Chapter 3
Globalization, Technology Transfers,
Economic Development and Cultural
Change
John S. Hill
Chapter Outline
• The Economic Development Process
• Economic Development Effects on Institutions
•
•
•
•
and Behaviors
Developmental Effects on Industry, Business
Practices, and Consumers
Country Development, Industrialization,
Modernization, and Integration into the Regional
and Global Economics
Obstacles to Economic Development
Figure 3.1 Chapter Outline
Overview
 Economic development is defined, along with the resource
bases needed to advance national economic agendas
 Economic development: Country progress in living
standards and changes in cultural institutions and values
 How international corporations affect national cultures,
both positively and negatively
 The ways that political, economic and cultural institutions
change with development, along with effects on social and
individual behaviors
 The diffusion of modern behaviors in national economies,
and what factors contribute to and impede development
processes
 The developmental process as it affects industry
development, business, and consumer behaviors.
Introduction: The Economic Development Process
 Resource Bases for Industrialization
 Internal public resources include government investments
to create infrastructures and to deliver essential services
 Internal private resources, comprising local businesspeople
and entrepreneurs
 External public resources include supranational
institutions such as the UN
 External private resources: the contributions of
international corporations
Technology Transfers: Positive and Negative Effects
Technology Transfer
Positive
Negative
Product Sales
(Consumer)
Upgrades Consumption know
how/consumer education
Affordable only to affluent
segments
Product Sales
(Industrial)
Upgrades production process
technologies;
technician/engineering skills;
lowers per unit production
costs/prices
Displaces workers with more
intensive use of capital
Licensing, technology
agreements; corporate R & D
efforts
Broadens, elevates technology
bases and workforce
vocational and scientific skills
Banking and Financial
institutions
Mobilizes savings to create
investment markets for
public/private sector-stock
market capital;
consumer/installment credit
for individuals and business
Only the wealthy benefit in
the short term and leads to
power concentrations;
possible unwanted foreign
influences encouraging buyers
to purchase goods beyond
their means.
Continued
Local procurement of
materials and
components
Stimulus for private
enterprise/local
initiatives
Establishment of
wholesale/retail
distribution systems
Creates distribution
infrastructure/expertise;
increases customer
exposures to modern
goods & services
Upgrades labor skills and
vocational bases
Worker training in
technologies and
production know how
Management training in
organizational know
how/methods
Increased managerial
education and efficiency
Financial and accounting
skills
Planning and budgetary
control
Easier for other foreign
firms to meet
procurement quality
requirements
Foreign control over
distribution; consumer
exposed to products that
are beyond their means to
purchase
For a minority only;
majority have insufficient
education
Only educated elites
benefit
Economic Development Effects on Institutions and Behaviors
Institutions
Traditional
Modern
Autarchy (dictatorships,
presidents for life, chiefs,
Kings, Shahs)
Democracy: multi party
systems
Centralized
(self-sufficient villages;
communist economies)
High
Decentralized (market
forces)
Population Base
Rural
Urban
Production base
Agricultural
Industrial
Land ownership
Stocks/shares
Political Institutions
Economic Institutions
Economic System
Community Orientation
Economic power base
Low
Continued
Cultural Institutions
Family unit
Gender orientation
Religiosity
Education system
Social class: criteria
:mobility
Linguistic and ethnic
backgrounds
Extended
Nuclear
Patriarchal
Emancipated
High
Low
Informal
Formal
Hereditary
Wealth
Seniority/education
Income
Multilingual/many ethnic
groups, often isolated
Linguistic homogeneity
Infrastructures develop to
link communities and
promote homogeneity
Conformist
Individualistic
Religious/social
Legal
Social Behaviors
Societal tendencies
Control mechanisms
Economic Development Effects
on Institutions and Behaviors
Changes in Institutions
• Changes in political institutions: autocracies to
democracies
• Changes in economic institutions
– Economic system changes: centralized production to
market forces-based systems
– Community orientation changes from high to low
– Rural to urban population shifts
– Agricultural to industrial sectors
– Economic power base shifts from land ownership to
stocks/shares
Economic Development Effects
on Institutions and Behaviors
• Changes in cultural institutions
– Family systems change from extended to nuclear
– Hereditary and seniority social class systems to
economically-based (income, wealth)
– Gender orientations: patriarchal to egalitarian
– Religiosity: declines with industrialization
– Education systems: from informal to formal
– Cultural homogenization- the Melting Pot Society
(Figure 3.2 p. 88): how multilingual/multiethnic societies
evolve over time into linguistically/ethnically
homogeneous national cultures
– Social behaviors:conformist to individualistic behaviors
Economic Development Effects
on Institutions and Behaviors
Individual Changes in Values and Behaviors
• Interpersonal behaviors: insider-outsider distinctions
break down
• Individual values (Table 3.3 p.89): Breakdown of
traditional values (formality, trust, dislike of change, risk,
fatalism, conformism) to modern values (low levels of
trust, formality; preferences for efficiency, change, risk;
self-help, individualism encouraged)
• How Individuals Adapt to Industrializing
Societies: The “Rat Race” Emulation Cycle (Figure
3.3 p.90): Individuals migrate to towns and become
committed to jobs and urban lifestyles
Impetus for Sustained Development: The “Rat Race”
Emulation Cycle
1. Industrializing society
uses economic criteria to
determine social position
Migration to towns,
young workers join
industrializing society
6. Work hard to emulate
of consumption patterns
of social superiors
“Demonstration Effect”
Exposure to new products,
media, lifestyles
5. Commitment to
industrial society
increases
2. Work becomes “means
to the end” work ethic
cultivated
3. Wages allow new
consumption patterns to
form and
4. Materialistic
behaviors take hold
The Diffusion of Modern Behaviors: Intra-Country
Behaviors and the Flexible Stereotype (Figure 3.4 p.92)
 Modern behaviors diffuse from urban to semi-urban to
rural areas over time
 Modern societies are urbanized—most of their
populations live in towns; rural populations more
traditional in institutions and values
 Modern urban values define national cultures
 Developing Societies: 40-70% rural populations define
national cultures and have traditional institutions and
values
 Developing societies have pockets of affluent, urban
peoples and migrants making the change to modern
behaviors and values
Developmental Effects on Industry,
Business Practices and Consumers
 Developmental Effects
on Industry Behaviors
 Developmental Effects
on Business Practices
 Developmental Effects
on Consumer Behavior
Developmental Effects on Industry,
Business Practices and Consumers
• Developmental Effects on Industry
Behaviors
Supply chain development: (Table 3.4 Long-term
developmental drivers of industry change)
– National trade policies: From protectionist to free
trade economies
– Local labor costs and availability: From abundant
low cost unskilled labor to high cost skilled labor
Developmental Effects on Industry,
Business Practices and Consumers
• Developmental Effects on Industry Behaviors
(cont’d)
– Infrastructure development: roads, ports, banking
systems, government support systems, education
Demand factors
– Market affluence increases: middle classes emerge
– Market demand: aggregate supply>demand; marketing
becomes important competitive tool
– Media communications:more commercial media
– Rural to urban population movements shift demand
– Cultural diversity decreases: more homogeneous demand
Developmental Effects on Industry,
Business Practices and Consumers
• Developmental Effects on Business Practices
– Corporate behaviors (Table 3.5 p.96)
• From small scale, harmonious, output-oriented firms to large
scale, profit-oriented, competitive organizations
– Management style changes (also Table 3.5)
• Decision making: from orders given to employee involvement
• Goal setting and planning: top-down to consensus
• Leadership styles: from autocratic to democratic
• Motivation methods: fear/punishment to rewards/involvement
• Management-worker interactions: few to frequent
• Career progression: seniority/loyalty to objective merit
Developmental Effects on Industry,
Business Practices and Consumers
• Developmental Effects on Business Practices
(cont’d)
– Developmental effects on marketing practices (Table 3.6
p.98)
• Segmentation: ethnic/geographic to
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•
•
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•
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income/demographic/psychographic criteria
Limited to extensive product lines
Urban-based marketing to national coverage
Price becomes a competitive marketing tool
Distribution: geographic to product specialization
Marketing emphasis: distribution to demand creation
Market research becomes important
Developmental Effects on Industry,
Business Practices and Consumers
• Developmental Effects on Consumer Behavior
Table 3.7 Traditional-Modern Changes in Consumer
Habits and Behaviors
– Purchasing roles
– Sources of information
– Branding
– Labor-saving products
– Retail outlet options
– Merchandising and packaging
– Means of purchase
Developmental Effects on Consumer Behavior
 Purchasing roles change from patriarchal to egalitarian as
families acquire purchasing power and buy more products
 Sources of information change from personal to
commercial media
 Branding: becomes important to consumers and firms
 Labor saving products (refrigerators, canned, frozen foods)
become important as more women work
 Retail outlet options increase (supermarkets, departmental
stores) and consumption patterns change (bulk-buying)
 Merchandising and packaging: viewed as important and
become primary marketing tools
 Means of purchase: credit/debit replace cash
Country Development, Industrialization,
Modernization, and Integration into the Regional and
Global Economies
• Table 3.8 The Industrialization, Modernization,
and Globalization Process
• Stage 1: Traditional Pre-industrial Societies:
communistic, self-sufficient, agricultural,
autocratic, culturally heterogeneous, hereditary
social classes, traditional manufacturing
• Stage 2: Industrialization and Modernization
Processes: development of: market forces system;
regional then national markets as infrastructure
develops; government health and welfare systems,
financial systems, democracies, national cultures,
modern factory methods
Country Development, Industrialization,
Modernization, and Integration into the Regional and
Global Economies
• Stage 3: Postindustrial Economies: mature,
service-oriented economies, internationally
involved, politically, economically very
competitive; large, specialized firms—customeroriented
• Stage 4: Regionally and Globally Involved
Societies: members of trade blocs and global
bodies; source and sell worldwide—deeply involved
in global economy; regional media, products,
currencies, cultures, infrastructures
Obstacles to Economic Development
 Industrialization Process Impediments
 Population migration problems:over-urbanization;
towns are melting pots
 Worker frustration: low-paid unskilled work
 Worker adjustment problems: rural lifestyles vs.
regimented factory disciplines
 Geographic Impediments
Resource impediments: lack of consistent
agriculture, energy sources, minerals
Geographic location: affects climate,
infrastructure development, trading route access
Obstacles to Economic Development
 Ethnic and Linguistic Composition: Common
languages must develop for economic
development/coordination to occur; dominant
ethnic language, colonial language
 Institutional Resistance to Change
 Political Resistance: incumbent politicians resist change
 Economic Resistance: privileged families, firms (SOEs)
 Cultural Resistance: religion (to westernization); education
(humanities-based versus science/technology); rigid class system
(old money); ethnic or tribal divisions
Key Points
 Economic development causes changes in country
political, economic and cultural institutions, and in
individual values, attitudes and behaviors
 Technology transfers by international corporations
contribute to modernization and westernization
 Individuals migrate to become part of the modern society
 Economic development causes change in industry demand
and supply chain
 Corporate behaviors alter to emphasize profit-oriented,
competitive behaviors, and participative corporate cultures
 Consumer behaviors change as companies become more
sophisticated and aggressive in their marketing efforts
Thank You!
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Chapter 13 Localization Strategies: Managing Stakeholders