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The Power Of (Virtual) Corporation - Part 1

In 1886 the Supreme Court of the United States declared that a corporation is a “Natural Person” (part of a verdict of Santa Clara County vs. Southern Pacific Railroad), and therefore entitled to the benefits of Equal Protection Clause, part of the Fourteenth Amendment to the United States Constitution. The real news behind this ruling was that for the first time, corporations were entitled for the same rights as human individuals.

OK, got it. But what really is a Corporation? A corporation is a legal entity of one person or more, which legally operates separately from its owners and workers. A Multi-National Corporation (MNC) is a corporation that operates in more than two countries. MNC’s are becoming increasingly important on the global scene. Some even believe that  MNCs have grown to be more powerful and influential than the nation-state; certainly when taking into account that some of the prominent MNCs posses larger economic power than small and medium countries.

Why are they so powerful? The MNC power lies in its size. MNCs have the ability to coordinate and control large scale operations which spread globally, even if its physical presence in each geographical region is limited or doesn’t exist. They also operate in a vast array of economic, political, social and cultural environments. It is estimated that there are about 61,000 MNCs in the world today, carrying out production through over 9000,000 affiliates. They account for about a tenth of the world’s Gross National Product (GNP) and about a third of total world export. Yet, only relatively small number of “global corporations” (e.g. Samsung, Microsoft) predominate, and the vast majority is in developed countries (at least for now…).

So how can they operate so widely? In one sentence: Compression of time and space. In one word: Technology. The fact that people succeeded in altering the world into a “global village”, in which any action can be controlled from any point of the globe within  seconds -  give corporation tremendous power. To that we have to add the fact that due to its size and power, the corporation has the ability to invest in advanced IT infrastructure, in a scale which is out of reach for every individual or even ordinary company. A corporation is in fact an entity with unprecedented strength.

So basically the corporation’s strength lies within its size and ability to communicate with its components. But what if a mass of individuals would also be able to communicate and coordinate their actions? It is really a “virtual corporation”, isn’t it? Exactly. Using the term “virtual corporation” to define a large group of people that can coordinates their operations, is precise. Such a group can use its size, not only for internal corporation, but also when facing external elements (e.g. suppliers). Yet it is still virtual, since it is not a firm legal entity, but a flexible and fluid cooperation, which can be constantly altered.  Information technology provides inexhaustible potential for the creation of such “virtual collaboration”.

You almost forgot the icing on the cake: In such “virtual corporation”, can people still remain independent? Certainly. This is another important aspect of the virtuality of the “virtual corporation”: indeed, it is based on a mass of people, but it is a dynamic and voluntary mass, which does not enslave the individual for the sake of the collective. At the end of the day, each individual promotes his own interests and this fact ensures a vivid and dynamic business, of which everybody benefits.

Dr. Shay Hershkovitz is the head of research and strategy at LINX (a competitive intelligence firm). He is also a lecturer at the Information & Knowledge Management Graduate School of Management - University of Haifa, and at the school of communication - Sapir Academic College.


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