[Congressional Record (Bound Edition), Volume 157 (2011), Part 10]
[Extensions of Remarks]
[Pages 14072-14073]
[From the U.S. Government Publishing Office, www.gpo.gov]




             9/11 IMPACTS ON INTERNATIONAL BUSINESS TRENDS

                                 ______
                                 

                        HON. DONALD A. MANZULLO

                              of illinois

                    in the house of representatives

                     Wednesday, September 21, 2011

  Mr. MANZULLO. Mr. Speaker, I am honored to present to my colleagues a 
succinct academic analysis written by Dr. Michael Czinkota of the 
McDonough School of Business at Georgetown University, and his fellow 
professors, Gary Knight and Gabriele Suder, regarding their analysis of 
the impact of 9/11 on the international business climate and the trends 
in globalizations. In light of the 10th anniversary of the terrorist 
attacks on the United States, I commend to you their observations.

Terrorism and International Business--Looking Back and Striving Forward

       (By Michael R. Czinkota, Gary Knight, and Gabriele Suder)

       The airplanes of 9/11 forced countless multinational 
     corporations (MNCs) to update their strategic planning. Our 
     work with executives at more than 150 MNCs shows that ten 
     years later, companies are still grappling with how best to 
     manage the terrorist threat.
       In the two decades before 2001, the rate at which firms 
     launched international ventures was growing rapidly. After 9/
     11, foreign direct investment fell dramatically as firms 
     withdrew to their home markets. The popularity of 
     international-sounding company and brand names decreased 
     appreciably as managers now emphasize domestic and local 
     affiliations.
       The tendency to reverse course on globalization has been 
     accompanied by declining international education in the 
     United States, as revealed by falling enrollments in foreign 
     language and international business courses. In the past 
     decade, managers shifted much of their focus from proactive 
     exploration of international opportunities to a defensive 
     posture emphasizing threats and vulnerable foreign 
     operations.
       In Europe, the radicalization of individuals and groups, 
     motivated by ideology, religion or economic concerns, 
     threatens local cooperation and social harmony. European 
     business schools have benefited from tighter restrictions on 
     international student enrollments in the U.S., but the focus 
     of teaching has shifted from global to regional trade.
       Another outcome of the terrorism threat has been a rise of 
     public-private partnerships, in which governments and firms 
     collaborate to counter them. For example, global police 
     agencies now partner regularly with private firms to combat 
     cyber crime and attacks on critical computer infrastructure. 
     Governments and activist groups now use social media to 
     organize campaigns fighting against threats ranging from 
     dictators to disease. But nations also have begun to curtail 
     social media when they are contrary to government interests.
       The cost of protecting against terrorism is many billions, 
     while terrorist spend millions or less on their actions. 
     There are abundant opportunities for small groups to employ 
     nonweapon technologies, such as aircraft, to cause massive 
     harm. Though our capacity to protect key facilities has 
     improved over time, the security focus on high-value assets

[[Page 14073]]

     encourages terrorists to redirect their violence at ``soft 
     targets'' such as transportation systems and business 
     facilities. Greater security at home means attacks will 
     increasingly take aim on firms' foreign operations.
       Companies have placed more emphasis on terrorism risk 
     considerations when choosing how to enter foreign markets. In 
     the last century, foreign direct investment (FDI) was the 
     preferred approach. But terrorism has shifted the balance. 
     Now many more firms favor entry through exporting, which 
     permits broad and rapid coverage of world markets, reduces 
     dependence on highly visible physical facilities, and offers 
     much flexibility for making rapid adjustments. In terms of 
     economies of scale and transaction costs, FDI is generally 
     superior, but the risks of exporting are judged to be lower. 
     Markets tend to punish failure more harshly than they reward 
     success, which makes risk-minimizing strategies more 
     effective.
       Skillful management of global logistics and supply chains 
     cuts the risk and cost of downtime. Firms seek closer 
     relations with suppliers and clients in order to develop more 
     trust and commitment. Some have increased ``on-shoring'' by 
     bringing suppliers back into the country when their 
     remoteness constitutes risk.
       Terrorism causes an organizational crisis whose ultimate 
     effects may be unknown, and poses a significant threat to the 
     performance of the firm. Corporate preparedness for the 
     unexpected is a vital task. Innovative managers develop back-
     up resources, and plan for dislocations and sudden shocks 
     with a flexible corporate response.
       Terrorism is a public threat, and some managers believe 
     government should bear the cost of protecting against it. 
     Others argue that a public-private partnership is the most 
     effective approach, with firms taking the lead. There is also 
     the issue whether corporate headquarters or the locally 
     exposed subsidiary should fund prevention and preparation 
     expenditures. Regardless of who pays, everyone can agree on 
     the need to guard against terrorism.
       Every world region is vulnerable, and most attacks are 
     directed at businesses and business-related infrastructure. 
     Terrorism requires decision-making and behaviors that support 
     vigilance and development of appropriate strategies. Managers 
     who fail to prepare run the risk of weaker performance or 
     even loss of the firm. While we can no longer choose the 
     lowest cost option, ten years after 9/11 companies are more 
     aware, less exposed, and less vulnerable to the risk of 
     terrorism. But in the next ten years comes the really big 
     task: What can and should we do collectively and individually 
     to reduce the causes of terrorism.

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