International Business: Why Distance Still Matters in a Flat World
Globalization, culture, institutions, foreign investment, entry modes, currencies, global strategy and trade blocs, through the ideas that surprise people most.
Try 3 questions
1. Which 1950s innovation did the most to cut the cost of shipping goods around the world?
- The early office fax machine
- The first commercial jet airliner
- The standardized shipping container
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Answer: The standardized shipping container
Containers slashed loading time and theft, cutting port costs dramatically and making long global supply chains economical.
2. The gravity model of trade predicts that trade between two countries does what?
- Rises with their size, falls with distance
- Is unaffected by how far apart they are
- Depends mainly on their exchange rates alone
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Answer: Rises with their size, falls with distance
Like Newton's law, trade grows with the economic mass of partners and shrinks with distance, one of economics' most reliable findings.
3. Pankaj Ghemawat's CAGE framework says the 'distance' between countries includes which dimensions?
- Climate, altitude, geology and energy supply
- Currency, military, government and education
- Cultural, administrative, geographic, economic
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Answer: Cultural, administrative, geographic, economic
Shared language, legal ties, borders and income levels can matter as much as kilometers in explaining trade and investment.
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