Financial Times, December 22, 2000

A century ago, Standard Oil New Jersey went overseas in search of oil. In the late 1990s, America Online went around the world in search of subscribers. In 1899, the United Fruit Company needed to be in Central America because of that region's advantages in the cultivation of bananas. Nowadays, Yahoo! needs to be everywhere because the more visitors it attracts, the higher its stock price.

While the rules and technologies of the new economy have altered some of the modalities of international business, the primary motives pushing companies abroad remain unchanged. Corporations still expand globally to increase profits or to respond to the competitive moves of their rivals.

In considering where and when to go abroad, companies are also driven by the unique imperatives of their particular industry. Oil and mining firms companies look to geology; consumer goods groups search for big markets; and so on.

But the internet has also modified some of these long-held truths. Fundamentally, a company no longer needs to go abroad to be abroad. Online brokerages operate globally without ever shipping anything overseas or establishing a physical presence beyond their own country. Moreover, even companies without a foreign presence must now contend with a wide variety of overseas challenges and threats to their operations. And so, just as the first US multi-nationals needed government help in advancing and protecting their interests, their new-economy successors need a new kind of commercial diplomacy. Indeed, one of the ironies facing today's nimble, flexible high-technology companies - many of which pride themselves on their libertarian spirit - is that their global success may depend in no small measure on the slow, lumbering process of multilateral negotiations.

In the old days, multi-nationals always had to bear the risk that foreign governments could seize their oil fields, plantations or factories. Today, the main risk for many companies is that hackers and counterfeiters spread around the world will appropriate their intellectual property. A stern protest from the trade representative or ambassador is not of much use against this kind of threat. Witness the continuing saga of US and Chinese efforts to negotiate and enforce contentious agreements that have done little to beat back a virtual army of copyright pirates, trademark tramplers and patent predators.

Companies also face a vastly different international antitrust landscape. In
the past, threats to the likes of Standard Oil came only from trustbusters in
the US Justice Department. Today, as AOL, Time Warner and Microsoft can attest,
challenges also emerge from the European Union in Brussels, the World Trade
Organisation in Geneva and a host of specific national jurisdictions. Today's
global companies may have as much to fear from the co-operation of regulators in
different countries as from the collusive practices of rival firms.

Finally, new-economy companies must look beyond their own governments to ensure uniform international technological standards. The more standards for internet and telecommunications vary across borders, the harder it is for companies in these sectors to maximise revenues worldwide. That explains the army of lobbyists these companies have in Brussels and Geneva as the EU, the WTO and other bodies shape new global rules.

These are issues where hegemony - a concept that finds its fullest and sharpest expression in military superiority - does not assure commercial success. For all its power and influence, the US has not been able to impose its preferences in these areas, not just because of its mixed record of support for multilateral organisations but mostly because no government, no matter how powerful, can attempt unilaterally to impose or enforce its will on these issues. Instead, challenges such as protecting intellectual property and establishing uniform technological standards can be met only through what perhaps is the slowest, most inefficient way of solving human problems: multilateralism.

That reality presents new-economy companies with an uncomfortable paradox: few of the traits they prize are found in institutions where governments converge to negotiate and organise. Technology companies favour speed, decentralisation, individualism and a disregard for geography, borders and sovereignty. Multilateralism normally involves slow decision-making, free-riders, unclear goals and hypersensitivity about any real or symbolic erosion of national sovereignty.

The clash between the spirit of the new economy and the culture of multilateral decision-making will play a crucial role in shaping the way the digital revolution spreads around the world. Innovations in how countries organise to define and collectively enforce the rules that govern the new economy will be as critical in determining its future evolution as the technological innovations that drive it.