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Semiglobalization and International Business Strategy

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Paula Santamaria

on 12 June 2014

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Transcript of Semiglobalization and International Business Strategy

Semiglobalization and International Business Strategy
What is it about?
Part 1. Review of the empirical evidence of the cross border integration of markets
Part 2. Implications of the empirical findings
There is a dispute between the conclusion of the results:
1. Maintains that the World has achieved a state of near "globality" in which there is market integration across borders
2. ....or not.
Conclusions
There are 2 different perspectives:
1. Globalist say ----> international economic integration had reached new highs
2. Skeptics say ----> barely returned to levels experience in the last century
Market integration across borders
How?
The article is divided into two parts:
1. Review of the empirical evidence of the cross border integration of markets
2. Implications of the empirical findings
Key terms
Semiglobalization:
Incomplete crossborder integration
"Barriers of integration are high, but not high enough to insulate countries"
1. Product Market Integration
2. Capital Market Integration
3. Labor Market Integration
4.Knowledge Market Integration
1. Product Market Integration
Trade flows:
Exports of different products around the world.
Wold Exports/World GDP
Increase 1% at the beginning of the 19th century to 20% in the last quarter of the 20th century.
There where substantial increases in the trade of manufactures and agricultural goods
Despite the numbers, nowadays economist try to understand why the numbers are not higher?

Foreign Direct Investment (FDI):
Product specific investment
FDI Stocks/World GDP
Shifting away from natural sources an raw materials towards manufacturing and most recently services.
Price Integration:
When two or more markets are attached by a "law of one price" (prices equalize across them)
This cross border integration is really difficult because of the lack of data on local currency prices of identical products across countries
Currencies would vary ... a lot
2. Capital Market Integration
Transactions across countries
Net Capital flow/GDP
Increase in recent decades
Foreign exchange transactions
Linked to FDI
Example: Taxes are to high - open a bank account in another country.
3. Labor Market Integration
According to the World Migration Report in 2000, 2.5% of the world population migrate from their countries
Specially during the war years
The larger receiver has been USA
4. Knowledge Market Integration
Intangible and therefore hard to measure
Technological knowledge
Managerial knowledge
Example: Erasmus, exchange programs, rotating concept in a company.
Market Factor-level issues:
International business strategy has to pay more attention to the market imperfections and therefore
predictions say that more research would come to support the theoretical approach
Firm Factor-level issues:
There are two ways in which companies might try to add value through cross border operations
1. Aggregation: Taking advantage of the similarities of each country (while somhow forgetting the differences)
2. Arbitrage: Taking advantage of the willingness to pay or differences in the economy (currencies)
The empirical evidence in this article suggest that is better to take more measured historically self-focus perspective on cross border integration instead of frequently announcing changes.
Market Integration has reached new highs but still fall far short of economic theory's
Full transcript