PowerPoints Week 2

Question 1

Definition of Globalization

Answer 1

Globalization = the international integration of markets in goods, services, and capital

Question 2

Difference between:

1. International Trade
2. Foreign Direct Investment
3. International Financial

Answer 2

1. International Trade
   - Primary Activity = cross-border market exchange
   (domestic companies/MNEs)
2. Foreign Direct Investment
   - Primary Activity = cross-border direct investment
   (non-financial MNEs)
3. International Financial
   - Primary Activity = cross-border portfolio investment
   (domestic financial companies/ financial MNEs)

Question 3

Trends Driving Globalization

Answer 3

Three interdependent trends

1. Technology innovation
2. Growing international economic activity
3. Liberalization of foreign economic policy.

Question 4

Globalization: Cons

Answer 4

• Increased income disparities within and across countries
• Trade barriers still remain
• MNEs have the ability to exploit tax havens to avoid paying taxes
• MNEs accused of social injustice
• x Unfair working conditions
• x Lack of environment concern, ecological damage and exploitation of natural resources

Question 5

Globalization: Pros

Answer 5

• growth of free trade
• increasing competition and reduction of prices
• infusion of foreign capital and technology to poor countries
• x economic development and increased social and political conditions
• more influx of information between two countries

Question 6

Ghemewat & Semiglobalization

Answer 6

Core idea = Most measures of cross-border economic integration have increased significantly in the last few decades, but still fall far short of the theoretical extreme of total integration

Important to consider local-specificity issues in IB

1. Aggregation
2. Arbitrage

Question 7

(Rugman & Verbeke)

Traditional View on globalization
vs.
New view on globalization

Answer 7

Traditional View on globalization = Macro-level growth patterns in trade & FDI

New view on globalization = Micro-level growth data for MNEs that are account for the trade and FDI flows

Question 8

Chemawat’s Dimensions of Cross-Border Market Integration

Answer 8

Product market integration
- Trade flows
- ˜ FDI
˜- Price integration

Factor market integration
- Capital
˜- Labor˜
- Knowledge