University of Birmingham,

MSc International Business

2023-2024

Technology and the Geo-economy

Prof. John R. Bryson

 Topics and Module Structure
Topics
1 A New Geo-economy? Drivers and Risks
2 Technology and the Geo-economy
3 Geo-economy and the state
4 Creating value? Alternative values and circular values.
5 Monetarising Value? Hymer and beyond
6 Eclectic Paradigm: Development and Application in Practice
7 Emerging Economies and Springboarding in Practice
8 Localization and the Practice of Embeddedness
9 Service versus manufacturing Internationalisation
10 The Irresponsibility of Global Value Chains? Pathways towards
Responsible Business
Revision – looking back before we go forward:
Theme 1: A New Geo-Economy

1) Drivers or enablers behind new forms of internationalisation

including new forms of place-based differential, new configurations
of the spatial division of labour by firms, new innovations in logistics
and in the application of different entry-modes and trade-offs.
2) Risks – national economic sovereignty and any one country being too
reliant on goods, components and products coming from any one
country.
 Gaps to explore in this topic

Gaps – a core gap is to understand disruptive innovation and the ways this
impacts on the on-going configuration of the international economy and of
international business.

This raises the question regarding the ways in which technology underpin
international business and the ways in which technology supports international
logistics and trade. This includes:

i) The role disruptive innovation plays in internationalisation and the

implications for practice.
ii) Platforms and their role in accelerating internationalization.
 Lecture structure

Topic 2.1: Technology and Theory

Topic 2.2: Disruptive Innovation and Internationalisation

Topic 2.3: Platforms and Internationalisation

Topic 2.4: Risk and Management Implications

 Growth Summit 2023

What type of economic growth is required and especially growth that is

linked to international business? More than 400 leaders convened in
Geneva at the World Economic Submit to discuss economic growth.

Should economic growth be resilient, equitable and sustainable?

Note that 23% of all jobs will be disrupted by technological innovation,

including Artificial Intelligence (AI), over the next four years.

Green investment will create new jobs and will also destroy existing
jobs.

•https://economymiddleeast.com/news/growth-su
mmit-2023-discussions-on-geo-economics-technolo
gy-and-sustainability/
 Topic 2.1:

Technology and Theory

 Marx and the Circuit of Capital:
A macro level approach for understanding
internationalisation
 The Circuit of Capital (after Marx)

Money (1) – Commodities – Production – Commodity - Money (2)

M(1) – C – P – C – M(2)

Profit/surplus value = M(2) – M (1)

The Capitalist economic
process can be conceptualised
as a continuous circuit
 The Circuit of Capital
1. Acceleration – increase the turnover time of capital by ensuring that the
transformation of M(1) to M(2) occurs as frequently as possible.

2. Reduce the variable costs (people costs - of production – enhanced mechanization

including technological substitution).

3. Remove risk by subcontracting or outsourcing the production process to others. In

other words, operational innovation including business model adaptation or
innovation.

4. Need to consider where value is created in the production process – identify and
capture the added value.

5. Geographies of production. Production processes relocated or established in cheaper

locations, apply a spatial division of labour or a fragmentation approach to global
value chains.
M= Money Circuit – flows of funds.
C = Commodities – raw materials
P = Production Capital (manufacturing
and services combined to produce
goods and services.
Internationalisation of the Circuits of Capital
Christian Palloix (1975) argued that each of the circuits of capital had become internationalised and
he identified a clear historical sequence:

Circuit of commodity capital was the first of the three circuits to be internalised in the form of
international trade

Circuit of money capital was the second to become internationalised with the development of flows
of investment capital into overseas ventures

Circuit of productive capital was the last to become internationalised with the growth in
transnational corporations and the rise of international production.

References:
Palloix, C. (1975), ‘The internationalisation of capital and the circuit of social capital’, in Radice, H. (Ed.), International
Firms and Modern Imperialism, Penguin: Harmondsworth, chapter 3
Palloix, C. (1977), ‘The Self-Expansion of Capital on a World Scale’, Review of Radical Political Economics, 9:1-28
 Circuit of Capital Approach
1. The circuit of capital approach to internationalisation highlights the interconnected
nature of finance, production and commodity trade.

2. The approach highlights that the internationalisation of economic activity is part of a

dynamic system.

3. It also highlights the contributions operational and technological innovation can make
to internationalisation.

4. It enables us to ask questions regarding the application of innovation to the organisation

of production.

BUT – this approach tells us nothing about the precise form that internationalisation takes,
for example, the geography, organisation of economic activity and sectors.
Division of labour and a spatial division of labour
 Division of labour and spatial division of labour
• Adam Smith (1776, The Wealth of Nations) argued that an individual without
knowledge of the production process would be unable to make even one pin a day
– an obvious point, but it highlights the role of knowledge in the production process.

• The pin-making production process in 1776 was divided into 18 distinct operations –
drawing the wire, making the pin head etc.

• One person doing all these tasks could produce 20 pins a day.

• 18 individuals working together with a

divided labour process produce
48,000 pins a day.
Three Points that come from Smith’s work

1. A division of labour increases the dexterity of employees –

productivity increases.
2. Time is lost when one person performs many tasks as they have to
change from one type of work to another. Tools have to be found,
etc.
3. Once a labour process has been subjected to a division of labour
than machines can be developed to replace aspects of the labour
process. A division of labour always precedes the replacement of a
task by a machine.
 A Spatial Division of Labour?
• Adam Smith’s theory did not include space. Once a production process
has been divided into its component parts than it is a comparatively
simple task to develop machines and factories dedicated to a particular
part of the production process.

• Manufacturers initially established specialist units that were

contiguously located, but soon developed a more dispersed spatial
division of labour.

See Massey, D. (1984) Spatial Divisions of Labour, Macmillan: London

From: Moore, Nancy & Grammich, Clifford & DaVanzo, Julie & Held, Bruce & Coombs, John & Mele, Judith. (2023). Enhancing Small-Business Opportunities in the
DoD. 128. https://www.researchgate.net/publication/235147217_Enhancing_Small-Business_Opportunities_in_the_DoD
The Decision to Locate a Production Plant/Facility/Office is
Determined by:
 Topic 2.2:

Disruptive Innovation and Internationalization

Disruptive Innovation
Different types of innovation:

• New to the world innovations.

• New to a company or even country.
• Disruptive innovation may destroy existing markets.
• Disruptive innovation includes technological and/or
business model innovation.
• Disruptive innovation that is not disruptive in that it
creates new markets.
 Disruptive Innovation and Internationalization
• Need to distinguish between innovation that has been disruptive and
transformational and that which is incremental.

• Disruptive innovations and internationalisation includes developments in shipping,

port technologies and especially containerization and in information
communications technologies.

• There are then incremental adaptations and enhancements.

• New and modified business models based on exploiting the internationalisation of

factor inputs (land, resources, people – place-based differentials, and/or market
access.
Disruptive Innovation and the Division of Labour
The division of labour underpins many of the factor input or operational aspects of
internationalisation and the role played by different types of disruptive innovation:
i) Operational innovation with one outcome being the application of a spatial
division of labour to a value chain or supply chain. Subsequently, these was an
intensification in the fragmentation of value chains.
ii) Innovations linked to the co-ordination of value chains (supply chains) that
have been fragmented with the application of a spatial division of labour.
iii) Post Covid-19 supply chain innovations intended to enhance supply chain
resilience. These innovations pre-date Covid-19 and include:
- Reshoring
- Dual sourcing
 Supply Chain Co-ordination and Radio
Frequency Identification
Radio Frequency Identification (RFID). A RFID tag uses
electromagnet fields to automatically track and identify objects.

Each item (completed goods and

components) in a supply chain can have
a RFID tag and these are used for
identification and tracking resulting in
enhanced inventory control and visibility
whilst also creating Big Data.
 Artificial Intelligence and Supply Chains
Once RFID tags have been adopted then Artificial Intelligence and
Machine Learning can be applied to enhance supply chain efficiency.
The tags create one form of Big Data.

Supply chain efficiency requires effective co-ordination based on

sophisticated logistics and increasingly AI is central to logistics.
Self-service technology, Internet-of-Things, Big
Data, Robotics, Artificial Intelligence
• Big data are data streams that have increasing volumes, greater variety and
velocity. Combined these are known as the three Vs.
• Volumes matter with big data and in this case firms and governments can
access high volumes of unstructured data, from data feeds, clickstreams,
apps, webpages and sensors.
• Velocity includes data that is streamed in real time.
• Variety includes data that includes text, images, video and audio and these
types of data require pre-processing.

• Big Data one of the primary inputs behind the emergence of AI.
Bryson, J. R., Sundbo, J., Fuglsang, L., & Daniels, P. (2020). Techno Service Worlds? Digitization of Service Businesses.
Chapter 4. Service Management. Springer Books.
Amazon, AI and Big Data
A retailer, ‘manufacturer’ and logistics company.

Amazon is a set of warehouses and suppliers linked to a supply and

logistics management system that is designed to enhance the
movement of goods and services.

Central to this firm’s business model are logistics, automated

warehouses and a customer ordering platform that is driven by the
company’s supply-chain algorithm team.
 Amazon
The company’s ‘secret weapon’ is based on devising mathematical solutions
to the critical issues that are central to this firm’s business model:
Where, when and at what price to stock particular products within
Amazon’s distribution network of fulfilment centres.

Amazon’s algorithms match demand with supply in real-time based on

instantaneous calculation of the relationship between stock levels by
location with logistics costs.

For a company like Amazon the key is minimise delivery costs and order
delays by identifying and removing supply chain blockages.
Amazon – Speeding Up and Spreading Out Strategy
• Speeding Up: Amazon has refined its supply chain to reduce the cut-off
time for next-day deliveries to within 45mins before the last truck
leaves a fulfilment centre.

• Spreading Out: Amazon was initially an on-line bookstore, but the

company’s strategy also includes a focus on extending the company’s
reach by colonizing adjacent retail sector. Spreading Out also includes
Amazon own branded goods including fashion brands.

Reflect on this type of company’s competitive strengths – the application

of maths and coding to retailing with the focus on efficiency and
profitability.
 Supply-Chain Disruptions and AI

Just-in-Case versus Just-in-Time approaches to supply chain

management.

With Just-in-Time there are three key questions for a firm to address:
i) How much capability and capacity should a firm have at what times
and in what locations?
ii) What happens if there is a breakdown in the logistics that support the
firm’s just-in-time supply chain.
iii) Who is responsible for the supply – the sender, the receiver or
logistics service provider?
Lenovo – Supply Chain Complexity and Risk Reduction
through AI
Supply chains becoming evermore fragmented with greater geographic complexity. To
enhance decision-making companies apply Artificial Intelligence.

IBM has developed a Supply Chain Insights program to identify operational cost reduction
that enhance profitability.

Lenovo is part of IBM’s Watson™ Supply Chain Fast Start programme. Initially an
analysis of the firm's supply chain was undertaken that took five weeks.

The outcome was Lenovo was able to optimise decision-making with up to a 95% increase
in the firm’s reactions to supply chain disruptions. Lenovo was also able to introduce its
Available to Promise (ATP) approach with the firm able to precisely estimate delivery to
clients in real time.
 Topic 2.3

Platforms and Internationalisation

Six important features of the platform economy
1. Platforms provide the primary platforms, or business model, on which other secondary
platforms may be developed.
2. Platform operations have unprecedented control and represent a form of concentrated
capital or monopoly capitalism.
3. Platforms have created an alternative mechanism for monetarising human effort (Google
and searches, Facebook and social networks, LinkedIn and professional networks).
4. New forms of working relationships are developing across the platform economy that are
transforming the nature and condition of some service work and employment.
5. Platforms, rather than corporations, will play an increasingly important role in the
organization of production and work.
6. Platforms experience network effects based on incremental benefits that accrue by
adding additional users to the network.

Bryson, J. R., Sundbo, J., Fuglsang, L., & Daniels, P. (2020). Business Models and Service Strategy. Chapter 3. Service
Management. Springer Books.
 Drop-shipping and Platforms
Drop-shipping emerged as an important aspect of internationalisation
with ordering platforms.

With drop-shipping a platform or e-commerce does not keep an item is

stock.

When an order is received it either goes direct to the manufacturer who

sends the item to the customer or to an intermediary.

Drop-shipping shifts the costs of holding stock to other companies and

also alters the balance between the retailer/platform and suppliers.
 Platform economy and digitalisation as
accelerators of internationalisation
• The emergence of platforms has led to a rapid and radical reconfiguring of
capitalism.
• In 2008, the ten largest global companies included oil and gas companies. By
2018, these firms had been replaced by seven platform-based businesses.
• The creation of digital communities and marketplaces allowing different
groups to interact and transact has enabled companies like Tencent and
Amazon to growing rapidly. For platforms, the network effect implies that
first movers have a considerable advantage and are able to lock-out competitor
companies.

Bryson, J. R., Sundbo, J., Fuglsang, L., & Daniels, P. (2020). Techno Service Worlds? Digitization of Service Businesses.
Chapter 4. Service Management. Springer Books.
 The Dominance of Platform Businesses: The eight largest global companies,
2008 versus 2019 (Table 4.6)

2008 2018
Rank Company Founded USBn Rank Company Platform Founded
Business USBn
Model
1 PetroChina 1999 728 1 Apple * 1976 890
2 Exon 1870 492 2 Google * 1998 768
3 GE 1892 358 3 Microsoft * 1975 680
4 China 1997 344 4 Amazon * 1994 592
Mobile
5 ICBC 1984 336 5 Facebook * 2004 545
6 Gazprom 1989 332 6 Tencent * 1998 526
7 Microsoft 1975 313 7 Berkshire 1955 496
Hathaway
8 Shell 1907 266 8 Alibaba * 1999 488
Source: The Innovator, 2019, https://innovator.news/the-platform-economy-3c09439b56,
accessed 30 November 2019
Bryson, J. R., Sundbo, J., Fuglsang, L., & Daniels, P. (2020). Techno Service Worlds? Digitization of Service Businesses.
Chapter 4. Service Management. Springer Books.
Shein – Ultra Fast Fashion – Blending
Innovation
• Introduces between 2,000 to 10,000 new stock keeping units (SKU) a day.
• Short lead time (a few days or less than 24 hours) between Chinese factories
and the firm’s China Fulfilment Centres.
• International orders fulfilled from the China Fulfilment Centres based on a
direct-to-customer model rather than the traditional model based on local
fulfilment centres.
• Shein able to predict demand based on a small-batch approach to
fulfilment. Small batches ordered and reordering occurs only when a
specific SKU has proved itself by selling well.
• Innovation based on small-batch orders, just-in-time inventory, use of China
Fulfilment Centres with some proven products supplied by local centres.
• Data analytics based on customer purchasing patterns.
 Topic 2.4

Risk and Management Implications

Managing Out Surprise and Avoiding Risk
Three types of Risk

1) Unique events that cannot be anticipated and are rare. Governments or companies
cannot plan for these, but should focus on generic resilience.
2) Discrete events can be anticipated and, where relevant, measures can be taken to
reduce any possible negative impacts. For example a logistics-related supply chain
problem, supply-chain disruption, impacts of an epidemic or pandemic, or a cyber
attack.
3) Normal events that are the result of living with highly complex interactive systems
and also systems that are increasing in their complexity. Planning and preparation
can occur, but there will be surprises.

See Bryson et al (2021), Living with Pandemics, Chapter 1; Perrow, C. (2003), Normal Accidents: Living
Charles Perrow and Understanding Risk (1984, 2007)
Identifies two factors that enhance system susceptibility to risk:

i) Risk emerges in the ways in which different parts of a system interact with
one another. Some systems are linear with any failure being obvious and
some are more complex with much that is occurring in such systems
remaining hidden.

ii) Risk is related to how much slack exists in a system. There are tightly
coupled systems in which system optimization has been adopted and these
systems have limited slack. The opposite are loose coupled systems in
which slack exists in the system. Any failure in a loose coupled system
might be covered by organizational slack.
Perrow, C. (1984), Normal Accidents, Princeton University Press; Perrow, C. (2007), The Next Catastrophe, Princeton University Press; Bryson, J.
 Risk Society Thesis (Beck, 1986)

The nature of risk has changed and new forms of non-calculable

uncertainty have emerged. This is partly due tight coupling of
systems that support internationalisation and everyday living.

There is a paradox here in that technological innovation seems to

have increased risks. Many of the risks that companies and
countries face come from human activity.

Beck, U. (1987), Risk Society, Sage

Crisis
A crisis is, according to the British Government, “an abnormal and unstable situation
that threatens an organisation’s strategic objectives, reputation or viability”. (
https://fticommunications.com/the-new-international-standard-on-crisis-management-iso-22361/).

A crisis may be an unstable situation and the situation can go either way with good or poor/bad
outcomes.

Crisis and the ‘rubber levers test’ – or when a crisis emerges what organizational or governmental
responses are possible.

Risk Equation used by insurance companies:

Level of risk = likelihood x vulnerability x initial impact x duration of disruption

The three dimensions of a crisis: Intensity, Extent and Duration.

The longer the disruption then the more damage occurs and the more socio-economic systems will be
 System Convergence
• More connections between different systems.
• Anyone system becomes less resilient as does the
complete system.
• Converged systems come saturated with unknown
risks.
• A future pandemic could trigger the collapse of water,
financial, security, food and energy systems especially
if keyworkers are unable to work. Tightly coupled
systems increase risks.
Disadvantages of technological adoption
• Costs of technology adoption.
• Consequences for employees.
• Keeping the business secure including cybersecurity.

• Digital security is a universal threat with potentially significant costs for all
service businesses. The most vulnerable are small and medium-sized firms
that do not have the fiscal resources or the expertise to set up or maintain
digital security systems that will minimize the threat of security breaches.

Bryson, J. R., Sundbo, J., Fuglsang, L., & Daniels, P. (2020). Techno Service Worlds? Digitization of Service Businesses.
Chapter 4. Service Management. Springer Books.
An Example: Norsk Hydro

• Norwegian manufacturer of aluminium.

• June 2019 – ransomware cyber attack involving 22,000 computers located

across 170 sites in 40 countries.

• Best in class response – went public and did not pay the ransom.

• Production lines switched to manual functions, but cost to the company was over
£45m.
Coping with System- Convergence

1) Identify exposure to system convergence at a corporate level.

What are the threats and what are the controls in place?
2) Manageable and unmanageable risks.
3) Balance optimization against risk. System convergence is
partly driven by a concern with optimization. Optimization
comes with many benefits including enhanced productivity
(including reduced costs), monitoring and control, but also
risks. Identify and control for these risks. Assume complete
system failure could occur.
Coping with Jenga Capitalism -
Convergence and Practice Implications

Backup systems should be in place that are in no way linked with the
converged systems.

Risk grids – but more risk planning needed. Set up a group to assess
exposure to system convergence and alternatives to maintaining output
if system failure occurs. Identify risks related to converged/linked
systems.
Coping with Jenga Capitalism –
Connectivity and Practice Implications

Disruption from epidemics/pandemics and place-based

disruption.

Supply-chain management and corporate strategy require a

fundamental rethink based around balancing optimization
with increased responsiveness and flexibility.
Coping with Jenga Capitalism –
Connectivity

Diversification in sourcing - avoid reliance on one source of supply

(dual sourcing) or one geographic location.

Diversification involves balancing local provision in key markets

versus global supply chains.

Ability easily to switch between sources of supply.

Risk Planning and Access to Markets
Ensure that a company is not too dependent on a very few marketing
channels.

Assess the risks related to access to markets – operations and logistics.

• Primark versus Next.

• KFC – February 2018 – supply chain disruption due to optimization -
5% impact on operating profits in the first quarter of 2018 (See Bryson
et al, 2020), Service Management).
Jenga Capitalism: People – Three Challenges
1) Converged communication systems: Any system failure might mean that
contacting critical employees could be impossible. What are the backups
in place?

2) The ability of the company to continue to operate when a Socially

Distanced Economy is imposed.

3) Develop a holistic approach to the management of risk related to

employees. Where are the critical risk points and how to deal with
these?
Conclusions
• Circuits of Capital and the Division of Labour.
• Disruptive innovation and internationalisation.
• Platforms as one example of a disruptive innovation,
but a complex innovation.
• New forms of risk and the practices implications for
companies.
Your next session will look at…
• Variety of capitalism and managing different forms or risk.
• Institutional perspectives.
• Governance and pathways to practice in the context of institutional
perspectives and responsible business.
Literature (1)
Website links:
• Christensen, C.M. et al. What is disruptive innovation? Harvard
Business School,
https://hbr.org/2015/12/what-is-disruptive-innovation
• Christensen, C.M. et al. Six Keys to Building New Markets by
Unleashing Disruptive Innovation, Harvard Business School,
https://hbswk.hbs.edu/item/six-keys-to-building-new-markets-by-unl
eashing-disruptive-innovation

• Growth summit (2023).

https://economymiddleeast.com/news/growth-summit-2023-discussi
ons-on-geo-economics-technology-and-sustainability/
Literature (2)
Disruptive innovation and unlocking new forms of value:
• Bryson, J. R., Sundbo, J., Fuglsang, L., & Daniels, P. (2020). Techno Service Worlds? Digitization of
Service Businesses. Chapter 4. Service Management. Springer Books.
• Hopster, J. (2021). What are socially disruptive technologies?. Technology in Society, 67, 101750.
• Faludi, J. (2023). How to create social value through digital social innovation? Unlocking the
potential of the social value creation of digital start-ups. Journal of Social Entrepreneurship, 14(1),
73-90.
• Kim, W. C., & Mauborgne, R. (2019). Nondisruptive creation: Rethinking innovation and
growth. MIT Sloan Management Review, 60(3), 46-55.
• Si, S., Chen, H., Liu, W., & Yan, Y. (2021). Disruptive innovation, business model and sharing
economy: the bike-sharing cases in China. Management Decision, 59(11), 2674-2692.
• Wan, F., Williamson, P.J. and Yin, E., (2015). Antecedents and implications of disruptive
innovation: Evidence from China. Technovation, 39, pp.94-104.
Literature (3)
Platform economy and digitalisation as accelerators of
internationalisation:
• Amoah, Y. S. A., Tiew, F. N. H., & Yap, C. S. (2022). Internationalisation
strategies of emerging market firms: evidence from Sarawak,
Malaysia. Review of International Business and Strategy.
• Bryson, J. R., Sundbo, J., Fuglsang, L., & Daniels, P. (2020). Business
Models and Service Strategy. Chapter 3. Service Management. Springer
Books.
• Kromidha, E., & Robson, P. J. (2021). The role of digital presence and
investment network signals on the internationalisation of small
firms. International Small Business Journal, 39(2), 109-129.