IBM/U2 Topic 2 Technology and its Impact, Enhancing Technological Capabilities
Advancements in technology have considerably facilitated globalization. In fact technological progress has been one of the main forces driving globalization. Technological breakthroughs compel business enterprises to become global by increasing the economies of scale and the market size needed to break even.
Technological advancements reduce costs of transportation and communication across nations and thereby facilitate global sourcing of raw materials and other inputs. Patented technology encourages globalization as the firm owning the patent can exploit foreign markets without much competition.
Information technology has led to the emergence of the global village. For example, the World Wide Web has reduced the barriers of time and place in business dealings. Buyers and sellers can now make transactions at any time and any part of the globe. Technological change also affects investments.
Earlier, high technology production was limited to rich countries with high wages. Now technology is easily transferable to developing countries where high tech production can be combined with low wages. A large number of firms in advanced countries are now outsourcing labour intensive services from developing countries like India.
Technology is understood to be the driving force of globalization that began in the 18th century and has continued ever since to the 21st century, in-between three industrial revolutions have taken place. The 1st industrialization revolution was in the 18th century that took place in manufacturing industries. The 2nd industrialization revolution was in the services industries. The 3rd industrialization revolution of the 21st century which we are going through is know as information age as described by Adam Smith.
This technological development has helped globalise the world economy and it is also known as the “Kondrative long Wave process” (K-wave). As the diagram below shows:-
The diagram describes the tends of technological changes that have taken place since the industrialization revolution, relating from production, distribution and communication, that has fueled the globalization. It has brought about innovation and interaction between nations that weren’t possible before. That has led to some of the greatest invention that revolutionized trade, communication and interaction to a whole new level and increased globalization .As Thomas Friedman’s said “Globalization is not a choice. Basically, 80% of it is driven by technology” .
According to Cable (1995) Transportation costs are falling with improved physical communication with the help of improved technological advances in telecommunication, computing, fibre optics and satellites.  Which has resulted in the speeding up of information flow and the transportation of goods across nations more quickly and efficiently. This is being achieved through the technologies mentioned above, that is at the heart of the communication and transportation globalization, which is ongoing. Joseph Schumpeter has called it a “glaze of creative distraction”. Take for instance transportation system wouldn’t have been made possible without the invention off “steam engine in 1796 a problem solved by James Watts”
The diffusion of steam engine technology to streamline ships, with the help of propulsion technology and the introduction of “Jet Aircraft in 1950s” brought about new dynamics of globalization which has allowed flexibility in movement of labour freely. This innovation has allowed massive economic expansion to take place and caused “Global Shrinkage,” in terms of distances. As the Diagram below illustrates on how travelling distances have been reduced over time and made world smaller: –
The diagram shows the Global Shrinkage: the effect of changing transportation technologies on Real distances. Improvements made in transportation and the development of containerization allowed goods to move from place to place and continent to continents ever since its launch in “1956 to move goods from Newark, New Jersey to Houston Texas through the Gulf of Mexico”. Shipping ports around the world have cranes built to lift the containers more efficiently and thus saving money and speeding trade. Compare to pre-containership era of 1960s where trade was slow and unreliable that also fall due to bad weather or thieves. As Economist Paul Kurgnam says that the result is “new economic geography” requiring new theories of location and trade. The changes have been both technological and political.
Technological development has helped increased globalization. A prime example of technological globalization is that China and India have benefited economically as technologies like airplane, container ships have allowed China to export its goods to Europe and US vice versa and allowed countries to exploit their comparative advantage in trade. Article named “The container that changed the world” published by Virginia Postrel in New York times re-enforces the point that” Low transport costs help make it economically sensible for a factory in China to produce Barbie dolls with Japanese hair, Taiwanese plastics and American colorants, and ship them off to eager girls all over the world,” writes Marc Levinson in … “The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger”.
According to “Kondrative Wave” (K Wave) system we are in the fifth cycle that is known as the “Information Age”. The Internet /World Wide Web has been the biggest thing to come out of Information technology advancements. That has revolutionized how information is passed or its availability thus creating an economy based on knowledge. The Internet has been described as “a decentralized, global medium of communication comprising a global web of linked networks and computers.” As people across countries can trade and communicate instantaneously economically, for example e-mail has allowed instant communication through the World Wide Web, World Wide Web on the other has made “World One” as countries can now trade with each other, all made possible due to the cost effectiveness technological advance like the internet /world wide web. Where information is been exchanged at a global level instantaneously. As “Information is the new mantra that spells success in the modern world”
Technology like the Internet has given rise to E-commerce; E-commerce that refers to business conducted through means of electronic communication networks like Internet. That has brought about new dynamics to the globalization of businesses. Where virtual business can be set up and trade worldwide without any barriers stopping them. For example business like Amazon, Borders and eBay that have sprung up because of Internet have transformed the way small business operate and have given opportunity to individuals to enter these global markets. As Internet help provides a cheaper faster way of communication between business and its consumers worldwide.
Another sector that has seen the biggest impact because of technological globalization is the financial sector, where diffusion of information based technology has made possible people around the world to trade 24/7 trading has moved to electronic system from the physical system making money move more efficiently and on a faster level, thus allowing more participation of those people who are connected with the internet.
Technology has also impacted the cultural globalization with inventions like telephone and television. Telephone has made it feasible for any one to talk to each other regardless of where they are geographically in the world, all made possible with the help of satellites and mobile phones that has made possible to make a call, receive e-mail, texts and even allow video call. It is due to technological advancements made in the field of communication, as seen no countries are now really apart. All made possible due to technological breakthrough in communication that have revolutionized business, commerce, and linked millions of people. TV on the other hand has connected parts of world, where they feel and see without having to leave the room. On TV’S by just a touch of the remote button, that allows people to explore worlds on different channels it is made available because of Internet, communication advances and with the help of sounds and visual that are transmitted through the TV. Communication technology has brought the world closer and people closer regardless of where they are in the world.
We have found out that form the 1st industrial revolution Technology has had a great impact in the globalization as it help join the world together, where distance is no barrier for trade and is considered to be an essential part of economic globalization activity. As Friedman pointed out that 80% of globalization is technology driven. The technological development made in areas like communication and the invention of telephone and Mobile phones all with the help of satellites has made help removed the time and distance that has excited before. Transportation on the other hand has allowed trade to take place more efficiently and cost effectively with the help of the containerships, Jet Airplane and electric trains. It has helped facilitated growth between nations, as countries are able to take advantage of their comparative advantages as large goods can be exported and imported between countries.
The spread of information technology has made production networks cheaper and easier, all made possible because of digital networks like the Internet that is cost effective. This has been one of the fundamental economic globalization factors that have helped overcome the friction of distance and time. Without these technological advancements globalization would not be made possible or even achieved As the K-Wave shows the types of technologic advances at different stages of industrialization and there economic impact that all began in the late 18th century.