Technology plays a major role in international business today. It impacts in myriad ways the internal mechanisms of globalization, the operations of international trade and commerce, and the relative competitiveness of small and medium-sized firms (SMEs), multinational enterprises, countries, and multinational regions. Indeed, understanding global business today requires an appreciation of the nature and workings of technology in the 21st century.
Technology is a broad concept that refers to the means by which humans can control and adapt to their environment. The two general categories of technology are products and processes; the former are meant for final consumer markets and the latter provide the means to make the products. Technology needs to be distinguished from science: whereas science looks to expand knowledge of how the universe operates, technology is concerned with practical applications useful in the real world to do work more rapidly and efficiently. Consequently, technology is closely related to engineering, and the productivity that technology via engineering creates.
Technological Change
Technological change refers to the advance in the state of the art of making products and the carrying out of processes. There are different types of technological change, depending on the degree of change involved; that is, incremental or radical. Incremental technology change is generally perceived as modifying, refining, and improving an existing technology platform. It consists of relatively minor changes to an existing technology. The results of incremental change, when cumulative, are often significant. Cumulative technological change may take place within the research and development (R&D) department or may occur on a daily basis on the plant floor by departmental employees in the course of everyday business.
Radical technology, in contrast, introduces completely new designs that depart fundamentally from existing practice and platforms. In the modern corporation, radical technology is often the product of the R&D department and requires creative experimentation and out-of-the-ordinary insights. Incremental and radical innovation generally take place within novel economic and organizational contexts; incremental change generally remains tied to established applications and markets and operates within familiar organizational structures and networks; radical change often opens up new markets and displaces existing products and companies from their market position.
Nylon ushered in the age of synthetics that toppled natural fibers from their preeminent position; jet propulsion replaced propeller aircraft; steel replaced iron; electrification replaced steam power; and so on. This process is famously described by the economist Joseph Schumpeter as the “winds of creative destruction.” In recent decades, radical innovation often proves difficult to achieve for larger, established firms, with their complex and relatively rigid organizational structures. Since the 1980s, radical innovation has become centered in the small start-up firm, which often licenses intellectual knowledge from universities, and obtains support from a large and specialized venture capital community. Larger firms increasingly capture innovation through acquisitions of small, innovative enterprises.
In reality, the distinction between incremental and radical technology change is not always clear, especially in assessing their relative impact on an economy. The significance of individual, truly radical technology—such as the assembly line and the atomic bomb—cannot be denied. However, over time the cumulative effect—technical, economic, and even social—of incremental innovation can be equally, if not more, important. Recent studies suggest that the bulk of the aggregate economic benefits to society derived from the introduction of new technologies are realized only during the often lengthy product and process improvement stages, when incremental modifications are made to the initial dominant design.
Technology And The Industrial Revolution
While technological change occurred throughout human history, the Industrial Revolution marks a watershed in the history of technology. This revolution meant that productivity in the factories, on farms, and in homes increased at a pace unprecedented in human history. While elements of the Industrial Revolution can be observed as early as the mid-18th century, it emerged in full force in England in the first half of the 19th century. Mechanization of production particularly characterizes this period. England applied mechanization to a number of industries, most notably textiles and apparel. Indeed, America’s southern states shipped significant amounts of their cotton to England in the antebellum period to feed the latter’s textile plants. The fact that Europe’s Industrial Revolution supported the plantation economy of the southeast United States in the decades prior to the Civil War testifies to the geopolitical and socioeconomic reach of technological change.
The Industrial Revolution was first and foremost a revolution in mechanical technologies. In the post–Civil War period, the United States wrested world leadership in mechanization from England. The so-called American System—with its production based on interchangeable parts and standardization of products—brought manufacturing to a new level of sophistication and efficiency that was the envy of late 19th-century Europe. In the decades leading up to World War I, labor-saving technology, innovation in organizing work and process flow, and the coming of the mass production revolution continually raised the upper limit of efficiency with which factors of production were utilized to create final products and services. Productivity grew, not simply because of the introduction of new types of production technology onto the factory floor, but in the ability of enterprises to effectively link this technology to all phases of business operations, including supply, distribution, and marketing.
By the 1970s, certain industries that regularly expanded their productivity, such as power generation, reached the technological limit to these increases. Similar barriers to productivity growth are anticipated in computers and information technology by 2020. At that point, semiconductor chips reach the point of diminishing returns to specialization and Moore’s law begins to break down. Another technological revolution will then be required involving a new generation of advanced materials and hardware to break through these barriers and set semiconductors on a new technological path.
The Drivers Of Technological Change
The question of the root drivers of technological change has intrigued scholars for decades. The fundamental issue is why technology emerges when and where it does and why it takes the path it does at a given time and place. One might ask, for example, why the United States took over leadership from England in the Industrial Revolution in the late 19th century and what sustained America’s technological performance over time to the present day. In this age of globalization, why does technological activity appear in robust form in some places and not in others?
There are two main schools of thought on the root causes for technology change and observed differences globally in technological capability. On the demand side, economists and economic historians point to market pull as a potent driver of technology. In other words, technologies are created to satisfied society’s needs and wants. Within the United States, for example, the existence of an expanding and relatively homogeneous market followed the Civil War, one that demanded standardized, inexpensive products, and spurred the growth of mass production technologies to make standardized products at low cost. The production of firearms in the 19th century and Ford’s Model T automobile in the early 20th century is often cited to substantiate this point.
On the supply side, a number of theories for technological growth have been considered. As early as the 1930s, economists claimed that only large firms controlled sufficient financial, labor, and material resources to sustain large-scale technology creation. In this view, the lone inventor (i.e., Thomas Edison) no longer had a place in an increasingly corporate world. Evidence in support of this position was the rise of the research and development (R&D) function in large corporations, such as General Electric (GE) and Jersey Standard (later Exxon). Over the course of the 20th century, these departments housed increasing numbers of scientists, engineers, and technical personnel theoretically working in concert on increasingly costly technological innovation.
In some supply-side models of technological growth, scarcity of resources induces technological advance in an attempt to utilize limited amounts of resources more efficiently. Economic historians discuss relative, rather than absolute, resource supplies as the critical issue: a society creates technology that allows the substitution of more abundant (i.e., cheap) for scarcer (i.e., expensive) factors of production. In this view, for example, the United States outpaced England in industrial technology because of America’s higher labor (wages) to capital ratios that compelled the creation of mechanization and mass production to effect the substitution of less expensive capital for higher-cost labor.
Another type of resource-based model concentrates on the interaction between intellectual capital and innovation. In particular, it focuses on the rise of modern science and its importance for technology creation. By this reckoning, scientific advance in a field leads directly to technological growth in a related industry. Advocates of this position point to the creation of the atomic bomb and its roots in modern physics as a case in point. The point, then, of corporate R&D is to push forward scientific inquiry, the results of which could then be used for the generation of new products and processes. On the other hand, recent research by historians of technology and management scholars points out that case histories and empirical analyses of innovation past and present show that technology is not simply “science grafted on,” but operates according to a more complex scheme.
In fact, they claim that science and technology are actually two very separate communities with distinct cultures, each with its own specific language, goals, methods of approach, and reward systems. If the technological community dips into science, it does so occasionally and with great selectivity; it borrows only those elements from science that it can use, modifies them as technological necessity dictates, and then discards the rest. In this more sophisticated view of science-technology interactions, those individuals who can, through their backgrounds, interests, and experiences, span the worlds of science and technology and so serve as translator, so to speak, between the two communities, play an especially important role. Research continues on the functions and impact of such “gatekeepers” of technology creation.
Recent research by management scholars uncovers other supply or resource-based causes of technological change: organizational structure, social capital, and entrepreneurship. These models of technological growth, for example, downplay the role of the large firm in technology creation: the complex structures and professional barriers that have enveloped functional departments within the large corporation hinder critical communication between them and that is absolutely required for the essentially multidisciplinary process of innovation. Rather, it is the SMEs navigated by an entrepreneurial spirit and possessing a flexible, communication-friendly organization that now have taken the lead as centers of the most advanced technologies. Recent research by international business scholars points to the importance of entrepreneurship in SMEs as a future indicator of technology-based economic growth within the developing countries of eastern Europe, Asia, and Latin America.
Technology And Globalization
The relationship between technology and globalization is complex. Technological progress in information technology, telecommunications, the Internet, and transportation is often seen as a driver of the wave of globalization trends that we have experienced over the last few decades. However, one should be cautious in carrying this argument too far. It was, after all, soon after the end of World War II—that is, long before the rise of the microprocessor and World Wide Web— that average tariffs of the major industrialized economies began to dramatically fall and converge to the 4 percent level.
One can surmise that the desire of a war-torn world, in fear of the dire consequences of a World War III and the nuclear carnage that would be unleashed, pushed international agreements on trade and tariff policies in the 1950s, which, in turn, led to greater cooperation between, and convergence of, the major nations and their economies—the hallmark for advancing globalization. Moreover, the question of cause and effect is not clear-cut. It is possible, and some scholars do indeed argue, that it was this earlier move toward a global world in the years following World War II that established the appropriate market conditions that induced the need for new technology. In other words, the growing, coherent, unified global market that resulted from lowered tariffs and that emerged in the 1950s and 1960s, and the opening up of previously closed economies in eastern Europe and Asia, demanded—and therefore pointedly compelled—the creation of the electronic and telecommunications revolution of the 1970s, 1980s, and 1990s.
Effect Of The Technological Revolution
Whatever the root causes of the globalization movement might be, there is little doubt that the technological revolution that took place during the last three decades of the 20th century has had a major impact on its pace and even direction, and continues to do so up to the present time. Innovative materials handling equipment and computer-aided operations—along with standardized “containerization”—has made the loading and unloading of global products at the docks highly time and labor efficient.
Telecommunications technology and systems and the World Wide Web have more closely linked production centers and product markets internationally, rapidly and effectively spreading Western tastes and products to all parts of the world and allowing companies to outsource both blue and (increasingly) white-collar operations overseas to take maximum advantage of the benefits from the workings of comparative advantage. Information technologies have radically restructured the international monetary and financial systems to permit instantaneous recording and accounting of, and response to, transactions and events that occur virtually anywhere in the world. Technology is also a sine qua non of effective multinational strategies. Economies of scale are the handmaiden of “global” strategies; the linking of world markets through advances in transportation and telecommunications technologies facilitates the creation of global brands, the very foundation of “international” strategies; and flexible manufacturing systems lie at the very heart of “transnational” strategies.
The impact of these technologies on economies and societies has both encouraging, but also less sanguine, dimensions. On the one hand, technology-based globalization makes available a broader variety of products and services at lower costs to more people around the world than ever before; it provides the most precise and up-to-date economic, financial, and monetary information reflecting current conditions for accurate and strategic decision making by businesses than heretofore possible; it offers the prospects of economic growth to the less-developed parts of the world through integration with larger and more advanced market economies; and (according to some scholars) through the growing interdependence of international economies, it lessens the chances of another world war and provides negotiating leverage to mitigate and even defuse regional conflict.
On the other hand, some argue, the new technological world means lost jobs at home due to outsourcing; exploitation of labor and the environment by industrialized countries setting up operations in less developed areas, and a greater chance of international economic and financial crisis, because of the rapidity with which markets in one country or region feel the collapse of economies in other parts of the world. Additional factors may be an erosion in the economic, social, and cultural “uniqueness” of different countries and regions in the name of global homogenization of markets; and as the world has become smaller, increasing instances of “culture clash” between the so-called modern world and the less economically developed and fundamentalist “traditional” parts of society, with the September 11 tragedy and the ensuing war on terrorism serving as the prime example and harbinger of things to come.
Technology, Productivity, And National/ Regional Economic Competitiveness
Whatever the relative merits of arguments for the benefits and costs of technology in a global world, it is clear that international technology is a critical factor in a country’s or region’s ability to compete in world markets. As the World Economic Forum (WEF) emphasizes in its annual Global Competitiveness Report, technological prowess has become one of (if not the) most important indicator of a country’s or region’s current and future competitiveness, especially within the more developed parts of the world; and long-term productivity growth is commonly viewed as the speed limit for sustainable economic growth and prosperity.
More than any other type of technology, information and communications technology (ICT) ranks as the most vital of drivers of productivity. In the 1980s and 1990s in particular, these innovations entered into and transformed office and factory information and data processing systems. Memory and applications of computer technology expanded and new hardware and software products eased the adaptation of advanced systems to the workplace. These advances, in turn, had enormous advantages in workplace productivity, especially in such areas as data processing, inventory control, Just-in-Time (JIT) delivery, and the like. According to the WEF, the United States’ robust productivity growth during these years, and continuing up to the present, is the result of the diffusion and adoption of the most advanced information technologies by manufacturing and the retail and wholesale service sectors. At the turn of the 21st century, about three-quarters of economic growth within the developed countries of the West rested on adoption of advanced technology, mostly residing in the electronics and IT sectors.
Over the course of the 21st century, biomedical and energy technologies will play increasingly important roles in the economic prosperity of developed (and developing) nations. Innovation in the energy sector results in greater efficiencies (and lower costs) in transportation (such as the automobile); oil refining, power generation, transmission, and distribution; and household and commercial appliances. It also means finding substitute energy sources for more expensive and environmentally problematic fuels. Innovation in biomedical devices and systems and in health care will significantly influence productivity growth, in part because such technologies increase the quality in the performance, and extend the useful working life, of a society’s workforce.
Feeding into all these technologies are a new generation of advanced materials. Since the 1980s, these materials—in the form of advanced polymers, microcrystals, thin films, metals and metal compounds, advanced ceramics, and high-performance fuels—have been completely revolutionizing a broad spectrum of industries and their products and processes. These materials are particularly relevant to the advance of ICT, energy, and biotechnology, and indeed provide the very foundations for these sectors’ continued technological advances.
By 2000, more than half of ICT’s growth was attributable to advanced materials, and by 2030 this figure is likely to reach 85 percent. Advanced materials technologies will also continue to penetrate the energy and biotechnology sectors. Overall, by 2030, a significant portion of total productivity growth within the industrialized countries, and thus, their ability to remain globally competitive, will depend on their ability to develop a new generation of advanced materials and apply them to society’s industrial base.
Bibliography:
- Aiginger and R. Wieser, “Factors Explaining Differences in Productivity and Competitiveness,” Presentation given at the Competitiveness Conference, Brussels, Belgium (January 30, 2002);
- Stephen J. Andriole, Technology Due Diligence: Best Practices for Chief Information Officers, Venture Capitalists, and Technology Vendors (Information Science Reference, 2009);
- Paige Baltzan et al., Business Driven Technology (McGraw-Hill Irwin, 2009);
- Friedman, The World Is Flat: A Brief History of the 21st Century (Picador, 2005);
- Philipp Koellinger, “The Relationship Between Technology, Innovation, and Firm Performance: Empirical Evidence from E-Business in Europe,” Research Policy (v.37/8, 2008);
- Ellen R. McGrattan and Edward C. Prescott, Technology Capital and the U.S. Current Account (National Bureau of Economic Research, 2008;)
- L. Moskowitz, The Advanced Materials Revolution: Technology and Economic Growth in the Age of Globalization (Wiley, 2009);
- A. Schumpeter, Capitalism, Socialism and Democracy (Harvard University Press, 1942);
- Scott Andrew Shane, Technology Strategy for Managers and Entrepreneurs (Pearson Prentice Hall, 2009);
- World Bank, “Growth of Output,” World Development Indicators Database (World Bank, 2005);
- World Economic Forum (WEF), Global Competitiveness Report (WEF, 2007).
This example Technology Essay is published for educational and informational purposes only. If you need a custom essay or research paper on this topic please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.
See also:
ORDER HIGH QUALITY CUSTOM PAPER
Always on-time
Plagiarism-Free
100% Confidentiality
Special offer!
