Many people who are not part of the majority ethnic group in the country they live in are accustomed to being asked: “But where are you really from?” Now companies are being asked the same question.
TikTok, owned by Beijing-based ByteDance, has fought hard this year to prove it isn’t a Chinese app in response to rising US suspicion about its ties with its parent and ultimately, the Chinese Communist Party, which has sweeping powers over its tech companies.
Elsewhere, India’s biggest digital payments platform, Paytm, is often scrutinized for being “Chinese” because Alibaba and its affiliates own a more than 25% stake in Paytm’s parent company One97 Communications.
Some political observers, like Robert Reich, have worried that international corporations would become “stateless global webs” and hence that their “nationality” would become ever more irrelevant. But as geopolitical tensions and nationalism rise globally, corporate nationality is making a comeback.
Governments are heavily scrutinizing foreign tech services which, like their domestic competitors, have troves of local user data and can affect issues ranging from elections to social movements. One of President Donald Trump’s requirements for TikTok to be allowed to stay operating in the US, for example, was that it finds a “very American company” to take over its US business.
But is it even possible to attribute a single nationality to an app, or to a tech company, in today’s highly intertwined world?
“In the globalization era, it is hard to say a company belongs to a certain country, as the whole world has become so connected in the past decades, in aspects like tech, human capital, and trade,” said Huang Yen-Nun, a research fellow at the Research Center for Information Technology, housed at Taiwan’s leading academic institution Academia Sinica.
Some of the most common approaches in deciding where a company is from include looking at the nationality of a company’s controlling shareholders, where a company hires the majority of its workforce, or where the company is incorporated. FTSE Russel, a London-based market index provider, also considers factors such as “the perception of investors” and “location of company meetings” when judging a company’s nationality. However, these criteria are far from perfect. For example, a ByteDance spokesperson controversially said the firm was not Chinese because it is incorporated in the Cayman Islands, a tax haven. That claim looks laughable in the face of Beijing’s rolling out of tech export controls to potentially stop the sale of TikTok in the US.
Moreover, the flow of funding across borders through vehicles like private equity and venture capital firms is making it harder to decide tech companies’ nationality, which usually have investors across continents.
“From a legal perspective, we look at the nationality of the controlling shareholders [to decide the nationality]. But nowadays, not only Chinese state-owned enterprises but also private ones can have very complicated investment arrangements,” said Jyh-An Lee, a professor focusing on internet law at the Chinese University of Hong Kong Law School. “For example, [the Chinese entities] can probably have a firm based in the US or elsewhere that controls apps like TikTok. Or they can set up VC firms in Silicon Valley that have Chinese money… Overall, it is very difficult to prove which foreign entity controls a company.”
Some argue that the decisive factor of a tech firm’s nationality should lie within its management team, especially in countries like India. “It is not about where the company is registered or have investors from, but where does the core founding team belong,” said Yugal Joshi, vice president at consultancy Everest Group. “It is about…the working culture of the company and what type of people presence it has in India.” By that logic, a company like Paytm, which has charismatic founder-CEO Vijay Shekhar Sharma at the helm and hires 7,000 people in India, should not be given grief over its Chinese funds.
Others say it more depends on which country has benefited the most from the companies. “The real essence that both governments and private entrepreneurs have been concerned with is technology transfer and intellectual property (think George Fernandes and Coca Cola), not merely the domicile of the management,” said Vivek Durai, founder of business intelligence platform Paper.VC. “Does the IP reside in India? Does value reside in India? This is especially important in areas where the creation of IP has a ripple effect on the ecosystem as people move out of a company and found new companies.”
This is not the first time the world has focused on companies’ nationalities—in fact, the last 30 years are an anomaly. Throughout the history of capitalism, the home base of a company said a lot about its values and objectives and shaped how consumers, employees, and governments perceived it. That changed with the fall of the Berlin Wall and then China’s opening up, as the ideology of globalization became dominant and countries competed to lure footloose international investors to their markets.
This trend has shaped the world as we know it today, with products like the iPhone designed in California, but sourcing its components from places like South Korea and Taiwan, and being manufactured in mainland China by Taiwan’s Foxconn. But the last few years have marked a return to normalcy. The world is once again asking companies: Where are really you from?