Copyright Farok J. Contractor

Some Insights from History for International Some Insights from History for International ManagementManagement

Farok J. Contractor

Rutgers Business SchoolNew Jersey, USA

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Historical Evolution of Economic Activity over Distances 1) Separation between Consumer and Producer

2) Concentration of Operations/Functions/Value-added Activities

3) Specialization by Task or Skill

4) Sequencing of Tasks (In Assembly Lines OR Across Countries)

5) Economies of Scale

6) Specialization by Firm (Outsourcing)At first within each district or country

7) Trade Across DistancesAt first local – then “international” [Domestication of the Horse c. 9000 BCE]

8) Consequent Rise in Interdependence and Intermediary/ Supply Chain Risk

Evolution of Economic Activity Grotta Sant’Angelo, Abruzzo, Italy

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“Workshop” (25,000 BCE)“Local flint resources apparently were exploited for raw material that was prepared at this site, with preforms and finished products being removed for use elsewhere.” ------- University of Michigan, https://editweb.lsa.umich.edu/umich

Evolutiuon of Economic Activity Prehistoric Times to 21st Century

Specialization/Economies of Scale & Experience/Mass Production

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• Chalcolithic era, (4th Millennium BCE) in the Levant, factories specialized by• only drills or micro-borers. • only tabular scrapers, • only sickles, • only ivory figurines, • and so on • From there, the output was distributed all over the Eastern Mediterranean.

Levy, T. 2003. “Chalcolithic” -- Entry in Encyclopedia of Prehistory: South and Southwest Asia, by P. Peregrine and M. Ember (eds.), Kluwer Academic, 2003).

Late Neolithic period (ca. 6000-3000 BC)Obsidian from Corsica found hundreds of kilometers away.Tykot, R. 2002. “Geochemical Analysis of Obsidian and the Reconstruction of Trade Mechanisms in the Early Neolithic Period of the Western Mediterranean”, in Jakes. K. (ed.), Archaeological ChemistryMaterials, Methods, and Meaning, American Chemical Society, 2002

Evolution of Economic Activity Prehistoric Times to 21st Century

Mediterranean Trade: An Example

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Ochre of various colors (brown from Roussillon, France and yellow from Cyprus) was used to paint dwellings, bodies and murals and for “religious” rituals

Ochre Trade in Western Mediterranean (Malta, Corsica and Sicily) Maniscalco, L., 1989. “Ocher Containers and Trade in the Central Mediterranean Copper Age,” American Journal of Archaeology, Vol. 93, No. 4.

http://wps.ablongman.com/wps/media/objects/262/268312/art/figures/KISH_04_77.gif

Greek and Phoenician Trade Routes

Copyright Farok J. Contractor

Some Insights from History for International ManagementSome Insights from History for International Management

Progress can go backwards [In 1913 things looked good]

The boundary of the firm has always been ill-defined

What is our unit of analysis? The Firm? The transaction? The individual manager/ innovator? The country?

But national borders are a curious modern concept

Countries / Companies can lapse into inward-looking introspection which is generally bad for economic prowess, and may not even be good for cultural vitality.

Speedier communication and mass-communication (inclusiveness)

For emerging countries the only economic model that works (apologies to Lenin and Mao) necessarily involves increasing inequality up to the middle stage of development

Copyright Farok J. Contractor

Some Insights from History for International ManagementSome Insights from History for International Management

The role of the state has a mixed record

The East Asian model [SELECTIVE FDI and Trade PROTECTION] pioneered by Japan and the copied by by Korea, Taiwan and China seems to have yielded net benefits for these countries

In other countries (e.g. India) the role of the state ranges from neutral to malign

A common currency (that is trusted) facilitates commerce at a distance

Trade deficits can be sustained (longer) only through imperial power (e.g., Roman conquests; Opium wars)

“Virtual Companies” driven by brand recognition are a viable model (e.g. Westinghouse; Nike)

© Farok J. Contractor 8

Thank You

Any Questions?

Farok J. ContractorFarok J. Contractor

School of BusinessRutgers University

farok@andromeda.rutgers.edu