Global enterprise and innovation Essay Example | Topics and Well Written Essays - 2750 words

Global enterprise and innovation - Essay Example Because of the extensive trade in goods and services, and because of the flow of capital and technology, the markets have become interdependent. This new structure, as a consequence of globalization is the result of the control measures and dominance adopted by the MNCs. Globalization has brought about tremendous changes in the ways that MNCs operate. Through innovation in various fields they have been able to generate new opportunities and challenges for the developing world. Globalization and Internationalization While globalization and internationalization are interchangeably used, they are distinctly different. Globalization is a worldwide process which implies that tastes, needs and wants become standardized across cultures. This occurs as technology, migration, and education become globally dispersed (McCabe, 2001). This suggests that globalization is the process of uniting the nations as members of one world, as the world shrinks. Internationalization, on the other hand, invol ves information of particular countries which in turn impacts the development of relationships in several sectors. These sectors include business, education, and social and cultural relationships. The concept of One World or globalization has driven innovation as companies like McDonald's have been accused of Macdonaldization of societies. While they export products and services, they are actually exporting American cultural identities. Economies are rapidly evolving and the effects of globalization are clearly visible; globalization is inevitable. Malaysia’s economic policy Among all the developing economies, Malaysia’s economic policy is considered worth emulating (Ritchie, 2005). The economic policies of Malaysia were liberal as it served to attract FDI. This drove a technological change, facilitated specialization and gave the nation comparative advantage. As the Malaysian policies liberalized, it helped in the reallocation and restructuring of resources in differe nt forms of labor, capital and technology which also facilitated FDI-led growth. FDI is a special form of capital flow which is expected to generate tangible assets and brings with it technology to the developing countries (Michi, Cagatay & Koska, 2004). Intangible assets like managerial skills also come with FDI which is a necessity for the developing nations. FDI is also the transfer of organizational knowledge from one country to another (Zhang, Zhang & Liu, 2007). FDI motivation and risks The motivation for the MNCs to invest in a developing economy would include the local and the global factors (Albuquerque, Loayza & Serven, 2005). The local factors include the benefits from location and the cost factors while the global factors explain the dynamics of the cross-section of the FDI. By investing in developing countries, MNCs can take advantage of their marketing and technical know-how, and managerial expertise (Athukorala, 2009). FDI is based on long-term profit considerations a nd carries with it the advantage of influence and control. Nations must be able to offer comparative advantage when they attract FDI. The MNCs would like to achieve economies of scale when they decide on the location for FDI. However, FDI in developing economies is beset with risks and the MNCs must have the capabilities to mitigate these risks. MNCs can face significant adjustment costs but prior experience helps to overcome this (Goerzen, 2005). Economic uncertainties can pose