Measuring Globalization
Once a concept becomes critical to business, it's only a matter of time before someone tries to measure it. Now, globalization's time has come, allowing us to answer – or at least sensibly debate – a number of questions. How fast is it spreading? Which countries are taking the lead in globalization? How do individual companies compare with their competitors?
The recently released "A.T. Kearney/Foreign Policy Magazine Globalization Index" is probably the most ambitious effort so far to measure globalization. The index "offers a comprehensive guide to globalization in 50 developed countries and key emerging markets worldwide," according to Foreign Policy. To gauge global integration, it tracks a variety of indicators such as information technology, finance, trade, travel, and personal communication.
Not surprisingly, the index shows that there has been remarkable growth in global integration in recent years. It found, for example, that the number of international travelers has tripled over the last 20 years, foreign direct investment reached an all-time high in 1999, cross-border investments doubled between 1995 and 1999, the traffic on international switchboards exceeded 100 billion minutes for the first time in 2000, and the global online population continues to grow at a rapid rate.
More surprising is the finding that "global integration appears to be growing no more rapidly now than it has been for years, and its pace may even be slowing." The slowdown is tied to the financial crises that swept through Southeast Asia, Latin America and Russia in the late 1990s. The result has been a situation in which economic globalization slowed even as technological globalization continued to rise at a rapid pace.
The world's most "global nation" turns out to be Singapore, which gets very good grades for the degree to which its people have contact with foreigners, both via international telephone traffic and via huge numbers (as a percentage of its population) of international travelers. Like various nations ranked high on the index, Singapore is a small country that opens itself to goods, services, and capital that can't be found domestically. A nation like the Netherlands (ranked 2nd) also benefits from its geographical position on the Rhine river, "which knits together countries that account for almost three quarters of total Dutch trade." Among the other most global countries are, in order, Sweden, Switzerland, Finland, Ireland, Austria, the United Kingdom, Norway and Canada. The United States, in the 12th position, has a fairly high ranking considering the size of its land mass and population and its relative geographic isolation.
One interesting finding from the index is that globalization, contrary to the claims of its critics, does not seem to increase income inequality. In fact, the most global countries tend to have more income equality than their less-global counterparts.
A different study of globalization, this one by Subhash Jain and Piotr Chelminskione of the University of Connecticut, focuses on the world's 100 largest multinational corporations. They use three criteria to determine how global an organization is: sales outside the parent country, non-home-based assets, and the number of different employee nationalities. If a company has a 50% ratio in at least two of those categories, they consider it "global." In essence, they found that fewer than half of the corporations they studied could be considered global.
They also found that European-based companies are more likely than their U.S. counterparts to be global. While eight of the ten most global organizations are European, five of the ten least-global firms are U.S.-based and four are Japan-based. Overall, the study looked at 28 U.S. firms and found that only 10 are global. By comparison, all Dutch and Swedish companies met the global criteria, as did 90% of UK firms and 75% of Canadian firms. It's intriguing to see that the most consistently "global companies" are based in what the Kearney/Foreign Policy index found to be among the most "global nations" in the world.
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For other information on global issues, please see HRI's Global Staffing. This report looks at the issues surrounding international management assignments, specifically those of expatriates and repatriation.
The recently released "A.T. Kearney/Foreign Policy Magazine Globalization Index" is probably the most ambitious effort so far to measure globalization. The index "offers a comprehensive guide to globalization in 50 developed countries and key emerging markets worldwide," according to Foreign Policy. To gauge global integration, it tracks a variety of indicators such as information technology, finance, trade, travel, and personal communication.
Not surprisingly, the index shows that there has been remarkable growth in global integration in recent years. It found, for example, that the number of international travelers has tripled over the last 20 years, foreign direct investment reached an all-time high in 1999, cross-border investments doubled between 1995 and 1999, the traffic on international switchboards exceeded 100 billion minutes for the first time in 2000, and the global online population continues to grow at a rapid rate.
More surprising is the finding that "global integration appears to be growing no more rapidly now than it has been for years, and its pace may even be slowing." The slowdown is tied to the financial crises that swept through Southeast Asia, Latin America and Russia in the late 1990s. The result has been a situation in which economic globalization slowed even as technological globalization continued to rise at a rapid pace.
The world's most "global nation" turns out to be Singapore, which gets very good grades for the degree to which its people have contact with foreigners, both via international telephone traffic and via huge numbers (as a percentage of its population) of international travelers. Like various nations ranked high on the index, Singapore is a small country that opens itself to goods, services, and capital that can't be found domestically. A nation like the Netherlands (ranked 2nd) also benefits from its geographical position on the Rhine river, "which knits together countries that account for almost three quarters of total Dutch trade." Among the other most global countries are, in order, Sweden, Switzerland, Finland, Ireland, Austria, the United Kingdom, Norway and Canada. The United States, in the 12th position, has a fairly high ranking considering the size of its land mass and population and its relative geographic isolation.
One interesting finding from the index is that globalization, contrary to the claims of its critics, does not seem to increase income inequality. In fact, the most global countries tend to have more income equality than their less-global counterparts.
A different study of globalization, this one by Subhash Jain and Piotr Chelminskione of the University of Connecticut, focuses on the world's 100 largest multinational corporations. They use three criteria to determine how global an organization is: sales outside the parent country, non-home-based assets, and the number of different employee nationalities. If a company has a 50% ratio in at least two of those categories, they consider it "global." In essence, they found that fewer than half of the corporations they studied could be considered global.
They also found that European-based companies are more likely than their U.S. counterparts to be global. While eight of the ten most global organizations are European, five of the ten least-global firms are U.S.-based and four are Japan-based. Overall, the study looked at 28 U.S. firms and found that only 10 are global. By comparison, all Dutch and Swedish companies met the global criteria, as did 90% of UK firms and 75% of Canadian firms. It's intriguing to see that the most consistently "global companies" are based in what the Kearney/Foreign Policy index found to be among the most "global nations" in the world.
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For other information on global issues, please see HRI's Global Staffing. This report looks at the issues surrounding international management assignments, specifically those of expatriates and repatriation.