Free Trade, Business Strategy and Globalization

This paper links the economist's analysis of free trade with the business strategist's analysis of the forces behind the globalization of competition. It argues that, although the drive to globalization may seem different from the seeking of superior outcomes in competitive markets, this may be only because the modern reference point for competition is inappropriate. However, reference to classical ideas of competition shows that both the advantages of globalization, and its disadvantages, had been anticipated by classical writers of the eighteenth century, most notably by Adam Smith. That argument is supported with two main lines of reasoning. The first identifies globalization as the most recent stage in a process of stadial development. The second links global business strategy to the analysis of competition as a dynamic process in classical economics. These two ideas are combined, to provide the basis for a 'cumulative causation' argument. In this approach, expansion of production, innovation, and increasing returns, are mutually reinforcing, causing a progressive spiral of growth. However, it is pointed out that the same process can cause 'vicious circles' as well as 'virtuous circles'. If demand starts to stagnate, this tendency can be self-reinforcing, with firms who are not industry leaders going to the wall, and a tendency to monopolisation asserting itself. Thus the process of globalization needs to be guided; the 'virtuous circle' is not a necessary outcome

Classical Economic Growth:An analysis in the tradition of Adam smith

This is the first book to treat classical economic growth, as derived from the work of Adam Smith, in a modern analytical fashion. The themes discussed are firmly rooted in the tradition of classical growth analysis; the methods and concerns are modern. The necessary background in classical economics and growth theory is provided to make the book self contained. Then a modern approach is applied to the central themes of classical economic growth analysis: technical change, the division of labour, capital accumulation, thriftiness, the competitive process, increasing returns, sectoral disequilibrium, and the functional distribution of income. The book develops a sequence of models, developing numerous new results. This sequence starts with growth and accumulation at the industry level, moves to fluctuations and growth at the aggregate level, and then the bargaining power of capital, and de-skilling, are analysed in an aggregate model. A sectoral disequilibrium analysis, which emphasizes the role of increasing returns and extends the work of Allyn Young and Nicholas Kaldor, is provided. The book concludes by relating classical growth analysis to the problems of a modern post-industrial economy

Complex Actions and Simple Outcomes: how new entrepreneurs stay in business

In this paper, the entrepreneur within the new small firm is regarded as taking complex rather than simple actions, which determine whether he or she will remain in business. Thus, instead of simply choosing output, as in the standard analysis of the competitive firm, the entrepreneur may take actions which involve choices about markets, finance, organisation, innovation, and much else besides. To explore this approach, very detailed information on actions within small firms is required. It is shown how this was obtained by a fieldwork study of new business starts. Using data from this fieldwork, a rich statistical picture was created of actions within the new small firm. In turn this permitted econometric analysis of actions that help a new small firm to stay in business over a three year period. This indicates that the crucial actions which enable a small firm to stay in business are: the rapid repayment of debt and the willingness to sacrifice short-run profit for growth. There is also evidence that staying in business is fostered by tight control of the wage bill, especially by substituting other labour inputs for full time employees.</p