Customers' perspectives of involvement in new product development Klaus Brockhoff. Lilien , Pamela D. Lead user analyses for the development of new industrial products Glen L. Urban , Eric von Hippel. Consumer research in the early stages of new product development: A critical review of methods and techniques Ellen van Kleef , Hans C.
The general lesson here and also earlier from the ERM crises of —93 appears to be that the public policies that support the highest degree of international capital market integration—rigidly pegged exchange rates and free capital mobility—are feasible, but only if other key macroeconomic policies, most importantly national monetary policies, are subordinated to this goal of financial integration.
Where the requisite degree of subordination is not feasible or not desirable, a choice of public policy orientations must be made. For some countries—notably those that have comparatively weak financial systems and have in place systems of controls on private capital flows—maintenance of some restrictions on private capital flows at least for some period of time may be a desirable option that allows greater stability of the exchange rate.
While it is true that flows of foreign direct investment to developing countries have expanded considerably during the s and have come to dominate net flows of private capital to these countries see Chart 6 ; and flows of FDI have also proved to be quite stable during recent financial crises.
Nevertheless, the international financial system was certainly not free of important problems during the past seven years. On the positive side, as previously noted, many of the emerging market countries that lost access to global capital markets in recent crises did rapidly regain it—a sign of enhanced resiliency.
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Bank lending as a source of finance for emerging markets—which proved quite volatile in recent crises—has continued to decline, while FDI has strengthened further and net portfolio equity flows have recovered. In a number of emerging market countries, domestic debt markets have developed considerably and have become an important source of finance for sovereigns and corporates. Although the global investor base for emerging market bonds remains somewhat fickle, emerging market equities seem to be gaining more of an independent foothold. Fourth, the emphasis in Mussa and Goldstein on efforts to improve market discipline through better provision of information, heightened transparency, harmonization of accounting standards, etc.
Already at this stage important progress has been made in these reform efforts; but much remains to be done on the implementation of reforms. It is still to be seen how much these reforms will improve the performance of the international financial system. In my view, the main omission from the discussion of global capital market integration in Mussa and Goldstein is the relative lack of emphasis on the globalization of the activities of providing financial services—a phenomenon which is part of the broader revolution in this sector brought on primarily by rapid advances in information and communications technology.
The rapid reductions in the costs of storing, accessing, analyzing, and communicating information are both dramatically reducing the costs of producing virtually all existing forms of financial services and creating new products and services such as many OTC derivatives which would have been prohibitively expensive with older technologies. At the national level, the structure of the financial services sector is changing as the distinctions that used to exist between commercial banks, investment banks, securities dealers, insurance companies, and other financial service providers become increasingly blurred.
There is no doubt that advances in information and communications technology are the most important technological advance of the past quarter century. In the United States, technological advances in these areas account for much of the rise in total factor productivity in recent years. As a result of these technological advances, the costs of processing and communicating all forms of information have been all declining very rapidly; i. By nature, much of the activity in the financial services industry has to do with the processing and communication of information.
It stands to reason, therefore, that the financial services industry would be particularly strongly affected by rapid advances in information and communications technology—and, it has been. This is readily apparent in a number of phenomena. The cost of bank transactions at the wholesale and interbank level has also dropped precipitously; and this, among other things, is reflected in the continuing rise in the volume of bank transactions relative to nominal GDP. Some indication of how advances in technology are affecting and likely to continue to affect retail banking transactions is suggested by Chart 7.
As information and communications technology has advanced and the costs of doing virtually all forms of financial business have declined, the meaningfulness of the differences associated with different locations or with different sectors of the financial services industry appear to have eroded. This reflects the fact it is much cheaper now than a few years ago to do financial business over a wider geographic range and over a wider scope of activities.
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As a consequence, there has been a tendency toward restructuring of institutions in the financial sector in the direction of broader geographic and functional scope. It is also apparent the restructuring of banking systems and the integration of banks with other types of financial institutions.
Public policy in most countries has been accommodating or facilitating these developments. In the United States, the last restrictions on nation wide banking have been removed; and, with the passage of the Gramm-Leach-Bliley Act last year, most remaining restrictions on bank holding company participation in the full range of financial services have been removed. In the European Union, under the auspices of directives from the European Commission, the banking sector is becoming more competitive; and the advent of the EMU at the start of is providing important additional impetus to restructuring in the financial sector.
In Japan, partly as a consequence of difficulties of recent years, public policy is also pushing, reform and restructuring in the financial sector; see IMF Not surprisingly, the same types of changes that have been taking place within the financial service sectors of individual countries have also been occurring internationally—and in response to the same principal driving force. The advances in information and communication technology which make it efficient to do financial business across a wider geographic and functional scope domestically, also operate across national boundaries.
And, the effects are seen, for example, in the efforts to integrate the activities of stock and commodity markets internationally and in the international diversification of a number of leading firms providing financial services. As in the domestic arena, public policies are, by and large, facilitating these developments or at least accommodating them.
In particular, seeing the advantages of allowing sophisticated foreign financial institutions to provide services in domestic markets, a number of emerging market countries have liberalized or are liberalizing to permit such participation; see IMF Going forward, it is clear that advances in information and communications technology that have already been achieved and those that are in the pipeline will continue to drive the evolution of the financial services industry. People will want to take advantage of the opportunities rapid advances in technology allow—in financial services, as well as elsewhere.
Public policy can influence, to some degree, the pace and pattern of developments. It can spur or retard them; but it is unlikely to stop them. At the international level, this implies that we have strong reason to expect an increasing degree of capital market integration in the future. Information and communications costs are a natural barrier to integration of capital markets and financial services—just as transportation costs are for trade in physical goods.
As these costs come down, integration should increase. There is, however, one important worry. Many empirical studies have confirmed the common-sense appraisal of the postwar experience with trade liberalization: open policies toward international trade are an important factor contributing to stronger economic growth.
Indeed, the experience in recent financial crises could cause reasonable people to question whether liberal policies toward international capital flows are wise for all countries in all circumstances. High openness to international capital flows, especially short-term credit flows, can be dangerous for countries that weak or inconsistent macro-economic policies or inadequately capitalized and regulated financial systems. For such countries, public policy has important challenges to meet in preparing for a world economy that is being driven toward higher degrees of capital market integration.
In many discussions of international economic integration, the focus is on integration through trade and factor movements, both labor and capital. There is, however, clearly another important mechanism through which economic activities in different parts of the world affect each other; namely, through the communication of economically relevant information and technology.
It may, or may not, be true that Marco Polo carried back from China to Italy the concept of noodles—and thus multiple forms of Italian pasta were born. The lesson nevertheless is clear. It is not necessary to transport large quantities of noodles by expensive and slow camel caravans from China to Italy to produce a culinary revolution.
It is necessary only to transport the concept of a noodle and an understanding of how noodles are made to have this effect.
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And clearly, noodles are but one example. International trade and movements of people and capital are undoubtedly important for the spread around the world of the fundamental technological innovations that underlie the broad advance of human productivity—from the use of the wheel through the modern personal computer. Societies that cut themselves off from commerce with the rest of humanity do tend to stagnate. However, the volume of international commerce is probably not the critical determinant of the spread of useful innovations—provided that channels of communication remain reasonably well open.
Abraham Lincoln—the only American President to be granted a patent—had a special appreciation of the importance of communication in facilitating innovation:. The date of the first [writing] is unknown; When writing was invented, any important observation , likely to lead to a discovery, had at least a chance of being written down, and consequently, a better chance of never being forgotten; and of being seen and reflected upon, by a much greater number of persons; and thereby the chances of a valuable hint being caught, proportionably augmented.
By this means, the observation of a single individual might lead to an important invention, years, even centuries later after he was dead. In one word, by means of writing the seeds of invention were more permanently preserved, and more widely sown. And yet, for the three thousand years during which printing remained undiscovered after writing was in use, it was only a small portion of the people who could write, or read writing; and consequently the field of invention, though much extended, still continued to be very limited.
At length, printing came.
It gave ten thousand copies of any written matter, quite as cheaply as ten were given before; and consequently, a thousand minds were brought into the field where there was but one before. This was the great gain ; and history shows a great change corresponding to it, in point of time. If Lincoln was right about this issue as he was about slavery, but not about tariffs , then the recent and continuing advances in communications promise to have profound effects on innovation across a very broad spectrum and on a global scale. We are seeing the beginnings of this now, in the financial services.
It promises to be a profound force driving global economic integration in the future. During the interwar period between World Wars I and II, there was a sharp reversal in the generally rising trend of global economic integration. The volume of world trade contracted sharply.
As illustrated in Chart 8 , this contraction of world trade was particularly pronounced during the early s, and was partly attributable to, the general decline of economic activity in the great depression. The decline in world trade, however, was much greater than the decline in economic activity or in goods production. The rise of protectionism, particularly the Smoot-Hawley tariff imposed by the United States in and the retaliatory responses to it, clearly contributed importantly to the collapse of world trade.
At around the same time, capital market linkages among countries weakened substantially, as the international gold standard collapsed and as several countries, led by Nazi Germany, began to impose highly restrictive controls on capital movements. A complex of factors undoubtedly contributed to the general sharp reversal of global economic integration in the interwar period, including especially the economic effects of the great depression.
Several studies have suggested economic and political economy explanations for this reversal, especially as relates to developments in the United States; see, for example, Eichengreen and Irwin and Kroszner However, I believe that it is not possible to explain an important part of this worldwide phenomenon without recognizing that there was an important change of tastes in the body politic of several key countries away from sympathy to involvement in an economically integrated global economy and toward nationalism and isolationism.
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In Europe, the tragedy of the Great War and its aftermath explains much of the change. Russia after the devastation of the war and Bolshevik revolution was invaded by some of its former allies. In Germany, a bitter defeat and a bitter peace fed a new spirit of nationalism. In the United States, the symptoms of the shift toward isolationism took many forms.
The Senate refused to ratify the League of Nations Treaty in The government took repressive action toward imported political ideologies in the red scare. The Ku Klux Klan was reborn and gained prominence outside of the south, expressing antipathy not only to blacks but also to most things foreign.
Prohibition was passed, partly based on campaigns that attributed alcoholism to foreign influences. The National Origins Act sharply restricted foreign immigration.