Advantages for East European countries by Internet labor

THE HISTORY OF SOCIAL NETWORKS

A presentation by Knut Linke, University of Latvia, at the My PHD International Conference:

“Does place Matter? Central and Eastern Europe in the global world of the 21. century”, 20-23 OCTOBER, 2011

SKALICA, SLOVAK REPUBLIC

Overview

Globalization Core regions Periphery areas Semi-Periphery areas Outsourcing approaches Transaction costs Examples

• Definition:

Compression of the world as a whole, involves the linking of activities and the centralization of working places through computer mediated interactions [1]

• New local and global business opportunities

• World System Theory by Immanuel Wallerstein

• Enhancement of the Dependency Theory [2]• Asynchrony dependencies between the economics of core areas, the

periphery areas and the complexities of country development

Globalization

• Dividing the whole into core regions, with possible semi-periphery and periphery [3]

• Core regions benefits most from the capitalist world economy

• Built first in the modern century in northwestern Europe within the areas of England, France and Holland• Factors: strong central governments & extensive bureaucracies• Ability to obtain control over international business and

networking for their goal to extract capital surpluses out of the proceeded trades

Core regions

• GAWV Index [4]:• Alpha: London, Paris, Tokyo and New York, Chicago, Frankfurt,

Hong Kong, Los Angeles, Milan and Singapore.• Beta: San Francisco, Sydney, Toronto, Zurich, Brussels, Madrid,

Mexico City, Sao Paulo, Moscow and Seoul.• Gamma (Examples): Amsterdam, Dallas, Dusseldorf, Geneva,

Jakarta, Johannesburg, Prague, Taipei, Washington, Beijing, Rome, Stockholm or Warsaw.

Core regions - GAWV

• Areas without a strong focus of government or which are settled in other states. From those areas raw materials and labor practices were provided to the core areas. The advantages for the core is in this situation unequal trade relations based on disadvantages in the periphery areas as also salary differentials [3].

Periphery areas

• Between core and periphery a semi periphery area can be established and exist.

• “These areas represented either core regions in decline or peripheries attempting to improve their relative position in the world economic system [3].”

Czech, Poland, Slovakia or Hungary

• “Higher productivity in the core areas can be reached by increasing the wealth in semi periphery areas. Networking technologies can affect communication processes in a variety of ways like speeding up communication and decrease costs for communication by bringing the distance in communication on a zero level [4].”

Semi-Periphery areas

• “Outsourcing is the act of transferring some of an organization’s recurring internal actives and decision right to outside providers”, a company is itself able to contract recurring activities [5].

• Cross-border mergers and alliances become more important in the ongoing globalization [6].

• Services can be provide decentralized and virtual (CSCW – Computer Supported Cooperative Work)• With the removing of local restrictions for cooperative working through Internet

this trend is additional supported. With this development, the working in and via networks, is supported, which allows normal societies to support the work in global networks through the Internet [7].

• Export of goods and service are a tremendous key value drive in the sector of the GDP from some areas.

Outsourcing

• “Think global, act local” – Theodore Levitt• Professor at Harvard Business School

• Possible areas for outsourcing: customer service, engineering, human resources, logistics, maintenance and janitorial, manufacturing, sales and marketing, administration, accounting or computer services [8].

• Outsourcing of: Out tasking (tasks), Selective Outsourcing (group of tasks), Application Service Providing, Business processes, Knowledge Process…

Outsourcing approaches

• Global networks support the necessary communication processes, which are "facilitated and sustained by an underlying network of individuals, institutions, and technologies that provide the means and mechanism for formulating, exchanging, and interpreting information and for creating the necessary linkages among these activities". [9].

• Those underlying networks contain additional components "which performs a function essential to the communication process“ and provides the capabilities for the network processes.

Global networks

• Capabilities are required to support the range of applications and services which can be provided from the network. This includes capacity, reach, and density for the communication speed, support of possible communication models, infrastructure costs, versatility, flexibility and accessibility in and to the network for increasing the general functionality.

• Those capabilities influence the transaction costs in the network

• Transaction costs for a network in a national economy can influence the success of an area. "High transaction costs not only reduce economic returns; they also inhibit economic growth. In Fact, when transaction costs become too high, markets cease to exist through a lack of profitableness [10]”.

Global networks & Transaction costs

• Saving on transaction costs can also increase the issue of bottlenecks in network.

• Key Performance Indicators are important for the monitoring of transaction costs

Transaction costsScale & Scope of the market

Location & Organization of Economic Activities

Transaction Costs

Social NormsGeographic Boundaries

Social NetworksPolitical

PrescriptionsProduct and Process

StandardsIT-based Networks

Coping with transaction Costs by D. Linda Garcia

• Arvato: Customer Service from Estonia, Ukrain, Bulgaria or Romania.

• Gameloft: Complete software development in Romania• Accenture: SAP Consulting from Czech Republic and

Slovakia• Headquarters of several companies in Ireland• Convergys, Vertex: International IT-Outsourcing

Examples

• [1] Mike Featherstone, Scott Lash: Global modernity’s, p. 35, Sage Publications, 1995.

• [2] Dirk Kläser: Aktuelle Theorien der Soziologie – von Shamuel N. Eisenstadt bis zur Postmodernen, Munich, 2005, p. 171.

• [3] Paul Halsall: Summary of Wallerstein on World System Theory, August 1997, 05/15/2011.

• [4] Peter J. Taylor, D. R. F. Walker, J.V. Beaverstock: Firms and their global service networks, In: Global Networks - Linked Cities, Routledge, 2002, p. 98-101.

• [5] Maurice F. Greaver II: Strategic outsourcing: a structured approach to outsourcing decisions and initiatives, Amacom, 1999, p.3-4.

• [6] Saskia Sassen: Locating Cities on a Global Circuit, In: Global Networks - Linked Cities, Routledge, 2002, p. 21 - 24.

• [7] Boris Holzer: Vom globalen Dorf zur kleinen Welt – Netzwerke und Konnektivität in der Weltgesellschaft, Department for Sociology, Ludwig-Maximilians-University Munich, 2005

• [8] George Ackerhof: The 'Market for Lemons': Quantitative Uncertainty and the Market Mechanism, In: Quarterly Journal of Economics 84, 1970, p. 488-500.

• [9] D. Linda Garcia: The Architecture of Global Networking Technologies, In: Global Networks - Linked Cities, Routledge, 2002, p. 40 - 57.

• [10] Steven M. Bragg: Outsourcing – A Guide to… selecting the correct business unit… negotiating the contract… maintaining control of the process, John Wiley & Sons, 2006, p. 129 – 365.

References

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