This is a complete summary of all literature regarding Week I: Core IB Theories for the course 'Theories of International Business'. The summary is designed to give an easy-to-read insight into the core aspects of each paper.
Papers covered include:
ARTICLE I: THE CAUSE OF GLOBALIZATION (GAR...
Table of Contents
THEME II: GLOBAL INTEGRATION PROCESSES......................................................................1
ARTICLE I: THE CAUSE OF GLOBALIZATION (GARRET)....................................................................2
INTRODUCTION...............................................................................................................................................2
HISTORICAL PARALLELS...................................................................................................................................2
THEOLOGICAL DETERMINISM.........................................................................................................................5
THE COSTS OF CLOSURE..................................................................................................................................7
CONCLUSION.................................................................................................................................................13
ARTICLE II: SEMIGLOBILIZATION AND INTERNATIONAL BUSINESS STRATEGY (GHEMAWAT)........15
INTRODUCTION.............................................................................................................................................15
PRODUCT MARKET INTEGRATION................................................................................................................15
TRADE FLOWS...............................................................................................................................................15
FOREIGN DIRECT INVESTMENT.....................................................................................................................16
PRICE INTEGRATION......................................................................................................................................17
FACTOR MARKET INTEGRATION....................................................................................................................18
CAPITAL.........................................................................................................................................................18
LABOR...........................................................................................................................................................19
KNOWLEDGE.................................................................................................................................................20
SEMIGLOBALIZATION AS A RESEARCH PROGRAM........................................................................................21
FIRM-LEVEL ISSUES.......................................................................................................................................22
CONCLUSION.................................................................................................................................................23
ARTICLE III: A PERSPECTIVE ON REGIONAL AND GLOBAL STRATEGIES OF MULTINATIONAL
ENTERPRISES (RUGMAN & VERBEKE)..........................................................................................25
INTRODUCTION.............................................................................................................................................25
THE TRIAD POWER CONCEPT........................................................................................................................25
EMPIRCAL EVIDENCE AND MEANING OF REGIONAL STRATEGIES................................................................27
IMPLICATIONS FOR EMERGING RESEARCH THEMES....................................................................................27
IMPLICATIONS FOR THE RELEVANCE OF THE INTERNALIZATION AND INTERNATIONALIZATION MODELS OF
INTERNATIONAL EXPANSION........................................................................................................................27
IMPLICATIONS FOR THE RESEARCH ON THE DIAMOND OF INTERNATIONAL COMPETITIVENESS...............28
IMPLICATIONS FOR RESEARCH ADOPTING A RESOURCE- BASED PERSPECTIVE ON THE
INTEGRATION/NATIONAL RESPONSIVENESS FRAMEWORK.........................................................................29
IMPLICATIONS FOR RESEARCH ON MNE STRUCTURE..................................................................................30
IMPLICATIONS FOR RESERACH ON THE PERFORMANCE EFFECTS OF GEOGRAPHICAL DIVERSIFICATION...31
CONCLUSION.................................................................................................................................................32
DISCUSSION READING: GETTING TO SI, JA, OUI, HAI AND DA (HBR)...........................................34
INTRODUCTION.............................................................................................................................................34
ADAPT THE WAY YOU EXPRESS DISAGREEMENT..........................................................................................34
KNOW WHEN TO BOTTLE IT UP OR LET IT ALL POUR OUT...........................................................................34
LEARN HOW THE OTHER CULTURE BUILDS TRUST.......................................................................................35
AVOID YES-OR-NO QUESTIONS.....................................................................................................................36
BE CAREFUL ABOUT PUTTING IT IN WRITING..............................................................................................36
CLOSING WORDS...........................................................................................................................................37
THEME II: GLOBAL INTEGRATION PROCESSES
,ARTICLE I: THE CAUSE OF GLOBALIZATION (GARRET)
INTRODUCTION
The author defines globalization as the international integration of markets in goods,
services, and capital, excluding aspects like labor mobility and cultural homogenization.
The central focus of the article is the exploration of four distinct perspectives on the causes
of globalization:
1. Historical Parallels: Some argue that the current wave of globalization mirrors earlier
periods of market integration, such as the early 20th century. However, the author
challenges this view by highlighting significant differences between then and now,
emphasizing the unprecedented aspects of today's global economy.
2. Technological Determinism: Tshe second perspective posits that technological
advancements have been the primary drivers of international economic activity. In
this view, governments are seen as relatively powerless in the face of these
technological forces, with policy liberalization representing a pragmatic
acknowledgment of the futility of resisting globalization. This perspective finds
support from various scholars and experts.
3. Moderate Technological Influence: A more moderate viewpoint acknowledges
technological progress but also considers governments' role in shaping globalization.
Many mainstream economists argue that technological advancements have
increased the potential efficiency gains from international integration. Governments,
they suggest, can still shield their countries from external market forces but face
rising opportunity costs for doing so, thus incentivizing policy liberalization.
4. Political and Ideological Constructs: The final perspective presents globalization as a
political construct, driven by power dynamics and ideology, without necessarily
benefiting society as a whole. Some scholars argue that freer trade and capital
mobility may not necessarily lead to economic growth, challenging conventional
wisdom. This perspective connects globalization to political shifts, particularly the
neoliberal policies of the Reagan and Thatcher era, which spread through
international institutions like the IMF and the World Bank.
The article also touches on the role of international institutions, like the World Trade
Organization (WTO) and the European Union (EU), in facilitating trade integration.
Additionally, it briefly explores cross-national differences in market integration, influenced by
factors such as a country's level of development, democratic institutions, and the balance of
power between political ideologies.
HISTORICAL PARALLELS
,THE PARAMETERS OF CONTEMPORARY GLOBALIZATION
The section discusses the remarkable growth of international economic activity over the
past 30 years, focusing on trade, foreign direct investment (FDI), and international portfolio
investment (equities and bonds). The data presented show substantial increases in these
flows, with international economic activity growing at an accelerating pace, particularly in
more liquid markets.
In 1970, exports plus imports accounted for approximately one-quarter of global gross
domestic product (GDP), but by 1997, this figure had nearly doubled to over 45%. Similarly,
international portfolio investments and FDI grew significantly, reaching approximately 5% of
world GDP for portfolio flows and 2.5% for FDI flows in 1997. The accumulated stock of FDI
reached an estimated $3.4 trillion, roughly 10% of global output in 1998.
The section also highlights a correlation between the growth of international economic flows
and the liberalization of foreign economic policies worldwide. For instance, there is a strong
negative correlation between global trade flows and average taxes on trade, indicating that
trade liberalization has accompanied increased trade flows. A similar pattern is observed in
international capital flows and the opening of capital accounts in countries, though capital
flows preceded policy changes by about five years.
Despite these trends, the article cautions against viewing the world as a fully seamless global
market. It emphasizes the considerable cross-national variation in market integration, with
significant differences in trade, FDI, trade taxes, and capital account openness between
countries. For example, while trade flows are comparable between high-income OECD
countries and low-income nations, other aspects of market integration, such as FDI and
international portfolio investment, differ significantly. Even within the OECD, substantial
variations in market integration persist.
The article also highlights that, in some cases, high and growing market integration can be
found among the poorest countries, but these instances are considered exceptions rather
than the rule. Moreover, it points out the unique characteristics of small, wealthy, non-OECD
countries that serve as conduits for trade and international finance, oil exporters, or tax
havens.
In conclusion, the section provides a nuanced view of globalization, showcasing the
remarkable growth in international economic activity while underscoring the persistence of
cross-national differences in market integration. It sets the stage for exploring the underlying
causes of these global trends and variations in market integration.
, THE UNIQUENESS OF CONTEMPORARY MARKET INTEGRATION
Economic historians have noted that, on many basic indicators, the level of globalization in
today's world is not significantly higher than it was a century ago. They argue that the 20th
century saw a significant reduction in international economic activity during its middle
decades, particularly due to the impact of the Great Depression and World War II. Some
economists suggest that only in the 1990s did the world economy achieve a degree of
economic integration that rivaled the level of integration achieved a century earlier during
the classical gold standard era.
However, there is a revisionist perspective that argues international market integration today
is qualitatively different from a century ago. According to scholars like Bordo, Eichengreen,
and Irwin, the contemporary era of globalization goes further and is deeper than the late
19th century. They point to several key differences, such as the shift from raw materials to
manufactured goods dominating international trade, the emergence of trade in services,
and the transformation of international capital movements.
One of the most distinctive features of the contemporary international economy is the
multinationalization of production. Modern multinational corporations operate in ways that
have no historical parallels. They manage complex international value chains and engage in
global strategic alliances. Intrafirm trade, which involves transactions among international
affiliates of the same corporation, accounts for approximately one-third of all global trade.
In summary, while there is debate among economic historians about the level of
globalization in different eras, there is a growing recognition that the contemporary era of
international market integration has unique characteristics, including the dominance of
manufactured goods in trade, the rise of trade in services, and the proliferation of
multinational production. This leads to questions about the factors that have driven the
expansion of international economic activity in recent decades.
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