International Trade & Investments in IT

International Trade & Investments in IT

Introduction

Over the last few decades, businesses have become more globalized than ever. Multi-nationals have taken a more leading role with operations in more than just home country. This rapid expansion in businesses, not surprisingly, increased international trade between countries. The increased international trade is due to the benefits companies see from exporting & importing products with the country which has a comparative advantage. Companies are not just involved in trading; they have gone as far as to make heavy investments in foreign countries to increase their corporate gains. The investments in foreign countries lead to greater profits, as long as the benefits from investments abroad outweigh the costs incurred to run operations abroad.

It is this fact which makes us want to study more on international trade and investments. International trade and investments are both inter-linked with each other. Often high barriers to international trade lead to economic disequilibrium, with inefficient allocation of resources. The economic disequilibrium in the home country tends to hamper growth and adversely affects foreign investments in the home country (Economy Watch, 2010).

Key Term: Investments in IT industry

As companies expand, the need to efficiently manage vast businesses increases as well. This demand led to more investments in information technology (IT) industry. Over last several years, internet and the IT industry has acted as the most important catalyst in managing international businesses. They provide a rich medium of information regarding trading rules, regulations, tariffs, market data etc. This easily accessible information assists in increasing international trade.

There are several articles regarding the relationship between investments in IT industry and international trade. But here, we will discuss the article 'effects of investment in informational technology on international trade' by Wang et.al. This article was published recently in 2013 in the Journal of Global Business & Technology. We will discuss this article because this article is an attempt to highlight the relationship between IT and international trade in a very concise way. For quiet some time, the propositions in the IT literature have suggested that IT industry promotes international business. To confirm this, the writers of this article developed and tested five different hypotheses. The results from their empirical tests confirm that investments in IT have a positive effect on international trade.

It is expected that global expenditures on Information and communications technology will reach around $3.7 trillion in 2013 (Gartner, 2013). Despite this, not much work has been done to highlight the relationship between investments in IT and international trade. Wang et.al tried to highlight this same aspect by means of their empirical tests. They believe boosting international trade through IT depends on various social, cultural, political factors of the countries (Slamecka, 2007). Strong IT infrastructure plays a key role in the success of international trade. Many organizations, such as European Union, have developed strong IT infrastructure by investing heavily in the IT industry. They have developed their own standards, rules, policies, domains ...