Thesis: International Networking and the Outcomes

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[. . .] " (World Bank, nd) As well the growth in trade and foreign domestic investment flows are reported to have "reflected, in part, the expansion of production networks." (World Bank, nd) Production, which generally was all completed in one location, has been broken down into separate steps and each step moved to locations where that step can be performed at the lowest of possible cots. Therefore, a great deal of international trade and foreign direct investment has "shifted from the exchange and production of final consumer goods to the exchange and production of parts and components." (World Bank, nd) The rise in the share of trade accounted for by global networks is reported to be partly that which is reflective of the growing importance in global production of goods such as electronics, chemicals, and transport equipment and machinery, where trade in components is most important." (World Bank, nd) There is a stated rise in those sectors in the world market from the 1986 27% to the 1997 43%. It is reported that the increase is further reflective of "a rise in components trade with the product classes." (World Bank, nd)

Technology in the area of transport, communications and data processing is reported as that which has facilitated the growth in foreign direct investment and establishment of networked cross-border production with sea freight unit costs reported as declining by 70% from the beginning of the 80s decade through the middle of the 90s decade stated to be resulting from "a rise in the share of cargo carried in containers." (World Bank, 1997 in World Bank, nd)

In addition the rates of long distance telephone calls have decreased as well as the addition of the fax machine as a regular business tool and finally, the Internet has enabled "multinationals to closely coordinate production at dispersed locations." (World Bank, 1997) The result is that the costs of evaluation of potential suppliers have fallen in what are "more arms' length transactions." (World Bank, 1997) The increase in the information and data processing arena has enabled more effective management of global networks. (World Bank, nd, paraphrased) Electronic data interchange (EDI) systems are reported to result in a reduction of procurement costs in addition to production coordination becoming greatly improved among factories that are widely dispersed through use of automation in routine processing of transactions. (World Bank, 1997) Improvements in economic policies are cited including specifically the "decline in barriers to trade, have also contributed to formation of cross-border production networks." (World Bank, 1997) It is reported that manufactured product tariffs were reduced through means of successive rounds of multilateral negotiations that took place for industrial countries from the 1980 of 10% down to the 1998 stated 5%. And it is also reported that there was a fall in the developing country average tariff rate "from between 25 and 30% in the early 1980s to 13% by 1998." (World Bank, 1997) The World Bank report states that the work of Hanson, Mataloni and Slaughter (2002) state findings that tariffs are an important determinant of the size of intermediate inputs from parent companies relative to the total sales of U.S. affiliates" and states that this is a "direct measure of activity within production networks." (World Bank, nd) Less production sharing is reported as "significantly correlated with less production sharing, with estimated elasticities in the range of 2 to 4." (World Bank, nd) Multinationals are allowed to lobby for reductions on tariffs on their inputs so as to reduce the networks cost." (World Bank, nd)

5. Structuring of Global Networks

The structuring of global networks is accomplished variously in a "range of ownership structures" which includes such as "arm's-length transactions…establishing a subsidiary for production components that are custom-made for particular products." (World Bank, nd) A wide range of choices are existent and each choice is inclusive of a relationship of some type between the purchaser and supplier. (World Bank, nd, paraphrased)

6. Intra-Firm Trade

The World Bank report states that 'intra-firm trade' has increased on a global basis. The following chart shows just how much intra-firm trade has actually increased in the United States and in Japan.

Figure 1

Source: World Bank Report (nd)

The following chart labeled Figure 2 in this study shows just how much intra-firm trade in services is becoming more and more important.

Figure 2

Source: World Bank Report (nd)

Intra-firm trade is reported to be inclusive of production that global networks share and trade in products that are finished for the purposes of "marketing and distribution in foreign countries." (World Bank, nd) The World Bank report states that there is "some evidence that production through networks has become more important over time. The share of exports of intermediate goods to overseas manufacturing affiliates in total Japanese exports rose from 20% in 1994 to 29% in 1999. Products intended for further processing increased from 57% of U.S. multinationals' exports to foreign-owned affiliates in 1989 to 68% in 1999 (Mataloni and Yorgason 2002). Trade among foreign affiliates of U.S. multinationals has also expanded, which probably indicates that networks have become more complex over time." (nd) According to the World Bank report networks result in (1) a boost in the access to technology; (2) an increase in the supply and demand for skilled labor; (3) benefits contributing to growth and structural transformation. (nd)

VII. Summary of Literature Review

The literature review in this initial and brief study has demonstrated that there has been a very large impact on international business economics by global networking. Also found in this review of literature is the intra-firm trade has become increasingly important and that the importance of intra-firm trade is still increasing. Affiliation in production and manufacturing has also been shown to be an important indicator of FDI.

VIII. Recommendations

Arising from this brief study is a recommendation that more research is needed in examining the impact of global networking on international business economics.

IX. Conclusion

Because more research is needed in gaining a better understanding of the impact of global networking on international business economics this study concludes that such a study should take place in a qualitative methodology in the form of an exhaustive and systematic review of literature because the information gained in the study will contribute greatly to a better understanding of international business economics and specifically in the areas of production and manufacturing and global networking impacts on international business economics.

Bibliography

Changes in Global Organization (nd) World Bank report. Retrieved from: http://siteresources.worldbank.org/INTGEP/Resources/335315-1257200391829/gep2003chap2.pdf

Contractor, FJ and Lorange, P (2002) Cooperative Strategies in International business: Joint Ventures and Technology Partnerships between firms. International business and management series. Vol. 2 Cooperative Strategies and Alliances in International business. Rutgers University. Graduate School of Management, Wharton School. Emerald Group Publishing 2002. Retrieved from: http://books.google.com/books?id=BwfRrH5jEKgC&dq=International+Business+Economics&lr=&source=gbs_navlinks_s

Heinsz, WJ (nd) The Institutional Environment for International business. The Wharton school, University of Pennsylvania. Philadelphia, PA. Retrieved… [END OF PREVIEW]

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