2 management - School of International Business and ...

141 The Puzzle of Globalization
industry (e.g. Japan, China). Unlike the aircraft industry where intensive international knowledge
spillovers occur within the globalized fragmentation of the value chain and where R&D is closely
connected to the dispersed component production (e.g. final assembling, engine production, avi-
onics, landing gear), other industries separate R&D geographically from the production process
by establishing autonomous laboratories in different countries (e.g. software industry, biotech and
chemical industry). This strategy allows exploiting talents on a global scale as well as adapting
the final products to the needs and culture of national/regional markets (e.g. Microsoft’s global
R&D model). The next wave of international knowledge spillovers seems to be the increasing im-
portance of the »Not Invented Here«strategy. Knowledge is acquired by cross-border acquisitions
resulting in new international knowledge spillovers. This strategy may also allow entering already
existing local/regional clusters.
Summarizing the two models there is strong evidence that knowledge intensive cross-border
transactions, such as licensing, high-skill labor migration, formal and informal networks, R&D-ori-
ented FDI, mostly take the form of interactions between urban regions/clusters or MNCs rather
than countries [Gumbau-Albert/Maudos, 2009].
2.4 OPENNESS VERSUS PROTECTIONISM
AND THE POWER OF NATIONS
Traditional theories of the evolution of the nation state underline the assumption that political borders
determine economic borders. Modern theories challenge this assumption by arguing that the econ-
omy is globalizing and as a result weakening the nation state. Openness via global agreements on
abolishing trade and investment barriers or via institutionalized regional integration systems reduces
the autonomy of governmental institutions. Experiences have taught that economic crisis in open
economies tend to produce contagion effects. Protectionism might celebrate a come back without
strengthening the role of the state. This may be due to the increasing power of highly concentrated in-
dustries demanding a promotion policy on the export side and a protectionist policy on the import side.
The financial crisis that started in the U.S.A. in autumn 2007 and rapidly spread over to other countries
delivered the latest proof of the global economic and financial interdependencies and the weakness of
the nation states. The costs of the stimulus packages will leave the burdens of these actions to future
generations. The credibility of public institutions might suffer significantly.
Despite these concerns the history of opening-up economic borders after World War II is impres-
sive. The idea of establishing an institutionalized supranational system of rules that replaces the
national beggar-my-neighbor policies proved to be successful in gradually moving the world econ-
omy toward free trade and integration. In 1947 23 governments accepted provisionally the General
Agreement on Tariffs and Trade (GATT). On January 1st, 1995 this agreement was integrated into
the newly established World Trade Organization (WTO). The basic principles of the GATT are: