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Summary Globalization & Offshoring
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Summary Globalization & OffshoringContent
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Introduction 2
§1 The globalization of markets and firms 3
§2 The concept of distance in international business 6
§3 Offshoring 10
§4 Offshoring of innovation activities 13
§5 Maximizing global potential + Recent trends in IB 17
,Introduction
Over the last few decades, markets have significantly increased their extent of globalization. Flows of
several types of inputs (e.g., products, capital) have increasingly become international. Even though
the recent global economic crisis has caused declines in the internationalization of many of these flows,
we are nowadays in a much more interconnected and globalized world than twenty years ago. Firm-
level data corroborate the notion that companies are even more globalized than markets. Despite the
fact that larger companies tend to rely more extensively on cross-border operations, small and medium
sized enterprises, especially in Western Europe, also often expand outside of their home country. In
particular, the recent progresses of information and communication technology has given companies,
irrespective of their size, the opportunity to fine-slice their value chain and relocate each of their value
activities where they can be most efficiently performed. This phenomenon, generally referred to as
business process offshoring, has contributed to a substantial reconfiguration of the modern
multinational company.
2
, §1 The globalization of markets and firms
Required readings:
- 1.1 – Ghemawat, 2007
- 1.2 – Altman & Bastian, 2020
- 1.3 – Cuervo-Cazurra et al., 2020
Questions addressed:
- How globalized is a company?
- How did it move on internationalization steps?
§1.1 Globalization
Slides 30-33, article 1.2
Globalization is defined as the process of international integration arising from the interchange of
world views, products, ideas and other aspects of culture. According to Altman and Bastian (2020)
there are four basic aspects to globalization:
- Trade: trade and transactions
- Capital: capital and investment movements
- People: migration and movement of people
- Information: dissemination of knowledge
The first age of globalization was from the mid-1800’s to the 1920’s. Labor was highly mobile: up to 1
million people were leaving Europe each year. It was driven by the steamship, telegraph, railroad,
telephone and airplane.
§1.2 Recent drivers of globalization
Slide 34-36, article 1.3
According to Cuervo-Cazurra et al. (2020) two main forces underlie the recent globalization of markets:
- Technological advances
- Economic liberalization (falling barriers to trade and investment)
3
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