University of Birmingham,

MSc International Business

2023-2024

Theme 1:
A New Geo-Economy?
Drivers and Risks
World at night

Submarine Cables
Defining International Business and the Geo-
economy
• International business: formal and informal transactions and commercial
activities that occur between companies, organisations, individuals, or
government entities that involve cross-border exchanges between different
national jurisdictions (countries) and regions.

• Geo-economy: The combination of economic and geographic factors relating

to all types of international flows. These flows include raw materials,
components, completed good, information/data, services, money, people.
 Defining International Business: Entry Modes
1. Trade by importing and exporting goods, trade enabled by platforms.

2. Production in another country but through strategic partnerships with local firms.

3. Design and development, but production via contract manufacturers who undertake
manufacturing. Also, the provision of services via a network of contracted providers.

4. Foreign Direct Investment (FDI) – the establishment of some form of facility in a foreign
market.

5. Trade in people – the movement of employees to other countries for a limited time period to
deliver services. This is often over-looked but is becoming critical for the delivery of services.

6. Temporary movement of consumers to another country to obtain some form of service –

education, health, consultancy, etc.
 Dynamics and International Business
The international economy and all international businesses are in a continual state of
change. These include:

• Deepening internationalisation as competition becomes increasingly international.

• Reverse globalisation or deglobalisation in response to government concerns over
national sovereignty or economic security.
• On-going restructuring of global supply chains by companies to reduce risk based on
dual or multiple sourcing.
• Alterations in demand, supply and also disruptive innovation.
• New forms of regulation.
• New forms of internationalisation as new flows are identified.
 International Business Module and Responsible Business
• Seeks to provide students with a toolkit that will enhance understanding of
internationalisation and international business and that will underpin practice.

• The module engages with the concept of responsible business:

“A responsible business is one that creates more value for society that it extracts as part of
a monetarisation or value capture process. This includes values created for individual
consumers and the wider society. The alternative are businesses that extract more value
than they contribute, and this may include transferring social and environmental costs to
other companies, citizens and governments” (Bryson, 2022: 226).
Bryson. J.R. (2022), ‘Reading manufacturing firms and new research agendas: Scalar-plasticity, value/risk and the emergence of Jenga Capitalism’, in Bryson, J.R., Billing, C., Graves, W.
and Yeung, G. (Eds). A Research Agenda for Manufacturing Industries in the Global Economy, Edward Elgar: Cheltenham, 211-244
Lecture Structure

Topic 1.1: International Business Module: An Introduction

Topic 1.2: Building Blocks: Defining Firms, Trade, Entry Modes
Topic 1.3: A New Geo-Economy? Drivers and Risks
 Topic 1.1

International Business Module:

An Introduction
 Module Description
• The module introduces students to international business focusing on exploring
the drivers and risks related to internationalisation, international business theory
and different ways in which international business is organised.
• The module explores all types of international business – small firms to complex
transnational companies, manufacturing and services, platform-based businesses,
and different national contexts.
• The emphasis placed on different national contexts is positioned within an
analysis that highlights the importance of understanding interactions between
place and space and international business or the local contexts within which
international business is practiced.
• The module develops a comparative and critical analysis of international business
theory and encourages students to apply theory to practice using case studies.
• Theory is explored in the context of application to support practice by identifying
and exploring the drivers, challenges and risks related to international business
practice.
Learning Outcomes
1. Assess and critically evaluate the drivers and risks behind international
business in the context of the complex nature of international business
environment.
2. Explain and review advances in international business theory.
3. Appraise and compare different approaches to understanding international
business.
4. Apply international business theory to understanding international business
in place and across space.
5. Critical thinking and judgement skills, systematically applied to different
international business scenarios and/or simulations.
 Topics and Module Structure
Topics
1 A New Geo-economy? Drivers and Risks
2 Technology and the Geo-economy
3 Geo-economy and the state
4 Creating value? Alternative values and circular values.
5 Monetarising Value? Hymer and beyond
6 Eclectic Paradigm: Development and Application in Practice
7 Emerging Economies and Springboarding in Practice
8 Localization and the Practice of Embeddedness
9 Service versus manufacturing Internationalisation
10 The Irresponsibility of Global Value Chains? Pathways towards
Responsible Business
 Module Assessment

Two assessments:
Individual digital artefact assignment, 1750
word equivalent, (50%).
Individual case study analysis – written report,
1750 word equivalent (50%)
 Teaching Structure

• One two-hour lecture per week.

• One one-hour seminar per week, from week 2 (three seminar’s
running).
• One one-hour workshop per week, from week 2.

You are meant to attend all three and thus there are four hours per
week when you are meant to be in class.
Core Text
 Topic 1.2

Building Blocks

Defining Firms, Trade and Entry Modes

Defining Firms
“Firms are highly complex socio-technical systems formed by ever-shifting
coalitions of people, technologies and organisational systems. To survive, such
systems must contain adaptive capacity and must be open to new ideas and
ways of organizing production” (Bryson et al., 2020: 2)

“Firms … operate as mechanisms for coordinating, motivating and assessing

individuals in the context of some form of value creation process” (Bryson et
al., 2022: 5)

“All firms are goal-directed, but not all firms are driven by a sole focus on
profit maximization . . . Goal-direction does not mean that decisions made by a
firm will be rational and will not result in perverse consequences including
organizational failure” (Bryson et al., 2022: 6).
Firms as the loci of a set of timeless processes
• Profit maximization.
• Decision-making under uncertainty.
• Rules, rituals, routines, habits and conventions.
• Learning, knowledge creation and transfer, and innovation.
• Employee recruitment, training and performance management.
• Corporate activity systems: operations management, sales and marketing, accounts, human resource
management, procurement, supply chain management, corporate governance, and so on.
• Improvisation under uncertainty.
• Bounded rationality and information asymmetry.
• Path dependency linked to sunk costs.
• Balancing risks versus reward.

See Bryson, J.R., Billing, C., Graves, W. and Yeing, G. (2022), ‘ Reframing Manufacturing research: place, production, risk and
theory’, in Bryson, J.R., Billing, C., Graves, W. and Yeung, G. (Eds). A Research Agenda for Manufacturing Industries in the Global
Economy, Edward Elgar: Cheltenham, pages 4-7
 Firms and their Characteristics
• Controller and coordinator of assets.
• Negotiator and enforcer of contracts.
• Set of relationships between people and other organisations.
• Collective of individuals who have come together to achieve some common purpose.
• Legal entity that can negotiate and agree written and unwritten contracts for which it is
legally accountable.
• Tax entity and tax collector.
• Locus where societal needs are aligned with production processes to create use and
exchange values.

See Bryson, J.R., Billing, C., Graves, W. and Yeing, G. (2022), ‘ Reframing Manufacturing research: place, production, risk and theory’, in
Bryson, J.R., Billing, C., Graves, W. and Yeung, G. (Eds). A Research Agenda for Manufacturing Industries in the Global Economy, Edward
Elgar: Cheltenham, pages 6
Use versus exchange values and firms
To Karl Marx firm’s produce two types of value:

• Use values or the tangible features of a commodity (a tradeable object) which can satisfy some
human requirement, want or need, or which serves a useful purpose. Thus, use values reflect the
‘utility of a product to a consumer and this is a subjective experience.
• Exchange values or the proportion at which a commodity can be exchanged for other entities. This is
not identical to the price of a commodity as, to Marx, the actual monetary value of a commodity only
roughly corresponds to the exchange value. This difference is explained by the emphasis placed by
Marx on the value of a good being determined by the socially necessary labour time required to
produce. Use values are subjective with exchange values being more objective.

In Topic 4, we focus on value and explore how alternative values might enhance a product’s price
without necessarily increasing the necessary labour time required to product it.
David Ricardo – Trade and Comparative
Advantage
International capital theory draws on David Ricardo’s principle of comparative
advantage that was developed in 1817. This approach is based on the premise
that a place (country, any area) should specialise in producing and exploring
those products in which it has a comparative or relative cost advantage
compared to other places.

Specialisation in these activities will bring greater returns and will result in the
movement of raw materials including agricultural produce, components, goods,
service inputs and expertise between places.

Ricardo’s approach does not provide an explanation for why these differences
exist, but it is still the basis of international trade theory.
 Ricardo’s Comparative Advantage Theory

A nation, region or city-region will perform better when they focus on producing
goods with the lowest production opportunity costs compared to its trading
partners. These least costs will reflect local circumstances that reflect history.

Opportunity costs represent the potential benefits that an individual, investor,

business, region or country misses out on when choosing one alternative over
another.

According to the labour theory of value the value of a good is measured by the
labour hours required to produce it and not how much is paid for the labour. Thus,
productivity is key here or the relation between the cost of inputs and outputs.
From: https://unctad.org/news/global-trade-hits-record-77-trillion-first-quarter-2022
From: https://www.wto.org/english/res_e/statis_e/trade_evolution_e/evolution_trade_wto_e.htm
 International Business and Entry Modes:
The five most common modes of international market entry are:
i) Exporting (Trade).
ii) Licensing.
iii) Partnering – different types of strategic partnership.
iv) Acquisition.
v) Greenfield venturing (Foreign Direct Investment).

Each entry mode has its own particular set of advantages and disadvantages.
Each can be applied nationally as well as internationally.
Often a firm will be engaged in all five types or will blend entry modes and, in
addition, will be engaged in financialization. There may be a progression
between types – from exports to foreign direct investment.
Source:https://www.worldbank.org/en/
topic/competitiveness/publication/ Source: https://blog.seeburger.com/the-fragility-of-
investment-perspective-on-global-value- global-supply-chains/
chains
 Topic 1.3

A New Geo-Economy?
Drivers and Risks
 Drivers Behind Internationalisation
1) Place-based differentials
2) Logistics including containerization
3) Information communication infrastructure – from cables to satellites.
4) Differentials in factor inputs
5) Financialization or the increasing importance of financial motives,
markets and financial intermediaries in shaping economies
6) Platforms or third globalization
7) New forms of organisation including born global firms.
8) Disruptive innovation
9) Government or state interventions
1) Place-based differentials
• Place matters – each place has a different combination of assets, and each is
connected to other places in different ways.
• Each place reflects the outcome of the historic accumulation of many decisions
made by governments, individuals and organisations.
• Each place is in an on-going process of change or dynamics.
• Each place will have a different cost structure that reflects the institutional
environment including salary levels.
• Differences in the capabilities of those living in a place that reflects different
approaches to education.
• Each place being integrated into different supply chains in different ways.
• Differences in approaches to governance – local and national.
2) Logistics including containerization

Development of
containerization and related
infrastructure (container
ports)
Cowen, D. (2014), The Deadly
Life of Logistics, University of
Minnesota Press

Levinson, M. (2016), The Box:

How the Shipping Container
Made the World Smaller and the
World Economy Bigger, Princeton
University Press

Savannah, US
3) Information communication infrastructure – from cables to
satellites.

1. E-mail, Web, teleconferences, technologies that enable the co-ordination of

production processes in real time, fibre optic cable capacity.

2. The issue is the ability to communicate and interact in real time – 24 hours
per day and seven days per week.

3. Exposes other economic activities to international production.

Billing, C & Bryson, J 2019, 'Heritage and satellite manufacturing: firm-level competitiveness and the management of risk in
global production networks', Economic Geography, vol. 95, no. 5, pp. 423-441.
https://doi.org/10.1080/00130095.2019.1589370
4) Differentials in factor inputs.

Factor inputs are the individual resources that contribute

to the production of goods and services.

Land, labour, and capital are some of the major factor

inputs.

Non-factor inputs include additional costs, for example,

transportation.
5) Financialization or the increasing importance of financial motives,
markets and financial intermediaries in shaping economies.

“An ongoing debate in the social sciences has identified a

prevailing trend since the 1970s of “financialization”. This is
defined in many ways, but the term highlights the increasing
importance of financial motives, markets and financial
intermediaries in shaping economies” (Epstein, 2005, bold not in
original).

1.Epstein, G. A. (2005) Financialization and the world economy. In G.A. Epstein (ed.), Financialization of the World Economy, pp. 3–16. Cheltenham:
Edward Elgar.
2.J.R. Bryson, R.A. Mulhall , M. Song and R. Kenny (2017), ‘Urban Assets and the Financialisation Fix: Land Tenure, Renewal and Path Dependency in the
city of Birmingham’, Cambridge Journal of Regions, Economy and Society, 1-15, doi:10.1093/cjres/rsx013
 Financialization in Practice
“Just 13 non-financial companies in the S&P 500, including mainly tech giants
like Apple, Google-parent Alphabet and Microsoft, are sitting on cash and
investments of more than a $1 trillion, says an Investor's Business Daily analysis
of updated data from S&P Global Market Intelligence and MarketSmith.

Apple alone last week reported sitting on $202.5 billion in cash and investments.
That's 7.4% of all the S&P 500's cash. And it's up nearly 4% from 2021. And
this week, Alphabet said it's holding $169.2 billion in cash and investments, up
more than 7% from 2021.”

From: https://www.investors.com/etfs-and-funds/sectors/sp500-companies-stockpile-1-trillion-cash-investors-want-it/
 6) Platforms or third globalization

A digital platform economy is emerging. Companies such as Amazon, Etsy,

Facebook, Google, Salesforce, and Uber are creating online structures that
enable a wide range of human activities. This opens the way for radical
changes in how we work, socialize, create value in the economy, and
compete for the resulting profits.

Hagiu, A., & Wright, J. (2015), ‘Multi-sided platforms’, International Journal of Industrial Organization, 43, 162-174.
Kenney, M., & Zysman, J. (2016), ‘The Rise of the Platform Economy’, Issues in Science and Technology, 32(3), 61-69.
 Platforms
‘Platforms and the cloud, an essential part of what has been called the
“third globalization”, reconfigure globalization itself” (Kenny and Zysman, 2016: 61).

1.Provide platforms on which other platforms are built.

2.Platform operations have unprecedented control.

3.Platforms – an alternative mechanism for monetarising human effort (Google and searches,
Facebook and social networks, LinkedIn and professional; networks).

4.New forms of working relationships developing.

7) New forms of organisation including born global firms.

On-going changes leading to new forms of internationalisation

Born Global Firms:

Developments in technology (ICT and travel) mean that it is now possible

and common for a new small firm to be established and, at the moment of
establishment, for it to be an international business.
Born global firms and trade-offs between technology as
driver and entrepreneurial behaviour
• Niche Versus Mass-Market Business Models
• Firms with a global niche business model internationalize faster than those with a mass-
market business model.
• The International Entrepreneurship View
• The greater a firm’s use of pre-existing international networks, the faster its
internationalization.
• High technology is a prerequisite for fast internationalization
• High-technology firms will internationalize faster than low-technology firms.
• Founder prior international experience
• Firms led by entrepreneurs with greater prior international experience will internationalize
faster.

Hennart, J. F., Majocchi, A., & Hagen, B. (2021). What’s so special about born globals, their entrepreneurs
or their business model?. Journal of International Business Studies, 52(9), 1665-1694.
 8) Disruptive innovation

Disruptive innovation is innovation that creates a new market and

value network or enters at the bottom of an existing market and
eventually displaces established market-leading firms, products,
and alliances.

For example: E-commerce, 3D Printing, Smartphones, Artificial

Intelligence, Machine Learning.
9) Government or state interventions.

i) Different regulations.
ii) Special place-based interventions – Investment Zones, Free
Ports.
iii) Procurement policies.
iv) Taxation.
v) Grants.
 Topic 1.3

A New Geo-Economy? Drivers and Risks

.
 Risks and Internationalisation
1) Disruptive innovation.
2) New forms of competition.
3) Alterations in demand.
4) Supply chains.
5) New technologies including digitalisation and system convergence.
6) Pandemics.
7) Climate change.
8) Government – trade barriers, new regulations.
 Jenga Capitalism
• “Globalization has resulted in system convergence combined
with enhanced connectivity. The outcome is similar to a game
of Jenga. Eventually in a Jenga game, removing one block and
replacing it will result in the complete collapse of the
structure. Covid-19 is one moment in Jenga Capitalism”. Pull a
few pieces out anywhere in the system of systems that
support internationalisation and the outcome ricochets
around the global economy.

• “The system convergence and the enhanced place-to-place

connectivity which characterises Jenga Capitalism increases
uncertainty, including unmanageable risks”
• (Bryson, 2022: 220).
Climate Change and Jenga Capitalism

Climate change is transforming the ways in which we live and work and will
enhance risk.

Known or established place-based differentials will alter or be destroyed.

Known and unknown additional costs linked to climate change adaptation

and mitigation.
Artificial Intelligence (AI) and Jenga Capitalism

The Cyber-Energy-Production Plexus

“A cyber-energy-production plexus has formed around multiple connections between
telecommunication, energy, and production networks (Bryson et al., 2021). Across manufacturing,
industrial control systems (ICS) have been developed that integrate hardware with software
through network connectivity. ICS systems underpin critical infrastructure within production
systems. Historically, production equipment was isolated or air-gapped from the outside world.
The cyber-energy-production plexus includes directly or indirectly linking ICS components to the
internet and these expose core operational systems to cyberattacks” (Bryson et al., 2022: 21).

Increased AI and machine learning forms of AI increase exposure to the risks related to the cyber-
energy-production plexus and this is especially the case the more AI is embedded in systems.
 Conclusions
• The geo-economy is in a continual process of becoming as firms, individuals and
governments negotiate risk/reward ratios.

• International business is continually changing in response to alterations in the drivers

that act as catalysts, but balanced by existing and new risks.

• Place-based differentials playing a central role in international business, but

challenges related to climate change and other drivers of change.

For firms and governments, a key challenge revolves around how to balance the
benefits and risks associated with the development of an increasingly integrated
international economy.
References:
Bryson, J.R. (2018), ‘Divisions of Labour, Technology and the Transformation of Work: Worker to Robot or Self-Employment and
the Gig Economy’, in Paasi, A., Harrison, J. and Jones, M. (eds.), Handbook on the Geographies of Regions and
Territories, Edward Elgar: Cheltenham: 141-152
Bryson. J.R. (2022), ‘Reading manufacturing firms and new research agendas: Scalar-plasticity, value/risk and the emergence of
Jenga Capitalism’, in Bryson, J.R., Billing, C., Graves, W. and Yeung, G. (Eds). A Research Agenda for Manufacturing
Industries in the Global Economy, Edward Elgar: Cheltenham, 211-244
Bryson, J.R., Billing, C., Graves, W. and Yeung, G. (2022), ‘ Reframing Manufacturing research: place, production, risk and
theory’, in Bryson, J.R., Billing, C., Graves, W. and Yeung, G. (Eds). A Research Agenda for Manufacturing Industries in
the Global Economy, Edward Elgar: Cheltenham, 1-32
Bryson, J.R., Sundbo, J., Fuglsang, L., Daniels, P. (2020), Service Management: Theory and Practice: Palgrave Macmillan:
Switzerland
Epstein, G. A. (2005) Financialization and the world economy. In G.A. Epstein (ed.), Financialization of the World Economy, pp.
3–16. Cheltenham: Edward Elgar.
Kenney, M., & Zysman, J. (2016), ‘The Rise of the Platform Economy’, Issues in Science and Technology, 32(3), 61-69.