The purpose of this essay is to explore how the technological developments have contributed to the process of globalization. First we will analyze the evolution of information technology and the role of communication technology in international trade and multinational enterprises, as well as the use of technological development as a competitive advantage for countries that possess it. Furthermore, we will discuss the technological developments in the transportation sector and finally the conclusions will be provided.
From the 19th century that Globalization has started to spread, many factors has contributed in order to accelerate this procedure especially after the World war (I-II). The need of the most affected countries for foreign capital and imports of products has helped to accelerate global trade and business development. However the high cost of the financial transactions and the distribution of products were discouraging for many companies that wanted to expand their activities to other markets. This needs of countries for foreign capital and for business further growth, has contributed to a rapid development of technology and the creation of a unified global market. The technological advances made from 1950 until today have affected greatly the process of globalization and played a determining role in development of a global commercial and communication network. Therefore we could say that technological developments are one of the driving forces of Globalization rather than independed phenomena. (James, 2001)
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Nowdays the strong trend of digitization of financial transactions and the electronic distribution of financial information is the core of the world economy and the interdependence of international financial markets. The evolution of communication technology facilitated the communication between buyers and sellers in different countries. Thus the sale of goods and products became much faster by eliminating distances and contributed to the dramatic growth of world trade while it reduced the communication costs of promoting products in other countries. Freeman and Hagedoorn, 1995, James, 2001)
Apart from the communications sector the most significant technological developments were made in the field of information technology bringing the information revolution. The information revolution and the Internet is the main reason for the current global changes, because by reducing the cost of communication and transport is causing a rapid change in economies in comparison with the world economic situation in 19th century. According to Paul Kennedy, the integration of the world economy and the process of globalization has been closely associated with two major events: the deregulation of international financial markets and the revolution in international communications as a result of new technologies. Without the rapidly increasing power of computers, software, satellites and fiber optics, the international market could not operate as a single unit. (Kennedy, 1994)
Internet is one of the most significant technological advances in communications and information that dramatically speed up the process of globalization. Its origins came from the collaboration of United States government and private commercial interests in 1960, aiming mainly in grouping several networks to simplify the communication between companies and any other organization, then it spread and until 1990 Internet has become an international network, now estimated that more than a quarter of the world has Internet access. the above contributed to the formation of a global electronic market so the term economic globalization gains essence because most national economies are linked electronically (on line) and international funds can be transferred in real time. ( http://www.nsf.gov, 2010)
Before the evolution and use of the information and communication systems in the early 90s, the information about global economic and political events in various parts of the planet couldn't transmitted quickly from the media (television, radio,newspapers) and there was also a suspicion about the authenticity of News from the citizens, because of the intense, government - state intervention during the Cold War. The financial news and information broadcast was costly (using telephone, fax, satellite) without the possibility of verification and without usable information that could make a difference and allow companies or governments to forecast economic changes. In this way the stock markets of America and other major financial centers in Europe could not learn in detail the movements of stock markets of other emerging markets (eg. Latin America, Asia). (McMahon, 2001)
The lack of significant economic and political information (financial scandals, political situation, economic and fiscal policy of a state voting laws) clearly make it difficult for international funds and companies to invest and transfer their
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their manufacturing facilities away from the country of origin. (Internationalization) ΑκρÏŒασηΦωνητικÎ® ανÎ¬γνωση
New technologies not only enabled the retrieval of appropriate financial information for strategic decisions of multinational companies but managed to make it with minimum possible cost in minimum possible time. Today all the world events wherever they may occur, spread in the form of real-time information through global communication networks giving the ability to stock markets to react fast and accurate, using again the same communication networks. Moreover, with the adaptation of new technologies the cost and speed of the international financial transactions has decreased dramatically, creating the conditions to form large global markets closely connected with each other.
Multinational companies use the online trade and try to advertise their new products outside their national boundaries gaining access to new markets and providing faster service to their customers. According to OECD countries members, on average, over 33% of all businesses use the Internet for purchasing and about 17% for selling goods or services. Furthermore the fast communication between parent companies and their subsidiaries or branches, which now operate at international level, allows better control through the use of computers and the Internet, giving new prospects and tools for better organization and administration of multinational companies. The production orders and financial transactions with the suppliers and customers of the subsidiaries of multinational companies based in another continent are made threw the Internet nowadays, also threw IT and communications systems multinational companies have the ability to communicate and share information with suppliers, customers and the trade system round the clock (24/7) on a global scale. All the above decrease the costs of acquisition and distribution of information as also the organizational and transaction costs, allowing the companies to be more competitive, to be able to react more quickly to external changes and more important to be able to form and participate in global markets.
Except of reducing communication costs and increasing the speed of managing the information, the evolution of technology helped in the development of new production systems. With the adoption of robotics, the full automation of the production process, and with the development of industrial software (such as computer aided design CAD) in the industrial sector, development and production of new products became much faster and the possibility of error has decreased. This has led companies to expand their business into new markets in order to reduce costs and to be able to quickly amortize the investments had made in the new technology. This extension of their activities helped the developing countries as also the small companies that operate in them, that's because, by establishing their (the multinational companies) facilities and production all the developed technology and expertise became accessible to those countries. (Krugman, 1995)
The expansion of multinational corporations within the framework of Globalization and competition has resulted in a continuous effort of the countries and companies to ensure better and more competitive terms and to make production efficient and profitable in order to attract investors and raise the foreign direct investments. The integration of markets (as mentioned above) came from the development and operation of global electronic markets. This enabled every investor in any country to be informed immediately about the situation of international financial markets, to buy stocks and bonds and to transfer money from banks in different countries. The international capital has now the ability to be transferred in a digital format to a minimum possible time in the most profitable market, while the transaction are more safe and the procedure of buying/sell currency is simplified.
Electronic markets and international financial capital can not be limited by
the borders of states or regions, creating a global market that operates continuously, without time and geographical constraints. The integration of global financial markets through the use of information technologies and communications work together and not independently with national economies of countries, creating strong bonds of
economic interdependence with nations that are part of the globalized market. (Narula and Wakelin, 1995)
As a result countries that are trying to cope in this competitive international economic and political environment, incorporating new technologies and use them as a power factor to obtain and establish competitive advantage over other countries.
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The ability of a nation to provide the appropriate expertise and technological infrastructure, creates an attractive environment for new companies, as also helps the evolution of its own production systems. Countries like USA, Germany, Japan etc. rely their economy mainly in technology trying to be innovative and pioneer , these efforts affect the global economy , trade and production processes being an important source of competitive advantage. Moreover countries nowadays are shaping the appropriate financial and tax policies in order to attract multinational companies, foreign direct investment and create new jobs for their citizens. (Chesnais, 1995)
Those technological developments (particularly in information systems) have become also a trading good that helped international trade. The production and export of these technologies is growing rapidly in the last decade contributing to the growth of international trade and globalization. In 2007 high-technology manufactures accounted for over 60% of total manufacturing trade and the global trade of information and communication technologies expanded strongly reaching USD 3.7 trillion with China being the worlds largest exporter (360 billion dollars). Trading information technologies is also a very important competitive advantage for countries since it is a rapidly growing and profitable sector.
( http://www.oecd.org/dataoecd/47/16/44212130.pdf, 2010)
Another sector that with its technological evolution has helped the process of globalization is the sector of the transportation. The ships that until the end of 18th century operated with coal replaced on early 19th century by ships operated by oil, in this way the speed and also the load they could carry have increased. (since a large quantity of the load was taken up by the charcoal). All this resulted in improved energy consumption, reduction of transport costs and also allowed the ship to perform longer trips, contributing to an increase in world exports / imports and trade. Over the years, ships have evolved and along with the construction of sophisticated ports, can now curry large volumes of products in every corner of the earth. Major developments occurred in the aircraft industry too, as well as the construction of large passenger planes like the Boeing 707 in 1958 and the Boeing 747 in 1970, made â€‹â€‹possible transatlantic voyages, contributing to the evolution of cultural globalization. (http://people.hofstra.edu/jean-paul_rodrigue/downloads/transportation%20and%20globalization.pdf.pdf, 2010)
Undoubtedly, the recognition of the role of information systems and communications as driving force and power of globalization, can be observed through the continuous efforts of most international financial institutions ( EU, OECD, WTO ) that are considered leaders in spreading the economic globalization by promoting and
financing the development and use of new technologies by the member countries, as a key weapon against poverty, political corruption, but also as a valuable tool for economic development.
In conclusion technological developments have contributed to the process of globalization in many different ways, promotes international trade and foreign direct investments. Technology contributed in the reduction of transaction and communication costs and allowed access to worldwide financial information creating a global electronic information bank, thus the fast and credible distribution of that information is significantly important for the development of today's global financial system. The integration of new technologies in most international financial transactions has resulted in the creation of a global electronic financial market that increases the speed and quantity of financial data, reduces the distance between international financial markets and globalizes the national economies of nations Furthermore those technological developments and innovations are used from many countries as a source of competitive advantages in order to attract foreign capital and create an attractive environment for international companies. Technological changes occurred also in the transport sector, ships and airplanes become more energy and cost efficient, faster and could transfer more cargo or passengers, thereby helping the further development of international trade and cultural globalization.