Business History Analysis of Globalization Essay

Business History Analysis of Globalization - Essay Example Is globalization restricted to the business world only? The concept of globalization has entered almost in all areas of our lives be it business, language, education, culture, lifestyle and other psychological and social behavior patterns. It is argued that we are fast losing our unique identity and sense of belonging and are moving towards globalized identity. This paper aims at studying the historical background of multinationals and the creation of global capitalism. It will also study the pattern of its growth that is believed to be non linear and will try to find if the global firms and global capitalism really is inevitable. Multinationals and Global Capitalism Multinationals are firms that operate in more than one country. They are the main source of flow of investment, trade and knowledge that transcends boundaries, which is the essence of the globalization process. Multinationals only proved to be the beginning of the globalization process. Globalization in the last two deca des has entered every aspect of our lives in unimaginable way. Yet its extent and background is still debatable. Globalization is referred to as a process of increasing integration in the civilized world (Gills et al. 2006). There are differing opinions about the history of globalization ranging from world war two to as old as sixteenth century. The extent of globalization today is also debatable some regard world as fast becoming borderless while others regard it just as a fallacy. The impact and consequences of globalization is also two tongued sword. On a positive note it has lead to convergence between countries but on a negative note it has resulted on more inequalities between countries and leading to erosion of sovereignty of nations. There are differing viewpoints about causes of globalization as well. Some believe that developments in the communication and transport technology is responsible for globalization while others regard businesses and governments as the main force behind globalization. According to this viewpoint multinationals has proved to be the forerunners of globalization (Toyne et al, 1997). Multinationals The role of multinationals in globalization cannot be fully understood without the sound understanding of multinationals and its historical background. The term multinational enterprise was used in the latter half of the twentieth century although firms had started to invest offshore in the nineteenth century. A multinational is an organization that has its control operations and income generating assets in more than one country. Home country of multinationals is called home economy and the other countries where they invest are called host economies or host countries. Usually the no of host economies should exceed five or six and they should be of considerable size as well for an organization to be called multinational. If a firm’s international operations are very extensive then it is called global organization. A multinationa l firm makes two types on investment in the host economy, portfolio investment and foreign direct investment (FDI). Portfolio investment is the acquisition of securities with no involvement in the management of the host economies. FDI involves control over the management as well. FDI gives ownership