Globalization and International Investment

Globalization has resulted in greater inter-connectedness among markets around the world and increased communication and awareness of business opportunities in the far corners of the globe. More investors can access new investment opportunities and study new markets at a greater distance than before. Potential risks and profit opportunities are within easier reach thanks to improved communications technology.

Countries with positive relations between them are able to increasingly unify their economies through increased investment and trade. Products and services previously available within one country are made more readily available to new markets, resulting directly in improved economic opportunities for workers in those economies and leading to improved household incomes.

For investors, these opportunities present a wider range of investment options and new ways to profit. Investment in global markets is possible for the investing public through stock purchasing, as most brokerage firms are able to access international stock markets and provide their clients with the opportunity to purchase shares in companies around the world.

Key Takeaways

  • Globalization refers to the way businesses and organizations develop an international presence or start operating in a variety of countries.
  • The rise of globalization has led to more connections among financial markets and businesses around the world, as well as increased opportunities.
  • Globalization has influenced international investing, making it easier than ever before, historically, for market participants to invest in companies, industries, or other financial instruments abroad.
  • Market participants can buy stocks, mutual funds, exchange-traded funds (ETFs) or American Depositary Receipts (ADRs) to gain access to the shares of internationally-based companies.

Maintaining Competitiveness

As a result, most businesses try to stay competitive with their counterparts in other parts of the world, broadening their competitive horizons past their local areas and home countries. Maintaining competitiveness often requires sourcing materials and outsourcing labor from other countries. Competitive companies have increasingly turned to global markets as a source not only of new customers but also of production locations and partners for new ventures. Globalization has facilitated this and made the transition to global markets easier.

Globalization Increases International Investing

Over time, these practices result in increased cultural similarities between countries and increasingly connected economies that have more mutual interests and challenges. Globalization and international investment are tied together and lead into one another as companies act internationally by increasing their international investment out of mutual interest and the need to stay internationally competitive. Companies benefit from pricing differences, or arbitrage, in different markets for labor and supplies. Globalization compels connected economies to continue to invest in each other to protect their economic health and acquire new profits. International investments have increased as a direct result of globalization and continue to do so. This is pulling more economies into globalization, further increasing international investment as this happens. 

Special Considerations

When countries seek collectively to pursue the opportunities provided by globalization, the demands of the new economic activity cause social change that develops these countries and prepares them to better pursue industrial activity. The society becomes a developed nation as its workforce begins to attract the investment activity of enough companies to cause the social and economic change necessary to produce a modern industrialized economy. This process is a result of the international investment that characterizes globalization. The competitive nature of globalization, in other words, ultimately has a social and economic impact that transforms economies in pursuit of investment and greater economic activity. This knits economies into each other and results in increased international investment.