Chapter 3Globalization, 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 agendasEconomic 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

Easier for other foreign firms to meet procurement quality requirements

Establishment of wholesale/retail distribution systems

Creates distribution infrastructure/expertise; increases customer exposures to modern goods & services

Foreign control over distribution; consumer exposed to products that are beyond their means to purchase

Worker training in technologies and production know how

Upgrades labor skills and vocational bases

For a minority only; majority have insufficient education

Management training in organizational know how/methods

Increased managerial education and efficiency

  Only educated elites benefit

Financial and accounting skills

Planning and budgetary control

Economic Development Effects on Institutions and Behaviors Institutions Traditional Modern

Political Institutions Autarchy (dictatorships, presidents for life, chiefs, Kings, Shahs)

Democracy: multi party systems

Economic Institutions    

Economic System Centralized(self-sufficient villages; communist economies)

Decentralized (market forces)

Community Orientation High Low

Population Base Rural Urban

Production base Agricultural Industrial

Economic power base Land ownership Stocks/shares

Continued Cultural Institutions    

Family unit Extended Nuclear

Gender orientation Patriarchal Emancipated

Religiosity High Low

Education system Informal Formal

Social class: criteria Hereditary Wealth

:mobility Seniority/education Income

Linguistic and ethnic backgrounds

Multilingual/many ethnic groups, often isolated

Linguistic homogeneity Infrastructures develop to link communities and promote homogeneitySocial Behaviors    

Societal tendencies Conformist Individualistic

Control mechanisms Religious/social Legal

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 societyuses 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

2. Work becomes “means to the end” work ethic

cultivated

5. Commitment to industrial society

increases

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 timeModern societies are urbanized—most of their

populations live in towns; rural populations more traditional in institutions and values

Modern urban values define national culturesDeveloping 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 BehaviorsSupply 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

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 BehaviorTable 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—customer-oriented

• 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, mineralsGeographic 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!