"Globalization is not something we can hold off or turn off . . . it is the economic equivalent of a force of nature -- like wind or water." Bill Clinton (American 42nd US president (1993-2001)) The first part of this research paper will define the major drivers of globalization and then introduce some of the basic and advanced theories of international trade and business. With this foundations it will then try to integrate theories and drivers and compare them to the actual situation and discuss if they are appropriately describing what we are seeing today.
At a glance
- Grade: 1.3 (1.0 is the best grade)
- Applies Dunning’s eclectic theory to WalMart’s international expansion
- Contrasts Samuelson’s and Bhagwati, Panagariya and Srinivasan’s arguments on outsourcing
- Proposes adding technology advantages to Dunning’s framework
- 16 sources in the bibliography
Table of Contents
1 Introduction
2 Drivers of Globalization
3 Theories and Models of Gobalization and International Trade
3.1 From mercantilism to Smith and Ricardo
3.2 Ricardo to the next step: Factor Proportions Theory and the Leontief Paradox
3.3 Vernon Life-Cycle Theory
3.4 Porter’s Diamond Approach
3.5 Monopolistic Advantage Strategy
3.6 Eclectic Theory
4. Discussion of Theories and Drivers
4.1 Ricardo-Mill and outsourcing
4.2 Dunning, Cantwell and the influence of technology
Objectives and Themes
This paper identifies major drivers of globalization, introduces theories of international trade and foreign direct investment, and examines how well those theories explain contemporary business developments. It asks whether established models remain applicable when considered alongside outsourcing and technological change.
- Technological, political, market, cost and competitive drivers
- Classical trade theory and comparative advantage
- Models of foreign direct investment and multinational activity
- Outsourcing and the Ricardo-Mill framework
- Dunning’s eclectic theory and technological competence
Excerpt from the Book
4.1 Ricardo-Mill and outsourcing
Outsourcing is a “hot” topic nowadays, as emerging states like China, India and some of the “tiger” states, “helped by their still low real wage rates” (Samuelson, 2004, p. 135) take over jobs from America and other advanced countries. A large number of popular economists like Greenspan, Bhagwati and Mankiw enter the debate by referring to the Ricardo-Mill theory.
“Yes, good jobs may be lost here in the short run. But still total U.S. net national product must, by the economic law of comparative advantage, be raised in the long run.” (Samuelson, 2004, p. 135) Nevertheless, a nationwide survey showed that over 69% of the US population thinks, that outsourcing has a negative effect on the economy (Pollingreport, 2004) and taking a look at publications from Charles Schumer and Paul C. Roberts, they argue that one of Ricardo’s basic assumptions, the immobility of factors of production is no longer valid today (Schumer & Roberts, 2004) and therefore Ricardo is no longer justified. But even using the theory, it can prove, following the argumentation of former nobel prize winner Samuelson published 2004 in the Journal of Economic perspectives, that outsourcing can become a permanent hurt. Starting out with the basic Ricardian model of two countries (US and China), he argues that changes of the production efficiency in only one state effects the per capita income of the states. Given that in this example China has a comparative advantage with good one and increases this advantage even more, its output will raise, but if demand reacts inelastic (not-Millian like) the more production of good one will only lower China’s terms of trade and therefore lower the per capita income and cause self-immiseration. On the other hand, if China improves productivity of good two, in which US had the comparative advantage so far, due to invention, it might happen that China equals the comparative advantage (productivity good one / productivity good two equals in both countries). This would drive both countries back to autarky and definitely reduce US per capita national income. Therefore it proves that Ricardo does not always mean benefits for all participating countries.
Chapter Summaries
1 Introduction: The introduction outlines the paper’s plan to identify globalization drivers, review trade theories and assess their relevance to contemporary business.
2 Drivers of Globalization: This chapter identifies five groups of drivers: technological, political, market, cost and competitive forces.
3 Theories and Models of Gobalization and International Trade: The chapter surveys theories from mercantilism and comparative advantage to Vernon’s life-cycle theory, Porter’s diamond, monopolistic advantage and Dunning’s eclectic theory.
4. Discussion of Theories and Drivers: The discussion applies trade theory to outsourcing and considers Dunning’s framework alongside WalMart’s expansion and Cantwell’s account of technological competence.
Keywords
globalization, international trade, foreign direct investment, comparative advantage, outsourcing, technological competence, eclectic theory, OLI advantages, multinational firms, market drivers, competitive advantage, WalMart
Frequently Asked Questions
What is the paper about?
It examines the drivers of globalization and their relationship to theories of international trade and foreign direct investment.
What are its central themes?
Themes include globalization drivers, comparative advantage, multinational investment, outsourcing and the role of technology.
What is the paper’s primary objective?
It aims to integrate theories and drivers of globalization and assess whether the theories explain contemporary business developments.
What method does the author use?
The author reviews and discusses published theories and arguments, applying them to examples including outsourcing and WalMart’s international expansion. The paper does not report an original survey or experiment.
What does the main body cover?
It identifies five groups of globalization drivers, surveys trade and investment theories, and discusses outsourcing and technology in relation to those theories.
Which keywords characterize the work?
Key terms include globalization, comparative advantage, foreign direct investment, outsourcing, eclectic theory and technological competence.
How does the paper examine outsourcing?
It discusses the Ricardo-Mill framework alongside arguments by Samuelson and by Bhagwati, Panagariya and Srinivasan.
How is WalMart used in the discussion?
The author uses WalMart’s international expansion to illustrate ownership, internationalization-incentive and location-specific advantages in Dunning’s eclectic theory.
What role does Cantwell’s theory play?
The paper considers Cantwell’s concept of technological competence when discussing how technology might be incorporated into a broader framework for international business activity.
- Citar trabajo
- Markus Bauernfeind (Autor), 2005, Drivers of Globalization: Integration of Theories and Models, Múnich, GRIN Verlag, https://www.grin.com/document/57026
