An Ideas-Based Online Magazine of the Global Network for Advanced Management

Future of Globalization: Cultural Heterogeneity

To coincide with the fifth anniversary of the Global Network for Advanced Management in April 2017, Global Network Perspectives asked faculty across the 29 schools in the network: "What do you think the future of globalization looks like? How will this affect the economy in your country or region? How is your school preparing students for this world?" Read all of the responses. Also, in a session at the anniversary symposium, a panel of experts—including former U.S. Secretary of State John Kerry—led a discussion of the future of globalization and its implications for business and management education. Watch the video.

K. Sudhir - Yale School of Management
K. Sudhir

What do you think the future of globalization looks like? 

We need to think about the future of globalization in both an economic and a cultural sense. Economically, in terms of global trade, technology will reduce geographic frictions, which will lead to greater long-term efficiency. Each country will evolve and adapt toward its comparative advantage and natural specialization; that evolution will continue to evolve as countries innovate. That same technology will allow people to maintain and adapt rich cultural heterogeneous identities within and across countries, even as we intermingle and develop a shared identity as global citizens.

I’ll focus first on the economic aspect. The technological advances in transportation, logistics, and communications will continue to improve trade flows, which will reflect the differential consumption potential and costs of production. Over the long term, on average, everyone wins as the economic output overall increases—consumers everywhere get products at lower prices overall; living standards in emerging markets rise; and firms in developed countries gain access to emerging markets. But in the short term, each technological advance that reduces the role of geographic friction creates winners and losers in every country, as production and consumption flows shift. These shifts create political pressure within each country to become selectively protectionist in the losing sectors, especially when the losers are visible and concentrated enough to be politically powerful—through either their numbers or their economic influence.

Right now, the nationalist, protectionist rhetoric is ascendant in the West. This is not a particularly new phenomenon in a historical sense, since with every wave of change, such calls for protection emerge. What is unusual now is the pairing of that reaction with the pace of technological change and the speed of economic upheaval. The West—which, for several decades, has benefited from free trade, and was the champion of institutions and trade agreements that support and facilitate free trade—has not been able to adapt quickly enough to benefit from the change without feeling the attendant pain through adjustments in the economy. 

Protectionism can slow down this pace of change, but fundamentally, the technological forces underlying globalization will continue to work toward making the world more efficient, with each country developing to its potential. Globalization should make the world a better place for all over the long term.

From the cultural perspective, will globalization homogenize tastes and demand across the world, destroying its rich cultural heterogeneity? Will a Coke or Pepsi or Hollywood come to dominate the globe? The evidence thus far suggests that the same technological advances—especially those around communications and transportation, which aid economic globalization—will also help preserve cultural heterogeneity, within and across countries. As with the long-tail effect of e-commerce, the ability to aggregate consumer demand for entertainment, information, and culture across distant geographies will mean that even when people migrate and travel, within or outside their countries, it will be increasingly more feasible for them to hold onto their cultural heritage. Immigrants around the world find that it is much easier to retain their food, language, and culture than it was a few decades ago, because social media makes it much simpler to find ingredients, books, movies, and so on across geographies. Our shared identity as global citizens will coexist with more nationalistic, tribal, and cultural identities. How this translates to either greater peace or greater friction is hard to predict, especially as we see the polarization of political viewpoints within democracies with the rise of targetable and selectively consumable media.

How will this affect the economy in your country or region?

Globalization has definitely created winners and losers in the United States. Among the losers are the blue collar, non–college educated workers who have lost manufacturing jobs and are facing a declining standard of living, even though they have benefited from the lower cost of consumption due to cheaper goods. Even educated workers in the “offshoreable” service sectors face pressure around wages and jobs. 

Among the winners are many multinational companies and entrepreneurial businesses in the United States, which have directly benefited from the economic growth across the world; the companies have also produced new jobs that otherwise would not exist. Business-process outsourcing and lower costs have meant more resources for productive investments like R&D and new product innovation for U.S. companies. Consumers across the board have benefited from the lower cost of consumption. 

The gains from globalization are, however, diffuse across sectors and consumers, and much less visible. The losses are visible, and more clearly attributable to globalization. Therefore, the losses dominate the political conversation more than the gains. In the short run, we have seen this translate to exaggerated protectionist and nationalist rhetoric such as “America First,” with traditionally free market and trade-friendly politicians—now willing to intervene in business choices—calling for pulling out of trade pacts such as NAFTA and the Asia-Pacific Trade agreement. While these choices may serve as a short-term palliative, they are likely to hurt U.S. competitiveness over the long term.

As other highly populated countries like China and India raise their standard of living, it is inevitable that the relative share of the U.S. in the world economy will decline. Yearning for the relative economic strength of the United States in the the 1900s or 1950s will be little more than a dream; innovations and ideas diffuse much faster today, and all countries with adequate human capital are likely to gain proportionately with those innovations. Trade is not a zero-sum game, however, and the gains from globalization will be greater for all countries if we can help those who lose in the short term to navigate the change through retraining for a changing economy, as well as a stronger social safety net. Protectionist policies may slow down this change, thus trading off immediate gains from efficiency to a slower, more gradual pace of change from the effects of globalization. 

How is your school preparing students for this world?

Given the economic and cultural effects of globalization, there are three things that an MBA student needs to work in this world:

1.  Cultural sensitivity to consumers and employees from across different countries and cultures. The Yale School of Management curriculum uses international cases, visits to other countries, etc., to help students appreciate cultural differences. Global Network courses and Global Network Weeks provide opportunities to engage and appreciate faculty and students from other geographies. The Master of Advanced Management degree brings in students from countries that are normally not well represented in our MBA program. This exposes our students to issues and opportunities across a more diverse array of countries. 

2.  The ability to work in virtual teams with divergent cultures, even when separated by geography, and still pull together cohesively toward common goals. The MBA program has a course focused on working in global virtual teams, and the course leverages partner schools from within the Global Network. Students participating in our small network online courses (SNOCs) gain valuable experience in working on teams with other students from around the world. 

3.  The recognition that market conditions, institutions, and even regulations are different, but also potentially endogenous—which firms may actively affect through interactions with the state and the communities in which they operate. The core MBA course on “State and Society” educates students on how businesses operate under a set of rules defined by the state and permitted by the society and its norms. It teaches students to not only understand how a firm needs to tailor its operations to these regulations and norms, but also to be actively involved in the creation/adaptation of such institutions, regulations, and norms.

Personally, I teach a small network online course on mobile banking across countries. The premise of this course is that even though the underlying mobile technology is similar, successful business models vary substantially across countries due to differences in consumer needs, competitive market structure, existing infrastructure, and regulatory environments. By placing students in virtual teams across different countries and continents, I am able to help them strengthen all of the above necessary skills to succeed in an interconnected, globalized world. Beyond analyzing the successful business models across countries through economic frameworks taught in the course, the students develop a more inductive learning approach from the cross-sectional and time series variations they observe in how business models evolve across and within countries. The presence of team members from different countries enriches and clarifies the importance of the differences across countries in developing business models suitable for a particular country at a particular time.