.Pankaj Ghemawat (2011), Boston (MA): Harvard Business Review Press, 386 p

Reis, Nuno Rosa

Revista Iberoamericana de Estratégia

PODIUM  Sport, Leisure and Tourism Review 
Vol. 3, N. 1. Janeiro/Junho. 2014 
 
 
 
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Revista Ibero-Americana de Estratégia - RIAE 
Vol. 14, N. 2. Abril/Junho. 2015 
e-ISSN: 2176-0756 
DOI: 10.5585/ijsm.v14i2.2188 
Data de recebimento: 09/01/2015 
Data de Aceite: 27/04/2015 
Organização: Comitê Científico Interinstitucional 
Editor Científico: Fernando Antonio Ribeiro Serra 
Avaliação: Double Blind Review pelo SEER/OJS 
Revisão: Gramatical, normativa e de formatação 
 
 
 
 
 
REIS 
 
 
 
 
 
 
 
 
BOOK REVIEW 
WORLD 3.0: GLOBAL PROSPERITY AND HOW TO ACHIEVE IT 
Pankaj Ghemawat (2011), Boston (MA): Harvard Business Review Press, 386 p. 
 
 
Nuno Rosa Reis 
School of Technology and Management 
globADVANTAGE – Center of Research in International Business & Strategy 
Polytechnic Institute of Leiria, Portugal 
Morro do Lena - Alto Vieiro 
2411-901 Leiria, PORTUGAL 
E-mail: nuno.m.reis@ipleiria.pt  
 
 
 
 
 
 
 
 
 
 
The financial and economic crisis the World has 
faced from 2008 was the starting point for the thorough 
and systematic review of the World Pankaj Ghemawat 
offers us in the book World 3.0. The global crisis, with 
strong effects in several countries and industries, has 
shattered the convictions on the benefits of 
globalization. Ghemawat proposes analyzing and 
provide a factual answer of 2 fundamental questions: 1) 
are the alleged benefits of market integration greater 
than market failures it arises? and 2) does it make 
sense to reduce – instead of increasing – the 
integration of markets to make the problems smaller 
and easier to address? The answer to these questions 
offer the readers a data-driven perspective of 
globalization and a simple understanding of the leading 
market failures commonly associated to globalization. 
Ghemawat also puts forward an avenue for the future – 
the World 3.0 – where there is no trade-off between 
further integration and greater regulation of markets. 
Ghemawat presents – in nearly 400 pages – a 
substantial wealth of data which supports an inductive 
approach: the author analyzes specific cases (e.g. 
market failures) and puts forward his conclusions and 
suggestions. The conceptual framework used to 
analyze the international business environment is the 
CAGE framework (differences in Cultural, 
Administrative, Geographic and Economic dimensions) 
which Ghemawat had developed in previous works and 
is extensively used in the book. Two other thought-
provoking concepts in the book are also noteworthy: 
“semi-globalization” and ADDING – a six-dimension 
scorecard which dissects the economic and social value 
of further integration. 
The book has three distinct parts. In the first 
part the author presents and explains the key concepts 
of the book, starting with an historic perspective of the 
World from the Prehistory until the present. The first 
phase, termed World 0.0, was characterized by a large 
number of very small societies, where personal 
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confidence was paramount and confidence-building 
institutions were absent. The second phase, World 1.0, 
developed in the 17th century after the Westphalia 
Peace with the emergence of nation states which 
replaced personal confidence by national institutions. 
The third phase, World 2.0, is the perfectly globalized 
world we arguably live in from the mid-19th century. 
Finally, the World 3.0 is also presented: a mix of 
greater market integration and also further regulation in 
some specific features. 
In the second chapter Ghemawat puts forward 
the concept of “semi-globalization”: using data on 
flows of information, people, products and investment, 
the author demonstrates the current globalization levels 
range from 10% to 25% and rather stable over time. 
Ghemawat’s perspective challenges the “Flat World” 
vision put forward by Thomas Friedman which predicts 
the end of distances, the homogeneity of preferences 
and the end of nation states. In fact, Ghemawat uses the 
data to support his criticism of “Flat World” and 
illustrates his argument with some examples of how 
distance (in all CAGE dimensions) still matters.  
The third chapter explores the effect of distance, 
delving into the effect of borders (between countries 
and regions of the same country), differences in foreign 
exchange, in administrative procedures and in 
consumer’s preferences to conclude distance still 
matters, even geographic distance. It is, once againg, 
noticeable the opposition to the “Flat World” concept 
where geographic differences are irrelevant and 
administrative distances and consumer preferences 
differences are negligible. 
The last chapter of the first part puts forward the 
scorecard to understand the benefits of greater 
integration and openness, the ADDING acronym: 
Adding volume, Decreasing costs, Differentiating 
goods and services, Intensifying the competition in 
oligopolistic industries, Normalizing risk (instead of 
ignoring it) and Generating and diffusing knowledge 
faster. Each one of the six elements is explained and its 
economic, social and cultural value is put forward. The 
author argues the benefits of further integration are 
much greater than the current estimates which neglect 
the combined effects and synergies of the six 
dimensions. 
The second part of the book dissects seven 
problems whose root (or intensification) is usually 
attributed to globalization. Throughout each of the 
seven chapters, Ghemawat demonstrates that the 
globalization of markets is not the origin of these 
problems. In fact, it is possible to mitigate some of 
these issues with greater integration whereas less 
integration (thus returning to World 1.0 or 0.0) is 
ineffective in addressing these problems. Chapter 5 
discusses the implications of globalization on market 
power concentration – one of the market failures 
usually considered by Industrial Organization (IO) 
researchers. Ghemawat considers globalization has not 
increased concentration in most industries since 
distance still matters in several products. As for 
commodities, concentration may be worrisome and it 
has been increasing: however increasing levels of 
globalization will lead to increasing rivalry in the 
industry (the ‘I’ in the ADDING acronym). Therefore 
globalization does not increase market power and may 
even contribute to address that failure. Chapters 6 and 
7 delve into other market failures usually analyzed by 
IO, global externalities and global risks. In both cases a 
similar argument is advanced: globalization is not the 
cause and the problems may only be addressed (e.g. 
global warming) with further integration and 
cooperation between countries. 
Chapter 8 addresses global imbalances arguably 
caused by globalization analyzing people and capital 
flows. Ghemawat concludes migratory flows are 
important to correct the effects of aging population and 
may augment the workforce quality in many cases. 
Since greater migratory flows occur between 
developing countries (not to developed countries), 
greater integration should lead to benefits instead of 
imbalances. As for capital flows, Ghemawat proposes 
the other facet of World 3.0: some regulation to limit 
the excessive capital movements. The author 
thoroughly analyzes the specific case of the USA-
China relation (China is the USA main creditor 
whereas America is China’s biggest market, in a 
symbiotic relation termed “Chimerica”) as a specific 
case of imbalances which may have nefarious 
consequences in the future. 
The last three chapters of the second part clarify 
preconceived ideas which are used as emblems by anti-
globalization supporters. Chapter 9 focus on labor 
market and the common fear globalization leads to 
works exploration. Although recognizing globalization 
may cause unemployment in some industries, 
Ghemawat underlines there is no global labor market. 
He goes further to suggest the importance of protecting 
people (instead of jobs) through greater productivity 
and workers qualification. Chapter 10 addresses the 
supposed oppression exerted by countries and firms 
which endanger democracy. On one hand, firms do not 
seem to limit individual freedoms (the idea is 
developed in the following chapter). On the other hand, 
Ghemawat demonstrates the USA do not have military, 
economic and financial supremacy and emerging 
countries suggest the future will be multipolar, not 
hegemonic. It is also suggested globalization and 
democracy are mutually reinforced. Finally, chapter 11 
focus on consumer preferences homogenization and the 
emergence of a dominant culture, with a special 
attention to multinational firms. Some cultural 
differences are acknowledged but the author highlights 
the role of education and contact between cultures to 
construct a more harmonic existence. A dominant 
culture is also posited not to exist: in fact local cultures 
are relevant event to multinational firms such as 
McDonald’s, Coca-Cola and KFC which adapt their 
products to meet local preferences. 
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World 3.0: Global Prosperity and How to Achieve it 
 
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Vol. 14, N. 2. Abril/Junho. 2015 
 
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The last part of the book presents the actions 
required to build World 3.0. Chapter 12 sums the 
arguments described in the book and advances six 
systematic proposals which combine further integration 
and greater regulation to overcome market failures and 
fears. Chapters 13 and 14 present a broad set of 
proposals for countries and firms which may lead them 
to World 3.0. Ghemawat uses examples (e.g. the cases 
of small countries without natural resources such as 
Andorra or countries rich in natural resources such as 
Nigeria) to illustrate the model validity. The book 
concludes with a chapter dedicated to people and the 
actions which may be taken to destroy myths and 
prejudices. Ghemawat underlines psychic distance still 
matters and demonstrates the effect using the example 
of media attention to tragedies (for USA media, one 
death in Europe “is worth” as much air time as 45 
deaths in Africa). Therefore he proposes three stages to 
decrease psychic distance and improve the relation 
with others: Awareness, Acquaintance and Altruism. 
The executives, managers and students – 
especially those with international orientation and 
interest – will find in this book an interesting base to 
better understand globalization, its facts, challenges 
and benefits. On one hand, the information presented 
allows for an in-depth knowledge of the international 
business environment, contributing to improve firms’ 
international performance. On the other hand, the 
proposals advanced are particularly useful in market 
selection decisions and managers’ selection and 
training for international operations. 
Although useful, it is important to underline 
some issues which arise upon reading this book. On 
one hand, the data presented may have a biased 
interpretation: for instance, the conclusion that 
domestic transportation is responsible for the majority 
of global pollution seems to neglect the effect of 
imported goods and global value chains on the upsurge 
of domestic transportation. On the other hand, criticism 
to completely globalized world enthusiasts is rather 
frequent, especially to Thomas Friedman and his “The 
World is flat” book. Even though the divergence of 
visions is understandable, sometimes the comparison 
seems to go beyond simple argumentation to reach an 
intellectual assault on the current vision of 
globalization. Finally the self-flattering tone of the 
book – especially when presenting the frameworks 
developed by Ghemawat, such as CAGE – may convey 
the readers a message of arrogance towards intellectual 
adversaries. 
Overall, the book is written in a clear and 
accessible way even to non-specialists. It has an 
interesting wealth of data and demystifies rather 
common misconceptions of globalization, especially in 
the first part of the book. However, the second part has 
a set of overly descriptive chapters (e.g. chapters 7, 8 
and 9) which render the reading monotonous and call 
for persistence not to give up. Nevertheless, the 
message of the book is important and useful: there is 
still much to gain in continuing the efforts of further 
integration. For firms, and especially for managers, is 
also worth noting that despite the substantial gains of 
international operations differences – cultural, 
administrative and in other institutions – still matter 
and have a profound impact in firms’ performance. 
 
 
 
 
 
 
 


World 3.0: Global Prosperity and How to Achieve it

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