Chapter 1: Information Technology, Transaction Costs and Globalization
INTRODUCTION To some degree, information technology and globalization can be separately analysed, because there are numerous respects in which these two phenomena are independent of one another. Defined in terms of an intensification of global trade and foreign investment, globalization can be partly attributed for example to the widespread liberalization of policy that has taken place in recent years (under the aegis in some cases of the World Bank and the IMF).1 By the same token, there are clearly applications of information technology that cannot be said to enhance these (or other) economic relationships to which the concept of globalization usually refers. The mere use of a computer, for example, often has no bearing at all on the relationship of the user to other countries. Even when information technology does serve to promote globalization, moreover, this influence is exerted through a wide variety of different mechanisms, some of which lie on the demand side, while others lie on the supply side, some of which affect trade between independent firms while others affect trade within multinational corporations. It is not our intention in this chapter to describe the full range of these mechanisms.2 Our goal, rather, is to show that many of them can be interpreted in one way or another as a reduction in the costs of transactions between agents in different countries. THE CONCEPT OF TRANSACTIONS COSTS As defined by the New Palgrave Dictionary of Economics, Transaction costs, like production costs, are a catch-all term for a heterogeneous...
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