SAGE Handbook: Globalization

By Matthew Byler, Taylor Jameson, Becky Tibbenham & Charlotte Windberg

Globalization has many definitions and has been researched from many different angles. Globalization has impacted (and has been impacted by) sociology, the natural environment, economics, politics, technology, culture, and businesses. Because of all of these changes, there are different perspectives as to whether globalization has positive or negative outcomes.

Summary

o 1990 to 2000, increase in connection & integration

o Organizations contributed to and were affected by global shifts

o Global can mean different things:o Global = internationalo Globalization = a processo Globalization = growing worldwide interconnections

Introduction

o Debate over where bounds of international business research stop

o IB with Economics: Examines international firm behaviors

o IB with Other Disciplines: Sociology, Political Science, etc.

Research on Globalization: IB to Sociology

o Is IB research stalled?o Buckley and Pervez say yes because IB research not

looking at big questionso Yes, because IB looks at same questions o Yes, but debate of whether research should have a

narrower or wider focus

o Shenkar believes IB research can develop a “superior ability to incorporate and interpret international issues, including political events, social processes, and historical legacies, which is where economics and strategy fail.”

o So… no clear answer on what IB research is or what it should be.

o Historically, sociology has looked at things within a country’s borders.

o Globalization has given us access to information about other countries, so now measure rights against “universal rights”

o However, management research still focuses on Europe, North America, and Japan

o Natural Environment includes oceans, atmosphere, space, Antarctica, natural ecosystems, and the internet

o Natural resources (oil, wood, minerals, ores) cause political and economic problems because of increased competition and shrinking supplies.

o Global interdependence both causing and spreading the problemso HIV for example

Globalization of the Natural Environment

o Boom: Unprecedented prosperity because rapid economic growth will create technologies to solve the environmental problems

o Doom: Technology is part of the environmental problem rather than its solution o e.g. global warming, species reduction, disease

o Two perspectives can lead to win/lose thinking, but really need win/win thinking of “sustainable development”o This will help both the economy and the ecosystem

Boom or Doom?

o Trade, foreign direct investment, and capital all contribute to economic globalization.o The global economy creates a worldwide market for

capital (which has also reshaped the role of banks and lead to World Bank and IMF)

o World economies are now fairly synchronized both upward and downward

o World poverty a main agenda for world economic leaders

Global Economics

o First globalization was for low-skilled manufacturing jobs

o Then for middle-skill back office jobs like call centers and reading X-rays

o Now moving professional labor who are well paid and go from project to project.o Because these jobs many companies are not investing

their main facilities where wages and taxes are. o These companies choose to move based on wages,

transaction costs, and government-business relations.

o Developing economies that are open to foreign direct investment and foreign trade have grown fastero Translates into higher incomes for the poor.

o Big companies create jobs in the formal sector of developing economies, often generating significant income in the nations that they operate.

o The OECD study said global businesses pay their workers more than the national average, spend more on R&D, and export more than domestic firms. o They can create stable, long-term jobs with decent pay and

good working conditions.

Two Main Perspectives on Globalization: Good for Poor

o Creates turmoil in developing economieso Businesses always go to where labor is the cheapest, which

disrupts these economies. o Can also contribute to child labor.o Companies contract with people who pay low wages, have

poor working conditions, and have abusive environmentso Ex. Nike

o Another school of thought:o Instead of comparing workers’ conditions to conditions in the

west they should compare the workers’ conditions to their actual alternatives, i.e. working on the street (shoe-shines, selling gum, etc.)

Two Main Perspectives on Globalization: Bad for Poor

o Need for global governance systems to agree on weights and measureso This will provide a systematic financial system, develop

guidelines for sustainable development, ensure equity, etc.

o Beyond government, also affected by intergovernmental organizationso Ex. NGOs, businesses, terrorists, etc.

Globalization of Political/Legal Environments

o Governments control national policyo E.g. industrial policy, trade missions, and tax breaks for

foreign investors

o Also have trade agreements with special arrangements with foreign economic zoneso Ex. Industry alliances (OPEC), regional economic

agreements (the EU), and global trade agreements (WTO)

o No common and global defense system to manage armed conflicts which include drug & human trafficking and terrorismo So global problems, but not global defense system to

solve it

o Certainly on of the most profound technological changes has been introduction of telecommunications to link the world, and computers that facilitate those links

o According to Makridakis (1989), today`s technological revolution began in the 1940s with mathematical demonstrations of computer concepts. Computerization to follow occurred in phases of processing, microcomputers, and networks that expanded to digital networks that merge telephone, internet, television, and other media.

Global Technologies

o Almost 96% of national R&D traditionally is conducted by industrialized nations such as Japan, the US, Switzerland, Sweden and other Western European nations. Other countries such as Singapore are not themselves high in innovation, but rapidly import new technologies. In general the most innovative nations also tend to be those that create an infrastructure that encourages business start- ups

o Countries that spend little on R&D often introduce technologically improved products at a low rate. As a result, they are less competitive and show lower rates of prosperity

o Ability to connect with others also makes it possible for small firms to compete globally

o Information access permits human rights groups to gather information that governments have long been able to suppress, and information sharing has enhanced knowledge transfer among women`s groups worldwide

o Instant on-line translators foster equality by reducing the English-language bias in the Internet

o Interestingly, reasons to provide translations from English to non-English are business ones: in many countries there are not enough English-readers to support English-only Internet services. According to Global Reach (2004), the number of non-English web users grew from 10 million in 1996 to 540 million in 2003.

o The rapid speed of information transfer also alters many traditional assumptions about knowledge. Any person anywhere can provide and consume information. This is important because within organizations, knowledge has become more central to organizational success and everyone is encouraged to leverage their knowledge to benefit the company.

o Breakthroughs in many process and product technologies generate questions about justice that often focus on the digital divide among rich and poor economies (Green and Ruhleder 1996)

o Other topics concern privacy, and the organization`s ability to stimulate creativity at arms-length or in virtual teams.

o Knoke (1996) argues that in the face of technological change, particularly the ”fourth dimension” of computerization, nation-states will lose sovereignty, and physical place will become almost irrelevant.

o Cultural globalization represents disputed terrain. Some argue there neither is nor could there be a global culture (Smith1990). Others present worldwide availability of branded products and accompanying consumption-based values services such as the Internet and television media that reduce communication boundaries and use of English as a common business language as evidence of cultural globalization.

Globalization of Culture

o Scholte (2000) believes global exposure to media and improved connectivity with contacts beyond local ones helps people reconfigure their own social space.

o Tomlinson (2003) argues that one result can be amplified significance and greater understanding of local identity. An example is English-language use which in some quarters has become the common business language, but its use often is localized such that it becomes many forms of English (Crystal 1997).Further, English-language does not displace local languages, suggesting that cultural practice is not the same as adopting a culture (Husted 2003)

o Among paradoxes of global culturalization are growing pressures for within-culture homogeneity set against a backdrop of increased worldwide heterogeneity.

o As time and space compression bring us to a realization of one world, they also expose us to the infinite variety and diversity of the world. These tensions create opportunities and they exact costs for nations, and for organizations.

o In the view of some theorists of globalization the world has apparently become one without any boundaries, despite the continued existence of borders between states and all the administrative devices that maintain them.

o However, to the extent the world is becoming economically global it is largely confined to Japan and the newly industrialized countries of South East Asia, Western Europe, and North America.

o Technological, economic and cultural integration is developing within and between these three regions and is evident in the pattern of international trade and investment flows.

o Many examine global businesses by looking at tens of thousands of transnational corporations whose activities are reported in annual World Investment Reports

o Focusing only on firms in consumer products and services tends to obscure the fact that many other businesses operate globally

Global Businesses Activities and Industries

o Many businesses opportunities are pursued by smaller firms.

o Porter defined a global industry as one in which a firm`s competitive position in one country is significantly affected by its position in other countries or visa-versa. He suggested that those with a high industry trade ratio are more global, and can be assessed according to the amount of industry influence that comes from outside domestic markets.

o Other suggested measures of industry globalization include intrafirm flow of resources (Korbin 1991); cross-border investment as a ratio of total industry capital invested, proportion of industry revenues generated by players competing in all the regions of the world

o Govindarajan and Gupta (2000); national border transcendence measured by cross-border mergers and acquisitions

o The latter authors believe a systematic analysis of industry globalization should explain the combined effects of all firms within the industry, be able to distinguish industries with significant international linkages in other countries, and should measure functional integration within the firm of value- added activities the firm conducts across national boundaries.

o Industry integration includes consolidation, alliance building, and value and supply chain management.

o Industries also contract due to shifting consumer interest and demands, or availability of desirable substitutes such as file sharing instead of music CDs. Finally, some industries dissolve.

o Globalization is simply internationalization by another nameo Today’s “globalization” is not unprecedented because previous historical periods

also had interconnections similar to those of todayo Even though there are players emerging in Asia and Latin America, trade,

investment, and financial flows are still concentrated in Europe, Japan, and north America

o These areas can coordinate policy and exert powerful influence over financial markets.

o Large companies account for the same amount of the world’s input in both 1980 and 1990 (no growth), and nations (not businesses) are the key actors since organizations are subject to politics in their home countries

o The scale of the current connections are significantly biggero Previously they were thin connections with little direct impact on consumerso Today has thick characteristics, involving long-distance flows that are large and

continuous, and affect many peoples’ lives.

The Skeptical Thesis

o Globalization is in a new stage, and the power of countries is supplanted by business activities

o Two variations:o Self-interest perspective: organizations are dispassionate actors on a global scale

working pragmatically in the pursuit of economic ends and self interesto New World Order perspective: Global businesses are not indifferent, rather nations

and organizations with economic and political power come together to advance their common interests

o Supporters of view: o Globalization is not business as usual. Managers will scan the world for pragmatic

opportunities, which could lead to unpleasant consequences for otherso “The market made me do it.”o Critics of view: o It also over-generalizes and causes people to overlook other options, such as the

fact some businesses work to enhance worldwide opportunities rather than abusing their power.

The Hyperglobalist Thesis

o Globalization is currently transforming, so we do not know whether the long-term will produce positive or negative results

o Interconnections and interdependence will forge new links and dissolve existing ones

o Relationships among nations and people will be reconfigured and power relationships restructured

o Businesses that view globalization in this way also find it important to generate wealth much like businesses with a hyperglobalistic view

o Managers would weigh cost with the long-term ramifications of the decisiono Global NGOs network with businesses through opposition and proposition o Opposition includes boycotts, demonstrations, and disruptionso Proposition includes dialogue, interlinked board memberships, and cross-sector

partnershipso Generally businesses are more attracted to direct-impact partnerships,

such as education, environmental sustainability, or job development

The Transformational Thesis

o Tendency towards oversimplificationo Ex. Rich vs. poor, nations vs. businesses, positive vs. negative outcomes,

winners vs. losers, local vs. global businesses, centralized vs. decentralized businesses

o Businesses will be shaped by globalizationo They can also play an active role in shaping globalization’s agenda and

consequences

o Businesses should make explicit and clear choices about what interconnections mean for their organization

o IB research needs to incorporate all social science disciplines because otherwise there are deficits in knowledge

o International relations, political economy, anthropology, sociology, cultural studies, economic geography, and economic history

o Globalization spans disciplines, making it more difficult for a single academic specialist to tackle it all

Conclusion

ANY QUESTIONS?