The historical context of globalization covers centuries. This paper divides those centuries into three eras. The first era covers the fifteenth through eighteenth centuries and views globalization through the lens of individuals who struggled to overcome natural, governmental, religious and economic barriers in their quest for wealth, freedom, position, and power. Throughout this era, the world of commerce was encumbered by territorial boundaries.
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The second era covers the nineteenth and twentieth centuries and saw great technological advances in transportation, machinery, livability, and communication. This allowed the masses to participate in an expanding economy and to experience territorial compression. The third era covers the twenty-first century (to date) and bears witness to the explosion of information technology. This explosion enables an international community to participate in a globalized economy, and it challenges participants to deal with the impacts of global compression.
It was not until this third era that technology shattered the remaining barriers to globalization so that international business could flourish. Keywords: barriers, communications, culture, economics, environment, flat, forces, globalization, history, information technology, international business, politics, technology History of Globalization Only in the last two decades has the term globalization become commonplace, and that is due to the advancement of information technology (Scheuerman, 2010). The current concept of globalization represents a flattened, borderless, non-territorial world where interests of business nd society overlap, and where information technology allows business to be conducted as though it were a single place (Friedman, 2007; Ohmae, 1995; Renesch, 1992; Robertson, 1995; Scheuerman, 2010).
Some posit that the historical roots for globalization go back millenniums because of trade links for carrying on business that existed between early civilizations (Frank, 1998). Friedman (2007) indicates the first true era of globalization did not begin until 1492 when Columbus set sail and opened trade between the Old World and the New World (p. ). Whether we go back millennia or centuries, the world of those times represented a territorial place. It was fettered by cultural, societal, and political borders that could not be breached. Friedman (2007) states the second era of globalization began around 1800 (p. 9). In this second era, technology was the catalyst for breaking down many territorial barriers to globalization. The emergence of reliable and relatively fast transportation and the universal usage of communication by telegraph or telephone were globally life-altering.
In 1848 social theorist Karl Marx formulated an explanation for territorial compression by saying that the influences of capitalist production “drove the bourgeoisie to nestle everywhere, settle everywhere, and establish connections everywhere,” paving the way for “intercourse in every direction [and] universal interdependence of nations” (Marx, 1848, p. 476). One can understand the historical context of these words more fully if they are viewed in light of significant global “flattening” events (Friedman, 2007, p. x) over the 50 years preceding the statement: ? ? ? ? ? ? ? ? ? ? 1803 Robert Fulton developed the steamboat and sailed it on the Seine River (France). 1804-06 Merriweather Lewis and William Clark blazed an overland trail from the eastern 1812 John Blenkinsop (U. K. ) built the first cog railway. 1814 George Stephenson (U. K. ) built the first successful steam locomotive. 1815 U. S. built the first steam warship. 1820 Thomas Robert Malthus (U. K. ) wrote Principles of Political Economy. 1821 James Mill (U. K. ) wrote Elements of Political Economy. 822 Gas street lighting was introduced in Boston. 1824 Joseph Aspdin (U. K. ) produced Portland cement for roadway paving. 1825 The Erie Canal (U. S. ) became a great water highway. United States to the Pacific Ocean. ? ? ? ? ? ? ? ? plow. ? 1825 The world’s first passenger railroad began to operate in England. 1834 Cyrus McCormick (U. S. ) patented a harvesting machine. 1838 Louis Jacques Daguerre (France) made a daguerreotype photograph. 1839 Baseball was first played at Cooperstown, New York. 1840 Charles Darwin (U. K. published Zoology of the Voyage of the Beagle. 1840 The penny post was introduced in Britain. 1844 Samuel F. B. Morse sent the first message over telegraph lines. 1846 Elias Howe (U. S. ) invented the sewing machine; John Deere (U. S. ) invented the 1847 Gold was discovered in California. This list is not all-encompassing, but it is significantly representative of the nature of (Hoffman, Ed. , 1987, p. 474; Presence, Ed. , 1978, p. 306-336; Safra, Ed. , 2010, p. 518). events that caused Marx (1848) to express the existence of territorial compression.
That expression was the forerunner for Robertson’s (1992) discussion of global compression, with his definition of globalization being: “The compression of the world and the intensification of consciousness of the world as a whole…. Concrete global interdependence and consciousness of the global whole in the twentieth century” (p. 8). When Marx (1848) spoke of territorial compression, he was referencing the advances in transportation, machinery, communication devices, economic and cultural knowledge, social and societal connections, and geographical discoveries.
When Robertson (1992) spoke of global compression in the twentieth century, he was foreseeing the advances in information and transportation technology that would allow the world to conduct international business “as a single place” (Robertson, 1995, p. 38). This last iteration of global compression ushered in what Friedman (2007) calls the third era of globalization (p. 10). It began around the turn of the twenty-first century and is based on the explosion of information technology that is ever-expanding because of the capabilities of Internet.
With the advent of Internet, businesses no longer need to depend on telephone and fax, telegraph, postal delivery, or transportation modes to connect parties in business transactions. What the inventors of the Internet did was enable “packets of information” to be sent “anywhere in the world, normally in well under a second” (p. 61). Information technology develops and provides new ways to expand the global reach of those engaged in international business. It allows participants in international business to xchange goods and services on a global scale, irrespective of national boundaries, time, and space (Martinelli, Rahschulte, & Waddell, 2010). International business has a broad domain that encompasses commercial transactions between private or governmental participants from two or more nations. For the purposes of this paper, international business will refer to the private sector, although the private sector is significantly impacted by the government sector. Transactions in the private sector are generally for profit, and they involve the economic resources of capital, skill, and labor (Joshi, 2009).
These statements about the domain of international business have held substantively constant throughout history. What has changed is the process by which international business is now conducted, due to the influence of information technology on globalization forces. “Globalization forces” are a set of economic, political, and technology forces that involve leaders and followers (Martinelli et al. , 2010, p. 17). Certainly those who discovered new lands, developed connective waterways, invented forms of transportation and industrial equipment, enhanced society through means of lighting, communication, and literary knowledge – all were leaders.
Their visionary advancements had economic impact at every juncture of these ventures. Not unlike today, historic leaders had to bend to the powers of government and they needed the security those powers could afford when dealing with both followers and competitors. But it was not until the twenty-first century that information technology shattered the remaining barriers to globalization and delivered a flat world within which international business could thrive (Friedman, 2007).
Historical Context of Global Business First era of globalization (fifteenth through eighteenth centuries) In the first era of globalization, global business involved trade routes across sea and land, commerce that developed through discoveries of new lands and natural resources, tools that made production more expansive, and funding for explorations through the sponsorships of the wealthy. The wealthy included kingdoms and states, the church, and private people of privilege. To function as a person of commerce in this first era of globalization required bravery, strength, fortitude, and more than a little luck.
Tawney (1926 ) indicated that the problem to be solved during the Middle Ages was one of material necessity for the West as they sought to garner wealth from the East. The striving for land, money, and position meant defeating obstacles in the environment that formed barriers to success. “It was the mastery of man over his environment which heralded the dawn of the new age, and it was in the stress of expanding economic energies that this mastery was proved and won” (p. 67). Many bstacles in the economic environment revolved around religion, with the foremost obstacles for merchants and those engaged in commerce being barriers raised by the church. Men could conquer mountains, deserts, and seas but they met an immovable force when they contended with religious edicts. The church was the governing body for most states during this period, and at every turn they placed “limits, restrictions, and warnings against allowing economic interests to interfere with serious affairs” (Tawney, 1926 , p. 2). Tawney further described the business environment of the era: “Labor – the common lot of mankind – is necessary and honorable; trade is necessary, but perilous to the soul; finance, if not immoral, is at best sordid and at worst disreputable” (p. 33). The “discoveries” in the East and the New World created a commercial revolution that was depicted by Tawney (1926 ) as opening “a seemingly limitless field to economic enterprise, and sharpen[ing] the edge of every social problem” (p. 87).
This somewhat sordid view of commerce was framed within the context of pronouncements by returning explorers. They declared that treasures such as gold were all one needed to possess – treasures that would herald salvation and happiness in both this world and the next. There were reformers like Luther who despised the “economic individualism of the age” and its “spiritual laxity” (p. 89). The subsequent reforms of Calvinism restored some “commercial common sense” by recognizing “the realities of commercial practice” (p. 108).
Tawney, (1926) concludes: “It is not wholly fanciful to say that, on a narrower stage, but with not less formidable weapons, Calvin did for the bourgeoisie of the sixteenth century what Marx did for the proletariat of the nineteenth” (p. 112). By the end of the sixteenth century, the divide between religious theory and economic realities was evident. With the rise of Puritanism, business was elevated to a place of honor. Even though religion did not create the barriers to business that existed earlier in the era, there still seemed to be a cultural need to enshrine business in a spiritual glow.
In speaking of the Puritan ethos, Tawney (1926 ) says: “He makes his very business a travail of the spirit, for that too is the Lord’s vineyard, in which he is called to labor” (p. 201). This was an era of commercial exploration wherein individuals struggled mightily to overcome natural, governmental, religious, and economic barriers. Individuals were the main players in global business because the communication connections were not available to link the masses in more expansive enterprises.
However, these commercial explorations could be described as the infancy of globalization, particularly in the western parts of Europe where: “Advances in production and incentives for long-distance trade stimulated Europeans to reach other parts of the globe” (Lechner, 2001). In the first years of the seventeenth century, historical globalization experienced one of its most far-reaching events: In 1620 a small group of English Puritans broke away from the Church of England, sailed on the Mayflower to a landfall known as Plymouth, and settled a colony there which became the present state of Massachusetts.
These English Separatists were first called “pilgrims” by William Bradford, one of the colonizers; and they were soon followed by other English settlers who also formed colonies (Collins, n. d. , para. 5). The New World that had been discovered by early explorers was now permanently settled by non-native inhabitants, creating the advent of commerce on a global scale between the colonies and Europe. The first era of globalization ended with a focus on American growth.
Events representing this growth would include: Expansion of global commerce as the 13 colonies with ties to the Old Countries were formed; establishment of educational institutions for the furtherance of knowledge; creation of newspapers that gave a global aspect to communication; victory for independence of America culminating in 1776 with the Declaration of Independence; and claims of American ownership extending across the continent into new and fertile territories (Safra, Ed. , 2010, p. 518).
Second era of globalization (nineteenth and twentieth centuries) In the second era of globalization, the transforming historical factors were technological advancements in transportation, machinery, livability, and communication. The list stated in the introduction is representative of the early advancements that influenced Marx’s (1848) declaration concerning territorial compression. Those advancements were the foundation for a technological expansion that occurred throughout the remainder of the nineteenth and twentieth centuries, leading Robertson (1992) to speak of global compression.
The significant shift in the history of globalization between the first era and the second era was that the participants in global enterprises shifted. In the first era, participants were comprised principally of one or a cluster of individuals who had the vision, fortitude, and leadership to strike out on lonely explorations. They were successful if they could claim land, treasure, power, and knowledge. The measures for commercial success did not greatly change between the first and second era, but the ability for participation by the masses did change. The essence of the transformation early in the second era was captured by Harvey (1996).
He said that in 1839 an English journalist was “postulating that as distance was annihilated, the surface of our country would, as it were, shrivel in size until it became not much bigger than one immense city” (p. 242). What a striking similarity to Robertson’s (1995) expression 156 years later that information and transportation technology allowed the world to conduct international business “as a single place” (p. 38)! Between the era’s bookends of compression references, there were those verbalizing both positive and negative opinions of a “flat world” – long before Friedman (2007) popularized the phrase.
The following were some representative expressions: ? Dewey (1927) pondered the cultural aspects of globalization with the question: “How might citizens come together and act in concert when contemporary society’s ‘mania for motion and speed’ made it difficult for them even to get acquainted with one another, let alone identify objects of common concern” (p. 140). ? Heidegger (1950) anticipated contemporary debates about globalization but also saw great possibilities for communication and information technologies that would dramatically extend the scope of virtual reality.
He stated: “Distant sites of the most ancient cultures are shown on film as if they stood this very moment amidst today’s street traffic…. The peak of this abolition of every possibility of remoteness is reached by television, which will soon pervade and dominate the whole machinery of communication” (p. 165). ? Scheuerman (2010) said the period beginning in the 1950’s witnessed “the unabated proliferation of high-speed technologies [and was] probably the main source of the numerous references in intellectual life since 1950 to the annihilation of distance” (p. ). (Strong inference might be drawn that usage of the word “annihilation” posited a fear of change by those viewing the future through 1950 lenses. ) ? Scheuerman (2010) confirmed the above inference when he stated that one “anxietyridden analysis of new media technologies in the 1960’s” (p. 4) was given by Canadian cultural critic McLuhan (1964). The centerpiece of McLuhan’s anxiety was the concept of a technologically based “global village” generated by social “acceleration at all levels of human organization” (p. 103).
By the end of the second era, many social theorists had moved beyond the compression angst just described to an association of globalization with deterritorialization. This is represented by statements of Ruggie (1993) and Scholte (2000) who indicated globalization referred to the spread of new forms of non-territorial social activity. Globalization also became associated with interconnectedness. Held, McGrew, Goldblatt, and Perraton (1999) postulated that there should be recognition of the degree to which interconnectedness across frontiers was no longer just a haphazard activity, but instead was one that was predictable and regularized.
The first era of globalization ended with a focus on American growth as it burgeoned into a world-wide power. The second era of globalization ended with a focus on advancements in technology as barriers fell for world-wide communication. Technology shifted the focus of commerce from territorial spheres of endeavor to the interconnected world of international business. Third era of globalization (twenty-first century) In this third and current era of globalization, the transforming factor has been the Internet. This has created not merely a compressed world, but a “flat” world – a “horizontal” world (Friedman, 2007, p. 59).
Friedman describes this phenomenon as a “web-enabled platform for multiple forms of collaboration. This platform now operates without regard to geography, distance, time, and, in the near future, even language” (p. 204). International businesses seeking success will be required to have: The technology to connect with this platform, educated managers who recognize economic factors involved with the platform, and governance stability at both the corporate and political levels of platform operations (Friedman, 2007, p. 204). These requirements are referred to as a set of “globalization forces” (Martinelli et al. , 2010, pp. 7-18), and are described as follows: ? Technology forces make globalization both more effective and efficient – they are what generate the speed of globalization. Technology has accelerated the permeation of national boundaries, allowing people and businesses to collaborate in the exchange of goods and services (pp. 21-23). ? Political forces enable globalization, because they represent the power and influence that can create or dissolve barriers to global commerce. The most powerful countries set the global agenda, but emerging markets are changing the dynamics with their energy, innovation, capital, and technology (pp. 0-23). ? Economic forces create interrelations that function, irrespective of national borders. They drive the global production, exchange, and consumption of goods and services (Martinelli et al. , 2010, p. 19, referencing Pearce & Robinson, 2000). Economics is the driving force for globalization, and there have been two dominate, economic theories. First, many world economists have held to the free-market theories of Adam Smith (1723-1790), “who defined markets as self-regulating mechanisms that drive toward a balance between supply and demand of goods and services” (Martinelli et al. , 2010, p. 9, referencing Milosevic, Martinelli, & Waddell, 2007). In a free-market, global economy the movement of capital and labor between nations flows unhindered by regulatory interference. Second, John Maynard Keynes (1883-1946) gave a counter economic theory for macroeconomics, and it became an economic model in the post-World War II expansion (Sullivan & Sheffrin, 2003). Keynesian economics held that “economic systems would not automatically balance themselves; therefore, macro-economic control by government institutions is needed to ensure balance and equity within an economy” (Martinelli et al. , 2010, p. 19).
A combination of these two theories is the dominant policy in today’s global economy (Martinelli et al. , 2010, p. 20). Global economic institutions have developed as a result of Keynesian economics. They have the role of overseeing global financial systems (International Monetary Fund), providing loans to developing countries (World Bank), and dealing with rules of trade between nations (World Trade Organization). These institutions are influential in developing rules for the global economy through control of international monetary and trade policy (Adler, 2002; Hesslebein, Goldsmith, & Somerville, 1999; Martinelli et al. 2010).
Having discussed the global forces that fuel the web-enabled platform described by Friedman (2007), it is fair to note that not all opinions are favorable for the advancement of globalization. Most of the criticism deals with a perceived weakening of individual cultures – a dilution of unique cultural qualities that can get swept into the mold of modernity. In acknowledging the criticism, Friedman (2007) agrees that “globalization has empowering and disempowering, homogenizing and particularizing, democratizing and authoritarian tendencies all built into it” (p. 82). But he also argues that the human hearts and minds of international business can make choices for the betterment of global contacts that outweigh the potential for destructive outcomes. In doing so, the job of international managers “is not to trash this platform but to get the best out of it and prevent the worst” (p. 483). The third era of globalization is a work in progress. The focus is on a process that involves world-wide interconnections leading to integration of information, unity of purpose, cohesion of strategy, and understanding of values (Parker, 2005).
Although the process is possible because of advanced technology, it retains the traditional recognition of leaders and followers that were inherent to commercial enterprises in the first and second eras of globalization. The distinction in this third era of globalization is that we are dealing with “globalization leaders” and “globalization followers” who are trying to establish a “recognizable competitive advantage in their respective industries” (Martinelli, et al. , 2010, p. 17).
Domain of International Business within the History of Globalization Globalization involves interconnection between foreign and domestic entities. These entities may be in the public sector (governments) or the private sector (organizations). In both sectors “the term globalization is omnipresent in contemporary writing about management” (Thomas, 2008, p. 4). For the purposes of this paper, the historical discussion of globalization has been from the perspective of private sector organizations that are engaged in commerce.
When organizations engage in commerce across national borders, they have entered the domain of international business. This is a domain that is relatively recent in its expansion due to advances in information technology. While having its origins in the twentieth century, it did not flourish until the twenty-first century when Internet flattened national, geographic, and communication boundaries (Friedman, 2007). International business involves individual managers or teams of managers who develop and carry out the strategies, goals, and values of their respective organizations.
They do so for the purpose of participating in the exchange of goods and services with global contacts; they usually do this for a profit; they often benefit from collaboration; and they regularly deal with competition (Joshi, 2009; Martinelli, et al. , 2010). There are complexities that have to be overcome in order to survive in this global system, and Duarate and Snyder (2001) indicate the complexities include the following: ? ? Crossing boundaries related to time, distance, and organization. Communicating and collaborating using technology. ? ?
Working in a multi-cultural environment. Preventing misunderstandings and conflict between team members who do not share a Organizations that engage in international business contend with the fact that global common first language (cited in Martinelli, et al. , 2010, p. 46). expansion by an organization will not necessarily improve performance or profits. As businesses expand globally, they have to deal with “incremental benefits and incremental costs of adding an additional nation or market to the firm’s existing portfolio of countries” (Contractor, 2007, p. 55). In the early stages of expansion there are the costs of learning about a new nation and culture (Doz, Santos, & Williamson, 2001) and there may be adaptation costs relative to local politics and regulations (Caves, 1971). As the expanded operations mature, global managers may face costly decisions on modifications; and additional international operations may entail further market-entry liabilities. These costs and liabilities need weighed by management against the benefits of an accumulated market power because of a wide multinational presence (Kogut, 1985).
In this press for competitive advantage, organizations have to guard against the effect of “over-nationalization” which could have “a net negative effect on performance” (Contractor, 2007, p. 459). Such a condition can cause organizations to have diminished performance because they are not at their “optimum degree of international diversification” (Hennart, 2007, p. 446). Belin and Pham (2007) posit that global companies need to “balance their relentless drive to find new markets with a disciplined focus on execution” (p. 46).
When businesses expand their operations to a multinational scale, they may be referred to as multinational enterprises, and Contractor (2007) warns that the traditional view of these enterprises has often been that of “an exploiter of internalized advantages that it developed in its home nation” (p. 462). But he indicates that view “is being partially displaced by the new view of the firm as an international learner, coordinator, cross-border arbitrageur, multiple-network alliance partner, and integrator across borders” (p. 462), (citing Contractor & Lorange, 2002; Palmisano, 2006).
Travis (2007) indicates there are issues managers should recognize in globalizing their business, which can be summarized as follows: ? ? Familiarize yourself with and take advantage of trade agreements with other nations. Protect your organization’s brand, intellectual property, and worldwide reputation. ? ? secure. ? Maintain high ethical standards based on your company’s code of ethics, as they translate Remain transparent throughout the supply chain, but keep your data and personnel Remember that all business is personal: go to the source; keep communications open; into good business. elate to offshore associates on a personal level; be available to global clients and customers around the clock. Discussions about international business tend to focus on global strategy within the economic and political framework of given industries, but too often these discussions end up “leaving the environment as a black box” (Buckley & Lessard, 2005). Environmental issues are the emerging red flags being waved over the domain of international business. Companies decrying global regulations of the environment as a barrier to business often fail to recognize the environmental degradation that will exist without regulations.
Friedman (2007) warns: “There is no minimizing the dangers posed to the environment by the flattening of the world” (p. 478). Scheuerman (2010) succinctly states: “Global warming and ozone-depletion cry out for ambitious forms of transnational cooperation and regulation, and the refusal by the rich democracies to accept this necessity implies a failure to take the process of globalization seriously, when doing so conflicts with their immediate material interests” (p. 11). Progress in protecting the environment can be reminiscent of the infancy of globalization – one small step at a time.
Aside from the high profile conferences on global climate change, air and water quality, and non-renewable resources, there is a growing concern by consumers for products that are eco-friendly. Josephs (2010) says this has resulted in the rise of third party organizations ( including Fair Trade USA, Rainforest Alliance, and UTZ Certified) with the role of providing international standards and certifying that products with their seal meet sustainability requirements. Josephs (2010) writes of chocolate makers who consider their certified product as “candy with a social conscience, and profits as a sweet aftertaste” (p.
B6). Consumables such as chocolate and coffee are well known for the international make-up of their production. Clothing, automobiles, electronics, and many other manufactured goods also have a web of roots that intertwine across national borders. Consumers today are becoming more socially aware of this international tangle and of eco-issues caught in its web: Sweat shop labor, environmental travesties, and cultural degeneration – the full list is significant. When there is a correlation between consumer conscience and sales, it causes international businesses to take note of this shift in global attitudes.
Those attitudes translate into bottom lines for global managers, and their profits rest in matching risk to consumer demand. Conclusion It has been a historic journey through the three eras of globalization. The shift in participants over the three eras has been from the individual, to the masses, to the global community. At each juncture, the dynamic facilitator of change has been technology. In this third and current era, the impact of Internet on information technology has been so intense that its future integration with culture and communication seems infinite.
The ramification of this era for international business is captured by Friedman (2007) in his statement: “The flattening of the world…has presented us with new opportunities, new challenges, new partners, but also, alas, new dangers, particularly as Americans. It is important that we find the right balance among all of these. It is imperative that we be the best global citizens that we can be…. ” (p. 634). There are the naysayers who perceive globalization to be the ruination of ethical business practices and the destruction of unique cultures.
They are correct that globalization has caused change, but the positive side of that change has been the robust opportunities for both business and culture. Friedman (2007) acknowledged the dichotomous opportunity of change versus fear of change in this statement: “The world is being flattened. I didn’t start it and you can’t stop it, except at a great cost to human development and your own future. But we can tilt it, and shape it, for better or worse. If it is to be for better, not for worse, then you…must not live in fear…. ” (p. 635).
From the first era through this third era, each transition has been accompanied by a certain aura of fear – a fear that seemed to occur for some by the mere act of change. Future changes will continue to evolve through information technology. But our civilization needs to accept the challenges of change and celebrate where those changes can take us on this globalization journey.