Globalization

Globalization is the most significant change taking place in today’s work environment. It connotes the economic interdependence among countries that develops through cross-national flows of goods and services, capital, know-how, and people. This entry covers mainly the organizational and human aspects of globalization.

Globalization has come into common use since the 1980s, reflecting technological advances and electronic communication that have made it easier to create economic interdependence across countries. Globalization is not just a recent phenomenon. But today commerce and financial services are far more developed and deeply integrated than they were in the past. The most striking aspect of this has been the integration of financial markets made possible by modern electronic communication.

Twenty-five years ago no one talked of world economy, the prevalent term was international trade, consisting of international trade and foreign investment. But today it has taken the form of a global economy, consisting of flows of information, technology, money, and people, and conducted via government organizations such as NAFTA (the North American Free Trade Agreement) and the European Community; global organizations, such as the International Standard Bureau (ISO) and the International Monetary Fund (IMF); and business corporations, such as multinational companies (MNCs) and cross-border alliances, mergers, and acquisitions. These interrelationships have enhanced participation in the world economy and have become the key to domestic economic growth and prosperity.

Myths about Globalization

Global connotes a holistic, integrative strategy. There are some myths about globalization that need to be avoided:

  • Globalization is simply a presence in other countries, without any connection between the activities across countries.
  • Global strategy means doing things the same way everywhere.
  • Globalizing means becoming a stateless organization with no national or community ties.
  • Globalization requires abandoning country values.
  • There is no need for integration when acquiring or merging with foreign companies.
  • A global strategy must involve sales or operations in another country.

In fact, globalization is not about the preceding list. Rather, it is about global integration, and not about internalization.

Global Organizations

Multinational companies are the dominant players in the global business environment. Some researchers consider MNCs to be the most important institutions of modern societies, because they are more than just businesses. These companies shoulder a huge responsibility for generating wealth by continuously improving their productivity and competitiveness; and their responsibility for defining, creating, and distributing values makes these corporations one of society’s principal agents of social change. Members of these organizations, although coming from different cultural backgrounds, have to share common goals and meanings and coordinate their activities to gain a competitive advantage for their company in the global market. The shared meaning and understanding of what it means to be a member of a global corporation, which crosses cultural borders, reflects the global corporate culture.

A Global Corporate Culture

Although each MNC may have its own unique organizational culture, global corporations share some common characteristics that reflect their being part of the global business environment. Global corporate values facilitate the adaptation of individuals and organizations to the global work environment.

Competition is a key characteristic of the global market. To gain a competitive advantage in the global market, companies must be performance oriented, emphasizing time to market, cost effectiveness, and customer  satisfaction,  while  also  being more innovative. Furthermore, the global business context is characterized by rapid changes and high uncertainty. Therefore, companies must be flexible and open to accept changes. Global corporations need to coordinate and mobilize resources within and across geographical borders. Therefore, high interdependence is an important characteristic of global corporations. The high diversity of the global workforce increases awareness of cultural variations, and acceptance of cultural diversity has become crucial for effective cooperation across cultural borders. A major proportion of the work in the global environment takes place in global multicultural teams, where cultivating trust is critical for team accomplishments. In sum, the global corporate values emphasize competitive performance orientation; flexibility, adaptation to changes, and innovation; high coordination and interdependence; acceptance of diversity; and trust and transparency. The level of agreement on these values among corporate members from different countries is an indication for their being global rather than local values.

A distinction can be made between global and local managerial roles. The former are homogeneously shared by managers in different subsidiaries, including strategic planning, innovation enhancement, and adaptation to change, necessary to compete in the global business environment. Yet, local managerial roles are mainly related to social exchange: providing direction to employees and showing employee consideration. Local managerial roles are influenced by cultural values at the national level, such as power distance and individualism versus collectivism.

Global Identity

Values are represented in the self, and they shape personal and social identity. The representation of global corporate values in the self, and the sense of belong-ingness to such corporations, lead to the emergence of a global identity as a new form of a person’s identity. A person may hold multiple identities, reflecting belongingness to multiple groups. Therefore, a global identity does not necessarily compete with a local-national identity, which is a person’s primary identity. Rather, individuals sample the relevant identity depending on the situation.

Global organizations evoke changes in the local work culture. For example, international trade imposes certain demands on local manufacturing organizations, such as meeting the quality standards of the International Organization for Standardization’s ISO-9000. Countries that want to become players in the global market need to adopt quality-oriented values that support the implementation of ISO-9000. Adoption of these values may change the local national and organizational cultures.

Globalization and Convergence

The question of whether globalization is leading toward a cultural convergence stirs hot debates. A major argument against cultural convergence is that traditionalism and modernity may be unrelated. Strong traditional values, such as group solidarity, interpersonal harmony, paternalism, and familism, can coexist with modern values of individual achievement and competition. However, research evidence such as that produced by Gili Drori, Yong Suk Jang, and J. W. Meyer points to some convergence in some areas. For example, firms trading globally are likely to imitate each other’s practices to boost their own performance. Furthermore, international organizations set the normative expectations, and in this way they play a prime role as agents of world society. Finally, education and science are seen as setting the foundation for economic development, standardization of national practices, and institutionalization of environmental policies, leading toward convergence across countries.

Globalization — Good or Evil?

The question of whether globalization is good or evil continues to be debatable. One of its disadvantages is the growing income gap between high- and low-income countries and the increased number of world citizens who live in poverty. There are fierce protests against globalization during the G8 summits. Strong opposition to globalization usually originates from developing countries that have been hurt by the destabilizing effects of globalization, including Central Asia and Eastern Europe, parts of Latin America, Africa, and parts of South Asia. In fact, fewer than 10% of the world’s population are fully globalized. But there is also opposition in Western countries, triggered by significant loss of professional jobs as a result of off-shoring to low-wage countries.

Yet, on the positive side, as globalization has progressed, the quality of life and life expectancy have improved significantly in virtually all countries, with the strongest improvement in the developed countries. The indexes of globalization have strengthened over the last two decades with respect to the following: world trade increased 10%, and more so in the newly industrialized economies, in Asia; capital movements, and in particular, flow of private capital to developing countries, increased significantly; workers moving from one country to another increased dramatically, and the foreign born proportion of labor forces around the world increased by approximately 50%; and the spread of knowledge and technology is increasing. Knowledge transfer is accelerated via multinational corporations and global alliances, and company Intranets and the free Internet provide access to knowledge of management techniques, as well as professional and technical know-how.

References:

  1. Drori, G., Suk Jang, Y., & Meyer, J. W. (in press). Sources of rationalized governance: Cross-national longitudinal analyses, 1985-2002. Administrative Science Quarterly.
  2. Earley, P. C., & Gibson, C. B. (2001). Multinational work teams. Mahwah, NJ: Lawrence Erlbaum.
  3. Erez, M., & Earley, P. C. (1993). Culture, self-identity, and work. London: UK: Oxford University Press.
  4. Erez,. M., and Gati, E. (2004). A dynamic multilevel model of culture: From the micro-level of the individual to the macro level of a global culture. Applied Psychology: An International Review, 53, 583-598.
  5. Govindarajan, V., & Gupta, A. K. (2001). The quest for global dominance. San Francisco: Jossey-Bass.
  6. Leung, K., Bhagat, R., Buchan, N. R., Erez, M., & Gibson, C. B. (2005). Culture and international business: Recent advanced and future directions. Journal of International Business Studies, 36, 357-378.
  7. Schaeffer, R. K. (2003). Understanding globalization: The social consequences of political, economic, and environmental change. Lanham, MD: Rowan & Littlefield.

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