Naren Natalia Arias Ocampo
Narenarias@usantotomas.edu.co
Pregrado de Negocios internacionales
To understand the impact of globalization and technology on the German economy, it is necessary to address the following concepts: The evolution of the German economy, technology and innovation..
Simple manufactures and semi-finished industrial goods dominated Germany’s exports at the end of the eighteenth century. Linen came first, followed by woolens and worsteds, cottons and iron goods (Pfister U. , 2015).
The present period of economic globalization originated following World War II, given the strong protectionist tendencies that prevailed at that time (Horowitz, 2004). Globalized economic structures and strategies also emerged in the second half of the 1990s (Lane C. , 1998).
More than 40 years ago, empirical trade economists realized that a large share of international trade among developed countries was made of simultaneous exports and imports of goods from identical industries (like exports of German cars to France and exports of French cars to Germany). This type of international trade was labelled intra-industry trade (Wagner, 2017). This type of trade can still be seen in some economies and Germany is a clear example of these.
A developed and well-functioning innovation system is of central importance for the German production policy of diversified quality production. It relies on the continual technological updating of products (Tulder, 1988). The German system has long enjoyed a high reputation, particularly in the production of high-value goods produced with Research and Development (R&D) methods (Tulder, 1988).
Nevertheless, German firms have been much slower than British and French ones to internationalize their R&D activity (Cantwell & Harding, 1998).
The reasons why Germany is a technological power are five:: 1) The country has a record funding for research and development, 2) issues with a future , 3) the country’s economics are planned with a vision, 4) science is valued, 5) there is a strong connection between politics, business and science. The German economic power has been, for decades, a national symbol, for which Germany has been envied worldwide. (Bach J. , 2017)
Recent transformations in the global economic and technological environment have induced a number of large German firms to expand their foreign investment and co-operations and to change their internationalization strategies. The few already globally oriented firms in the chemical/pharmaceutical industries have stepped up their efforts to become global players. (Sally, 1995)
German exports account for a large share of innovation and profits in the automotive, machine building, electronics and pharmaceutical sectors. They are the pillars of the German economy and have a large percentage in the world economy. They also enjoy worldwide recognition. (Reina W. F., 2015)
It is important to mention that the auto-parts import level of a given country is mainly driven by its automobile production and by the degree of presence of foreign headquartered carmakers (Frigant & Zumpe, 2017). For example, the company Mercedes Benz (MB) is now aiming to globaliza its operations, also, the big chemical companies Hoechst and Bayer are now offering now as much or more employment in foreign places than in Germany. Volkswagen, aswell, has become a company that operates worldwide, with a presence on several continents.
One example of innovation in the automotive sector is evident rise of electric Vehicle development. It has been adopted as one of the national policies by the German Government as the country desires to reduce carbon emissions and address the energy problem. Germany has invested a lot in the EV development (Aqueel, Ahmad Khan, Saad Alam, & Khateeb, 2018).
Regarding the effects of globalization, exports and imports of final and intermediate goods have increased. That is, there has been an increase in outsourcing (Stockhammer, Hein, & Graft, 2011).
Also, jobs can be exported to places where labor costs and tax burdens are lower. Additionally, due to the new information technologies that make it possible to connect the furthest corners of the world, it is possible to break down the products and the services provided, as well as to distribute the work throughout globally, in such a way that national and business labels can easily be decomposed (Beck, 1998)
Another effect is the increase in trade relations between countries. Germany seeks to establish commercial agreements with other countries, which would allow it to expand its operations and have investment plans in Latin America, Asia and Africa (Reina W. F., 2015).
Conclusion
Had it not been for the impact of globalization, Germany’s economy would not have evolved to the point of becoming the fourth most powerful in the world. Furthermore, it is evident that Germany’s economy is mainly based on research and development, which allows its technological advance. This technology is in turn applied to the main economic sectors, such as pharmaceutical and automotive, driving the increase in exports due to the production of high-value goods.
References
Aqueel, A., Ahmad Khan, Z., Saad Alam, M., & Khateeb, S. (2018). A Review of the Electric Vehicle Charging Techniques, Standards, Progression and Evolution of EV Technologies in Germany. Smart Science.
Bach, J. (2017). La industria automotriz en Alemania: ¿está perdiendo este sector emblemático su hegemonía a causa del escándalo del diésel? Revista de Direccion y Administracion de Empresas.
Beck, U. (1998). ¿Qué es la globalización? Falacias del globalismo, respuestas a la globalización. Barcelona: Paidós Ibérica.
Cantwell, J., & Harding, R. (1998). The Internationalisation of German Companies’ R&D. National Institute Economic Review, 99-115.
Frigant, V., & Zumpe, M. (2017). Regionalisation or Globalisation of Automotive Production Networks? Lessons from Import Patterns of Four European Countries. Growth & Change, 661-681.
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Pfister, U. (2015). The quantitative development of Germany’s international trade during the eighteenth and early nineteenth centuries. Revue de l’OFCE, 175-221.
Reina, W. F. (2015). Economia Alemana, situacion actual. Universidad Militar Nueva Granada.
Sally, R. (1995). States and firms : multinational enterprises in institutional competition. London: Routledge.
Stockhammer, E., Hein, E., & Graft, L. (2011). ). Globalization and the effects of changes in functional income distribution on aggregate demand in Germany. International Review of Applied Economics, 1-23.
Tulder, R. v. (1988). European multinationals in core technologies. New York: Wiley.
Wagner, J. (2017). ) Intra-good trade in Germany: a first look at the evidence. Applied Economics, 5753-5761.
