Impact+of+globalization

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Module 2. Impact of globalization.
The meanings of globalization are many. It refers to the free flow of ideas, culture, information, people. However most widespread understanding of the globalization is in the domain of economic as free flow of goods, services and finance. The main characteristics of globalization are open markets, free competition and cross border integration. Intensifying interdependence and competition between the world economies, the globalization affects the national economies of the participants in many ways. For instance outsourcing is one of the direct consequences of the globalization. Creating jobs in developing countries through capital investment in manufacturing and/or services, it reduces the poverty and positively contributes to the economic growth and welfare of the same. Furthermore it supports dissemination of knowledge and technologies and migration of the people. The technology transfer from developed to developing countries results in increased technological development of the latter. Migration of the people has opposite direction, from the less to the more advanced economies. The main reason behind this movement are higher wages and in the case of the skilled workers, better career opportunities. However the last few years the opposite trend is observable. With increased economic growth of the emerging markets lot of white collar workers are moving back to their home countries, contributing the knowledge and experience gained in the Western world to the development of their own technologies. Among the people the globalization is perceived in different ways. There are supporters and opponents. The opponents are more concerned about the sociological and cultural influence of the globalization rather than the economical benefits. In that sense there are lot of myths about the globalization.  Myths and benefits of the globalization are nicely elaborated in the article of Tom G. Palmer Senior Fellow of Cato Institute “Globalization is great”. As a final frame, talking about the globalization one has to keep in mind that [from the paper] “Trade is at the very foundation of the human civilization” and one old adage “ when goods cannot cross borders, armies surely will “. http://www.cato.org/pubs/letters/palmer-catoletters.pdf


 * Globalization and innovation **

Offering more goods and services, globalization raised the competition on the macroeconomy (country) and microeconomy (company) level. In order to get strategic advantage a company has to be innovative and recognize quickly the customers' needs and market's demands. Although not every company is well placed for innovation, every company has to adopt and follow the innovative trends in its industry. Hence, fostering the competition the globalization foster the innovation. Allowing free circulation of ideas, knowledge and information, the globalization imposes the model of "open innovation" as a new perspective for technology development and enterprise corporate strategy. The impact of the globalization on the technology development of developing countries is more expressed through adoption and adaption of existing technologies rather than pushing up the frontiers of cutting edge technology solutions. However "reverse innovation" is a nice example of "vice versa" effect. It is innovation created in low income countries, designed according to the needs of local population, and after that launch, adopt and adapt at wealth countries.

The following link summarizes the role of technology and the impact of globalization on the economic growth of developing countries. http://www.un.org/esa/sustdev/publications/industrial_development/1_2.pdf


 * Globalization and cross-cultural differences**

Fostering cross border trade and exchange of money, people, ideas, goods and services, globalization brings together different cultures, with different behavioral norms, believes and value systems. Local cultures with their specific attributes have impact on the corporate values and business strategy of large multinational organizations and/or multinational joint ventures/strategic alliances. How do national cultures differ? The most extensive study in this field has been done by Geert Hofstede. The idea comes from large survey on national cultural differences across the local subsidiaries of multinational corporation IBM. Nowadays the outcome of this research is widely accepted in scientific and business community and serves as a basis for further investigations in that area. The dimensions of national culture he identified are:
 * Power Distance
 * Uncertainty avoidance
 * Individualism vs collectivism
 * Masculinity vs Femininity
 * Long term orientation
 * Indulgence vs restraint

The power distance index denotes the extent to which members of some community accept and/or expect unequal distribution of power. The cultures with high power index have more autocratic way of living, while the cultures with lower power index are more democratic. Specially it refers to decision making process. The subordinates in countries with low power distance index are more comfortable to argue with their superiors, unlike their colleagues from high power distance countries who acknowledge someone's power and opinion based only on the position that an individual has in a hierarchical system.
 * Power distance**

Uncertainty avoidance indicates the level of tolerance one society has for uncertainty and ambiguity. If this level is high, more aspects of everyday life tend to be regulated by strict laws, leaving its members less room for improvisations and dealing with unstructured situations. Oppositely cultures with low uncertainty index are more tolerant to unexpected situations and easily accept changes and unpredictable environment. People in those cultures are more pragmatic.
 * Uncertainty avoidance**

It reflects the degree to which individuals are integrated into groups. Individualistic cultures emphasize individual rights and personal achievements. The ties between the individuals are loose. Everyone is expected to look after himself/herself and choose own affiliations. In contrast in collectivist society individuals are strongly integrated in groups, most often large families, and act predominantly as members of the same.
 * Individualism vs collectivism**

It refers to the distribution of emotional roles between the genders. By masculinity is understood competitiveness, assertiveness, ambition, power, materialism. Femininity means sensitivity, relationship, quality of life. In masculine cultures predominant values are ones described by masculine traits and difference between the genders is more expressed and less fluid than in feminine cultures.
 * Masculinity vs femininity**

Long term orientation vs short term orientation as a cultural dimension is introduced to distinguish the difference in thinking between east and west. Originally it was called "Confucian dynamism" and describes the influence of Confucius philosophy on Eastern countries. Cultures with long term orientation attach more importance on: persistence; ordering relationship by status and observing this order; thrift; having a sense of shame. Short therm orientation is best characterized by: personal steadiness and stability; protecting your "face"; respect for tradition; reciprocation of greetings, favors and gifts.
 * Long term orientation**

Indulgence stands for societies that allow hedonistic behavior. Their members can freely enjoy the life and satisfy their needs and desires. Oppositely restraint societies impose strict social norms where gratification of drives is suppressed or regulated.
 * Indulgence vs restraint**

Practical implication of globalization is collaboration with people from different cultures. In that sense cross-cultural understanding is indispensable. Understanding values and behavioral norms of the members of different cultural groups is very important in international communication, international negotiation, international management and international marketing.


 * Cross-cultural differences and innovation**

Cross-cultural differences in values, risk acceptance, motivational orientation, leadership role, engrave the approach and attitude toward the creativity and innovation across the globe. Respective to that, creativity and innovativeness could be considered as specific conditions of the environment where people live and/or operate. Creative environment will encourage people to develop their creative skills into full potential, support entrepreneurship, enable building close and creative interactions between the individuals and organizations and establish the whole innovative ecosystem. The best example of such an environment is Silicon Valley.

A nice study about the differences in innovation culture across Europe. http://www.transform-eu.org/publications/documents/Differences%20in%20Innovation%20Culture.pdf

The approach and understanding of creativity and innovativeness differs among the East in West. Both Eastern and Western perspectives on creativity/innovation emphasize the process. However Western perspective is subject-focused, while Eastern approach is more self focused, perceiving creativity as harmony of inner self being with the spirit of the deity. This difference might be challenge for corporate management how to recognize and extract the best people and ideas originated from different cultural backgrounds. As Lubart and Sternberg stressed: "Creativity is not in the person, or in the culture, but in the interaction between the two".

Do cultural differences matter in realization of global project? According to the authors of this paper, yes. http://crgp.stanford.edu/publications/working_papers/WP001.pdf