COMPETITIVE TERRITORIES IN THE GLOBAL ECONOMY

James R. Wilson

Email: jwilson@orkestra.deusto.es

Twitter: @jamierwilson

SESSION-BY-SESSION PROGRAMMETOPIC FACULTY DATES

Introductory Session James Wilson 6 September

1. Globalisation and competitiveness

We will explore the phenomenon of globalisation; from historical roots to the

impacts that it is having today on the competitiveness of businesses and territories.

James Wilson 8 September

13 September

15 September

20 September

1. Clusters, global value chains and competitive territories

We will introduce the popular concept of ‘clusters’ as a key link between the

competitiveness of territories and firms, analysing and critiquing the academic

foundations of the concept and exploring its practical usage. We will examine the

lifecycles of clusters, the relationship between their development and territorial

economic development, their situation in global value chains and global innovation

networks, and the types of institutions and actions that support clusters and cluster

development.

James Wilson 22 September

27 September

29 September

4 October

6 October

1. Open innovation in territorial context

We will study the origins of the strategy of open innovation and explore its evolution

in practice, including analysis of different types of open innovation patterns and the

relationship between these and territorial competitiveness.

Henar Alcalde 11 October

13 October

18 October

20 October

25 October

27 October

3 November

1. Innovation systems and the role of public policy

We will introduce the concept of innovation systems and its implications for

territories (either nations or regions). We will deepen in the understanding of its

components and their relationship with a strong emphasis on the understanding of

knowledge organisations and the role of public policy within a system. In addition,

we will introduce the concept of policy-learning for understanding public policy

(with a stronger emphasis on innovation policy).

Edurne Magro 8 November

10 November

15 November

17 November

22 November

24 November

29 November

Revision Session James Wilson 1 December

Written test James Wilson 13 December

DIFFERENT ERAS OF GLOBALISATION?

OUR CLASS

• Trade has taken place for many centuries– Regional trade in the Roman empire, for example

– Marco Polo

– The search for sea routes between Europe and the East

– But not all ‘Euro-centric’: Chinese trading links?

• The commercialisation of trade– Exploration and the development of modern financing

– The ‘India’ companies

– The significance of the industrial revolution

ORIGINS OF A GLOBAL ECONOMY …

• Transnational firm: One that controls and manages production in at least two countries

• Embryonic transnational firms must have been found in the ancient trading cultures of China, Europe, the Middle East, the Americas …

• But the modern transnational really emerged with the industrial revolution– Initially, mostly European based (e.g. British American Tobacco, Lever

Brothers, Michelin, Nestlé)

– But, the ‘American Challenge’ from the 1950s

– And then acknowledgement that TNCs can take different forms (e.g. Japanese, Chinese … )

EMERGENCE OF ‘TRANSNATIONAL FIRMS’

• Pre-WW2: Simple ‘core and periphery’ structure– Core: Production of manufactured goods

– Periphery: Raw materials, foodstuffs, market for manufactures

– 71% of world manufacturing output in 4 countries, 90% in 11

– Core also absorbed 80% of periphery’s primary products

• This structure was shattered by WW2, which devastated the global economy– Post-1945 therefore a ‘new beginning’

– The US in a position to play a particularly dominant role …

– A new set of institutions set up at the Bretton Woods conference

• New divide: Capitalist West, communist East, plus ‘third world’

SHAPING THE ECONOMY POST-WW2

• Rapid growth in world production– The world economy performed better in the second half of the last

century than at any time in the past

– World GDP increased six-fold from 1950 to 1998 with an average growth of 3.9% a year, compared with 1.6% from 1820 to 195, and 0.3% from 1500 to 1820.

• Trade has grown faster than production, signalling greater interconnectedness: FDI, Mergers, Global Value Chains …

• But it is not a story of consistent, predictable growth …– Post-WW2 ‘golden age’

– Recession in the 1970s

– Volatility in the 1980s and 1990s

– Renewed rapid world growth post-2000 ...

– Global recession from 2008, following financial crisis

RAPID GROWTH OF ECONOMIC ACTIVITY

Current economic outlook?

• Globalisation has now been a buzzword for several years– It was first used in a significant sense in 1983 by Theodore Levitt, to

refer to ‘the globalisation of markets’ …

– But it was not until the mid 1990s that we began to see the term used more widely …

– And by the end of the 1990s there had been a dramatic ‘explosion’ in the use of the word

• ‘Globalisation’ has passed into our language as a key word, and today it is used as a ‘catch-all’ term to refer to a whole range of phenomena …

The world’s needs and desires have been irrevocably homogonised

Levitt, 1983

BUT was he correct?

WHAT IS GLOBALISATION?

• “But cheap flights, globalisation and the mounting cost of train travel have made aviation by far the fastest growing source of carbon dioxide in the UK.”

– From an article in The Guardian on aviation emissions, January 2007.

• “… a backlash against globalisation and a desire to help local communities had helped the rise of farmers' markets”

– From an article in The Times on politics and shopping, January 2007.

• “France’s sport-lovers, it seems, accept the globalisation and monetisation of rugby because of the rewards it brings and the classy discretion surrounding the sport. But the mixture of flashy displays of wealth with football grates”

– From an article in The Economist on sport, May 2015

• “Yet despite all this activity and enthusiasm, hardly any of the promised returns from globalization have materialized, and what was until recently a taboo topic inside multinationals — should we reconsider our global growth strategy? — has become an urgent, if still hushed, discussion”

– From an article in The Washington Post on business, April 2015

A GENERALLY ACCEPTED STATE OF THE WORLD

• An Economist– “a dynamic process of growing liberty and world integration in the markets

for labour, goods, services, technology and capital.” (De la Dehesa, 2000)

• A Sociologist– “the compression of the world and the intensification of the consciousness

of the world as a whole.” (Waters, 2000)

• A Geographer– “a reterritorialisation of both socioeconomic and political-institutional

spaces that unfolds simultaneously upon multiple, superimposed, geographical scales.” (Brenner, 1999)

• A Politician– “Nations act in their own self interest. But … our self-interest and our

mutual interests are today inextricably woven together. This is the politics of globalisation.” (Tony Blair, 2nd October 2001)

CATEGORIES OF GLOBALISATION

• ‘Globalisation’ cannot be confined to one discipline– “globalisation has been a prominent topic among geographers and

sociologists as well as economists and political scientists, and is studied within every paradigm…” (Radice, 2000)

• It is also characterised by “opposing tendencies”– Homogenisation versus Differentiation

– Integration versus Fragmentation

– Globalisation ALONGSIDE Regionalisation … etc.

GLOCALISATION?

A COMPLEX, MULTI-FACETED PHENOMENON

• So-called hyperglobalists argued that globalisation was the new economic, political, social, cultural order in which we live, where our lives are dominated by global forces … – One where transnational firms dominate, and cultural differences are

seen simply as variations in consumer preferences

– “The nation state is just about through as an economic unit” (Kindleberger, in 1969)

• So-called globalisation sceptics argued that the nation state will remain highly significant (an international world)

• Where do you stand?– Is the world becoming borderless?

– Does Brexit signal a trend towards re-establishing borders?

– To what extent can the Scots or the Catalans really become an independent nation?

A BORDERLESS WORLD?

• While the world economy has arguably been ‘open’ at other times in history, there is something qualitatively different about current ‘globalisation’– Deep integration has replaced shallow integration

– A new “turbocharged” era of globalisation (Friedman, 2000)

– This is impacting in different ways on the economic, political, social, cultural and natural environments

• However, while such ‘globalising forces’ clearly exist, we have not reached an ‘end-state’ in which local and national factors cease to be significant– Moreover, we can’t predict that we will reach this state, as globalisation

involves a complex set of intermittent, uneven processes that are inherently unpredictable

– Consider, for example, Dicken’s analysis …

MIDDLE GROUND … ?

• New, more integrated, global markets

• New global (and local) actors

• New (and changing) rules and norms

1. Changing territory

2. Changing technologies

3. Influence of different forms of market capitalism

Associated with these characteristics, we can identify three key components to ‘globalisation’

SUMMARY: CHARACTERISTICS OF GLOBALISATION

• Scholte (2000) argues that globalisation is a new and distinctive phenomenon only when seen in terms of ‘deterritorialisation’– Social geography is no longer entirely territorial

– Territory still matters, but it no longer constitutes the whole of our geography

– While production used to be organised within national boundaries, for example, this is no longer the case

• Space is shrinking, and borders are becoming less significant, or significant in different ways

1. CHANGING TERRITORY

• Changing spatial relations are intimately associated with changes in transport, information, and communication technologies– Faster and cheaper air, sea, rail travel

– Cheaper and better phone connections

– Fax

– Mobile phones

– Internet and other electronic communications

– Etc.

• These have facilitated emerging ‘global’ economic, social, cultural and political relationships

2. CHANGING TECHNOLOGIES

• The process of ‘globalisation’ that we see around us cannot be separated from the capitalist context in which it has emerged– Liberalisation of markets

– Privatisation and the reduction of the role of governments

– The role of the IMF and World Bank in these processes

– The increasing significance of transnational corporations

– New ‘global’ division of labour and ‘global’ production chains

• The current form of globalisation is heavily influenced by this context– See Friedman (2000) and Stiglitz (2002)

– ‘Washington consensus’ globalisation (Sugden and Wilson, 2005)

• But is it changing? (see previous debates …)

3. SPREAD OF MARKET CAPITALISM

• It is a complex, multifaceted phenomenon, incorporating changes in economic, political, cultural, social relationships

• In particular, globalisation refers to the changes in these relationships as new technologies combine with the capitalist context in changing the significance of territory

• As markets and production chains become more globally integrated, there are clearly economic, political, cultural and social implications for different actors …

What are the implications of ‘globalisation’ for business?

SO WHAT IS GLOBALISATION?

• Businesses need to recognise that they are operating in global market places– This presents both threats and opportunities

• Perhaps most crucially, businesses need to understand that globalisation is inextricably linked with the creation and communication of knowledge and information– Success means staying one step ahead

• There is also a need to recognise and respond to some of the ‘opposing tendencies’ and be aware of ‘backlash’– For example, regionalisation and localisation are important counter

forces to global markets

– This is a BIG factor in Europe, for example

• Global businesses able to respond to local markets?

• Local businesses able to project themselves globally?

SOME IMPLICATIONS FOR BUSINESS

Similar

implications

for territories/

societies?

• Some would say ‘yes’:– Wealth spreading around the world through the globalisation of trade

and production

• However, some would say ‘no’– There is a loose ‘anti-globalisation movement’ incorporating many

diverse groups, with different agendas

• First coming to prominence in Seattle in 1999

– They are linked by a belief that ‘globalisation’ is threatening certain things: culture, economy, environment etc.

IS GLOBALISATION A POSITIVE FORCE?

In many ways, this is an extension of long-held concerns with inequalities and tensions created by capitalism

• Given these concerns, and given your own concerns, do you think there are alternatives to ‘globalisation’?

• Is ‘globalisation’ irreversible?

• Would it be desirable to reverse it?

• It may be possible to reverse or stifle such trends by re-implementing borders etc., and to some extent this may even be starting to happen ... ?

• But my personal view is that this is not the way forward:– The problems, and the frustrations, are not with ‘increasing and

deepening global relationships’ per se, but with the forms of capitalist organisation

• Tendency to widen divisions between ‘winners’ and ‘losers’

We must ask, therefore, if there are alternative forms of globalisation?

ARE THERE ALTERNATIVES TO GLOBALISATION?

Towards a more durable form of globalisation?

• We have seen that globalisation is a complex phenomenon!– It is multi-faceted and highly contested

– There is some middle ground however, which sees something fundamental happening to the economic, social, political and cultural relationships around which the world is organised

– These changes are influenced particularly by changing geography, changing technology, and the capitalist context

– In turn there are implications for business, and for societies, around the world

– But questions remain as to how ‘globalisation’ can best be harnessed as a positive force, how we can make it work better

– The real issue today, for both firms and societies, is finding some solutions to these questions …

GLOBALISATION: SUMMARY

Next session we will build on this context … We will explore what it means for

territories to be competitive in a globalised and globalising economy