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Summary ‘Technologische ontwikkeling in internationaal perspectief’ (0E050)P. Dicken, Global shift
Chapter 2: A new geo-economy
Something is happening out there – but what it is?
The explosion of interest in globalization signifies a universal acceptance that something fundamental
is happening in the world economy; the feeling that there are lots of big issues that are somehow
interconnected under the broad umbrella term globalization.
Internationalization is nothing new. Nevertheless, the production process itself was organized primarily
within national boundaries. Today, the picture is very different: national boundaries no longer act as
‘watertight’ containers of the production process.
These developments signify the emergence of a new global division of labour, a transformation of the
old geographical pattern of specialization, in which the industrialized countries produced manufactured
goods and the non-industrialized countries supplied raw materials and agricultural products to the
industrialized countries and acted as a market for manufactured goods. Such geographical
specialization – structured around a core and a periphery – formed the underlying basis of much of the
world’s trade for many years (figure 2.1).
During the past 50 years, this has been transformed into a highly complex, kaleidoscopic structure
involving the fragmentation of many production processes and their geographical relocation on a global
scale in ways that slice through national boundaries. In addition, new centres of industrial production
have emerged in the so-called newly industrialized economies (NIEs). The nature and the geography of
the global economy are being transformed further by the shift towards an information, or knowledge-
driven, economy, in which knowledge intervenes upon knowledge itself in order to generate higher
productivity.
A ‘new’ geo-economy? The globalization debate
What is happening is a subject of enormous disagreement. The hyperglobalists argue that we now live
in a borderless world in which the national in no longer relevant. We live in a new world economy in
which our lives are dominated by global forces. On the other hand, we have the view that not all that
much has changed; that we still inhabit an international, rather than a globalized, world in which
national forces remain highly significant. This is the sceptical position.
Although there are undoubtedly globalizing forces at work, we do not have a fully globalized world
economy. The position taken in the book is that globalization is a complex of interrelated processes,
rather than an end-state. It is important to distinguish between two distinct processes:
Internationalizing processes: The simple extension of economic activities across national
boundaries. They reflect quantitative changes that lead to a more expensive geographical
pattern of economic activity.
Globalizing processes: They involve also the functional integration of activities. They reflect
qualitative changes in the ways economic activities are organized.
Figure 2.2 shows the relationship between the two processes. Within this framework, internationalizing
processes are shown as phenomena of varying spatial extent but a low level of functional integration.
Globalizing processes are shown as embracing different degrees of both geographical and functional
integration. A marked tendency in the contemporary world economy is for economic integration to be
established at a variety of regional scales, above the national but below the global.
Globalization is not a single, unified phenomenon, but a syndrome of processes and activities.
Globalizing activities do not occur everywhere in the same way and at the same rate; they are
intrinsically geographically uneven, both in their operations and in their outcomes.
A new geo-economy: unravelling the complexity
We are witnessing the emergence of a new geo-economy that is qualitatively different from the past.
The question is: how can we begin to unravel the dynamic, kaleidoscopic complexity of this geo-
economy? The conventional unit of analysis is the country, but because national boundaries no longer
contain production processes, we need to find ways of getting both below and above the national scale.
One way of doing this is to use the concept of the network: the processes connecting actors or agents
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, Summary ‘Technologische ontwikkeling in internationaal perspectief’ (0E050)
P. Dicken, Global shift
into relational structures at different organizational and geographical scales. Adopting a network-based
approach forces us to think in terms of connections of activities through flows of both material and
non-material phenomena, of the different ways that networks are connected, and of the power
relationships through which networks are controlled and coordinated.
Production chains; production networks
The production of any good or service can be conceived as a production chain – that is, as a
transactionally linked sequence of functions in which each stage adds value to the process of
production of goods or services.
All production processes have at their core a set of four basic operations connected by a series of
transactions between one element and the next: inputs are transformed into products which are
distributed and consumed. The processes are two-way.
Further each element in the production chain depends upon various kinds of technological inputs, each
chain is embedded in a financial system and has to be coordinated, regulated and controlled (Figure
2.3).
Each element of the production chain depends upon many other kinds of inputs – particularly services
– in order for the whole process to function.
Three dimensions of production networks are especially important:
Governance: how they are coordinated and regulated
Spatiality: how they are configured geographically
Territorial embeddedness: the extent to which they are connected into particular bounded
political, institutional and social settings
Governance of production networks
In market economies, production networks are coordinated and regulated primarily by business firms,
through the multifarious forms of intra- and inter-organizational relationships that make up an
economic system. It is increasingly the transnational corporation (TNC) that plays the key role in
coordinating production networks and in shaping the new geo-economy. A TNC is a firm that has the
power to coordinate and control operations in more than one country, even if it does not own them.
The dichotomy between externalized, market-governed transactions and internalized, hierarchically
governed transactions grossly simplifies the richness and diversity of the governance mechanisms in
the contemporary economy. The boundary between internalization and externalization is continually
shifting. What we have in reality, therefore, is a spectrum of different forms of coordination consisting
of networks of interrelationships within and between firms structured by different degrees of power and
influence. However, there will invariably be a primary coordinator:
Produces-driven production networks are characteristics of those industries in which TNCs or
other large integrated industrial enterprises play the central role in the production system.
Buyer-driven production networks tend to occur in those countries in which large retailers,
brand-named merchandisers, and trading companies play the pivotal role in setting up
decentralized production networks in a variety of exporting countries.
Spatiality of production networks
Every production network has spatiality – the particular geographical configuration and extent of its
component elements and the links between them. We are witnessing the emergence of global
production networks (GPNs).
Thinking of the world in terms of discrete spatial scales – global, regional, national, local – is helpful in
many ways. But is can too easily imply that each scale is a self-contained box whereas this is not the
case.
Territorial embeddedness of production networks
Every component in the production network is grounded in specific locations. Such grounding is both
physical (sunk costs) and less tangible (social relationships). The precise nature and articulation of
firm-centred production networks are deeply influenced by the concrete socio-political, institutional
and cultural context, within which they are embedded, produced and reproduced.
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