Globalization, Specialization and Innovation Dynamics

Economic globalization means the combined growth of trade and foreign direct investment (FDI) on a worldwide scale. FDI grew particularly in the 1980s and 1990s, when the role of multinational companies started to grow strongly for various reasons:

• Privatization in many countries around the globe has created a larger menu for international mergers and acquisitions. For example, the infrastructure sector in Europe, Asia, Latin America and Africa has become strongly shaped by multinational companies.

• Regional integration in North America (NAFTA), Latin America (MERCOSUR), Europe (EU, most notably the full establishment of the EU single market in 1992) and Asia (ASEAN) created larger regional markets which in turn, raised the optimum firm size — this in turn implied strong motives for mergers and acquisitions, including international M&As.

• Opening up and systemic transformation in China in the 1980s and in Eastern Europe as well as the former Soviet Union have enlarged both the opportunities for trade and foreign direct investment.