Issue link: http://www.e-digitaleditions.com/i/59297
Research The Growing Pains of Globalization Just what does globalization mean for the global economy? Where are jobs lost or gained? How are wages affected? And, most important, how must companies structure themselves to survive? Andrew Bernard, a professor at Dartmouth College's Tuck School of Business in Hanover, New Hampshire, has focused his research on demysti- fying globalization and quantifying its effects on individual companies and workers. "Competition from low-wage countries will induce a long-run real- location of economic activity, away from low-wage, low-skill industries and toward high-wage, high-skill industries. Over time, the benefits of this competition include more efficient production, a wider variety of products, lower prices, and an improved standard of living," says Bernard. These benefits, he warns, will not reach all workers. "Our forecasting highlights that these net gains will not be shared equally by all workers," he says. "Although some displaced workers will be absorbed quickly by expanding industries, others will face prolonged bouts of unemployment or under- employment." Bernard's latest research explores how firms can survive the wave of imported goods that comes part and parcel with globalization. A fall 2005 paper, "Firm Structure, Multi- nationals, and Manufacturing Plant Deaths," which Bernard wrote with J. Bradford Jensen, deputy director of the Institute of International Eco- 52 BizEd MARCH/APRIL 2006 nomics, outlines the factors that are most important to a U.S. company's survival in a global economy: n Enterprises that are part of a multiplant firm are more likely to survive than single-plant firms. About 40 percent of surviving enter- prises belonged to multiplant firms; "Competition from low- wage countries will induce a long-run reallocation of economic activity, away from low-wage, low-skill industries and toward high- wage, high-skill industries." —Andrew Bernard of those that failed, only about 36 percent were multiplant firms. How- ever, there is one exception: Multi- national firms are actually more likely to close a plant if its production UPCOMING & ONGOING n CR in the Spotlight London Business School has launched initiatives to emphasize the importance of corporate respon- sibility to business success in the global market. It recently released a report, "Globally Responsible Leader- ship," a collabora- tion of academics and businesspeople worldwide, which was published by the European Founda- tion for Management Development. LBS mix is different from those of other plants in the firm. n Enterprises that are owned by multinationals or that are part of a larger firm are more likely to survive the tides of globalization than those that must go it alone. This may be, in part, because multinational com- panies are usually larger, older, and more productive than nonmultina- tional companies, Bernard explains. Again, there are exceptions: Mul- tinational ownership makes a shut- down of a domestically based plant or a recent acquisition more likely. n Finally, companies that export products or manufacture multiple products are more likely to survive than those that that rely on domestic markets or single product lines. "Our research shows that compa- nies must take advantage of oppor- tunities to work with firms in other growing markets, such as China," says Bernard. "Firms that stop mak- ing low-end products, partner with will host an international corporate responsibility conference July 13 to 14 to encourage further discussion and research regarding the devel- opment of strategy for corporate responsibility. LBS also was chosen by the European Academy of Busi- ness in Society to con- duct a three-year project that will explore cur- riculum development in corporate responsibility. For information about the upcoming confer- ence, visit www.london. edu/marketing.html. To read the report, visit www.globally responsibleleaders.net. H/O PHOTOGRAPHERS INC.