos, Affiliated Professor of Practice in Global Management at INSEAD. Instead, it must be treated as a globally integrated system in which the whole is more than the parts – where “more” means different and value-adding. 

In this episode of INSEAD Explains Governance, Santos explains why multinationals face unique challenges: Globalisation has evolved in such a disruptive way that it can rapidly reshape the company’s footprint. Designing and sustaining a global organisation now requires integrating dispersed knowledge and decisions across countries that are simultaneously more connected and more distinct than ever.

Importantly, boards and leadership teams of MNCs must clarify where global integration truly creates value and where local specialisation (“acting local”) or local integration (“being local”) must prevail. These choices involve distinctive governance forms in different parts of the world. To do this, boards must look beyond financial results and regularly review the political, economic, social and technological pulse of key countries. Engaging with local business ecosystems while cultivating sensitivity to invisible differences would be helpful.

Finally, Santos highlights a bright spot: Incumbent MNCs can learn to use dispersed knowledge to create breakthrough new products, new processes and new business models. This is what he calls global innovation that fosters competitive advantage of a "metanational" nature such that the MNC as a whole is better off than  the sum of its subsidiaries. In this light, multinationals can now use the world for their development and growth, while also bringing benefits to the regions where they operate.