Globalization of Markets and Its Impact on Domestic Institutions

Abstract

Globalization of markets is one of the most fascinating developments of this century. Its impact on economic transactions, processes, institutions, and players is dramatic and wide ranging. It challenges established norms and behavior and requires different mindsets. Yet, it creates opportunities for the well prepared participants who can be proactive and visionary.1 Globalization of markets involves the growing interdependency among the economies of the world; multinational nature of sourcing, manufacturing, trading, and investment activities; increasing frequency of cross-border transactions and financing; and heightened intensify of competition among a larger number of players.2 This phenomenon has been fueled by advances in communication and transportation technologies, the spread of economic growth and wealth around the world, the loosening of barriers to trade, and the formation of regional economic blocs.3 Development of new technologies and the proliferation of new products also contributes to the globalization of markets. Simply consider the following industries which came into existence only in the last decade: medical imaging, biotechnology, composite materials, robotics, and process innovations. Gaining momentum since the end of World War II, the globalization of markets has led to the formation of irreversible economic linkages among countries. It has also shifted the focus away from the nation-state, and more toward industry and the individual enterprise.