International Business relate to: International trade theories attempt to explain motives for trade, underlying trade patterns, and the ultimate benefits of trade. The western European notion of mercantilism theorized that nations, not individuals, should be involved in the transfer of goods between countries in order to increase the wealth of home countries, specifically through the accumulation of gold. The classical theories of absolute and comparative advantage looked at cost efficiencies of production as motivators of trade. Weaknesses in their basic assumptions led to the development of the factor endowment theory, which explains trade among nations on the basis of factors, or inputs, used in production, such as land, labor, capital, technology, facilities, and distribution networks. Recent theorists have found that individuals, rather than nations, initiate and conduct trade. Further, traditional theories ignore the importance of technology and marketing and management skills. The international life cycle theory offers different motivations for trade based on the four stages of a product: innovation, growth, maturity, and decline. Other modern theories explain foreign investment as a natural competitive response through which f irms seek to optimize market opportunities offering production advantages, economies of scale, and favorable capital markets, or as firms reacting to the investment decisions of competitors by following the leader. Economic development theories attempt to explain the transition from an underdeveloped economy to a developed, manufacturing-oriented economy. Classical economic theory limited a nation’s development and economic growth to its supply of land and labor and discounted any effects of technological improvements that might create greater efficiencies. Rostow’s theory of economic growth attempted to relate economic development to changes within society and identified five stages of development: traditional society, preconditions for takeoff, takeoff, the drive to maturity, and the age of mass consumption. The big-push theories argued that only synchronized uses of capital to develop wide ranges of industries in combination with an overall popular effort would propel developing nations into more developed stages. Alternatively, Hirschman’s strategy of unbalance advocated selective investment in developing countries to create backward and forward linkages. Economists such as John Kenneth Galbraith and Amartya Sen have also contributed to the understanding of developmental economics, and Sen has come up with a framework for development that is useful for governments deciding on policies in the developing world. Political and economic systems run along a continuum that has democratic, free-market economies on one extreme and totalitarian, centrally planned economies on the other. Nations have been divided into three categories: the first, second, and third worlds; these distinctions are based principally on gross national income per capita criteria. A fourth world , or shadow world exists where many transactions are not included in official GNI figures, leading to a significant understatement of real national wealth. Other social criteria influence categorization, such as life expectancy, infant mortality levels, literacy rates, and health and education standards. Trading patterns have shifted away from industrialized countries toward less-developed and newly industrialized countries. Increasing competition from countries such as China and India are challenging the preeminence of the United States.
Posted on: Fri, 18 Jul 2014 13:51:43 +0000
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