Geography 372b

The Geography of International Business

2006

Course websitehttps://instruct.uwo.ca/geog/372

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Don’t be like this

Does Geography Matter?

The cliché is that instantaneous global telecommunications, television and computer networks will soon overthrow time and space. Companies will need no headquarters, workers will toil as effectively from home, car or beachThere’s something in this.

Software for American companies is already written by Indians and transmitted to Silicon Valley by satellite. Foreign-exchange markets have long been running 24 hours a day.Such developments have made hardly a dent in the way people think and feel about things.

For example, at newspapers or news broadcasts anywhere on earth, and you find them overwhelmingly dominated by stories about what is going on in the vicinity of their place of publicationWhat your neighbours (or your kith and kin) do affects you. The rest is voyeurism.

• American multinationals going global have discovered that for all their world products, world advertising, and world communications and control an office in, say, New York cannot except in the most general sense manage the company's Asian operations

Global strengths must be matched by a local feel and a jet-lagged visit of a few days every so often does not provide one.Most telling of all, even the newest industries are obeying an old rule of geographical concentration. From the start of the industrial age, the companies in a fast-growing new field have tended to cluster in a small region.

This is why the world got Silicon Valley in California in the 1960s. It is also why tradable services stay surprisingly concentrated: futures trading (in Chicago), insurance (Hartford, Connecticut), movies (Los Angeles) and currency trading (London).

main reason is that history counts:

where you are depends very much on where you started from

Spatial inertia

New technologies will overturn some of this, but not much. The most advanced use so far of the Internet, the greatest of the world's computer networks, has not been to found a global village but to strengthen the local business and social ties among people and companies in the heart of Silicon Valley.

As computer and communications power grows and its cost falls, people will create different sorts of space and communities from those that exist in nature. But these modern creations will supplement, not displace, the original creation; and they may even reinforce it.

Companies that have gone furthest towards linking their global operations electronically report an increase, not a decline in the face-to-face contact needed to keep the firms running well: with old methods of command in ruins, the social glue of personal relations matters more than ever.

The reason lies in the same fact of life that makes it impossible really to understand from statistics alone how exciting, say, China's economic growth is unless you have physically been there to feel it.

People are not thinking machines (they absorb at least as much information from sight, smell and emotion as they do from abstract symbols), and the world is not immaterial virtual realtyCyberspace can help overcome space but it cannot replace it

Evolution of Global Capitalism

this global system is capitalistic which developed in specific locations, according to Fernand Braudel certain conditions must exista. vigorous and expanding market economy, this is a necessary but not sufficient condition

b. need certain kind of society, having hierarchies, encouraging survival of dynasties and wealth accumulationc. world trade needed - doorway to superior profit level

first evident in period 1450 to 1640Prior to, and even during, this period the pattern of trade was bimodal.

local trade - short distance, mainly concerned with basic necessities - the kind of trade focused upon the medieval market towns

the much smaller volume of long-distance trade in luxury goods and rare items for a very tiny fraction of the population: the spice and fine cloth trade

the late 15th and early 16th centuries the geographical extent of trade increased dramatically as a result of the expansion of a small number of European maritime nations which came to form the core of an evolving world economy

first core was European Maritime nations believing in mercantilism, that is the control of external trade and the necessity of increasing holdings of precious metalsinitially Spain was the core, Portugal to a lesser degreeby middle of 1700's core shifted to England, France and Netherlands, Spain now in semiperiphery, with N. America in periphery

this trade lead to a structure of core, semicore, semiperiphery, peripheryalso laid foundations for industrialization

pattern of specialization where core produced most manufactured goods and periphery provided raw materials

industrialization started in Britain, why is matter of debate but some reasons are

well developed trading linkagesstable governmentcolonial empire

existence of entrepreneurial groupgood supplies of raw material, i.e. coalimprovements is agriculture creating a pool of labour

the factory system could thus occurthe middle of the 17th century economic leadership was centred on north-west Europe.industrialization greatly accelerated the further expansion of world trade and further transformed its character

19th century progressed the nature and geographical pattern of world trade changed to one in which the core (initially Britain) exported manufactured goods throughout the world and imported raw materials, especially from the colonies.

Exports of textiles led the wayin the second half of the 19th century, by heavy manufactured goods, such as iron and steel and also coal

a new international division of labour- a new pattern of geographical specialization - had emerged.

Historical development of the international firm

Credit Where It’s Due

Merchant capitalism

merchant capitalism (c1600-1770)saw the rise of a monetary economy through the import of large quantities of precious metal1st international firms were Italian and German owned banking networksmain source of capital accumulation was international trade

Industrial capitalism

industrial capitalism (c1770-1890)rise of manufacturing industryinternational production organized by individual entrepreneurs moving abroad to exploit market opportunities and resource based companies

Finance capitalism

finance capitalism (c1890-1945)period marked by rise of powerful banks and financial institutions and increasing concentration of industrial firmscartels might exist, and financial capital grew most rapidly rather than industrial capitalTNCs start to come into existence

Global capitalism

global capitalism (c1945 onwards)capital accumulation has proceeded most rapidly within MNEs

Chinese Robber Barons

US Robber Barons, c1890s

Marble House, Newport, RI The Breakers, Newport, RI

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