Global Business Environment

Lecture - A definition
The art of transferring information from the teachers notes to students notes without it entering either ones mind.

Business Environment
1) Liberalization of economic policies worldwide (import-substitution vs. export-led strategies).
2) Changes in the technology paradigms/regimes.

Economic Liberalization 1
Greater role for private sector. Liberalization of trade and investment policies. International institutional mechanisms to reinforce liberalization trends (e.g. WTO, EU, bilateral agreements) Sectoral policies affecting innovation (e.g. Intellectual property rights, clinical trials, etc.)

Economic Liberalization 2
International standards setting (e.g. ITU, UN) facilitated flow of goods and services. Global harmonization of consumer preferences in some industries.

Technological changes 1
Changes in techno-economic paradigm Emergence of new science-based pervasive technologies Even old products incorporate new technologies Multi-disciplinary inputs for innovations

Technological changes 2
ICT as a driver and facilitator of globalization Companies that did incorporate new technologies faded away Learning-by-doing approach to Learning-by-training approach Vertical disintegration of value chains Divisibility of innovation processes

Global competition 1
Increased competition (more global competition in domestic markets also) Greater complexity in competition Oligopolistic competition in major industries Emergence of innovative small firms in niche areas

Global competition 2
Shorter product life cycles Technology becomes the key factor of competitiveness Increasing R&D costs Shortage of S&T skills in advanced countries. Access to global markets and resources

New Competitors
Entry of emerging economies as huge markets Brazil, Russia, India and China (BRICgroup of countries) as arbitrators of the global economic developments MNCs from the emerging economies Local availability of S&T skills Low costs of operations

Corporate responses
Rationalization of corporate structures: World/regional product mandates Global intra-organizational networks Global inter-organizational networks (including with universities)

Implications for innovation 1

Centre-for-global: innovations for global markets centralized in headquarters Local-for local: innovations for local markets Locally-linked: innovations in each location for global application Globally-linked: collaboration between different local units for global innovations (Barlett and Ghoshal, 1991)

Implications for innovation 2

Modularity and divisibility of innovation process (specialization within the innovation process) Globalization of R&D (including to emerging economies) R&D outsourcing Emergence of technology markets and research firms

Implications for innovation 3

Outsourcing of R&D to emerging economies (firms/universities) Emerging Products for Emerging Markets (e.g. single-chip mobile phones; low-cost car Nano) Standards setting by China Entrepreneurship in emerging economies

Implications for innovation 4

University spin-offs Regional/national government policies Cluster development/science parks New sources of financing for innovation Importance of intellectual property rights Regional agreements and trade barriers