Development of Nations in the Global Economy

This paper will focus on how people react to the different types of innovations used in developing countries as they attempt to develop in ways that allow them to compete on a global basis. Many have had the perception that the international community should be doing more to close the gap between developed and developing countries since the aid per capita to developing countries has fallen by 6 percent since its peak in 2010 (OECD, 2013). One could argue that developing countries are at a disadvantage and that the scales are tipped against them. In order to address the different types of inequities that may arise, those in the international business arena must develop policies and procedures that address these issues and create a sense of fairness for everyone involved. Issues such as business ethics, world viewpoint, corporate social responsibility, and trade liberalization will be discussed in order to develop a framework for how developing countries can be positioned to compete with established countries.

Keywords Biotechnology; Business Ethics; Cartagena Protocol on Biotechnological Security; Corporate Social Responsibility; DuPont; Genetically Modified Organisms (GMOs); Multinational Corporation; National Technical Commission on Biosecurity (CTNBio); Social Responsibility; Trade Liberalization; World Development Report

International Business > Development of Nations in the Global Economy

Overview

According to the 1999 World Development Report, there was a growing gap in GDP between the developed and less developed countries (World Bank, 1999); however, more recent data suggests that, overall, this gap is shrinking, especially given the rapid economic development of China, India, South Korea, and other Asian countries (World Bank, 2013). Many had the perception that the international community should be doing more to close the gap since the aid per capita to developing countries was reduced by one third in the 1990s; aid rose in the early part of the 2000s, but has shrunk since 2010 (OECD, 2013). “As developing countries made strides to open their economies and expand their exports, they were faced with significant trade barriers” and no aid or trade (Stiglitz, 2000).

"To many in the developing world, trade policy in the more advanced countries seems to be more a matter of self-interest than of general principle." (Stiglitz, 2000, p. 438). It appears that good economic analysis is used solely in favor of the advanced countries in order to support their self-interests. Given the number of opportunities for developing countries to be placed at a disadvantage, supporters of trade liberalization argue that standard economic analysis would benefit a developing country. Common economic theory reasons that losses in one sector will be gained in another sector (i.e. job loss in one sector will be offset by job creation in another sector). However, this relies on the assumption that the markets are functioning properly, which is not always the case. As a result, the anticipated jobs may not be created in another sector, and the process becomes unbalanced. When situations such as this arise, supporters of trade liberalization must be prepared to respond to the resultant challenges.

One could argue that developing countries are at a disadvantage and that the scales are tipped against them. In order to address the different types of inequities that may arise, those in the international business arena must develop policies and procedures that address these issues and create a sense of fairness for everyone involved. Many believe that there should be standards for social responsibility and ethics in order to make sure that the developing countries are not exploited. Having a formal global approach to these types of challenges can ensure a sense of fairness for everyone involved in the process.

Representational Approaches

Khan (2007) introduced a conceptual framework that identified four representational approaches to understanding how social inequities surface in developing countries as they attempt to venture into international business. When the model was created, it was established that there are many parties involved in the process. Since representation ranged from local workers to international mass media organizations, each party was defined in terms of geography. The two categories introduced are locals and foreigners. Locals were defined as individuals or entities that are primarily located in the developing countries. Locals are very diverse and have different perspectives and interests. Individuals falling into the "foreign" category are those that do not fit into the local category. Significant players in the foreign group would include international businesses that are directly involved in specific situations, and their critics.

Four Approaches to International Business

Both of these groups are considered to be "representers" as they work to resolve issues that arise. Each situation is analyzed and evaluated according to the representers' role in the situation and the worldview of the situation. The approaches attempt to conceptualize the representation of the ethical issues involving international business in the developing world. The four different approaches are:

Approach 1 (No-speak): Foreigners are the representers and the issue is expressed from a foreign world viewpoint. The local residents have no voice and they have no input into the world view. Local world views have no place in the development of issues, and the local experience is not considered relevant in social equity issues. Most international business research follows this approach (i.e. Hofstede's Culture's Consequence).

Approach 2 (Us-speak): The commonality between this approach and the first approach is that the foreigners are the representers. However, the difference is that the world view incorporates the local experience. This approach attempts to represent local realities (local view) in a way that the local inhabitants understand the situation. In many instances, the representer places himself in the local's position and attempts to articulate the viewpoint based on the local's perspective.

Approach 3 (Same-speak): The locals are the representers and the world view is the same as the foreigner's perception. Locals represent themselves based on one or more world views that originate from the West (i.e. modernism, post-structuralism, secular nationalism). Many of the most influential representations of ethical issues that affect international business in developing countries are based on this approach.

Approach 4 (Other-speak): Locals are the representers, and international business issues are explained in the context of local viewpoints. When evaluating this approach, representation is being explained by locals using local concepts.

These approaches provide an explanation as to how foreigners and locals perceive the severity of social issues; an important element to the interactions in the business community. Multinational corporations have to understand the culture and values of the countries in which they do business. Otherwise, the corporation may suffer as a result of conflict on social and business ethics issues. There has to be some sense of social responsibility on the part of the multinational corporation.

Application

Developing Social Responsibility

According to Griesse (2007), "the introduction of new agricultural biotechnologies has raised a number of concerns regarding the safety of the product for human or animal consumption, the affects the product may have on the environment, the question of patenting living organisms and the power large corporations have over cultivation and food supply" (p. 103). These concerns have created much debate and division in the scientific research field as well as the international business community when it comes to deciding on the best way to feed the growing world population. In addition, many believe that these new technologies force the world to re-evaluate its views on social responsibility. Some of the key questions that need to be addressed include:

1. What is the role and responsibility of corporations when laws do not address the issues of the new technologies?
2. What are the procedures that governments, scientists and corporations should follow when developing and approving new technologies?
3. What are the new issues that arise as a result of new technologies?
4. Is there a difference in how foreigners and locals view and make use of the new technologies?

Historical Stages of International Business Practices

In order to satisfy world view concerns on socially responsible issues, many organizations have implemented policies that address the concerns. This position was seen as a survival technique. Many corporations have realized that if they did not change their practices, they would be out of business. Sandman (1990) provides an explanation of how corporations have transformed the way they do business. In his opinion, there have been three historical stages.

1. Stonewall Stage — Corporations ignore any responsibility for what happens in a community as a result of their actions.

2. Missionary Period — There is an effort to gain favor in the community by promoting the social and environmental benefits of the product.

3. Dialogue Stage — There is awareness that the local community and world view may have valid concerns. The corporation opens lines of communication with the public and initiates a process that will repair any damage that has tarnished their image.

Further analysis was conducted by Swift and Zadik (2002) when they defined the three generations of corporate business responsibility. Their work was based on an evaluation of several organizations in Western Europe. Every organization starts at the same base stage where the primary concern is to be in compliance with established laws and regulations. When an organization decides to move to the first generation of CSR, it implements practices and policies that will protect the organization from risks and crises. Actions are reactive as the organization takes a defensive position based on a risk management philosophy.

However, when the organization is ready to move to the second generation of CSR, there is a sense of wanting to be proactively responsible for their actions. The organizations start to see a favorable relationship between social and environmental responsibility and financial gain. By incorporating CSR into their business, there is an opportunity to add value to the product or service, improve the corporate image in the local community, and increase the corporation's ability to attract and retain a qualified workforce (Griesse, 2007). At this stage, there is a systematic approach to integrating CSR throughout all of the business operations.

The third generation is symbolized by the creation of partnership and communication between various stakeholders, especially at the international level. At this stage, corporate social responsibility is no longer an organizational issue. Rather, there is a desire to establish relationships that benefit everyone as the world economy strives for global development. "Social responsibility is seen as part of the very fabric of the economy, in which non-governmental organizations (NGOs), unions, different levels of government, community organizations, industry, and business form a system that strengthens the country's competitive edge" (Griesse, 2007, p. 104).

E.I. DuPont & GMOs in Brazil

The perspectives that have been introduced by the researchers provide a foundation and understanding as to how organizations have evolved over time in their realization of how being socially responsible benefits the corporation and the world. The next section of the application segment will provide an overview of how one organization handled a topic dealing with social responsibility in a host country. The review will detail how E. I. DuPont handled the concern regarding genetically modified organisms (GMOs) in Brazil, one of the largest agricultural countries in the world.

The commercialization of GMOs in Brazil dates back to 1998 when Monsanto received approval for its GM seed, "Roundup Ready." However, the Brazilian Institute for Consumer Defense filed a suit against the release of the product. In addition, the opposition Workers' Party voiced their concern about the use of GM seeds. Many groups joined together to fight the commercialization and cultivation of GM seeds, and they developed arguments to support their position. Some of their concerns included:

1. How transgenic plants could pose health risks that have not been studied.
2. Transnational organizations have not provided sufficient information on their products.
3. No technical regulations for the secure use of these products.
4. GM seeds represent a new form of technology and can have unknown consequences.

However, there are two sides to a story and there was a faction that supported the use of GM seeds. Some of the arguments provided by the proponents were:

1. The exaggeration of risks for transgenic plants by ecologists and activists. Supporters saw these groups as exploiting emotionalism and irrational perspectives in order to validate their position.
2. GM seed crops use fewer toxic materials
3. GM crops mean lower costs for farmers because they don’t require as many agrochemicals
4. GM crops may offer special dietary benefits
5. GM crops could be used in the production of plastics, which would reduce the need to rely on petroleum.
6. Brazil's ability to compete in a global economy would be hindered if the use of advanced technology was minimized.

The Case of DuPont

DuPont is an established corporation and has been around for more than 200 years. The corporation has a history of trying to do the right thing and giving the perception that it is a responsible company. DuPont has invested time, effort, and money in implementing business policies that focus on social and environmental issues. In addition, the organization recognizes that a positive public image in the local community is important.

DuPont has had a presence in the Brazilian community since 1937, and it began work in the GMO field during the mid-1980s. However, Monsanto was the primary corporation fighting the battle for commercialization of GMO. DuPont recognized the struggles that the organization was encountering and decided to implement policies that would address the concerns of the community. Some of the initiatives included the establishment of a Biotechnology Advisory Panel consisting of independent consultants from universities, NGOs and the government sector of various countries, and partnership with major food and seed companies in forming the Conselho de Informacoes de Biotechnologia (CIB), Biotechnology Information Council.

These two strategies were proactive efforts of DuPont that aimed at maintaining their image as a socially responsible multinational corporation that recognizes the sensitivities and viewpoints of the host country. The purpose of the council was to diffuse scientific information on biotechnologies that would promote the advantages of GM technologies and lobby the government for the release of GM seeds (Guerrante, 2004). The purpose of the panel was to assess DuPont's social and environmental commitment as well as to provide guidance during the various phases of product development. DuPont’s campaign was successful, and in 2008, Brazil allowed for GMO’s to be used. Some of the recommendations that the panel has suggested to DuPont were to:

• Make responsible statements when accidents and genetic transfer to wild plants occur;
• Share plant genetic resources, especially in developing countries;
• Develop biotechnology in developing countries that would benefit the poor;
• Increase transparency and seek outside perspectives;
• Use its influence to increase transparency and include external perspectives in other industries;
• Provide access to scientific knowledge assessment;
• Exercise the precautionary principle;
• Examine how lessons learned can be applied to emerging issues; and
• Continually work to identify new issues (DuPont, 2002).

Viewpoint

Innovation Championing Strategies

In order for economies to grow, there must be change. Unfortunately, all communities do not readily accept innovation (i.e. the biotechnology example). Many of the scenarios discussed in the DuPont case study focused on external groups who either supported or criticized the GM crops. However, multinational corporations should be concerned about internal reaction to change. Some organizations hire from the local community and these employees may be aligned with the views of their country. Therefore, there may be a need to create innovative championing strategies in order to get buy-in.

Shane, Venkataraman & MacMillian (1995) have emphasized the necessity of championing strategies. As corporations continue to explore global opportunities, managers will need to "ensure that the process of innovation championing occurs in culturally appropriate ways in each of their national subsidiaries" (p. 948). A champion is a person that promotes the development of new ideas within an organization. There is a need for championing when there is resistance to change. Based on the example provided in the application section, multinational corporations may be required to promote new initiatives to their workforce. "Senior managers will be required to understand if and how national cultural values influence the championing behavior of their subordinates in different countries around the world" (Shane, Venkataraman, & MacMillan, 1995, p. 932).

Conclusion

Trade liberalization is an asset to developing countries and the world. However, it must be "balanced in agenda, process, and outcomes, including not only sectors in which developed countries have a comparative advantage, like financial services, but also those in which developing countries have a special interest, like agriculture and construction services" (Stiglitz, 2000, p. 437). One could argue that developing countries are at a disadvantage and that the scales are tipped against them. In order to address the different types of inequities that may arise, those in the international business arena must develop policies and procedures that address these issues and create a sense of fairness for everyone involved.

Khan (2007) introduced a conceptual framework that identified four representational approaches to understanding how social inequities surface in developing countries as they attempt to venture into international business. The approaches provide an explanation as to how foreigners and locals perceive the severity of social issues, which is important to interactions in the business community. In order to satisfy world view concerns on socially responsible issues, many organizations have implemented policies that address these concerns. This position was seen as a survival technique. DuPont utilized this approach as it positioned itself to continue work in the GMO field and appease the local Brazilian community.

Terms & Concepts

Biotechnology: “The use of microorganisms, such as bacteria or yeasts, or biological substances, such as enzymes, to perform specific industrial or manufacturing processes. Applications include the production of certain drugs, synthetic hormones, and bulk foodstuffs as well as the bioconversion of organic waste and the use of genetically altered bacteria in the cleanup of oil spills” (Dictionary.com, 2007).

Business Ethics: Field concerned with whether or not (or to what degree) a business’s activities are at odds with purely social values.

Corporate Social Responsibility (CSR): Idea that an organization has an obligation to its stakeholders in all of its operations; stakeholders include employees, customers, suppliers, community organizations, subsidiaries and affiliates, joint venture partners, local neighborhoods, investors, and shareholders.

DuPont: As of 2013, the third-largest chemical company in the United States and ninth largest in the world (Tullo).

Genetically Modified Organisms (GMOs): Organisms which have been altered through a process of gene structure manipulation; results in desired outcomes or traits.

Multinational Corporation: Having operations, subsidiaries, or investments in more than two countries.

National Technical Commission on Biosecurity (CTNBio): The government agency overseeing the transgenics issue in Brazil.

Social Responsibility: Belief that every part of a society, whether a corporation, organization, government or individual, has some obligation to that society. This could refer to the responsibility to act (positive responsibility) or the responsibility to avoid action (negative responsibility).

Trade Liberalization: The easing of trade regulations and policy so as to allow freer competition in domestic and international markets.

World Development Report: Yearly report published by the World Bank which comments on the economic, social and environmental state of the world.

Bibliography

DuPont. (2002). Biotechnology advisory panel report. Retrieved June 7, 2007, from http://www.dupont.com/biotech/images/difference/BiotechPanelReport.pdf.

Griesse, M. (2007). Developing social responsibility: Biotechnology and the case of DuPont in Brazil. Journal of Business Ethics, 73, 103-118. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=24942137&site=ehost-live

Khan, F. (2006). Representational approaches matter. Journal of Business Ethics, 73, 77-89. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=24942135&site=ehost-live

Organisation for Economic Cooperation and Development. (2013, Mar 4). Aid to poor countries slips further as governments tighten budgets. OECD. Retrieved November 20, 2013 from http://www.oecd.org/dac/stats/aidtopoorcountriesslipsfurtherasgovernmentstightenbudgets.htm

Sandman, P. (1990). Addressing skepticism regarding responsible care. Retrieved June 7, 2007, from http://www.psandman.com/articles/cma-care.htm.

Shane, S., Venkataraman, S., & MacMillan, I. (1995). Cultural differences in innovation championing strategies. Journal of Management, 21, 931-952. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9512044421&site=ehost-live

Stiglitz, J. (2000). Two principles for the next round or, how to bring developing countries in from the cold. World Economy, 23, 437-455. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=3112173&site=ehost-live

Swift, T., & Zadek, S. (2002). Corporate responsibility and the competitive advantage of nations. Retrieved June 7, 2007, from http://www.ibd.-com.br/default.asp.

Tullo, A. H. (2010). Global top 50. (cover story). Chemical & Engineering News 88, 13–16. Retrieved November 20, 2013 from EBSCO online database, Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=52765233&site=ehost-live

World Bank (1999). World development report 1999-2000: Entering the 21st century. Washington, D.C.: World Bank.

World Bank. (2013). World development indicators, 2013. Retrieved November 20, 2013 from http://data.worldbank.org/sites/default/files/wdi-2013-ch4.pdf

Suggested Reading

Al-khatib, J., Rawwas, M., & Swaidan, Z. (2005). The ethical challenges of global business-to-business negotiations: An empirical investigation of developing countries' marketing managers. Journal of Marketing Theory & Practice, 12, 46-60. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=21031869&site=ehost-live

Barichello, R., McCalla, A., & Valdes, A. (2003). Developing countries and the world trade organization negotiations. American Journal of Agricultural Economics, 85, 674-678. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=10075602&site=ehost-live

Beschomer, T., & Muller, M. (2007). Social standards: Toward an active ethical involvement of business in developing countries. Journal of Business Ethics, 73, 11-20. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=24942133&site=ehost-live

Devadoss, S. (2006). Why do developing countries resist global trade agreements? Journal of International Trade & Economic Development, 15, 191-208. Retrieved June 7, 2007, from EBSCO Online Database Business Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=21322993&site=ehost-live

Hertel, T., & Martin, W. (2000). Liberalizing agriculture and manufactures in a millennium round: Implications for developing countries. World Economy, 23, 455-469. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=3112175&site=ehost-live

Kessler, F. (2011). The global financial crisis 2007 fallout: Changing paradigms on trade and development. Journal of International Business, 3/4(2/1), 29–42. Retrieved November 20, 2013 from EBSCO online database, Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=79270515&site=ehost-live

Volkema, R., & Fleury, M. (2002). Alternative negotiating conditions and the choice of negotiation tactics: A cross-cultural comparison. Journal of Business Ethics, 36, 381-398. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=12132360&site=ehost-live