Globalization, Deglobalization, and New Paradigms in Business 3030815838, 9783030815837

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Edited by Justin Paul · Sanjay Dhir

Globalization, Deglobalization, and New Paradigms in Business

Globalization, Deglobalization, and New Paradigms in Business “This book on globalization and deglobalization is timely and interesting given the events of 2020, and current times…The authors should be commended for their efforts.” —Dr. Jane Menzies, Deakin University, Australia “Within IB perspective, authors excellently operate at the firm-, industry-, institutions-, and country-level while re-considering established concepts and brainstorming on the future (de)globalized life with(in) Covid-19 pandemic.” —Prof. Andrei Panibratov, St. Petersburg State University, Russia “The COVID-19 pandemic shook various industries including healthcare, retail, hospitality, and mobility at their very core, putting to the test the validity of traditional principles that used to guide business operations. The current book is one of the pioneers to bring together a collection of articles that not only addresses relevant themes and key sectors but also offers concrete solutions to mitigate the future uncertainties of new market reality.” —Dr. Benadett Koles, IESEG School of Management, France

Justin Paul · Sanjay Dhir Editors

Globalization, Deglobalization, and New Paradigms in Business

Editors Justin Paul University of Puerto Rico System San Juan, Puerto Rico

Sanjay Dhir Department of Management Studies Indian Institute of Technology Delhi New Delhi, Delhi, India

ISBN 978-3-030-81583-7 ISBN 978-3-030-81584-4 (eBook) https://doi.org/10.1007/978-3-030-81584-4 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Introduction

The process of globalization was considered as an irreversible phenomenon till 2019 in the pre-COVID era. The strategic buzzwords used to be—Go Global and Grow Global. COVID-19 pandemic has forced the economies around the world to be disintegrated and selfsufficient despite the immense scope of globalization. The decline in economic trade and investments during this pandemic period makes deglobalization as an important arena to explore from both developed and developing nations perspective. The impact and outcome of the pandemic-induced de-globalization warrants a systemic investigation from varied perspective to understand the implications in new normal. This book is an attempt to bring together twelve perspectives on the topic which will holistically provide us an integrated view of the globalization, de-globalization and new paradigms in business and economy in current times. The first chapter aims to critically review and provide a summary of the extant literature in de-globalization of businesses over the last two decades. For this review, a systematic literature review methodology was followed. A new framework called philosophy-attributes-methodsoutcomes (PAMO) framework was adopted to review the existing literature from Scopus indexed journals. Several opportunities and avenues for future research have been identified to provide philosophical, attributive, method, and outcome-related directions.

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INTRODUCTION

The second chapter is a contemporary study to identify factors influencing the de-globalization process during the current pandemic. This research identifies eight dominant factors responsible for speeding up the de-globalization process worldwide during COVID-19 using TISMP approach to look over interplay among the selected factors. It creates a conceptual model to assist policymaking to increase global cooperation. Policymakers are recommended to examine the direction of influence of driver factor and formulate strategies accordingly. The third chapter investigates the impact of the COVID-19 pandemic on Italian firms’ sourcing strategies. By interviewing 212 Italian manufacturing firms, this study provides new and robust evidence on firms’ sourcing behaviour, the main channels through which COVID-19 has affected firms’ business and the role of sourcing strategies in adjusting to the present and future economic consequences of the pandemic. Most firms assign an important role to their supply chain in mitigating the adverse consequences of the pandemic do not foresee a change in the supply strategy in response to the pandemic. Results have policy implications for favouring domestic over foreign sourcing. Domestic supply chains are credited with giving firms an increased protection against supply disruptions. Chapter “The Nexus Between Trade Openness and Foreign Direct Investment Amid Structural Economic Vulnerability in Developing Countries” aims to evaluate the relationship between trade openness and foreign direct investment (FDI), considering the complex effects of economic vulnerability in developing countries, while focussing on nonleast developed countries (non-LDCs). Using a panel data of 89 nonLDCs over the period 1990–2018, it is found that trade openness positively affects non-LDCs but is particularly insignificant to emerging market countries. Developing countries need a policy regime to increase FDI inflows sustainably, as it is insufficient to focus solely on trade openness and trade liberalization schemes. As organizations refocus on home and regional markets, the need for international joint ventures (IJVs) will evolve in the de-globalized world. The fifth chapter attempts to conceptualize the effect of de-globalization on IJV formation, purpose of IJV, IJV termination and interaction post IJV termination, and thus develops actionable propositions. For policymakers, the study identifies four distinct aspects of IJVs that is affected by

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de-globalization, that can be further fastened or slowed down by regulatory decisions. For practitioners, it suggests managers incorporate the contemporary theme of de-globalization during decision-making. Sixth chapter analyses the strategic actions taken by hospitality firms in view of unprecedented black swan event of COVID-19. Using social media analytics, this study extracts the tweets for a six-month period in both pre- and post-COVID scenario. These actions are observed in context of the business model of these firms, and analysed based on construct, focus area and sentiment of social media communications by the firms having different business models in post event scenarios. Comparative studies suggest that firms with different business models have reacted to COVID situation differently which has also reflected in their social media communications as well. The airlines of Latin America have faced severe government restrictions, which have severely disrupted their operations. The seventh chapter analysed the exact process of de-internationalization adopted by the Mexican airline Aeroméxico in dealing with the pandemic using a qualitative approach. The main results indicate that the airline has taken actions in nine specific areas and that the consequences of these actions were negative, because they reduced the company’s operating capacity, thereby affecting its income. The results will also help make the learning process of companies more effective and efficient, which will make the companies more stable and less vulnerable to the effects of shocks that trigger unexpected events. The effects of COVID-19 on the nations and society are forcing them to look within own borders and attain self-sufficiency in all respects. Chapter 8 has implications for research to study measures for better preparedness of various countries to future COVID-19 like pandemics, making society self-contained, keeping trade and commerce flow uninterrupted and ramping up health services at all levels. Proponents of globalization and isolation will continue to discuss various business opportunities available due to globalization or challenges seen by deglobalization. But in the opinion of most economies, globalization is here to stay, albeit more dependent on the block chain and data science drivers. Ninth chapter aims to study whether digital marketing can de-globalize the impact of COVID-19. Using a survey, it captures responses from 230 businessmen, young entrepreneurs and employees. Results obtained from this study confirm that COVID-19 has significantly initiated a chain of de-globalization. It also confirms that de-globalization has negatively

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affected all types of businesses across the globe and concludes that digital marketing will stop the de-globalization and support the globalization process. It will also help in growth of the world economy, as businesses will be able to reach more consumers and vice versa. Tenth chapter analyses how the process of de-globalization takes place, and its expected impact, showing benefits and disadvantages in the short and medium term. Some questions are answered regarding main concepts of globalization and de-globalization, the influence of COVID-19 in globalization of the economy and politics considering the big negatives impacts in health professionals, population and firms. Assessing the impacts of the de-globalization of the world needs to be considered by governments to support the development of companies, with incentives and research and development activities, to find practical solutions to national and international commercial activity. Time has arrived to shift from closed innovation to open innovation. The COVID pandemic has brought many alterations in innovation and surroundings with OI. The eleventh chapter aims to show how the association of university and research can help both organizations and SMEs. There are many advantages of open approaches for innovation such as accessing complementary assets. Organizations can obtain and employ external sources of knowledge by following the OI approach. This aids in accessing and incorporating complementary reserves, experience and abilities; developing new ideas for the development of products; searching for ways of using commercially internal knowledge and Intellectual Property Rights; growing profits and revenues from innovation; and increasing knowledge base and client’s satisfaction. Digital marketing-based business transformation has been documented as an important strategy to respond to disruptive environmental changes. During the COVID-19 pandemic, long-lasting changes are occurring, uncovering layers of novel branding and marketing strategies being adopted by old and new organizations alike. The last and twelfth chapter plunges into notable digital marketing trends and shifts that this pandemic has caused, thread-bearing the reasons, processes and effects on the way. It proposes four digital marketing-based business transformation (DMBT) strategies that firms can adopt to combat the present crises and finally concludes that digital marketing is here to stay in the post-pandemic times and businesses should think of it as a ‘strategy for keeps’.

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Editor-in Chief, International Journal of Consumer Studies (A RankABDC Australia) Justin Paul Professor, University of Puerto Rico System, San Juan, Puerto Rico Distinguished Professor, IIM, Kozhikode, Kerala, India SIBM, Pune, India Sanjay Dhir Associate Professor and Area Chair of Strategic Management, Indian Institute of Technology Delhi, New Delhi, Delhi, India

Contents

Deglobalization: Review and Research Future Agenda Using PAMO Framework Harchitwan Kaur Lamba Developing a Hierarchical Model Among Factors Influencing Deglobalization Thinking in COVID-19 Era Shamita Garg and Sushil Global Sourcing in Times of Covid-19 Marta Bernasconi, Sara Galetti, Valeria Gattai, and Piergiovanna Natale The Nexus Between Trade Openness and Foreign Direct Investment Amid Structural Economic Vulnerability in Developing Countries Chi Quynh Nguyen and Thai-Ha Le De-globalization and Its Effect on International Joint Venture Nakul Parameswar Analysing Covid Adjustments in Hospitality Business Models: Insights from Indian Hospitality Sector Through Social Media Analytics Saurabh Srivastava

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CONTENTS

De-internationalization in the Sky: Aeroméxico and the COVID-19 Pandemic José Satsumi López-Morales Effects of Covid-19 on De-globalization Pooja Chaudhary and Kulwant Kumar Sharma Digital Marketing as a Tool of De-globalization: A Study During Covid-19 Pandemic Ila Sharma, Rahul Dhiman, and Saurabh Jha Deglobalization in COVID-19 Times: New Routes for Global Business Marián Arias, Renato Carrillo, Romina Gómez, María Alejandra Leiva, Thalía Pineda, María de las Mercedes Anderson-Seminario, and Aldo Alvarez-Risco Business Beyond COVID-19: Towards Open Innovation Asha Thomas

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Combating COVID-19 with Digital Marketing: Strategies for the Marketer Meenu Chopra and Neha Saini

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Index

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Editors and Contributors

About the Editors Dr. Justin Paul is a full Professor in the Ph.D. & M.B.A. programmes at the University of Puerto Rico, San Juan, PR, USA and holds a title ‘Distinguished Scholar’ with India’s premier business school IIM (IIM-K). He serves as Editor-in-Chief, International Journal of Consumer Studies (An A ranked global academic journal with over 1400 submissions a year). He is well known as an author/co-author of best-selling text books—Business Environment (4th edition), International Marketing, (2nd edition) Management of Banking & Financial Services (2nd edition) and Export–Import Management (2nd edition) by McGraw-Hill, Pearson & Oxford University Press, respectively. He served as a full-time faculty member with the Rollins College—Florida, University of Washington and Nagoya University of Commerce & Business—Japan, accredited by AACSB & AMBA in the past. He has been conferred with an honorary title—Distinguished Professor—by Symbiosis University, Pune, India in 2020. Dr. Paul serves/has served as Senior/Guest/Associate Editor with the International Business Review, Journal of Business Research, Services Industries Journal, European Bus Review, Journal of Retailing & Consumer Services, Small Bus Economics, European Journal of International Management, Journal of Promotion Management, Business Ethics: A European Review & International Journal of Emerging Markets. Over

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100,000 copies of his books have been sold and his articles have been downloaded over 700,000 times, which rank him among the most downloaded academicians in the field of business and economics. He is an author of over 75 articles in SSCI listed journals, out of which 40+ are in journals ranked as A & A star by Australian Business Deans Council. He has also authored/co-authored two more books, namely International Business and Services Marketing. He started his career as Officer— Corporation Bank and moved to academics later. He served as Department Chairperson at Indian Institute of Management (IIM), the premier business school in South Asia at age 30. He has taught full courses at Aarhus University—Denmark, Grenoble Eco le de Management—France, University of Washington Foster School of Business—Seattle, Universite De Versailles—France, ISM University—Lithuania, SP Jain—Dubai, Warsaw University—Poland and has been a visiting professor/an invited speaker and trainer at Vienna University of Economics and Business, Deakin University—Australia, University of Queensland, University of Chicago, University of Puget Sound, St.Martyn’s University—USA, VSEUniversity of Prague, Fudan University—Shanghai and UIBE—Beijing. He has conducted corporate training many times for South East Asian Bank—Mauritius, Al Omaniya Financial Services—Oman, South Indian Bank, Federal Bank and Thomas Cook. Dr. Justin has been distinguished as ‘Role Model’ by ‘Careers & Campuses’ magazine, as ‘Young Achiever’ by ‘The Hindu’ newspaper and as ‘The Global Professor’ by Mathrubhumi. He has also secured international level awards for Best Research Papers and Case studies, instituted for faculty members by European Case Clearing House, American Society for Competitiveness, Emerald UK, London School of Business, Association of Indian Management Schools, etc. He is also known as an Author of 3 Best Selling Case studies pub by Ivey—Canada & distributed by Harvard Business School (1. LV in Japan 2. Ferro Industries—Exporting Challenge 3. L’oserie—Turnaround challenges). Dr. Sanjay Dhir is an Associate Professor and Area Chair of Strategic Management at the Department of Management Studies, Indian Institute of Technology Delhi. He is a Fellow (Ph.D.) from the Indian Institute of Management (IIM) Lucknow. He worked at corporate sector—Mahindra and Mahindra Ltd (Automotive), R&D Department, Nasik—for three and a half years. He has published several research papers in leading

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international journals including case studies at Richard Ivey School of Business, Western Ontario jointly distributed by Ivey and Harvard Business School, Journal of Business Research, Technological Forecasting and Social Change, and International Business Review. His research papers were presented and published as conference proceedings at several prestigious academic conferences such as Academy of Management (AoM), Academy of International Business (AIB), Strategic Management Society (SMS), Southern Management Association (SMA), International Simulation Conference of India (ISCI, IIT Mumbai) and Strategic Management Forum (SMF, IIM Lucknow). His research interests include strategic management, joint ventures, innovation management, management of change, implementation strategies, and international strategy.

Contributors Aldo Alvarez-Risco is a Professor in the International Business career at the Universidad de Lima and has a PhD in Administration by Universidad Autónoma de Nuevo León, a Doctor diploma in Pharmacy and Biochemistry, and has a master degree in Pharmacology and Pharmacist by Universidad Nacional Mayor de San Marcos. He is a member of the Academy of International Business (AIB). Also, he is coordinator of Global Logistics and Supply Chain Management Research Group, member of the Global Business Research Group of the Scientific Research Institute of the Universidad de Lima, a speaker in events in 22 countries, and an author of books and articles in international business, sustainability, and health systems. Marián Arias is a Student of International Business in Universidad de Lima, Peru. Marta Bernasconi graduated in Economics in 2018 and completed a two-year M.Sc. in Global Management at Università degli Studi di Milano-Bicocca in November 2020. She wrote her M.Sc. dissertation on the impact of Covid-19 pandemic on industrial production in the Lombard manufacturing sector, under the supervision of Valeria Gattai. Marta Bernasconi is currently research assistant at Università degli Studi di Milano-Bicocca. Renato Carrillo is a Student of International Business in Universidad de Lima, Peru.

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Pooja Chaudhary is working as an assistant professor and academic coordinator in Chitkara Business School of Chitkara University. She looks after undergraduate programs of the School. She is also a research scholar, pursuing her ‘doctorate studies’ in strategic management field under Panjab University. She is a post graduate in finance and marketing with a strong economics background. Her interests in teaching are in economics, finance, marketing and strategic management, strategic business leader and financial performance management. Her research interests are mainly in the field of implementation of strategies for organizations, financial frauds and sustainable development. She is working towards her doctorate research in strategy. Meenu Chopra is an Assistant Professor in Department of Business Economics and Management Studies, Guru Gobind Singh College of Commerce, University of Delhi. She completed her Doctorate program as a Full-time Research Scholar from the prestigious Delhi Technological University (Formerly Delhi College of Engineering) under the DTU Fellowship program. She has published various research papers and case studies with leading international journals. She has also presented and published papers with prestigious conferences at national and international level. Her areas of interest include Strategic Management, Strategic innovation, Knowledge Management, Organizational Change and Transformation. María de las Mercedes Anderson-Seminario is a Professor of International Business in Universidad de Lima, Peru. She is a Candidate to Doctor in Global Business Administration from the Universidad Ricardo Palma, and has a Master of Science degree in Agricultural Economics by the Universidad Agraria La Molina and Economist from the Universidad de Lima. She is also a Member of the Academy of International Business (AIB), a Member of the Global Business Research Group of the Scientific Research Institute of the Universidad de Lima, and a collaborative research professor of the economic research group of professors at the Universidad Agraria La Molina Dr. Rahul Dhiman received his PhD from National Institute of Technology, Hamirpur (HP), Government of India and Master in Business Administration (MBA) in Finance and Marketing. Presently, he is working as Assistant Professor in the Department of Business Management, Dr. YS Parmar University of Horticulture and Forestry, a state University, Solan

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(HP). He has several Scopus and ABDC papers in international journals of repute published by Inderscience, Emerald, Sage, Taylor and Francis etc. He has presented papers in several international conferences held in IIMs, IITs, NITs and state universities. Sara Galetti graduated in Economics in 2018 and completed a twoyear M.Sc. in Global Management at Università degli Studi di MilanoBicocca in November 2020. She wrote her M.Sc. dissertation on sourcing strategies in the Lombard manufacturing sector, under the supervision of Valeria Gattai. Sara Galetti is currently research assistant at Università degli Studi di Milano-Bicocca. Shamita Garg is a doctoral scholar in the area of strategic management at the Department of Management Studies at Indian Institute of Technology Delhi, India Valeria Gattai is Associated Professor of Applied Economics at Università degli Studi di Milano- Bicocca. She holds a Ph.D. from Bocconi University (Italy). Her research focuses on internationalization strategies and theory of the firm. On these topics, Valeria Gattai published in The B.E. Journal of Economic Analysis and Policy, International Review of Applied Economics, International Review of Economics, Journal of Economic Surveys, Economics Letters, The World Economy, Review of World Economics/Weltwirtschaftliches Archiv, International Journal of Emerging Markets, Journal of Industrial and Business Economics, Review of Financial Economics, Journal of Chinese Economic and Business Studies, Journal of International Trade and Economic Development. She is also co-author of the Palgrave Pivot “ODI from BRIC countries. Firm-level Evidence”. Romina Gómez is a Student of International Business in Universidad de Lima, Peru. Saurabh Jha is working as an Assistant Professor in the School of Engineering and Technology (Department of Biotechnology) at Sharda University, Greater Noida. He obtained his M.Sc.(Biotechnology) degree from VIT University, Vellore, and Ph.D. Degree in Biotechnology (Neurobiology) was awarded from Delhi Technological University (Formerly Delhi College of Engineering). His areas of interest in Stem Cell and expertise include molecular chaperone and ubiquitin E3 ligase in neurodegenerative disorders along with therapeutics action of

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biomolecules in aged neurons and muscles. He has published 22 papers in peer-reviewed and high impact factor International Journals such as JNC, JAD, BBA, APCS, GENE & JTM (h-Index 08; i10-index 8; Cumulative impact factors 50; Citation Index is 350) and Three books chapters in Springer International Publishing AG. He has also got “Commendable Research Excellence Award DTU 2018” from Delhi Technological University, Delhi. Recently, Dr. Jha has received “Best Stem Cell Researcher Award 2019” by Prof. (Dr). Michele Zocchi, University of Turin, Italy. He has also presented more than 17 papers in international symposium and proceedings. Further, He has also designed and introduced the two new courses at level of B.Tech/M.Sc./PGD in “Stem Cell Technology and Regenerative Medicine” & “Genetic Engineering” at Sharda University. Dr. Jha has an excellent track record in Teaching, Research and Placement in term of B.Tech and M.Tech Biotechnology at Sharda University. Until now, he has currently guided 03 Ph.D., 02 M.Tech, 02 M.Sc. and more than 10 BS students. He has also served various committee Members of the Department of Biotechnology as well as the University level. He is the life and regular member of various professional societies across the globe. Harchitwan Kaur Lamba is a doctoral scholar in the area of strategic management at the Department of Management Studies at Indian Institute of Technology Delhi, India. She holds undergraduate and post graduate degrees in Commerce from University of Delhi and Panjab University, respectively. She has varied work experience teaching at undergraduate colleges in University of Delhi, and corporate experience working with small and medium business clients for AdWords at Google India. Her areas of interest include sharing economy and strategic alliances. Thai-Ha Le is the Director of Research and Senior Faculty Member at Fulbright University Vietnam. María Alejandra Leiva is a Student of International Business in Universidad de Lima, Peru. José Satsumi López-Morales holds a PhD in Administrative Sciences from Universidad Cristobal Colon in México and a MBA from Universidad de Palermo in Buenos Aires, Argentina. He is a member of the National System of Researchers (Level 1) supported by CONACYT in Mexico. He is a full-time professor and academic coordinator of MBA at the Tecnologico Nacional de México/Instituto Tecnológico de Veracruz,

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also have teached in Universidad Veracruzana, Universidad Cristobal Colón and Universidad de Monterrey, all in in Mexico. In 2021 was nominated as Track Chair of “Global and Regional Supply Chain” of Academy of International Business chapter Latin America (AIB-LAC). Piergiovanna Natale Full Professor of Economics at Università degli Studi di Milano-Bicocca. She holds a Ph.D. from the University of Exeter (U.K.). Her research focuses on institutional design and theory of the firm. On these topics, she published in The European Journal of Political Economy, Journal of Policy Modelling, IfoStudien, Economics and Politics, The Manchester School, The Scottish Journal of Political Economy, Journal of Economic Surveys, Economics Letters, International Journal of Emerging Markets, Review of Financial Economics. She is also co-author of the Palgrave Pivot “ODI from BRIC countries. Firm-level Evidence”. Chi Quynh Nguyen is associated with Fulbright University Vietnam. Nakul Parameswar is an Assistant Professor in the department of entrepreneurship and management at the Indian Institute of Technology Hyderabad. He holds a doctorate from the Indian Institute of Technology Delhi. His research interests include dynamics in strategic alliances, competitive strategy and start-up management. Thalía Pineda is a Student of International Business in Universidad de Lima, Peru. Neha Saini has completed her PhD in the area of Finance and International Business from Faculty of Management Studies, University of Delhi. She has done her graduation from Keshav Mahavidyalaya and post-graduation from RDIAS (GGSIPU). With the rich corporate and academic experience, she has participated in various national and international paper presentations, including IIMs, IISc, IBS-Hyderabad, Delhi School of Economics, Department of Commerce (DU) etc., including some best paper awards as well. Besides this, her publication list includes the leading journals in the area of finance, international business and sustainability. Kulwant Kumar Sharma is a professor and dean, at Chitkara University, Punjab. His teaching interests include OB & HR, learning and development, global & virtual team management, strategic management, pedagogy, UN sustainable development, human values and human rights.

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His research interests include peace operations, human rights, sustainable development as a global agenda, political economy and humanitarian disaster management. He has headed a number of educational institutes and has worked with UN components of peace operations, refugee agency and office of human rights. Dr. Ila Sharma is a reputed name in the list of Pune scientist club in the field of Life Science Research. She completed PhD from Fergusson College, Pune and Masters in Biotechnology from Rajasthan University. Currently, she is an independent researcher. Before this, Dr Ila worked as a Professor of Pharmaceutical Marketing courses in DY Patil Business School, Pune. She is an example of beauty with a brain. She has dynamic and versatile in her personal and professional life. She is good at developing and executing instructional materials, guiding and mentoring research scholars, supervising student performance, supporting and managing teaching staff, taking part in departmental or college events, training the students for academics and non-academics projects. She is also invited as a keynote speaker in various management institutes. She is also the author of the Management and Biotech book. Dr Ila served as a consultant and advisor in various reputed groups like CEGR and Integrated Chambers of Commerce and Industry, New Delhi. Her idea is dreams should be trusted and continuously followed until one manages to achieve them. Saurabh Srivastava is a Doctoral Scholar in Strategic Management at Department of Management Studies, Indian Institute of Technology Delhi, India. He has completed his Post Graduate Diploma in Management from IIM Ahmedabad, India and has completed his undergraduate studies in Mechanical Engineering from IIT Kanpur, India. He has 14 years of progressive work experience across corporate strategy & planning, financial management and cost controllership functions across industries and is currently heading digital strategy initiatives at one of the leading ITES organisation. His interests lie in working towards bridging the gap between academia and business practices in management domain. Sushil is a Professor in the area of strategic management at the Department of Management Studies at Indian Institute of Technology Delhi, India.

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Asha Thomas is Assistant Professor at Jagan Institute of Management Studies (JIMS), New Delhi. Her areas of research interest include knowledge management, organizational behaviour and marketing. She has about 12 years of experience in teaching, as well as over 3 years of experience in IT and Telecom Industry. She is currently pursuing doctorate program as a part-time Research Scholar from the prestigious Delhi Technological University. She has several national and international research papers to her credit. She has also presented papers in National and International Conferences. She also serves as reviewer for several top international journals.

List of Figures

Deglobalization: Review and Research Future Agenda Using PAMO Framework Fig. 1 Fig. 2

Trade Openness Index 1870–2017 The number of articles published in the area of deglobalization over time

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Developing a Hierarchical Model Among Factors Influencing Deglobalization Thinking in COVID-19 Era Fig. 1 Fig. 2

Diagraph portraying interaction among the identified factors TISM-P based diagram exhibiting how COVID-19 is influencing deglobalization process

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Global Sourcing in Times of Covid-19 Fig. 1 Fig. 2 Fig. 3 Fig. 4 Fig. 5

Sampled firms’ sourcing strategy (Source Authors’ database) Inputs relevance by type (Source Authors’ database) Impact of the Covid-19 pandemic on business by sourcing strategy (Source Authors’ database) Impact of the Covid-19 pandemic on business by input type (Source Authors’ database) Impact of the Covid-19 pandemic on business by direct and indirect channels and sourcing strategy (Source Authors’ database)

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Fig. 7

Fig. 8

Fig. 9

LIST OF FIGURES

Impact of the Covid-19 pandemic on business by direct and indirect channels and input type (Source Authors’ database) The importance of the supply chain in dealing with the Covid-19 pandemic by sourcing strategy (Source Authors’ database) The importance of the supply chain in dealing with the Covid-19 pandemic by input type (Source Authors’ database) Sourcing strategy switch in response to the Covid-19 pandemic (Source Authors’ database)

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The Nexus Between Trade Openness and Foreign Direct Investment Amid Structural Economic Vulnerability in Developing Countries Fig. 1 Fig. 2

FDI inflows (US$ million) and trade openness (%) trends by region (Source UNCTAD, 2020) Economic vulnerability measurement in the framework of FERDI (Source FERDI [Feindouno & Goujon, 2016])

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De-internationalization in the Sky: Aeroméxico and the COVID-19 Pandemic Fig. 1

De-internationalization actions carried out by Aeroméxico. Note The data are drawn from Aeroméxico (2020d), Americaeconomia (2020), Businesstriper (2020), Expansion (2020a), Expreso (2020), Garrow and Lurkin (2021), Milenio (2021), and Resultados del 3T20 (2021)

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Effects of Covid-19 on De-globalization Fig. 1

Business leaders’ perception on globalized world (2020) (Source: World Economic Forum Executive Opinion Survey 2008–2020 series [WEF 2020])

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Deglobalization in COVID-19 Times: New Routes for Global Business Fig. 1

Mortality rate of the main virus outbreaks worldwide in the last 50 years (From “Death rate of major virus outbreaks worldwide in the last 50 years starting in 2020”, by Statista [2020])

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LIST OF FIGURES

Fig. 2

Number of coronavirus (COVID-19) cases worldwide as of April 21, 2020, by country (From “Number of coronavirus [COVID-19] cases worldwide as of April 21, 2020, by country”, by Statista [2020])

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Business Beyond COVID-19: Towards Open Innovation Fig. 1 Fig. 2

Word cloud Conceptual model

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Combating COVID-19 with Digital Marketing: Strategies for the Marketer Fig. 1

DMBT thematic map

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List of Tables

Deglobalization: Review and Research Future Agenda Using PAMO Framework Table 1 Table 2 Table 3 Table Table Table Table

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Bibliograghic sources of deglobalization in the literature Theories widely discussed in the articles reviewed Distribution of the widely used theories used in the articles reviewed Most common host countries in the articles reviewed Industries analysed in the articles reviewed Methods used in the literature Distribution of methods used in the literature

5 7 8 9 10 12 13

Developing a Hierarchical Model Among Factors Influencing Deglobalization Thinking in COVID-19 Era Table 1 Table 2 Table 3

Reachability matrix (with polarity) Reachability matrix (without polarity) List of determinant and their levels in TISM

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Global Sourcing in Times of Covid-19 Table 1

Population and sampled firms by location, manufacturing activity and firm size

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LIST OF TABLES

The Nexus Between Trade Openness and Foreign Direct Investment Amid Structural Economic Vulnerability in Developing Countries Table 1 Table 2 Table 3 Table 4 Table 5 Table 6

Effect of Trade openness on FDI/GDP in terms of EVI Dynamic effects on FDI, estimator: D-GMM & S-GMM Effects of openness on FDI/GDP with interaction variables: System GMM Definition of variables Descriptive statistics List of countries in the study sample

72 75 77 80 82 83

De-globalization and Its Effect on International Joint Venture Table 1

Snapshot on the Evolution of Purpose of IJV from Globalized to De-globalized world

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Analysing Covid Adjustments in Hospitality Business Models: Insights from Indian Hospitality Sector Through Social Media Analytics Table 1 Table 2 Table 3 Table 4 Table 5

List of firms selected for this study Summary view of Tweets in the pre- and post-Covid scenarios Firm wise Tweets descriptive analysis based on media used in Tweets Keywords and their associated words in the preand post-Covid first wave scenarios Sentiment analysis of Tweets by various firms

107 107 109 110 113

De-internationalization in the Sky: Aeroméxico and the COVID-19 Pandemic Table 1

Aeroméxico’s de-internationalization policies according to the literature

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Digital Marketing as a Tool of De-globalization: A Study During Covid-19 Pandemic Table 1 Table 2

Descriptive statistics Reliability of instrument

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LIST OF TABLES

Table 3

Respondents’ view on de-globalization and digital marketing

xxix

166

Business Beyond COVID-19: Towards Open Innovation Table Table Table Table

1 2 3 4

List of journals Definitions Companies’ response to COVID-19 A summary of empirical studies

192 193 195 203

Combating COVID-19 with Digital Marketing: Strategies for the Marketer Table 1

Digital marketing-based business transformation strategies

221

Deglobalization: Review and Research Future Agenda Using PAMO Framework Harchitwan Kaur Lamba

1

Introduction

The global economy is withdrawing from international economic integration as a result of the COVID-19 pandemic. Business leaders and policymakers have been debating if global supply chains have become too strained. They are also discussing whether they should minimize their economic interdependence in a climate where alliances are unstable and international cooperation is lacking. Figure 1 shows the trade openness index from 1870 till 2017. Deglobalization has gained traction as a result of the COVID19 pandemic. As multinational corporations (MNCs) and countries both reassess risks and prioritize national security and resilience over performance, the unfolding global pandemic can hasten deglobalization. However, this term is not particularly new. The idea of deinternationalization was conceptualized in 1988 as a relevant topic in the area of international business as a means of recognizing firms’ declining participation in overseas operations (Welch & Luostarinen, 1988). Similar

H. K. Lamba (B) Department of Management Studies, Indian Institute of Technology Delhi, New Delhi, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_1

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Fig. 1 Trade Openness Index 1870–2017

meanings have been proposed by other authors (Benito, 1997; Benito & Welch, 1997; Pauwels & Matthyssens, 1999). The decreased participation in one or more global markets is common among the various meanings. In two ways, this chapter endeavours to add to the existing IB research. This chapter aims to review the extant literature of deglobalization from a strategy perspective, in order to summarize it, along with identifying gaps in the literature to outline an agenda for the future, to advance research in this area. The chapter will also comment on the implications of the uncertain situation created by the COVID-19 pandemic, with respect to deglobalization. This chapter is structured in the following way. In Sect. 2, literature in the field of deglobalization has been discussed. In Sect. 3, the methodology for the review has been discussed. Section 4 entails development of a research agenda for the future, based on the lacuna in the literature. Finally, in the conclusion section, the findings of this paper have been summarized along with the limitations of this study.

2

Literature Review

Deglobalization refers to reduction in the scope of a business’ geography or international market penetration (Turner, 2012). It not only involves entirely withdrawing from all international markets but also

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entirely halting all activities on a single international market or in a few of them, diminishing the level of international activities (for instance, reducing ownership in an international strategic alliance), and changing operations so as to operate with fewer resources: for example, divesting from the operations and instead doing exports (Benito & Welch, 1997; Calof & Beamish, 1995; Swoboda et al., 2011). It is possible at any point in the process of globalization, however businesses that are smaller in size, often with lesser experience, and businesses that do not innovate are seen to deglobalize more often (Benito & Welch, 1997; Reiljan, 2007; Welch & Luostarinen, 1988). Deglobalization can be influenced by external agents, for instance, political pressure, drastic changes in foreign exchange rates impacting the business environment, or, growing competition (Akhter & Choudry, 1993; Crick, 2009; Javalgi et al., 2011; Pauwels & Matthyssens, 1999). It can also be influenced by inward factors: lack of experience or know-how, deficiency of financial assets, revised globalization strategy, inadequate performance, or even the termination of collaboration contracts with business allies (Reiljan, 2007). Despite this, deglobalization should not necessarily be called a failure for an organization, it is possible that it is a strategic choice for the business (Vissak et al., 2012). Additionally, it could even be considered the way of learning, for when the business chooses to enter a country that is similar, or if it chooses to re-enter the same country (Lukason & Vissak, 2017). International business (IB) research on deglobalization has largely focused on describing the phenomenon (Calof & Beamish, 1995; Welch & Luostarinen, 1988), determining the motivation for deinternationalization (Akhter & Choudhry, 1993; Yayla et al., 2018), analyzing various scenarios for deglobalization (Turner & Gardiner, 2007). Three outcomes of deglobalization have been discussed in prior studies: complete cessation of foreign operations; a temporary break from foreign operations; and a complete withdrawal from foreign operations, as well as a halt to trade, either simultaneously or quickly after (Calof & Beamish, 1995; Turcan, 2013). However, there exists a need for current research to be reviewed in order to improve understanding of deglobalization and develop insights into the concept.

3

Methodology

For the purpose of this chapter, a comprehensive framework has been proposed to review the literature, following the design of several other

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reviews (Nicholls-Nixon et al., 2011; Paul & Benito, 2018; Paul & Rosado-Serrano, 2019). This chapter proposes a framework to examine the philosophy, attributes, method and outcomes (PAMO) of the literature. The framework aims to examine the philosophy and the theoretical foundations behind the study based on which it is written, the attributes of the study, specifically the context, and the variables on which it is established. It also examines the method used for the purpose of the study, as well as the sample section and the kind of data used, in addition to the outcomes and findings of the study. The database used for reviewing the extant literature was Scopus. The search used to find the articles were: deglobalization, deglobalization, deglobalization, de-globalisation, deinternationalization, de-internationalization, deinternationalisation, de-internationalisation. This initial search resulted in 278 documents. After limiting the area of the search to business, management and accounting, the number of documents narrowed down to 99. The extent of this search was constricted to articles published in journal (Chabowski et al., 2013). Conference proceedings, books, editor notes, as well as book reviews were not included in the analysis. Before being published in journals, articles are first reviewed thoroughly by several reviewers. Accordingly, they are regarded to be bodies of “certified knowledge” (Ramos-Rodrígue & Ruíz-Navarro, 2004). This further narrowed it down to 73 documents. After restricting the search only to articles published in the English language, the number of articles was 70. The final search string was: TITLE-ABS-KEY (“deglobalization” OR “de-globalization” OR “deglobalisation” OR “de-globalisation” OR “deinternationalization” OR “de-internationalization” OR “deinternationalisation” OR “de-internationalisation”) AND (LIMIT-TO (DOCTYPE, “ar”)) AND (LIMIT-TO ( SUBJAREA, “BUSI”)) AND (LIMIT-TO (LANGUAGE, “English”)) AND (LIMIT-TO ( SRCTYPE, “j”)). After thoroughly reviewing the 70 articles, it was found that only 52 of them were relevant for this study, and these were the articles that formed the basis of this review. The number of research papers from each journal can be seen in Table 1. The time period in which these research papers were published is distributed across two decades. This distribution can be seen in Fig. 2. This distribution pattern clearly shows that there has been increasing interest in the area of deglobalization. There has been a sharp rise

DEGLOBALIZATION: REVIEW AND RESEARCH FUTURE …

Table 1

5

Bibliograghic sources of deglobalization in the literature

Bibliographic source

No. of articles

Percentage

International Business Review Journal of International Trade Law and Policy Asia Pacific Journal of Management Entrepreneurial Business and Economics Review European Business Review Journal of Business Strategy Journal of East-West Business Journal of International Business Studies Review of International Business and Strategy TourismGeographies Business and Politics Business History Chinese Management Studies Economic and Labour Relations Economics and Management Global Business Review Global StrategyJournal Human Resource Management International Entrepreneurship and Management Journal International Journal of Business and Globalisation International Marketing Review Journal of Air Transport Management Journal of Business & Industrial Marketing Journal of East European Management Studies Journal of Evolutionary Studies in Business Journal of Global Business Advancement Journal of Small Business and Enterprise Development Journal on Food System Dynamics Management and Organization Review Management International Review Multinational Business Review Organization Problems and Perspectives in Management The Economist The World Economy Thunderbird International Business Review, TourismManagement Transnational Corporations Review Vision Total

4 3 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 52

8 6 4 4 4 4 4 4 4 4 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 100

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18 16 14 12 10 8 6 4 2 0 2004

2007

2009

2011

2012

2013

2015

2016

2017

2018

2019

2020

2021

Number of articles published

Fig. 2 The number of articles published in the area of deglobalization over time

especially in the year 2020, primarily due to the ongoing COVID-19 pandemic. While there seems to be a decline in 2021, it can be attributed to the fact that the year is ongoing. The articles included in this study can be considered as the accumulated research about deglobalization, especially in international business literature. Table 1 shows the bibliographic sources of the articles that were included in this review.

4

PAMO Framework: Research Agenda 4.1

Philosophy

In a phenomenon as far-reaching and dynamic as deglobalization, there are many disciplines that study it. Thus, one individual philosophy will not be able to address all aspects of it. All philosophies/theories that were discussed in the literature have been listed in Table 2. Table 3 indicated the distribution pattern of the different theories. As it can be clearly seen, the most commonly used theoretical lenses are born global and the Uppsala model. This is not surprising as these

DEGLOBALIZATION: REVIEW AND RESEARCH FUTURE …

Table 2

7

Theories widely discussed in the articles reviewed

Theory

Authors

Born Global

Freeman et al. (2013), Vissak and Zhang (2016), Dominguez and Mayrhofer (2017) Dominguez and Mayrhofer (2017), Kuiken et al. (2020), Wójcik and Ciszewska-Mlinariˇc (2020) Mlody (2016), Ambos et al. (2019), Poruchnyk et al. (2021) Liesch et al. (2011), Turner (2012) Lafuente et al. (2015), Wang et al. (2020) Lafuente et al. (2015), Casas-Klett and Li (2021) Mlody (2016) Mlody (2016) Ozkan et al. (2020) Ballor and Yildirim (2020) Zámborský (2020) Turcan et al. (2020) Witt (2019a) Casas-Klett and Li (2021) Gopalan et al. (2020) Ezeani (2018) Witt (2019b) Witt (2019b)

Uppsala Model

Economic Theory Coevolutionary Theory Resource Based View Institutional Economics Strategic Management Theory Internationalization Process Management Contingency Theory Dependency Theory Dynamic Capabilities International Business Theory International Relations (IR) Theory Narrative Economics New Economic Geography Theory Theory of Comparative Advantage Liberalism Realism

two philosophies directly address the internationalization of organizations. Born global organizations are those that rapidly enter international markets, not long after the commencement of its business. Some of these foreign markets are much more distant than the others (Vissak et al., 2019). Whereas, the Uppsala model is a primary theory of internationalization, describing the process of an organization entering one foreign market at a time, learning from its own experience. The economic theory is also one of the most discussed theories in the literature. However, since deglobalization is not a single disciplinary phenomenon, it can be seen that there are philosophical influences from other disciplines such as political science, in form of the theories of liberalism and realism (Witt, 2019b), and from political science, in form of irelations (IR) theory (Witt, 2019a).

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Table 3

Distribution of the widely used theories used in the articles reviewed

Theory

Number of articles

Percentage

Born Global Uppsala Model Economic Theory Coevolutionary Theory Resource Based View Institutional Economics Strategic Management Theory Internationalization Process Management Contingency Theory Dependency Theory Dynamic Capabilities International Business Theory International Relations (IR) Theory Narrative Economics New Economic Geography Theory Theory of Comparative Advantage Liberalism Realism Total

4 3 3 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 28

14 11 11 7 7 7 4 4 4 4 4 4 4 4 4 4 4 4 100

International business literature has been at the receiving end of growing criticism for omitting and the absence of micro foundations and behavioural theorizing (Buckley et al., 2007, 2017; Clarke & Liesch, 2017). Several scholars have asked for increased research on individual perceptions to further theorizing on the micro foundations of globalization and the importance of distance (Dow, 2017). However, so far, not many authors have used a micro foundations lens to quantitatively explore managerial perceptions and decision-making in globalization (Ambos et al., 2019; Buckley et al., 2007; Clark et al., 2018; Fabian et al., 2009; Mataloni, 2011). 4.2

Attributes

Research in the field of deglobalization has helped in increasing our knowledge by recognizing the pertinent context and variables of this phenomenon. The research base for this area is wide with varying conclusions resulting from it. In the context of countries, as it can be seen

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in Table 4, 45% of the literature is focussed equally on three nations, USA, UK and China. Other than that, developed countries such as Italy, Denmark, Australia and France are also relevant markets for this study. This clearly indicates a major scope for future research to be focussed on African and South American markets. Table 5 indicates the industries in which research has primarily been conducted in the past. It can be seen that technology, tourism and manufacturing are the main industries. In the last few years, global sentiment around manufacturing locally has been very strong. Thus, manufacturing and technology have been studied more. Interestingly, all three articles that focus on the tourism industry have been written in 2020, the year that brought international travel and tourism to a halt (Niewiadomski, 2020; Renaud, 2020; Yousaf & Fan, 2020). While reviewing the extant literature, it was seen that due to the limited number of empirical studies in this area, the number of measurable variables, especially those with defining dependent relationships between them, were only few. Gopalan et al. (2020) discussed the impact of Table 4 Most common host countries in the articles reviewed

Host country

Number of articles

Percentage

China USA UK Italy Australia Denmark France Argentina Belarus Colombia Estonia Spain Germany Austria Switzerland India Poland Romania Sweden Total

6 6 6 3 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 39

15 15 15 8 5 5 5 3 3 3 3 3 3 3 3 3 3 3 3 100

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Table 5 Industries analysed in the articles reviewed

Industry

No. of articles

Percentage

Technology Tourism Manufacturing Small and Medium Enterprises Food Telecommunications Shipping Medical Rayon Recruitment/Human Resources Higher Education Industrial Machinery International Aviation IT Services Finance/Financial Markets Total

4 3 3 2

17 13 13 8

2 1 1 1 1 1

8 4 4 4 4 4

1 1 1 1 1

4 4 4 4 4

24

100

Note Manufacturing includes manufacturing of remote controllers, flyback transformers and doors

distance between countries, free trade agreements and whether or not they share a border on the bilateral exports between two countries. The effect of domination of foreign-based competitors in the home industry, environmental hostility of the home industry on deglobalization was also discussed (Wójcik & Ciszewska-Mlinariˇc, 2020). From a management perspective, impact of the entrepreneur’s human capital and perception, measured by their labour experience, the number of founders, and their fear of business failure, on export behaviour was studied (Lafuente et al., 2015). There was only one study that used moderating variables (competitive intensity and complacency), doing so while studying the effect of disruption and differentiator on market growth opportunity intensity (Jois & Chakrabarti, 2020). Future research may investigate the strategies that businesses were able to employ in order to develop a certain level of flexibility to be able to react to dynamic situations to counteract uncertainty in the environment. Additionally, while there does exist evidence to validate the idea of coevolution between environmental determinism and managerial intentionality,

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over a period of a few years, researchers would be able to observe this better. For instance, businesses have been seen to increase their collaborations with educational institutions to affect curriculum, and this is likely to influence education policy on a country-wide level. However, it could take several years for this to be noticed (Farndale et al., 2020). Certain internal and external variables—such as the business’ perceptions of the relevance of target countries, issues with vendors or partners, any changes in the business environment, depending upon on unsought export orders, type of product, and/or reduced interest in clients— can cause nonlinear globalization/deglobalization. In the future, further study of these variables can be useful for and have far-reaching implications for practitioners and researchers (Vissak et al., 2012). A lot of data had been collected by primary methods. 4.3

Methods

The methods used in the extant literature can be seen in Tables 6 and 7. It can be seen that the two most commonly used methods by studies in our sample are conceptual, and case study. While some case study methods were longitudinal, multiple-case study research, and punctuated longitudinal, this shows that there is a lack of empirical analyses. Very few articles used methods such as regression analysis and factor analysis. A lot of data had been collected by primary methods. This may suggest a lack in availability of secondary data. This would also explain methods such as case studies being employed more often. Most cases used a single case, or two organizations. It is suggested that research be done using at least five or more organizations, to get more insights into the behaviour of individual firms. Researchers can extend the conceptual models created in the literature, for instance, mixed-method approach can be used with both quantitative and qualitative methods of research (Jois & Chakrabarti, 2020). Quantitative analyses are greatly required to further empirical knowledge in this area of research (Freeman et al., 2013). Several authors repeat the need for testing conjecture (Casas-Klett & Li, 2021). Propositions are presented throughout the literature, that can be tested, such as whether coercive deglobalization is caused by the erosion of institutional legitimacy, whether asymmetry between institutional and strategic legitimacy adjusts coercive deglobalization, if the coevolution between the

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Table 6

Methods used in the literature

Method

Countries

Studies

Conceptual Study

Argentina, China, US and UK

Case Study

Renaud (2020), Ballor and Yildirim (2020), Ezeani (2018), Liesch et al. (2011), Martin (2018), Niewiadomski (2020), Postelnicu et al. (2015), Poruchnyk et al. (2021), Turcan et al. (2020), Turner (2012), Witt (2019a, 2019b), Zámborský (2020), Senesi et al. (2021), Thangavel et al. (2021), Rainnie (2021), Buttonwood (2016), Allen and Raynor (2004) Turcan et al. (2010), Anwar (2019), Cerretano (2012), Kuiken et al. (2020), Turner and Gardiner (2007), Vissak and Francioni (2013), Vissak and Zhang (2016), Ozkan et al. (2020), Vissak et al. (2012), Vissak et al. (2019 Turner (2011)

Denmark, Sweden, UK, Italy, China, Belarus and US Poland and Gopalan et al. (2020), Wang et al. (2020), Wójcik and Romania Ciszewska-Mlinariˇc (2020), Lafuente et al. (2015) China Li et al. (2020), Macilree and Duval (2020), Castellões and Dib (2019 China Casas-Klett and Li (2021), Mlody (2016), Yousaf and Fan (2020) US, UK Abboushi (2018), Farndale et al. (2020) and Australia France Dominguez and Mayrhofer (2017)

Regression Analysis Literature Review Qualitative Analysis Exploratory

Content Analysis, using Nvivo Cross-Case Analysis Descriptive Analysis Discrete Choice Experiment Duration Analysis Exploratory Factor Analysis Factor and Cluster Analyses Longitudinal Analysis Random Walk SAP-LAP Framework

Australia

Freeman et al. (2013)

Colombia

Rodriguez-Satizabal (2020)

Germany, Ambos et al. (2019) Austria, and Switzerland Denmark Choquette (2019) India

Jois and Chakrabarti (2020)

France

Lukason and Vissak (2017)

UK

Berrill and Hovey (2019)

Estonia and Spain USA

Vissak et al. (2018) Garg and Sushil (2018)

DEGLOBALIZATION: REVIEW AND RESEARCH FUTURE …

Table 7 Distribution of methods used in the literature

13

Method

No. of articles

Percentage

Conceptual Study Case Study Regression Analysis Literature Review Qualitative Analysis Exploratory Content Analysis, using Nvivo Cross-Case Analysis Descriptive Analysis Discrete Choice Experiment Duration Analysis Exploratory Factor Analysis Factor and Cluster Analyses Longitudinal Analysis Random Walk SAP-LAP Framework Total

18 12 4 3 3 2 1

35 23 8 6 6 4 2

1 1 1

2 2 2

1 1

2 2

1

2

1 1 1 52

2 2 2 100

multinational company and the host market in which it operates drives deglobalization, etc. (Turner, 2011, 2012). 4.4

Outcomes

Future studies should highlight the crucial role of management’s steps in global processes and strategy (Freeman et al., 2013). It can emphasize the contrast between the motives and circumstances in case of, both the earliest relocation and, consequently, deglobalization of manufacturing processes. Particularly, these central conditions, that make firms more vulnerable to these processes should be considered. This would help the business in laying out the decision-making process with regards to their globalization strategy. Additionally, future research could incorporate the analysis of reliance between motives of businesses’ relocations and their characteristics, such as the specificity of host nation, the size of the firm, mode of governance and its industry of operation (Mlody, 2016).

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They can be observed for a longer time period during their globalizing activities; and wider variables can be studied, that are both financial and non-financial in nature. Consequently, it would be feasible to know if, for example, slow and fast globalizing firms fail differently, or if businesses with better trained management personnel follow a unique failure processes as compared to businesses with management with more training and experience (Lukason & Vissak, 2017). It could also be helpful to study the exact impact, the events at the home market and international markets have, in the failure of export businesses. Other avenues for future research could include investigating how large companies revise their investment in research and development, as a response to internationalization and de-internationalization (Vissak et al., 2019). A large organization may reduce their R&D expenditure for products that are intended only for the home market and may raise their R&D budget for fulfilling the requirements of fast globalizing foreign market.

5

Conclusion

This paper provides a summary of the extant literature in the area of deglobalization of businesses over the last two decades. There have been several opportunities for research that have been identified. From a philosophical perspective, there is a need for micro foundations and behavioural theorizing (Buckley et al., 2007, 2017; Clarke & Liesch, 2017). With respect to attributes, there are research opportunities in the emerging nations, especially in Africa, and South America; further research could be conducted in the context of industries in the service sector and agriculture industry. Quantitative analyses are greatly required to further empirical knowledge in this area of research (Freeman et al., 2013). It was also seen that failure processes of export businesses could be another avenue for future research. Other avenues for future research include investigating how large companies revise their investment in research and development, as a response to internationalization and de-internationalization (Vissak et al., 2019) and whether the current COVID-19 pandemic is potentially going to embark on a possibly long-running phase of deglobalization (Elliott et al., 2020). While a thorough search of the literature was conducted, it is possible that few articles published in the area of deglobalization were erroneously not included. One reason for this could possibly be due to the keywords

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used for the search. Books, editor notes, book reviews, conference proceedings, etc. have not been included in this review. Furthermore, only those articles that have been published in ABDC ranked journals were considered for the purpose of this study.

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Developing a Hierarchical Model Among Factors Influencing Deglobalization Thinking in COVID-19 Era Shamita Garg and Sushil

1

Introduction

The COVID-19 pandemic is raging across the world, and humanity is facing health crises and economic dislocation. The COVID-19 occurred when the world was suffering extreme nationalism tendencies like; Brexit, relation within the EU, crack in NATO allies, and growing shrinkage in world trade (Garg & Sushil, 2021). Till the last decade, globalization was reflected in increasing trade (Ethier, 2005), technology innovation (Chareonwongsak, 2002), lower production costs (Becker & Murphy, 1992; Burda & Dluhosch, 2002; Levitt, 1993), and an efficient supply chain (Humphrey, 2003). Globalization comes into sight as a win– win situation for every nation. Then, why abruptly turn around? Why is the win–win situation changing? Is deglobalization appearing the right strategy for the world trade? In the COVID-19 era, the world faces temporary deglobalization due to travel restrictions and the suspension of flights.

S. Garg (B) · Sushil Department of Management Studies, Indian Institute of Technology Delhi, Delhi, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_2

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In April 2020, as the pandemic starts to spread quickly, countries started facing immense shortages of medicines, personal protective equipment, and other critical medical commodities (Zhu et al., 2020). During the pandemic, most industrialized countries figured out that their response to deal with the health emergency was crippled due to their incompetent industrial bases that failed to scale up the production of essential commodities. Shutting down factories, borders, and trade routes represented a frightening scenario for the complicated supply networks that govern international business. Pandemic has brought into notice the flaws of the China-dependent value chain, instigating to reorient the accustomed supply network where firms look for the low manufacture outlays (Gao & Ren, 2020). This frightening situation has flickered anger among world leaders. Many have instigated “onshore” or “reshore” industrial units that have been contracted out to Asian countries in the past few decades, predominantly commodities that are imperative to national security (Austermann et al., 2020; Unterberger & Müller, 2021). The year 2020 impedes the global trade flows (Vidya & Prabheesh, 2020), forced the countries to produce more products locally, and speeds up the deglobalization of the world economy. Some critics argue that post-pandemic would experience different kinds of globalization scenario. Gruszczynski (2020) anticipates that 2020 could bring a permanent shift to the global value chain, cross-border flow of goods, commodities, people, and ideas. One of the greatest aftershocks of the coronavirus pandemic is felt in the manufacturing business globally. The coronavirus has laid bare the risks of the world’s dependence on multifaceted, inter-reliant global supply-networks (Gao & Ren, 2020; Gereffi, 2020). Firms may adjust their supply network and relocate their manufacturing factories to hedge against future risk in their host countries. Scholars (Acemoglu & Restrepo, 2020; Graetz & Michaels, 2018; Jung & Lim, 2020) observe that other factors that could change global production and value network patterns during pandemic include rising wages in industrial countries such as China and dramatic cost reduction in manufacturing robots. As the deglobalization thinking accelerates, we could likely see many other examples similar to Huawei across the world (Cartwright, 2020). Post-pandemic, we could observe an upturn of economic theories shortly, just like the “big push” that inspires industrializing countries to acclimatize themselves away from “exports led growth” and towards ‘localoriented market strategies’. For industrializing economies, particularly

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like Egypt, a deglobalized economy could enforce severe restrictions on growth, predominantly for industries that are greatly dependent on imports of raw materials. Bakari (2017) proclaims that imports have positively influenced the economic growth of Egypt. Other economies like China that is too reliant on export-led development may also be disadvantageous if deglobalization happens. As per World Bank reports, China’s export of goods and services constitutes nearly 18.5% of GDP. Many studies have been conducted to identify the impending challenges during the COVID-19 era; still, hardly any article has tried to instigate the interplay among the factors influencing the deglobalization thinking in the COVID-19 age. This study aims to fulfill that void by examining how the diverse factors augmented the deglobalization process after COVID-19. In the next section, we have discussed the factors responsible for the growing deglobalization process during the COVID-19 pandemic. Then, we have discoursed the methodology (TISM-P) employed in the contemporary study. Next, we have discussed the managerial implications of the developed model. Finally, we have thrown some light on the limitations and future work.

2

Literature Review

We have reviewed the existing literature to examine the various factors that have accelerated the deglobalization process during the COVID pandemic. The articles related to “COVID- 19”, “COVID and Travel restrictions”, “Impact of COVID on Trade”, “COVID-19 and Tourism Industry”, “Disruption in Supply Chains during COVID-19”, “COVID and Deglobalization” are searched in the registered databases. The eight factors that are predominantly causing deglobalization amid pandemic are identified after reviewing significant number of articles. A concise discussion of the dominant factors is given as follows: 1. COVID-19: Coronavirus disease 2019 (COVID-19) is a contagious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The first known case of this disease was found in Wuhan, China, in December 2019. Since then, the disease has spread globally, leading to an ongoing pandemic. On 12thJanuary 2020, the WHO confirmed that COVID-19 is causing respiratory illness in many patients. Numerous countries have announced nationwide lockdown and imposed strict restrictions to curb the

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spread of the pandemic in their realms (Pomara et al., 2020; Ren, 2020; Nilima et al., 2021). 2. Travel restrictions: Many nations have imposed travel restrictions in the form of forced quarantine or entry ban to curtail the spread of massive contagious disease (Anzai et al., 2020). Some countries have imposed global restrictions on all foreign realms, while others have imposed travel restrictions on select countries where cases are high. As per the statistica report of April 2020, nearly seventeen per cent of countries in the Asia Pacific region have suspended their flights, forty-six per cent have either partially or fully closed their borders, while twenty-four per cent have put destination-specific travel restrictions aimed at a particular country, and thirteen per cent have adopted different measures. 3. Supply chains: It has been observed that over the past few years, the corporates have formed the supply network by focussing more on lowering production cost, a complete circumvention of holding inventory, and reducing the time by following just-in-time methods (Zimmer, 2002). The coronavirus pandemic has confronted the existing value chain network. COVID-19 pandemic has dramatically affected the business of Cargo services (Damor, 2020). The closing of borders has disrupted the manufacturing and distribution of essential products (Al-Mansour & Al-Ajmi, 2020; Golan et al., 2020; Mahajan & Tomar, 2021). For instance, India struggled to get the raw materials needed to develop solar panels from China during pandemic (Damor, 2020). 4. Tourism: Travel restrictions like airport closure, suspension of flights, and nationwide lockdown have badly impacted the tourism industry (U˘gur & Akbıyık, 2020). As per the United Nations World Tourism report, the pandemic had a devastating impact on global tourism. As per the new data, the number of international tourists reduced by 87% in January 2021 compared to January 2020 (accessed on 1 May 2021). Many people have lost their jobs because of closed boundaries. According to statistica reports, it is anticipated that roughly 12.4 million jobs (fifty-one per cent of tourism employment) are lost in 2020 in the travel and tourism business as an impact of the coronavirus pandemic in Africa. 5. Production: Pandemic has dramatically impacted the production competence of the firms. Damor (2020) proclaims that pandemic has significantly disturbed the pharma industry and created immense

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pressure on regional companies to maintain the supply of essential medical commodities. Kumar et al. (2020) argue that world-leading corporates have extended their complete support to the national government and started focussing more on essential items instead of focussing on their core products and services. For instance, during the pandemic, Ford began manufacturing ventilators and respirators. Similarly, Gucci started producing masks instead of clothing, and airbus focussed more on making ventilators rather than aircraft. This changing business strategy has lowered the import and export worldwide. 6. Export: Pandemic has a wide-ranging financial consequence beyond the spread of infectious diseases. The coronavirus has already led to the steepest decline in global trade in recent decades (Vidya & Prabheesh, 2020). For instance, Indonesia has imposed a temporary ban on the export of sanitizers, facemask, other medical equipment during pandemic (Carreño et al., 2020). The demand for outdoor products and transport equipment has decreased significantly during the pandemic, which has dramatically impacted the Spanish export business of outdoor goods (Minondo, 2021). 7. Import: Pandemic has adversely affected the supply chain and closed numerous factories amid lockdown in different parts of the world.Shutting down of factories has reduced the production and consequently imports. For instance, as per statistica reports published in January 2021, the import value of Italy for 2020 is believed to be reduced by 14.3% as against last year. On the other hand, in response to the pandemic, western economies are making efforts to minimize their dependency on imported goods from China (Coveri et al., 2020). The decoupling strategy adopted by western countries might accelerate the deglobalization thinking worldwide. 8. Deglobalization: Deglobalization is limiting the ill- effects of the globalization (Garg & Sushil, 2021). Coronavirus pandemic has raised concerns around globalism and world trade as global value chains have started fraying amid restrictions. Presently, countries are looking inward for economic growth. Post-pandemic countries have begun adopting policies to replace their “export-led development model” with “inward-oriented strategies” like focussing more on regional production (Abdal & Ferreira, 2021). For instance,

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India has announced Rs 20 lakh crore economic package under its “self-reliant program” (Jha et al., 2020).

3

Methodology

This research has used the TISM-P approach to examine how COVID19 has accelerated the deglobalization paradigm. Incorporating polarity into the Total interpretive structuring approach would make the relationship more explanatory (Garg & Thakur, 2021). We have done an exuberant review of articles to identify the factors influencing deglobalization process. In the contemporary study, we have identified eight factors influencing the deglobalization thinking in the COVID-19 era and have put them in different levels according to their relative importance. The steps of modelling the relationship among the factors is stated below {for details, refer to Sushil (2018)}: Step I : The first step involves identifying critical factors exhibiting how COVID-19 is influencing Deglobalization thinking. Step-II : In this step, we have described the contextual interplay between the select factors by comparing them pairwise. For instance, the first two factors are compared, i.e. (1,2 and 2,3), and transitivity for (1,3) is checked. At the same time, polarities of the established relationships are specified. Step III : Then, we interpret the established relationship. For instance, if Travel Restriction (D2) influences Tourism (D4), an interpretation of the above-stated relationship is made. Step IV : In the next step, we have developed the successive comparison digraph to conceptualize the relationships (refer to Fig. 1). An initial reachability matrix with polarity is made by inserting “+1”, “−1”, or 0 in the matrix (see Table 1). Then, we convert the reachability matrix with polarity into the reachability matrix (without polarity) by changing entries of “+1” and “−1” by “1” (refer to Table 2). STEP V : Level partitioning is performed after analyzing the reachability set and antecedent set (refer to Appendix). Table 3 exhibits the factorsand their levels. STEP VI : Finally, we form the final model with nodes and links (see Fig. 2). The links portray the identified relationship among the

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2

1

3

4

5

6

7

8

Direct +ve Link Direct -ve Link Transitive +ve Link Transitive -ve Link

Fig. 1 Diagraph portraying interaction among the identified factors Table 1

Reachability matrix (with polarity) D1

D1 D2 D3 D4 D5 D6 D7 D8

Table 2

D1 D2 D3 D4 D5 D6 D7 D8

D2

1 0 0 0 0 0 0 0

+1 1 0 0 0 0 0 0

D3 +1 0 1 0 0 0 0 0

D4

D5

−1* −1 0 1 0 0 0 0

−1 −1 −1 0 1 0 0 0

D6 −1* −1 −1* 0 −1 1 0 0

D7 −1* −1 −1* 0 −1 0 1 0

D8 +1* 1 +1 +1 −1* +1 +1 1

Reachability matrix (without polarity) D1

D2

D3

D4

D5

D6

D7

D8

1 0 0 0 0 0 0 0

1 1 0 0 0 0 0 0

1 0 1 0 0 0 0 0

1 1 0 1 0 0 0 0

1 1 1 0 1 0 0 0

1 1 1 0 1 1 0 0

1 1 1 0 1 0 1 0

1 1 1 1 1 1 1 1

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Table 3 List of determinant and their levels in TISM

S. No

Factor Code

Determinant

Level

1 2 3

D1 D2 D3

Level-5 Level-4 Level-4

4 5 6 7 8

D4 D5 D6 D7 D8

COVID-19 Travel Restrictions Disruption in Supply Chain Tourism Industry Production Export Import Deglobalization

Level-2 Level-3 Level-2 Level-2 Level-1

factors along with the polarity.

4

Discussion

In total, we have selected eight factors that have speed up the deglobalization process during the COVID-19 pandemic. TISM-P approach is used to establish the interplay among the select factors. We observe that incorporating polarity into the TISM model has made the model more refined. The factors placed at the bottom are more influential as compared to other selected factors. This study deduces that the COVID-19 pandemic has raised the travel restrictions (Sułkowski, 2020) and disruption in the supply chains (Guan, 2020) worldwide. After analyzing the model, we deduce that Travel restrictions and disruptions in the supply chain appear at level four of the hierarchy and are driving factors of our model. In this case, travel restrictions like closing borders, visa restrictions, and suspension of flights visa restrictions have negatively impacted the tourism industry (Cheer, 2020; Gössling et al., 2020; Hall et al., 2020). Likewise, disruption in the supply chain has dramatically impacted production (Bryson & Vanchan, 2020). Gereffi (2020) argues that low-cost production centres like China and Malaysia have closed their factories to curtail coronavirus spread, which has impacted the supply of intermediate goods. The closing of these manufacturing hubs, in turn, has destructively impacted international business and reduced global export and import. Eventually, reduced tourism and lessening of export and import has accelerated the deglobalization process (Abdal & Ferreira, 2021). Thereby, policymakers should focus more on driving factors identified at level four to improve the situation arising out of COVID-19.

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8.Deglobalization

+ Reduced tourism has accelerated deglobalization thinking

+

+

Reduced exports eventually leading to deglobalization

Lowering of import is speeding up deglobalization

6. Export

4.Tourism Industry

7.Import -

-

_-

Reduction in production has lowered imports

Travel restrictions has eventually lowered the travelling

Reduced production has reduced the demand for raw material

5.Production Difficulty in procuring material

3. Disruption in supply chain

2. Travel Restrictions

+

+ Nations have closed their borders to curtail the spread of pandemic

Lockdown in countries have disrupted the value network

1. COVID-19

Fig. 2 TISM-P based diagram exhibiting how COVID-19 is influencing deglobalization process

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4.1

Practical Implications

● Countries may provide economic package to increase production activities in their realm. Emphasizing more on production will facilitate the export and increase the job prospects. ● Countries need to strengthen their infrastructure to ensure the easy movement of goods. ● Countries could revive their tourism industry by introducing vaccine passport.

5

Conclusion

The primary objective of the contemporary study was to identify the factors influencing the deglobalization process during the pandemic. This research has identified the eight dominant factors responsible for speeding up the deglobalization process worldwide during COVID-19. We have employed the TISM-P approach to look over the interplay among the select factors. This conceptual model would assist the policymakers in making policies that would increase the corporation among countries. Policymakers should examine the direction of influence of driver factor and formulate strategies accordingly. Globalization and deglobalization both are important for nations, and identifying the right strategy is important. This research has few setbacks, and these limitations open up the prospects for the upcoming scholars. Firstly, the conceptualized model is made by analyzing select writings; thereby, the biasedness could exist in the developed model. Secondly, this model has not been empirically tested. Future researchers could verify the conceptualized model using the statistical approach.

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Appendix Factors

Reachability set

Antecedent set

Intersection set

Level

1 2 3 4 5 6 7 8

1,2,3,4,5,6,7,8 2,4,5,6,7,8 3,5,6,7,8 4,8 5,6,7,8 6,8 7,8 8

1 1,2 1,3 1,2,4 1,2,3,5 1,2,3,5,6 1,2,3,5,7 1,2,3,4,5,6,7,8

1 2 3 4 5 6 7 8

L-1

Factors

Reachability set

Antecedent set

Intersection set

Level

1 2 3 4 5 6 7

1,2,3,4,5,6,7 2,4,5,6,7 3,4,5,6,7 4 5,6,7 6 7

1 1,2 1,3 1,2,3,4 1,2,3,5 1,2,3,5,6 1,2,3,5,7

1 2 3 4 5 6 7

L-2

Factors

Reachability set

Antecedent set

Intersection set

Level

1 2 3 5

1,2,3,5 2,5 3,5 5

1 1,2 1,2,3 1,2,3,5

1 2 3 5

L-3

Factors

Reachability set

Antecedent set

Intersection set

Level

1 2 3

1,2,3 2 3

1 1,2 1,3

1 2 3

L-4 L-4

L-2 L-2

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Factors

Reachability set

Antecedent set

Intersection set

Level

1

1

1

1

L-5

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Humphrey, J. (2003). Globalization and supply chain networks: The auto industry in Brazil and India. Global Networks, 3(2), 121–141. Jha, A. M., Jha, A. K., & Jha, S. K. (2020). National education policy 2020: A step towards technology driven education and self-reliant India. Solid State Technology, 63(6), 9475–9482. Jung, J. H., & Lim, D. G. (2020). Industrial robots, employment growth, and labor cost: A simultaneous equation analysis. Technological Forecasting and Social Change, 159, 120202. Kumar, A., Luthra, S., Mangla, S. K., & Kazanço˘glu, Y. (2020). COVID-19 impact on sustainable production and operations management. Sustainable Operations and Computers, 1, 1–7. Levitt, T. (1993). The globalization of markets. Readings in International Business: A Decision Approach, 249, 249–252. Mahajan, K., & Tomar, S. (2021). COVID-19 and supply chain disruption: Evidence from food markets in India. American Journal of Agricultural Economics, 103(1), 35–52. Minondo, A. (2021). Impact of COVID-19 on the trade of goods and services in Spain. Applied Economic Analysis, 29(85), 58–76. Nilima, N., Kaushik, S., Tiwary, B., & Pandey, P. K. (2021). Psycho-social factors associated with the nationwide lockdown in India during COVID-19 pandemic. Clinical Epidemiology and Global Health, 9, 47–52. Pomara, C., Li Volti, G., & Cappello, F. (2020). The post-lockdown era: What is next in Italy? Frontiers in Pharmacology, 11, 1074. Ren, X. (2020). Pandemic and lockdown: A territorial approach to COVID-19 in China, Italy and the United States. Eurasian Geography and Economics, 61(4–5), 423–434. Statistica. (2021). https://www.statista.com/topics/5994/the-coronavirus-dis ease-COVID-19-outbreak/. Retrieved on 27 May 2021. Sułkowski, Ł. (2020). COVID-19 pandemic; recession, virtual revolution leading to deglobalization?Journal of Intercultural Management, 12(1), 1–11. Sushil. (2018). Incorporating polarity of relationships in ISM and TISM for theory building in information and organization management. International Journal of Information Management, 43, 38–51. U˘gur, N. G., &Akbıyık, A. (2020). Impacts of COVID-19 on global tourism industry: A cross-regional comparison. Tourism Management Perspectives, 36, 100744. Unterberger, P., & Müller, J. M. (2021). Clustering and classification of manufacturing enterprises regarding their industry 4.0 reshoring incentives. Procedia Computer Science, 180, 696–705. UNWTO. (2021). https://www.unwto.org/news/tourist-arrivals-down-87in-january-2021-as-unwto-calls-for-stronger-coordination-to-restart-tourism. Retrieved 1 May 2021.

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Vidya, C. T., & Prabheesh, K. P. (2020). Implications of COVID-19 pandemic on the global trade networks. Emerging Markets Finance and Trade, 56(10), 2408–2421. World Bank. (2021). https://databank.worldbank.org/source/world-develo pment-indicators. Retrieved 30 May 2021. Zimmer, K. (2002). Supply chain coordination with uncertain just-in-time delivery. International Journal of Production Economics, 77 (1), 1–15. Zhu, G., Chou, M. C., & Tsai, C. W. (2020). Lessons learned from the COVID19 pandemic exposing the shortcomings of current supply chain operations: A long-term prescriptive offering. Sustainability, 12(14), 5858.

Global Sourcing in Times of Covid-19 Marta Bernasconi, Sara Galetti, Valeria Gattai, and Piergiovanna Natale

1

Introduction

Recent years have witnessed remarkable changes in the world economy and the nature of trade. During the first wave of globalization, in the early 1900s, trade was an “inter-industry” phenomenon, relying on comparative advantages and involving different goods and different countries. Then, under the second wave of globalization, after the Second World War, trade became “intra-industry”, meaning that similar countries exchanged similar goods, exploiting increasing returns to scale in imperfectly competitive markets. Nowadays, most trade is neither interindustry nor intra-industry: It is “intra-firm”, in that it takes place within the boundaries of multinational enterprises (Abraham & Taylor, 1996; Yeates, 2001). Indeed, a new feature of globalization is the increasing interconnectedness of production processes in a vertical trading chain

M. Bernasconi · S. Galetti Università degli Studi di Milano-Bicocca, Milan, Italy V. Gattai (B) · P. Natale Center for European Studies (CefES), Università degli Studi di Milano-Bicocca, Milan, Italy e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_3

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that stretches across many countries, with each country specializing in a particular stage of production, rather than manufacturing final goods from start to finish. “Outsourcing”, “global value chain” (GVC), “disintegration of production” are just a few labels for the same phenomenon of vertical specialization that pushes modern firms towards a global structure (Feenstra, 1998; Feenstra & Hanson, 1996; Hummels et al., 2001; Zeile, 1997). Global value chains are thus a distinctive element of the last globalization wave that started in the 1980s: Falling communication costs fostered production fragmentation across production units, to reap location advantages, and declining transport costs made it viable on a global scale. More and more firms participate into GVCs nowadays, integrating either backward as buyers of intermediate inputs or forward as suppliers of intermediate inputs, or both (Antras, 2003, 2020; Antras & Chor, 2013). Against this increasingly globalized scenario, the Covid-19 pandemic has brought in new challenges for firms doing business outside their country. In particular, the Covid-19 pandemic is credited with posing an existential threat to GVCs and ultimately to globalization (The Economist, 2020). This is because participation into GVCs entails that a disruption in any upstream stage ripples down, investing downward stages as well. Likewise, any adverse shock affecting downward stages transmits upwards causing disruptions in markets that would otherwise be unaffected by the shock. Put another way, the Covid-19 pandemic caused both upstream and downstream disruptions, the effects of which were magnified by the fact that they occurred at different points in time, so that when upstream stages were ready to resume production downward stages were entering lockdowns. Following Antras and Helpman (2004), we believe that the impact of Covid-19 cannot be fully assessed without considering that participation into GVCs amounts to a joint organizational and location choice. For the sake of simplicity, consider a stylized framework in which production of a final good requires intermediate inputs as well. In this context, the final good producer takes two crucial decisions over input procurement or sourcing. On one hand, it has to decide whether to manufacture the needed components by itself (integration) or to buy them from an independent input supplier (outsourcing); on the other hand, it has to decide whether to employ domestic (domestic sourcing) or foreign inputs (foreign sourcing). We refer to the former decision as the final good producer’s organizational choice, and to the latter as its location choice.

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In the past, when globalization was not an issue, sourcing was a mere local phenomenon. As such, it could be fully explained in terms of organizational choices. However, having globalization become an issue nowadays, sourcing has become a global phenomenon. It follows that understanding the impact of Covid-19 requires investigating how the pandemic affects the joint organizational and location choice of firms. This is the challenge we address in this chapter, dealing with global sourcing in times of Covid-19. For the purpose of the present research, we provide new empirical evidence on a large stratified sample of Italian manufacturing firms headquartered in Lombardy, one of the most developed regions in Europe and, at the same time, one of the most severely affected by the Covid-19 pandemic. In particular, our evidence draws on survey interviews conducted between April and July 2020, on a sample of 212 Italian firms headquartered in the region and stratified by size, manufacturing activity, and province. Our research question is twofold. First, we provide a general overview of the sampled firms’ sourcing behaviour, analyzing the relative importance of outsourcing versus integration and foreign versus domestic sourcing. Doing this way, we track our firms’ organizational and location choices, thus highlighting the most preferred solutions to sourcing. Second, we discuss to what extent the sampled firms have been affected by the Covid-19 pandemic and whether they have been re-thinking their organizational and location choices. Doing this way, we portray the impact of the pandemic on the sourcing behaviour of our firms and discuss future potential developments. The rest of the chapter is organized as follows. In Sect. 2, we provide a brief literature review on global sourcing. In Sect. 3, we introduce some background information about Lombardy. In Sect. 4, we describe our data and methodology. In Sect. 5, we present our results. Section 6 summarizes our main findings and provides some concluding remarks.

2

Literature Review

From a theoretical point of view, global sourcing has been recently investigated in a few studies at the crossroad between Microeconomics and International Economics (Antras, 2014; Gattai, 2006; Spencer, 2005). These contributions address firms’ organizational and location choices extending already established theories of the firm to the international

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context. In doing this, they open up the firm’s “black box”—traditionally explored by microeconomists—and simultaneously endogenize the market environment—as in the International Economics tradition. The property rights theory of the firm is a good case in point. Originally developed by Grossman and Hart (1986), and Hart and Moore (1990), it has recently been applied to the international context by McLaren (2000), Grossman and Helpman (2002, 2003), Antras (2003), Ottaviano and Turrini (2007), and Antras and Helpman (2004). The framework, common to these theoretical models, is that final good production requires relation-specific inputs that the firm procures under contract incompleteness. McLaren (2000) and Grossman and Helpman (2002) focus on the domestic side of firms’ organizational choice (domestic outsourcing versus domestic integration); whereas Grossman and Helpman (2003), Antras (2003), and Ottaviano and Turrini (2007) analyze the international side of firms’ organizational choice (foreign outsourcing versus foreign integration). Antras and Helpman (2004) address both organizational and location concerns in a joint theoretical framework: The former turns out to be sensitive to the input specificity; the latter is driven by fixed and variable production costs, varying across locations. An additional interesting prediction of Antras and Helpman (2004) regards the type of firms that are more likely to take a certain organizational and location choice. Assuming firms’ heterogeneity à la Melitz (2003), this paper demonstrates that in low-tech sectors, integration never occurs: Lower-productivity firms engage in domestic outsourcing, whereas higher-productivity firms engage in foreign outsourcing. On the contrary, in high-tech sectors, all sourcing strategies may be undertaken: Lower-productivity firms buy inputs in the domestic market, and higher productivity firms buy inputs in the foreign market; among firms that source in the same country, the most productive vertically integrate, and the least productive outsource. In the last decade, a burgeoning empirical literature has grown rapidly to test the main predictions of Antras and Helpman (2004). Depending on data availability, Tomiura (2007), Defever and Toubal (2013), and Corcos et al. (2013) study foreign outsourcing versus foreign integration. Tomiura (2005, 2009) and Ito et al. (2011) analyze foreign outsourcing as opposed to domestic outsourcing. Federico (2010), Kohler and Smolka (2011), and Gattai and Trovato (2016) consider all sourcing strategies in a joint empirical framework. The available evidence confirms the main theoretical predictions of Antras and Helpman (2004): No matter the year

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and country of analysis, firms that source abroad are, on average, more productive than firms that source domestically; moreover, integrated firms are, on average, more productive than outsourcers.

3

Background Information

As mentioned in Sect. 1, this chapter provides empirical evidence on a sample of Italian manufacturing firms headquartered in Lombardy. The choice of this region was not random. As far as industrialization and internationalization are concerned, Lombardy is often credited with being the leading region of the Italian economy and one of the most important regions in the European Union (EU). Moreover, Lombardy was the first region in Italy and among the first in Europe to register the presence of Covid-19 and to face the social and economic consequences of it. For all of these reasons, we believe that Lombardy is the natural setting for an empirical investigation on global sourcing in times of Covid-19. In what follows, we provide some recent data about Lombardy. First, we comment on industrialization and internationalization; second, we follow the spread of the Covid-19 pandemic and its disrupting effects. As for industrialization, Lombardy is one of the most industrialized regions in Italy and Europe. According to recent Eurostat data, in 2018 around 20% of the population of Italian active enterprises locate in Lombardy.1 Lombardy is also one of the most developed regions in Italy and Europe. In 2019, Lombardy’s GDP per capita exceeds by 33% the national value and equaled 127% of the EU average (Iammarino et al., 2019). As for internationalization, trade openness is a distinctive feature of the Lombard economy: In 2019, the volume of exports plus imports over value added amounts to 74% for Lombardy, far above the national value of 56%.2 In 2019, exports account for 36% of value added in Lombardy, above the national value of 30%. Consistently, in 2019 Lombardy accounts for 27% of Italian exports. The EU is the main destination market for Lombard exporting firms, absorbing 66% of exports from the region; United States and Asia follow, with shares in regional exports equal to 12% and 17%, respectively. Imports are equally important

1 See Eurostat Homepage. 2 See Unioncamere Lombardia Homepage.

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in explaining Lombardy’s degree of trade openness. In 2019, imports to Lombardy amount to 31% of the Italian total. The EU accounts for 74% of region’s imports, followed by Asia with a 20% share. Lombardy’s participation in GVCs is significant: Bentivogli et al. (2018) estimate that slightly above 50% of Lombardy’s gross exports and outflows towards other regions originate from participation into GVCs. Furthermore, Lombardy’s share of foreign value added from international sources is the highest among Italian regions, witness to the importance of the region’s international backward linkages. Highly industrialized and densely populated (423 inhabitants per square kilometre, against a national value of 199), Lombardy was the first region in Italy and among the first in Europe to register the presence of Covid-19. On 21 February 2020, the first Covid patient in Italy was reported in the town of Codogno, south of Milan. By the end of March 2020, Lombardy registered 44,743 cases. One year later, Lombardy counts over 620,000 cases, more than 20% of the total number of cases in Italy. Within two weeks since the first reported cases, on 7th March 2020, Lombardy imposed severe restrictions on individual mobility and economic activities. The region went into lockdown: All non-essential commercial activities were closed and all non-essential production activities were suspended. The rest of the country followed immediately after. The strictest restrictions were lifted only on 18th May 2020 and commercial and production activities had resumed in all sectors by June. However, the respite was short-lived. Contagions spiked again in the second half of October and new and severe restrictions were introduced. Limitations on commercial activities were still in place in the early months of 2021. Local as well as global economic conditions took a high toll on business activities in Lombardy. In 2020, GDP in Lombardy is estimated to fall by 9.7% with respect to 2019. For Italy, the estimated fall is slightly lower at 9.1 (Assolombarda, 2021). Data on industrial production show that the impact of the Covid19 pandemic on the manufacturing sector in Lombardy was particularly severe. With respect to 2019, industrial production fell by 10% in the first quarter, by 21% in the second quarter, and by 5.2% in the third quarter of 2020 (Assolombarda, 2021). A 3% increase in the fourth quarter leads to an estimated year-on-year fall slightly above 9%. Trade flows in and out of Lombardy suffered an equal important fall due to the collapse of international trade. If in the first quarter of

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2020 exports and imports fell by around 3%, the second quarter witnessed a fall by 25%, with trade flows remaining below the 2019 level also in the third and fourth quarters.3

4

Data and Methodology

The present study draws on an original survey of a representative sample of manufacturing firms headquartered in Lombardy. Our target sample of 300 firms is drawn from the national firm Census and stratified according to geographical location, manufacturing activity, and firm size. Geographical location stratification is based on four macro areas that group neighbouring provinces according to their productive specialization; they are designated as follows: northwest (Como, Lecco, and Varese), northeast (including Bergamo, Brescia, and Sondrio), southwest (Lodi, Milano, Monza Brianza, and Pavia), and southeast (Cremona and Mantova). The manufacturing activity stratification follows the taxonomy of Bell and Pavitt (1993), which groups industries into four macro categories according to the source of technology and technical change; they are designated as supplier-dominated, specialized-suppliers, science-based and scale-intensive. Firm size stratification reflects the number of employees, and it is based on three main cells: firms with fewer than 10 employees, firms with 10–49 employees, and firms with more than 50 employees. The number of firms in each stratum of the target sample was obtained to ensure proportionality to the total number of firms in the same stratum of the population. All firms were contacted by phone, and a multiple-choice questionnaire was submitted by email to senior managers and CEOs between April and July 2020. The questionnaire consists of two sections: First, we ask about the background information of the firm; second, we investigate their sourcing behaviour and the impact of Covid-19. With a response rate of 70%, this study provides a detailed outline of 212 enterprises. As displayed in Table 1, our sample is highly representative of the entire population of manufacturing firms headquartered in Lombardy.

3 See Unioncamere Lombardia Homepage.

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Table 1 Population and sampled firms by location, manufacturing activity and firm size Class

Population N

Geographical location

Manufacturing activity

Firm size

Northwest Northeast Southwest Southeast Total Supplier-dominated Science-based Scale-intensive Specialized-suppliers Total 0–9 10–49 ≥ 50 Total

17,400 24,695 36,064 6,553 84,712 36,730 9,297 19,748 18,937 84,712 65,630 16,037 3,045 84,712

Sample %

N

%

21 29 42 8 100 44 11 23 22 100 77 19 4 100

47 66 84 15 212 92 23 47 50 212 164 41 7 212

22 31 40 7 100 43 11 22 24 100 77 19 4 100

Source Authors’ database

Concerning the geographical location, the majority of our firms are from the southwest of the region (40%), followed by the northeast (31%), the northwest (22%), and the southeast (7%). This suggests that the manufacturing core of Lombardy is centred in Lodi, Milano, Monza Brianza, and Pavia, whereas Cremona and Mantova account for a limited share of regional manufacturing. For the manufacturing activity, supplier-dominated operations prove to be the main economic activity, involving 43% of the sampled firms. They are followed by the specialized-suppliers (23%) and the scale-intensive (22%) industries, whereas the science-based (11%) activities represent the smallest segment. These data confirm that the industrial texture of the region is highly diversified, with multiple specializations leading to a balanced mixture of traditional and high-tech activities. Finally, with respect to firm size, our sample is characterized by the sharp prevalence of small enterprises (77%) with fewer than 10 employees. On the contrary, medium and large firms account for a limited 20% and 3% of the total, respectively. Given the well-documented relevance of

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What is this firm's sourcing strategy, as shaped by the organizational and the location choice? 100% 86%

90% 80%

66%

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34%

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14%

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domestic

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Fig. 1 Sampled firms’ sourcing strategy (Source Authors’ database)

Lombardy for the Italian economy,4 this suggests that a mass of small and medium enterprises, rather than a handful of huge conglomerates, is responsible for remarkable shares of the national value added, GDP, export, import, and FDI.

5

Empirical Evidence

In this section, we report the main results of our interview-based survey. For the sake of readability, empirical evidence is presented in the form of simple descriptive statistics and graphs. 5.1

Sourcing

To characterize the sourcing behaviour of the sampled firms, we asked them to report their core strategy for input procurement in 2020. Drawing on Antras and Helpman (2004), we aimed at exploring firms’ organizational and location choices in a joint empirical framework. Our results are shown in Fig. 1.

4 See ASR Homepage.

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As for the organizational choice, 66% of the sampled firms engage in outsourcing, against 34% that prefer integration. This suggests that most of the inputs used by Lombard manufacturing firms are bought from independent suppliers, rather than manufactured within firms’ boundaries. As for the location choice, 86% of the sample engage in domestic sourcing, whereas 14% prefer foreign sourcing. This evidence points to the fact that Lombard enterprises have a clear preference towards employing “made in Italy” rather than foreign components. If we combine the organizational and location choices, domestic outsourcing turns out to be pervasive, accounting for 54% of the respondents; this is followed by domestic integration (32%), foreign outsourcing (13%), and foreign integration (2%). Interestingly, these results are robust to the stratification criteria, meaning that the sharp preference for outsourcing over integration and for domestic over foreign sourcing survives once we consider sub-samples by geographical location, manufacturing activity and firm size. Moreover, these results are consistent with the ranking of fixed costs assumed by Antras and Helpman (2004). To go deeper into characterizing the sourcing attitude of our firms, we investigated the type of inputs used for production purposes. In particular, we asked our respondents to define the relevance5 of four categories of potential inputs—denoted as tangible, intangible, standardized, and specific—in their production process. Tangible inputs have physical substance, like components and raw materials; intangible inputs lack physical substance, like patents and know-how. Standardized inputs are untailored to a particular final good, meaning that they can be easily replaced; on the contrary, specific inputs are tailored to a particular final product and cannot be easily transferred. From Fig. 2, we see that specific inputs are very important for the majority of our sample. Indeed, 64% (17%) of the respondents report specific input to be very important (important) for production purposes, and only 19% consider them not important at all. This suggests that Lombard manufacturing firms tend to employ inputs that are specifically tailored to their final products, and cannot be easily replaced if unavailable. Tangible inputs are also very important for the majority of 5 Relevance is defined with respect to a 1–5 Likert scale, with 1 = minimal relevance and 5 = maximal relevance. In the following figures, we denote as “very important” those items receiving an evaluation equal to 4 or 5; “important” those receiving an evaluation equal to 3 and “not important” those receiving an evaluation equal to 1 or 2.

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Define the relevance of tangible inputs, intangible inputs, standardized inputs ad specific inputs for this firm 100% 90% 80%

39%

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Fig. 2

29% standardized inputs

important

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very important

Inputs relevance by type (Source Authors’ database)

our sample. From Fig. 2, 85% (11%) of the respondents declare tangible inputs very important (important), against a negligible 4% considering them not important at all. This result is not surprising, since our firms belong to the manufacturing industry, where components and raw materials are commonly used. Intangible inputs and standardized inputs are relevant as well, but prove to be less important. 5.2

The Impact of Covid-19

As mentioned in Sect. 1, our survey was specifically designed to capture the impact of Covid-19 on firms’ business, besides depicting the respondents’ sourcing behaviour. Our evidence reveals that Covid-19 has affected business for 89% of the sampled firms, no matter their geographical location, manufacturing activity and size. Interestingly, this evidence is robust to the sourcing behaviour of the sampled firms. This is shown in Fig. 3, in which we split our data by categories of organizational and location choices, consistent with Fig. 1. The percentage of firms whose business has been affected by the pandemic is above 80% in all cases. As for the organizational choice, there is no difference between firms engaging in outsourcing and integration: In either case, the percentage of firms whose business has been

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location choice

organizational choice

Has the Covid-19 pandemic affected this firm's business?

integration

89%

11%

outsourcing

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90%

10%

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80%

0%

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20%

30%

40% yes

20%

50%

60%

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no

Fig. 3 Impact of the Covid-19 pandemic on business by sourcing strategy (Source Authors’ database)

affected by Covid-19 is equal to 89%. As for the location choice, a slight difference emerges in that firms engaging in domestic sourcing turn out to be more affected by the pandemic than those engaging in foreign sourcing. This evidence is not surprising given that Lombardy was the first region in Italy and among the first in Europe to register the presence of Covid-19 and to impose restrictions on production activities.6 In Fig. 4, we display the impact of the pandemic on firms’ business by type of inputs, consistent with Fig. 2. As the most notable finding, our firms’ business has been affected by Covid-19, no matter the importance of tangible versus intangible inputs, or standardized versus specific inputs. Those firms considering tangible (intangible) inputs as very important were harmed in 89% (91%) of the cases; likewise, those firms considering standardized (specific) inputs as very important were harmed in 88% (90%) of the cases. This evidence points to the widespread effects of the pandemic on firms’ business, irrespective of the specificities of the production process.

6 See Sect. 3.

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Has the Covid-19 pandemic affected this firm's business?

specific inputs are very important

90%

10%

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88%

12%

intangible inputs are very important

91%

9%

tangible inputs are very important

89%

11%

0%

20% yes

40%

60%

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100%

no

Fig. 4 Impact of the Covid-19 pandemic on business by input type (Source Authors’ database)

To gain a better understanding of these effects, we asked a few questions regarding the channels through which the Covid-19 pandemic has likely affected the firm’s business. For the purpose of the present survey, we distinguish between direct and indirect channels. As mentioned in Sect. 3, during 2020 Lombardy adopted strict measures to limit contagion, with all non-essential commercial businesses and firms forced to suspend activities and enter into lockdowns. Similar restrictions were in place in other Italian regions and in foreign countries as well, leading many firms to stop production. Such measures could affect the firm’s business because the firm itself was put into lockdown or because they caused disruptions in the firm’s demand and/or along its supply chain. Therefore, by “direct” channel, we mean the effects of Covid-19 on the responding firms’ business due to their lockdown; by “indirect” channel, we mean instead the effects of Covid-19 on the responding firms’ business due to the responding firms’ buyers or suppliers’ lockdown. Our evidence reveals that all channels are important for the firms in our sample. Moreover, the indirect channel by buyers’ lockdown has affected the sampled firms’ business the most, followed by the direct channel and the indirect channel by suppliers’ lockdown. In particular, the indirect channel by buyers’ lockdown has affected our

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firms’ business a lot in 70% of the cases, so-so in 15% of the cases and little in 15% of the cases.7 As for the direct channel (indirect channel by suppliers’ lockdown), the percentages are equal to 58% (49%), 14% (18%), and 28% (33%), respectively. Being robust to the stratification criteria, this result suggests the active role played by Lombard enterprises in GVCs. Figure 5 summarizes the relative importance of direct versus indirect channels by categories of organizational and location choices, consistent with Fig. 1. At this stage, it is worth mentioning that the ranking of the most important channel survives this robustness check. Notably, all channels are important in our sample. Moreover, the indirect channel by buyers’ lockdown has affected the sampled firms’ business the most, followed by the direct channel and the indirect channel by suppliers’ lockdown, no matter our firms’ choice of integration versus outsourcing or foreign versus domestic sourcing. We acknowledge that the minor role played by the indirect channel of suppliers’ lockdown might be partially driven by the fact that 34% of our sampled firms engage in integration, meaning that these firms manufacture the needed inputs within their boundaries rather than relying on independent suppliers. The same data might also explain the great importance of the direct channel that affects input procurement besides final good manufacturing for those firms engaging in integration. To complete our discussion about the direct and indirect channels, Fig. 6 dissects empirical evidence by type of inputs, consistent with Fig. 2. As the most notable finding, all channels are important in our sample. Moreover, the indirect channel by buyers’ lockdown has affected the sampled firms’ business the most, followed by the direct channel and the indirect channel by suppliers’ lockdown, no matter the relevance of tangible versus intangible inputs or standardized versus specific inputs. Lastly, we note that the share of firms reporting significant indirect effects due to buyers’ lockdown is similar across firms relying on different types of input. On the contrary, the share of firms reporting significant indirect effects due to suppliers’ lockdown is the largest among firms requiring specific versus standardized and intangible versus tangible inputs in their production processes. 7 The extent to which the Covid-19 pandemic has affected our firms’ business is defined with respect to a 1–5 Likert scale, with 1 = minimal extent and 5 = maximal extent. In the following figures, we denote “a lot” an evaluation equal to 4 or 5; “so-so” an evaluation equal to 3 and “little”an evaluation equal to 1 or 2.

indirectly (buyers lockdown)

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Fig. 5 Impact of the Covid-19 pandemic on business by direct and indirect channels and sourcing strategy (Source Authors’ database)

directly (this firm lockdown)

organizational choice

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Specify the extent to which the Covid-19 pandemic has affected this firm's business: - directly; - indireclty (suppliers lockdown); - indirectly (buyers lockdown)

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indirectly (buyers lockdown)

indirectly (suppliers lockdown)

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65%

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Specify the extent to which the Covid-19 pandemic has affected this firm's business: - directly; - indireclty (suppliers lockdown); - indirectly (buyers lockdown)

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Fig. 6 Impact of the Covid-19 pandemic on business by direct and indirect channels and input type (Source Authors’ database)

directly (this firm lockdown)

52 M. BERNASCONI ET AL.

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5.3

53

Sourcing and the Impact of Covid-19

As a last step in our empirical investigation, we discuss the extent to which the supply chain, linking our firms to their suppliers, has helped dealing with the pandemic, and we analyze the impact of Covid-19 on the sourcing behaviour of the sampled firms. As for the first issue, we asked our firms to define the extent to which their supply chain has helped them and their suppliers dealing with the Covid-19 pandemic. Notably, the supply chain turned out to be helpful for the majority of the respondents. Taking the firm’s (the firm’s suppliers’) point of view, 32% (36%) of the respondents believe that the supply chain helped a lot in dealing with the pandemic, followed by 29% (29%) declaring it has helped so-so and 39% (36%) reporting it has helped little. Our evidence is fully consistent when dissected by the stratification criteria; this suggests that our respondents credit the supply chain with being of major importance against the pandemic, no matter their geographical location, manufacturing activity and firm size. As shown in Figs. 7 and 8, our evidence is also consistent when dissected by categories of organizational and location choices and type of inputs. Put another way, those firms thinking that the supply chain has not been useful in dealing with the pandemic, from their point of view or from their suppliers’ point of view, are in the minority, irrespective of their organizational and location choices (Fig. 7). At the same time, those firms thinking that the supply chain has not been useful in dealing with the pandemic, from their point of view or from their suppliers’ point of view either, are in the minority, no matter the relevance of tangible versus intangible inputs or standardized versus specific inputs (Fig. 8). As for the second issue, organizational and location choices show a good deal of inertia in our data. Despite the very high percentage of firms whose business has been affected by the Covid-19 pandemic,8 only 13 out of 212 firms are re-thinking their sourcing strategies for the future. Moreover, out of 13 future switchers, only three firms are planning to change permanently their organizational and/or location choices because of Covid-19. The persistence of organizational and location choices should not come as a surprise. As shown above, our firms regard the relationship with their suppliers as an important factor in mitigating the adverse consequences of the pandemic. Firms invest large amounts of 8 See Sub-Sect. 5.2.

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integration

this firm's suppliers

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Fig. 7 The importance of the supply chain in dealing with the Covid-19 pandemic by sourcing strategy (Source Authors’ database)

relational capital in forging supply chains and such investments seem to pay off in times of crisis. This might explain the inertia we observe in their sourcing behaviour, consistent with Giovannetti et al. (2020).9 Further insights can be obtained by focusing on firms willing to switch strategy and comparing their current versus future strategies. Our evidence suggests that all sourcing strategies are likely to be permanently re-thought because of Covid-19 (Fig. 9). If we consider firms’ organizational choice, we can appreciate a slight decrease of integration in favour of outsourcing; regarding firms’ location choice, our switchers plan to abandon foreign sourcing completely and engage in domestic sourcing alone. Therefore, Lombard enterprises do not fear relying on independent suppliers, albeit they do fear relying on distant suppliers in times of Covid-19.

9 Future research will investigate whether persistent adverse conditions led to changes in sourcing strategies, not anticipated in the first months of the pandemic.

0%

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Fig. 8 The importance of the supply chain in dealing with the Covid-19 pandemic by input type (Source Authors’ database)

standardized specific inputs tangible inputs intangible inputs are very are very are very inputs are very important important important important

Define the extent to which the supply chain, linking this firm to its suppliers, has helped: - this firm dealing with the Covid-19 pandemic; - this firm's suppliers dealing with the Covid-19 pandemic

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Present sourcing versus future sourcing 100% 100% 90% 80%

67%

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Fig. 9 Sourcing strategy switch in response to the Covid-19 pandemic (Source Authors’ database)

6

Conclusions

In this study, we investigate the impact of the Covid-19 pandemic on firms’ sourcing strategies. To this aim, between April and July 2020 we conducted survey interviews of a sample of 212 Italian manufacturing firms headquartered in Lombardy, one of the most developed regions in Europe and, at the same time, one of the most severely affected by Covid-19. Stratified by geographical location, manufacturing activity, and size and with a response rate of 70%, our sample provides new and robust evidence on firms’ sourcing behaviour, the main channels through which Covid-19 has affected firms’ business and the role of sourcing strategies in adjusting to the present and future economic consequences of the pandemic. Empirical evidence reveals that domestic outsourcing is pervasive in our sample, followed by domestic integration, foreign outsourcing, and foreign integration. The preference for outsourcing over integration and for domestic over foreign sourcing is robust with respect to the stratification criteria and the type of inputs employed in the production processes.

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The Covid-19 pandemic adversely affected 9 out of 10 of our firms. Although the Covid-19 impact was equally felt by integrated and outsourcing firms, firms relying on domestic sourcing are more likely to report a negative impact, due to the pandemic’s early onset in the region compared with the rest of the world. The main channel through which the Covid-19 pandemic has affected our firms’ business is the indirect channel of demand disruptions, followed by the direct channel of lockdowns imposed on the firm itself and by the indirect channel of disruptions in the supply chains. This result holds no matter the sourcing strategy and the type of inputs. Notably, the majority of the sampled firms assign an important role to their supply chain in mitigating the adverse consequences of Covid-19 and they do not foresee a change in the supply strategy in response to the pandemic. The very few firms considering to change sourcing strategy expect to switch from integration to outsourcing and from foreign to domestic sourcing. We consider the above results of particular interest in assessing the response of firms to the present and future challenges the Covid-19 pandemic poses to our globalized economies. No matter their organizational choice, firms invest large amounts of relational capital in forging supply chains. Our evidence suggests that such investments pay off in times of crises, which might explain why firms resist changes in their sourcing strategies in response to Covid-19. Our results have implications for the policy debate on the importance and appropriateness of policy measures favouring domestic over foreign sourcing (Miroudot, 2020). Domestic supply chains are credited with providing firms with increased protection against supply disruptions. Moreover, supply chains relying on long-term relationships turn out to recover faster in the event of adverse supply shocks (Jain et al., 2016). The same might occur also in the event of adverse demand shocks in the final product market, as those implied by Covid-19. In fact, long-term relationships rest on the trading partners’ ability to sacrifice short-term gains in view of greater value to share in the future. The latter is shaped by the parties’ relational investments in the supply chain. Governments can significantly contribute to promote trading partners’ relational investments by developing economic and institutional environments characterized by transparency and predictability of policy actions. Pursuing self-reliance in supply chains, governments can protect the economy from external supply shocks. Pursuing resilience in supply

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chains through transparent and predictable policy actions, governments can protect the economy from supply as well as demand shocks. In light of the topic covered and its firm- and country-level implications, we believe this study could be used in teaching courses like International Economics, International Business, Political Science, Industrial Organization, and Contract Theory, to mention just a few. To conclude, we acknowledge some limitations of our current analysis that restrict its scope. First, there is an issue of external validity. Although our sample is highly representative of the Lombard population of firms, it focuses on a single region, within a single country. To better assess the robustness of our results, it would be preferable to widen the sample used for empirical purposes, possibly relying on cross-country comparisons. Second, our data have a clear cross-sectional nature, which prevents a proper causality analysis of the relationship between sourcing and Covid19. For this reason, our descriptive statistics should be considered as a convenient way of summarizing correlations rather than a rigorous study of the impact of Covid-19 on global sourcing. Future research might improve on these limitations.

References Abraham, K. G., & Taylor, S. K. (1996). Firms’ use of outside contractors: Theory and evidence. Journal of Labor Economics, 14(3), 394–424. Antràs, P. (2003). Firms, contracts, and trade structure. Quarterly Journal of Economics, 118(4), 1375–1418. Antràs, P. (2014). Grossman-Hart (1986) Goes global: Incomplete contracts, property rights, and the international organization of production. Journal of Law, Economics, and Organization, 30(1), 118–175. Antras, P. (2020). De-globalisation? Global value chains in the post-COVID-19 age. mimeo. Antràs, P., & Chor, D. (2013). Organizing the global value chain. Econometrica, 81(6), 2127–2204. Antras, P., & Helpman, E. (2004). Global sourcing. Journal of Political Economy, 112, 552–580. ASR Lombardia Homepage. www.asr-lombardia.it/asrlomb/. Last accessed on 8 March 2021. Assolombarda: Booklet Economia. La Lombardia nel confronto nazionale ed europeo. # 53 (2021). Bell, M., & Pavitt, K. (1993). Accumulating technological capability in developing countries. World Bank Economic Review, 6(1), 257–281.

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Bentivogli, C., Ferraresi, T., Monti, P., Paniccià, R., Rosignoli, S. (2018). Italian regions in global value chains: An input-output approach (Banca di Italia Questioni di Economia e Finanza Occasional Paper). Corcos, C., Irac, D. M., Mion, G., & Verdier, T. (2013). The determinants of intrafirm trade: Evidence from French firms. Review of Economics and Statistics, 95(3), 825–838. Defever, F., & Toubal, F. (2013). Productivity, relation-specific inputs and the sourcing modes of multinational firms. Journal of Economic Behavior & Organization, 94, 245–335. Eurostat Homepage. https://ec.europa.eu/eurostat/web/main/data/database. Last accessed on 8 March 2021. Federico, S. (2010). Outsourcing versus integration at home or Abroad and firm heterogeneity. Empirica, 37 (1), 47–63. Feenstra, R. C. (1998). Integration of trade and disintegration of production in the global economy. Journal of Economic Perspective, 12(4), 31–50. Feenstra, R., & Hanson, G. H. (1996). Globalization, outsourcing, and wage inequality. American Economic Review, 86(2), 240–245. Gattai, V. (2006). From the theory of the firm to FDI and internalisation: A survey. Il Giornale Degli Economisti e Annali Di Economia, 65(2), 225–262. Gattai, V., & Trovato, V. (2016). Estimating sourcing premia using Italian regional data. The B.E. Journal of Economic Analysis and Policy, 16(2), 1029–1067. Giovannetti, G., Mancini, M., Marvasi, E., & Vannelli, G. (2020). Il Ruolo delle Catene Globali del Valore nella Pandemia: Effetti sulle Imprese Italiane. Rivista Di Politica Economica, 2, 77–99. Grossman, S. J., & Hart, O. (1986). The costs and benefits of ownership: A theory of vertical and lateral integration. Journal of Political Economy, 94, 691–719. Grossman, S. J., & Helpman, E. (2002). Integration versus outsourcing in industry equilibrium. Quarterly Journal of Economics, 117 (1), 85–120. Grossman, S. J., & Helpman, E. (2003). Outsourcing versus FDI in industry equilibrium. Journal of the European Economic Association, 1(1), 317–327. Hart, O., & Moore, J. (1990). Property rights and the nature of the firms. Journal of Political Economy, 98, 1119–1158. Hummels, S. D., Ishii, J., & Yi, K. (2001). The nature and growth of vertical specialization in world trade. Journal of International Economics, 54(1), 75– 96. Iammarino, S., Rodriguez-Pose, A., & Storper, M. (2019). Regional inequality in Europe: Evidence, theory and policy implications. Journal of Economic Geography, 19(2), 273–298.

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Ito, B., Tomiura, E., & Wakasugi, R. (2011). Offshore outsourcing and productivity: Evidence from Japanese firm-level data disaggregated by task. Review of International Economics, 19(3), 555–567. Jain, N., Girotra, K., & Netessine, N. (2016, August). Recovering from supply interruptions: The role of sourcing strategies (INSEAD Working Paper # 2016/58/TOM). Kohler, W. K., & Smolka, M. (2011). Sourcing Premia with incomplete contracts: Theory and evidence. The B.E. Journal of Economics Analysis and Policy, 11(1), 1–39. McLaren, J. (2000). Globalisation and vertical structure. American Economic Review, 90(5), 1239–1254. Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725. Miroudot, S. (2020). Resilience versus robustness in global value chains: Some policy implications. In R. Baldwin & S. Evenett (Eds.), Covid 19 and trade policy: Why turning inward won’t work. CEPR Press. Ottaviano, G. I. P., & Turrini, A. (2007). Distance and FDI when contracts are incomplete. Journal of the European Economic Association, 5(4), 796–822. Spencer, B. J. (2005). International outsourcing and incomplete contracts. Canadian Journal of Economics, 38(4), 1107–1135. The Economist: Changing Places. (2020, October 10). Tomiura, E. (2005). Foreign outsourcing and firm-level characteristics: Evidence from Japanese manufacturers. Journal of the Japanese and International Economies, 19(2), 255–271. Tomiura, E. (2007). Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm-level. Journal of International Economics, 72(1), 113– 127. Tomiura, E. (2009). Foreign versus domestic outsourcing: Firm-level evidence on the role of technology. International Review of Economics & Finance, 18(2), 219–226. Unioncamere Lombardia Homepage. www.unioncamerelombardia.it. Last accessed on 8 March 2021. Yeats, A. J. (2001). Just how big is global production sharing? In S. W. Arndt & H. Kierzkowski (Eds.), Fragmentation: New production patterns in the World economy. Oxford University Press. Zeile, J. (1997). US Intrafirm trade in goods. Survey of Current Business, 77 (2), 23–38.

The Nexus Between Trade Openness and Foreign Direct Investment Amid Structural Economic Vulnerability in Developing Countries Chi Quynh Nguyen and Thai-Ha Le

1

Introduction

Krugman (1979) and Kojima (1973) have long suggested that foreign direct investment (FDI) is an important stimulator of any country’s economic growth. In transitioning and developing countries, FDI is even more important as it creates knowledge spillover, technical transfer, physical capital, jobs and management skills (Baldwin et al., 2005; Borensztein et al., 1998; Liu et al., 2001). As a result, FDI increases income, total factor productivity (TFP) and living standards in developing countries (Li & Liu, 2005). A highlight in the correlation charts between the trend of trade openness and FDI inflows (Fig. 1) is that countries with higher degrees of trade openness often attract more FDI. UNCTAD (2020)’s statistics also indicate that developing countries and emerging markets possess the highest degree of trade openness. This can be among the

C. Q. Nguyen · T.-H. Le (B) Fulbright School of Public Policy and Management, Fulbright University Vietnam, Ho Chi Minh City, Vietnam e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_4

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FDI inflows in Developing coutries

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Fig. 1 FDI inflows (US$ million) and trade openness (%) trends by region (Source UNCTAD, 2020)

determining factors that stabilize FDI growth and FDI per GDP in these countries over the years while FDI per GDP fluctuates more in developed markets. Overall, the Asia region has the highest level of average trade openness and thus, attracts the majority of the global FDI inflows. Yet, the large trade openness without clear and tested guidelines, combined with the effect of exogenous shocks, such as global financial recessions and the unforeseeable ongoing COVID-19 pandemic’s effect on the global economy, seems to reduce FDI inflows for these developing countries. According to Briguglio et al. (2009), countries with high

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economic vulnerability are more susceptible to external shocks when there is an interaction between the countries’ trade openness and the shocks themselves. Production and supply-demand market seem to be impacted more strongly when the sudden and simultaneous interactive reaction triggers a series of negative effect on all macro-economic aspects. The shock from the 2020 COVID-19 pandemic has brought about a series of global macro-economic instabilities and a sharp decline in FDI. This pandemic crisis reveals the unsustainable structural economic and social system. During the COVID-19 pandemic, international capital circulation became stagnant due to worldwide lockdowns and that also largely disrupted the global supply chains and impacted significantly on global production resilience in the long run. Global FDI flows declined by 30% to 40% overall, with FDI to developed countries dropping by 25–40% and FDI to developing countries dropping by 30–40% (UNCTAD, 2020). Developing countries are facing the dilemma of how to effectively adapt investment attraction policies for sustained long-term economic growth. FDI-dependent economies can fall into the trap of absorbing outdated technologies, overselling natural resources without valuable value-added domestic productions, or committing to assembly only activities with few domestics inputs. This causes developing countries to become more dependent on foreign investors for both capital and imports of intermediate products or inputs. Meanwhile, a higher degree of trade openness represents more favourable conditions in corporate taxes, land rentals, remittance, foreign personnel policies, environmental restrictions, tariffs and others for an FDI to conduct business in the host country. Therefore, FDI increases at a higher degree of trade openness. Gastanaga et al. (1998) also find a positive association between lowering tariffs and FDI in an econometric analysis based on the “eclectic theory” of Dunning’s foreign investment. Further, trade liberalization increases FDI inflows and trade volume, thus increasing the effect of economic vulnerability due to structural instability, many financial and monetary risks due to external shocks are hidden in the process. However, the underlying threats of such openness in these countries have not been properly discussed in the existing literature. While the external shocks are generally unforeseeable, developing countries’ structural economic vulnerability (proxied by the vulnerability index) can be estimated and benchmarked to see how likely or severe a country’s

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economy is to burst into a major crisis (Dabla-Norris & Bal Gündüz, 2014). The objective of the study is to examine the two following questions: 1. How does the complex interaction effects between trade openness and structural economic vulnerability causally affect FDI inflows in developing countries, focusing on non-LDCs? 2. Considering the above causal effects, what is the estimated safety threshold of the structural economic vulnerability index to maintain the positive effect of trade openness on FDI? The remainder of this study is organized as follows. Section 2 reviews the concept of economic vulnerability as defined in the literature and the relationships among trade openness, FDI and economic vulnerability in the existing studies. Section 3 presents the model, data and estimation methods. Section 4 reports and discusses the empirical results. Section 5 concludes the study with policy implications.

2 2.1

Literature Review Economic Vulnerability

Developing countries’ economic vulnerability receives increasing attention internationally when recession and unforeseeable crises (e.g. COVID-19) emerge. Guillaumont (2009) emphasizes on the “Asian crisis” concept and suggests that developing and emerging market economies should be mindful of their vulnerability to external shocks, especially during fast growth periods. Essentially, economic vulnerability is the measurement of risk potentials or likelihood of a country-level economic crisis, resulting from socio-economic shocks. Briguglio (1995) and Briguglio and Galea (2003) construct an economic vulnerability index based mainly on the concept of “risk”. They contend that for all economies, its inherent economic features, including high degrees of economic openness, export concentration and dependence on strategic imports, are the leaven of exposure to exogenous shocks. For developing nations, the United Nations’ Committee for Development Policy (UN-CDP) estimated “the risk potential to the economic growth” by using the structural economic vulnerability index (EVI).

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FERDI1 has created a measurement framework that is used as the backbone of this index, such that structural vulnerability and resilience (shock degree and exposure) are included in a composite index to measure economic vulnerability. FERDI’s framework considers two types of exogenous shocks: natural disasters (i.e. earthquakes or tsunamis) and climatic shocks (i.e. drought, flood or storm). Endogenous shocks from within the country (i.e. civil war, political and social instability) are not considered shocks but structural handicaps. This EVI focuses more on current policies because it considers exogenous and persistent shocks from an objective angle to suggest future policies (Guillaumont, 2011). EVI captures the effects of external shocks through factors such as volatility of international commodity prices or the decline in demand from international markets. EVI, however, excludes the nation’s ability to react to shocks or resilience that are consequences of political policy and institutional factors. Technically, EVI is constructed by normalizing sub-index of the component through a min–max procedure, ranked by indicator from 0 to 100. Higher scores correspond to higher levels of vulnerability. The proportional distribution of the components into EVI is illustrated in Fig. 2. Scholars note that small-sized economies are vulnerable by the exposure components for three main inherent features including trade intensity, government size and social cohesion (Guillaumont, 2009). 2.2

The Nexus Among FDI, Trade Openness and Economic Vulnerability

By the concept and measurement of EVI with the FERDI framework, predictably a higher EVI may negatively affect the economy in general and deter FDI inflows in particular. According to the research of Gnangnon and Iyer (2017), the average effect of EVI on FDI inflows in both LDCs and non-LDCs is negative and statistically significant. However, only the size of exposure has a significantly negative effect on FDI inflows over LDCs. For non-LDCs, the size of shocks negatively and significantly influences FDI. In the short term, however, EVI’s negative effect on FDI inflows does not receive supports. There are a lot of arguments about the role of trade during the Mexico 1994 and Asia 1997 crises. Kaminsky and Reinhart (2000) contend trade

1 The Foundation for Studies and Research on International Development.

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Exposure (50%) Size index (12.5%) Population (12.5%)

Location index (12.5%) Remoteness (12.5%)

Shock index (50%)

Structural index (12.5%)

Evironment index (12.5%)

Share of agricultural forestry and fisheries (6.25%) Export concentration (6.25%)

Share of population in low elevated costal zones (12.5%)

Natural shock index (25%) Victims of natural disaster (12.5%)

Trade shock index (25%) Instability of export of goods and services (25%)

Instability of agricultural production (12.5%)

Fig. 2 Economic vulnerability measurement in the framework of FERDI (Source FERDI [Feindouno & Goujon, 2016])

itself is not a means through which economic crisis can spillover, and it is less influential than a financial linkage. In contrast, Eichengreen and Rose (2000) and Abeysinghe and Forbes (2005) indicated that “trade linkages” has a significant role in spreading crises. Trade openness is related directly to the components of export concentration and trade shock in the economic vulnerability index, and thus sensitively reacts to uncertainty shocks. Trade liberalization can increase the risk of external shocks to the small and open economy, thus rising the exposure of shocks. Malik and Temple (2009) suggest that in a global economic crisis, import–export commodity prices fluctuate more than domestic ones. If an economy is highly open to trade, the volatility in costs and prices due to crisis can easily affect the basic economic structure of the country (Gnangnon, 2016). Especially, for host countries with small and vulnerable economies, when TFP is low, trade openness may cause a “competitive effect”, an “income effect” and a “cheap import effect” that are the origins of a hidden wide crisis via trade linkages (Edwards et al., 2013). However, Gnangnon (2016) also argues that in smaller-scaled crises from a partnering country, trade openness helps firms in a country quickly identify alternative partners from other countries and as a result avoid the crises completely. Trade openness increases competitiveness through the opportunities to approach the innovation and essential inputs of value

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chains. Melitz (2003) refers to this ability as import–export diversification that helps firms and the country mitigate from economic crisis spillover from a partnering country. In such a case, Haddad et al. (2011) contend that a country with high vulnerability can avoid being affected by natural shocks by risk-sharing and leveraging its trade openness to the network of global value chains through joint ventures, production diversification and international lending. From the above theoretical reviews, it is hypothesized that: H1: Trade openness has a positive effect on FDI inflows especially in EMCs. H2: EVI interaction trade openness has a negative effect on FDI inflows. 2.3

Other Determinants of FDI

Numerous empirical studies have demonstrated a relationship between FDI and economic growth (for instance, Belloumi, 2014; Borensztein et al., 1998; Le, 2017; Le & Le, 2020; Le & Tran-Nam, 2018). Theoretically, GDP is a proxy for market size, which attracts horizontal FDI inflows of MNEs seeking for new markets. Exchange rate and inflation reflect the macro-economic stability of the market price and the risk of the national currency. Exchange rate volatility causes FDI to decrease (Kosteletou & Liargovas, 2000) because it presents the instability of the host country’s monetary system and national reserve. However, currency depreciation would attract more FDI for the relative increase of the foreign investors’ wealth and the relative decrease of the domestic price with the international price which affects the price of the asset and local production cost (Tolentino, 2010). Similar to exchange rate, inflation also has two dimensions of impact. Positive inflation is generally associated with the higher cost of productions and thus, negatively affects FDI inflows, especially in horizontal and export-platform models (Rammal & Zurbruegg, 2006). Therefore, inflation and exchange rate are reasonable control variables in the FDI model. While the supporting effect is either positive and negative, both influence the effect of trade openness on FDI. FDI also depends on the specific factors of the country such as institutional environment, government policy and infrastructure foundation (Asiedu, 2002; Ghazal & Zulkhibri, 2015). Political stability

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and low corruption are the proxies to capture the institutional quality which is expected to have a favourable effect on FDI and increase FDI inflows. Trade freedom and investment freedom index are estimated by the Heritage Foundation to present the evaluation from the world to the trade and investment policy reforms of a country. A sound institutional quality and benevolent policy reforms are able to encourage the investment motivation of MNEs.

3

Empirical Method 3.1

Model Specification

Based on the empirical studies mentioned in Sect. 2, the model of this study, which examines the impact of trade openness on inward FDI in correlation with structural economic vulnerability, is specified as the following equation: FDIit = α+βTOit + δEVIit + γ X it + λCit + ηi + εit

(1)

in which, FDI = dependent variable i = the country i t = the year t TO= trade openness EVI= economic vulnerability (EVI) X = a vector of other determinants of FDI (GDP per capita, Exchange Rate, Inflation, Trade of Freedom, Investment of Freedom, Political Stability, Corruption, GDP growth rate) C= a vector of other proxy variables added (for infrastructure, natural resources). ε = the error term η = country’s fixed effect Since the FDI variable contains some negative values, to limit the appearance of missing value in the log transformation, a semi-log transformation of the variable FDI is adjusted as suggested by Dabla-Norris et al. (2015) and Arndt et al. (2015) in the following equation: LogFDIit = sign(FDIit ) ∗ Log(1 + |FDIit |)

(2)

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Since trade intensity is more sensitive to the nominal indicator FDI/GDP, in the model of FDI/GDP growth, trade openness is considered as the policy variable. To estimate the trade intensity to the increase of FDI per real GDP, this following model is used: LogFDIit = α0 + α1 LogFDIit−1 + α2 TOit + α3 EVIit + α4 Growthit−1 + α5 LogGDPCit−1 + α6 TFIit + α7 IFIit + α8 ERit−1 + α9 Iflait−1 + α10 PolStabit−1 + α11 CORRit−1 + α3 RENT_NRit−1 + ηi + εit

(3)

Subject to data availability, this study analyses 89 Non-Least Developed Countries (non-LDCs) (as assessed by the UN-CDP), over the period 1990–2018. This period also recorded cases of successful economic transitions such as stepping out of the LDCs group and even becoming emerging markets with a strong growth in trade liberalization and attracting FDI. Data on economic macro-economic growth of selected countries include GDP, FDI, trade openness, freedom index, real effective exchange rate and inflation are collected from World Bank, the Global Economy, Heritage Foundation and UNCTAD; EVI and the components are provided by FERDI. Table 4 in Appendix describes the variables and their expected effects on FDI. Table 5 in Appendix shows the descriptive statistics of the 89 non-LDCs including 29 Emerging Market Countries (EMCs) and 60 Other Developing Countries (ODCs) (the detailed list of countries is provided in Table 6 in Appendix). The statistics also show that for the EMCs with a higher rate of economic growth, both trade openness and FDI inflows tend to be lower than those of less developed countries. The structural economic vulnerability of ODCs is significantly higher than EMCs, but the political stability is better and the control of corruption is weaker than EMCs. 3.2

Estimation Method

The model of the determinants of FDI (scaled by GDP) will be estimated in two steps: the first step is to estimate the average effect of trade openness and EVI on FDI in unlagged baseline model by using OLS Fixed Effect with standard errors by Driscoll and Kraay (1998). The second step is to estimate the dynamic model with a spatial lag by using the system GMM two-steps estimator. The Augmented Dickey-Fuller test (ADF) is used to check the stationarity of the data in the level and log the first

70

C. Q. NGUYEN AND T.-H. LE

difference. The Wald test is applied to FE-Driscoll-Kraay to check the consistency and efficiency. GMM estimator requires two main assumptions: no serial correlation in error terms and valid instrument variables strong enough to efficiently explain the model. GMM uses lag of dependent variables as the instruments, and choosing many levels of lag and endogenous variables as instruments in the model can be over-identified. The test AR(1) and AR(2) for the autocorrelation at first and second order (Arellano & Bond, 1991) are applied to check the inconsistency of the model and the Sargan-Hansen test is employed to check for overidentification. The ADF test along with the Pedroni test for cointegration and the Granger test for causal effect are then applied for improving the model.

4 4.1

Empirical Results

Baseline Model with Average Effects

In the baseline model, for the large T dimension and with the assumption that autocorrelation is only due to the residual, the estimator with fixed effect by using the Driscoll and Kraay (1998) standard errors is applied to correct for heteroskedasticity and autocorrelation, with the command “xtscc” in Stata. EVI has a significant and negative effect on FDI/GDP, such that a one-point increase in EVI corresponds to a 3.7% reduction in FDI/GDP while trade openness is shown to cause a 3.1% increase on FDI/GDP. This indicates that to attract FDI, economies may have excessive trade openness at the expense of additional structural vulnerabilities. Among EVI’s major components (including Exposure and Shock), the shock index has the most statistically significant effect on FDI/GDP and is shown to decrease it by 2.6%. EVI enhances the influence of economic growth on FDI especially in the group of Emerging Market Countries (EMCs), but poses no effect in less developed countries, while GDP per capita has a mostly significantly positive effect on FDI/GDP in all countries. Exchange rate tends to decrease FDI/GDP slightly. Meanwhile, inflation has a stable effect between models, which is statistically insignificant. Political stability and corruption mainly have positive effects on FDI/GDP when considering EVI. Due to the considerable disparity in growth rates and increased intensity of the macro-economic indicators in the EMCs and ODCs group,

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there is a distinct impact of the nation factor on FDI growth as mentioned in the section above. When assessing the effects individually by each group of countries, trade openness has no significant effect on FDI/GDP in EMCs. Due to an exaggeration of the trade openness index in EMCs that does not reflect a real economic integration and trade, liberalization and MNEs would not consider this market-seeking factor in EMCs as the investing key. In contrast, in EMCs countries, economic growth and GDP per capita increase FDI/GDP by 9%. Meanwhile, for the ODCs with a low GDP growth, the effect on FDI/GDP is not statistically significant. EVI only has a statistically significant and negative effect on FDI/GDP for ODCs as it reduces FDI/GDP by 5.1%. When evaluating separately for each group, exchange rate has no significant impacts on FDI/GDP. Interestingly, higher corruption seems to attract FDI for EMCs, while the income of natural resource index stimulates FDI/GDP in ODCs. Thus, the results support H1 where trade openness has a significant positive effect on FDI/GDP in ODCs, but not effective in EMCs. EMCs are attracting FDI inflows based on their domestic market size with a strong effect from the economic growth rate and GDP per capita. Therefore, two different investment trends are predicted for developing countries: the trend of market-seeking in EMCs and the trend of resource-seeking in ODCs. EVI directly and intensively impacts FDI/GDP in ODCs but not EMCs, suggesting that the effect of market size overwhelms that of EVI in EMCs. Notably, corruption and trade freedom index are important factors in attracting FDI in EMCs. Institutional issues and trade liberalization are the concern of MNCs that invest in these markets (Table 1). 4.2

Short-Term Effect Models with Spatial Lag

In the system-generalized method of moments (S-GMM) model, the impact of trade openness on FDI/GDP appears to be more significant than that in the difference-generalized method of moments (D-GMM) model, with a significant positive effect of 2% on FDI/GDP in the baseline model, similarly in both baseline and EVI’s components model. The EVI index has no significant effect in the GMM model in the short term, only GDP growth rate has a strongly significant effect with a mean onepoint increase in economic growth rate associated with an 18% increase in FDI/GDP.

ER

EXPOSURE

EVI

CORR

PolStab

0.0335*** (−0.0052) 0.0251 (−0.0176) 0.2879 (−0.3656) 0.0046 (−0.0148) −0.0056 (−0.009) −0.0001* (−0.0001) −0.003 (−0.0056) 0.0091 (−0.0238) 0.5748 (−0.363) −0.3943* (−0.2282)

0.0310*** (−0.0054) 0.0357*** (−0.0119) 0.8991 (−0.5418) −0.007 (−0.0141) 0.0096 (−0.0155) −0.0003*** (−0.0001) 0.0007 (−0.0064) 0.0395 (−0.0296) 0.5654* (−0.299) −0.2473 (−0.3806) −0.0373* (−0.0197) 0.0593

0.0324*** (−0.0057) 0.0347*** (−0.0112) 1.0728* (−0.5409) −0.0066 (−0.014) 0.0125 (−0.0136) −0.0003*** (−0.0001) 0.0002 (−0.006) 0.0333 (−0.0314) 0.522 (−0.332) −0.2021 (−0.3903)

0.0155 (−0.0158) 0.0918*** (−0.0288) 0.3451 (−0.3003) 0.0008 (−0.0134) 0.0107 (−0.012) 0 (−0.0001) 0.0146 (−0.0127) 0.0732** (−0.0269) 0.3673 (−0.2609) 1.5958*** (−0.5542) 0.0896 (−0.0689)

Baseline model (4)

Components (3)

Without EVI (1)

Baseline model (2)

EMCs

Whole sample

Effect of Trade openness on FDI/GDP in terms of EVI

RENT_NR

Infla

IFI

TFI

logGDPC

Growth

TO

Table 1

0.1257

0.0169 (−0.0163) 0.0934*** (−0.0286) 0.5575* (−0.3176) 0.0038 (−0.0137) 0.015 (−0.0109) −0.0001 (−0.0001) 0.0168 (−0.0125) 0.0583** (−0.0268) 0.2543 (−0.3137) 1.7613** (−0.6602)

Components (5) 0.0468*** (−0.016) 0.0204 (−0.0154) 1.6096** (−0.6781) −0.0137 (−0.0215) 0.0148 (−0.0165) −0.0001 (−0.0005) 0.0008 (−0.0059) 0.0132 (−0.0497) 0.3974 (−0.4631) −1.0691 (−0.8435) −0.0511** (−0.0237)

Baseline model (6)

ODCs

−0.0273

0.0467*** (−0.0165) 0.0204 (−0.0149) 1.6039*** (−0.5981) −0.0136 (−0.0218) 0.0148 (−0.0153) −0.0001 (−0.0005) 0.0008 (−0.0051) 0.0133 (−0.0535) 0.3938 (−0.4684) −1.0669 (−0.8943)

Components (7)

72 C. Q. NGUYEN AND T.-H. LE

−0.2063 (−2.6021) 1589 87 16.81 0.000

−4.3526 (−4.455) 1488 87 7.93 0.000

(−0.0913) −0.0263** (−0.0115) −8.4011 (−5.6217) 1488 87 14.79 0.000 −3.9184 (−2.9468) 529 28 65.22 0.000

(−0.0912) 0.0193 (−0.0316) −7.7828 (−4.709) 529 28 58.56 0.000

Components (5)

−10.3450** (−4.5411) 959 58 11.51 0.000

Baseline model (6)

ODCs

(−0.1852) −0.0253 (−0.0179) −10.2373 (−8.0441) 959 58 11.54 0.000

Components (7)

Note *, ** and *** denote statistical significance at 10, 5 and 1% levels, respectively. Numbers in parentheses ( ) denote standard error. The testparm is to check if the variables are equal to each other rather than jointly equal to zero

Obs df(r) Testparm (F, p-value)

Constant

SHOCK

Baseline model (4)

Components (3)

Without EVI (1)

Baseline model (2)

EMCs

Whole sample

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C. Q. NGUYEN AND T.-H. LE

The lag of FDI marks an important significant effect on the growth of FDI in all models. In D-GMM one step and S-GMM two steps, applying the Arellano-Bond test for AR(1) for the first-order serial correlation shows a p-value < 0.1 and the AR(2) for the second-order serial correlation shows a p-value > 0.05, suggesting second-order serial correlation in the residuals in both of the two models and no endogenous problems. The Sargan–Hansen test for over-identification restrictions gives a p-value > 0.05, indicating that the instrument variables in the models are valid (Table 2). 4.3

Interaction Effects Between Trade Openness and EVI

However, due to the interactive relationship between trade openness and EVI, the effect of trade openness and EVI can be manipulated. The results in Table 3 indicate that trade openness remains to positively affect FDI/GDP. EVI and integration variable TO*EVI have a statistically significant effect on FDI inflows. That would be caused by the great disparity in the FDI inflow volume of EMCs and ODCs. The total net effect of trade openness on FDI in this model is 0.111 = (−0.003 + 0.114), equivalent to a growth of 11% in FDI/GDP, compared with 2% in the baseline model above. To calculate the EVI threshold value, the total effect of trade openness is 0, whereas: α2 TOit + α3 TO ∗ EVIit = 0 and EVIit = −α2 /α3

(4)

From the coefficient values estimated in the system GMM model below, the threshold value of EVI is expected to be 38, which means that for the developed country with an EVI of more than 38, the effect of trade openness depresses the increase of FDI/GDP. This finding does not imply that for countries with an EVI of more than 38, the higher trade openness, the lower FDI inflows. The risk of large trade openness within the weak and vulnerable economy implies that macro-economic violation may impede the attraction of foreign investment. Similarly, the total net effect of trade openness on FDI beyond the interaction effect with shocks (natural and trade shocks) is 0.10 = (−0.0032 + 0.1030), and the safety threshold of shock index on the positive effect of trade openness is 32. Thus, the instability of agricultural products and export needs to be kept under 8 and 16 points, respectively, according to the FERDI measurement framework. These results also support H2 where

PolStab

(1)

0.0949 (−0.0673) 0.4421 (−0.4103) −0.0151 (−0.0182) 0.0025 (−0.0167) −0.0001 (−0.0001) 0.1144** (−0.0504) 0.015 (−0.0541) 0.3429

0.3942*** (−0.047) 0.0118 (−0.0173)

(2)

Log(FDI)

0.3946*** (−0.0465) 0.0115 (−0.0176) 0.0198 (−0.0673) 0.0952 (−0.0679) 0.3711 (−0.3521) −0.0151 (−0.0185) 0.0017 (−0.0173) −0.0001 (−0.0001) 0.1152** (−0.0504) 0.0191 (−0.0581) 0.3699

Log(FDI)

Baseline model

0.4379*** (−0.1365) 0.0206*** (−0.0064 0.0281 (−0.0367) 0.1838* (−0.104) 0.0900 (−0.4649) −0.0207 (−0.0209) 0.0163 (−0.0124) 0 (0) 0.0813 (−0.0522) −0.0089 (−0.0276) 0.2274

(3)

Log(FDI)

Two-step S-GMM Baseline model

Components

One-step D-GMM

Dynamic effects on FDI, estimator: D-GMM & S-GMM

RENT_NR

Infla

ER

IFI

TFI

LogGDPC

Growth

EVI

TO

L.logFDI

Table 2

0.1915* (−0.1046) 0.0587 (−0.4477) −0.0156 (−0.0209) 0.0175 (−0.0117) 0 (0) 0.0805 (−0.0537) −0.0046 (−0.028) 0.1461

0.4444*** (−0.1299) 0.0203*** (−0.0062)

(4)

Log(FDI)

Components

(continued)

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75

(continued)

(2)

(1)

1112 88 0.006 0.072 0.770

(−0.3931) 0.037 (−0.8752) 0.0493 (−0.0769) −0.0004 (−0.0346) 1120 88 0.006 0.074 0.747

Log(FDI)

Log(FDI)

(−0.3781) −0.0592 (−0.8564)

Baseline model

Baseline model

1201 87 0.012 0.076 0.708

(−0.3288) 0.1282 (−0.5219)

(3)

Log(FDI)

Two-step S-GMM Components

One-step D-GMM

(−0.2727) 0.1968 (−0.5369) 0.0171 (−0.0196) 0.0208 (−0.0243) 1209 87 0.013 0.073 1.000

(4)

Log(FDI)

Components

Note *, ** and *** denote statistical significance at 10, 5 and 1% levels, respectively. Numbers in parentheses ( ) denote standard error. EcoGrowth, L.log(FDI), logGDPC and trade openness are considered as the endogenous variables, REER, Inflation, freedom index, EVI, institutional proxy as control variables. 2 maximum lags are applied for dependent variable as instrument and endogenous variables

Obs df(r) AR(1) (p-value) AR(2) (p-value) Sargan (p-value)

SHOCK

EXPOSURE

CORR

Table 2

76 C. Q. NGUYEN AND T.-H. LE

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Table 3 Effects of openness on FDI/GDP with interaction variables: System GMM

Components (1) L.logFDI TO EXPOSURE SHOCK TO_EXPOSURE TO_SHOCK Growth LogGDPC TFI IFI ER Infla RENT_NR PolStab CORR

0.3760** (−0.1456) 0.1030** (−0.0515) −0.0017 (−0.1007) 0.3028** (−0.144) 0.0001 (−0.0011) −0.0032** (−0.0016) 0.1273* (−0.0696) 0.3277 (−0.4786) −0.0403 (−0.0306) 0.0168 (−0.0194) −0.0001 (−0.0001) 0.122 (−0.0882) −0.0158 (−0.032) 0.1879 (−0.5588) 0.0444 (−0.6455)

EVI TO_EVI Constant Obs df(r)

−8.1814 (−5.3944) 1201 87

77

EVI (2) 0.3880*** (−0.1414) 0.1143** (−0.0476)

0.1468* (−0.081) 0.4433 (−0.5738) −0.0578** (−0.029) 0.0236 (−0.0167) 0 (−0.0001) 0.1147 (−0.1004) −0.0247 (−0.0388) −0.2989 (−0.4511) 0.2231 (−0.675) 0.3161** (−0.1295) −0.0030** (−0.0015) −9.7787* (−5.5889) 1201 87

(continued)

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C. Q. NGUYEN AND T.-H. LE

Table 3

(continued)

Components (1) AR(1) (p-value) AR(2) (p-value) Sargan (p-value)

0.014 0.09 1

EVI (2) 0.009 0.08 0.930

Note *, ** and *** denote statistical significance at 10, 5 and 1% levels, respectively. Numbers in parentheses ( ) denote standard error. EcoGrowth, L.log(FDI), logGDPC and trade openness are considered as the endogenous variables, REER, Inflation, freedom index, EVI, institutional proxy as control variables. 2 maximum lags are applied for dependent variable as instrument and endogenous variables

EVI interaction trade openness has a negative effect on FDI, and EVI reduces significantly the net effect of trade openness.

5

Concluding Remarks

Using a panel data of 89 non-LDCs over the period 1990–2018, we find that trade openness positively affects non-LDCs in general but is particularly insignificant to EMCs which have a higher average FDI inflows. For the entire sample, the impact of trade openness strongly depends on the structural vulnerability of the economy. Although the effect of EVI does not have much significance in the short-term models, it tends to reduce FDI growth, and EVI strongly reduces the impact of trade openness on FDI growth. Among the major components of EVI, exposure to the shock has the effect of reducing FDI inflows while the shocks affect overall FDI per real GDP. In the short term, EVI has no statistically significant effect on FDI growth, although it has a significant effect on the impact of trade openness and the macro growth index. A vulnerability level of 38 or higher can negatively affect FDI inflows. Countries that maintain a vulnerability index below 38 will likely experience a positive effect of trade openness on FDI growth. In 2018, the number of developing countries with EVI greater than 38 was 15 countries excluding EMCs. As the calculation of threshold that the interaction effect of EVI’s components does not turn the effect of trade openness negatively, developing countries need to keep the index of the instability of agricultural products under 8 points and the instability of export under 16 points.

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79

In a nutshell, in the context of economic vulnerability, the government of developing countries needs a policy regime to increase FDI inflows in a sustainable manner, as it is not sufficient to focus solely on trade openness and trade liberalization schemes. Trade openness is not an accurate measure of economic integration and free trade, especially in EMCs. Although EVI is not a perfect measure of economic vulnerability, governments in developing countries, especially EMCs, need to consider factors that may produce structural economic damage to maintain a stable resilience to external shock effects. This is especially meaningful for EMCs since most of these countries attract FDI into outsourcing activities and depend on international supply chains. This was evident in the great depression of the COVID-19 crisis. Therefore, attracting FDI should be accompanied by policies supporting sustainable economic growth and concerning human development and environmental issues such as investments in technology, research and development, clean energy, and agricultural stability. Corruption is also a concern for EMCs that wish to improve their investment environment and attract more FDI. This study has some limitations. First, there are some missing values due to data unavailability, leading to an unbalanced panel dataset. This could affect the estimation results even though our selected estimator has reduced the bias from dynamic unbalanced panel data models. Furthermore, due to data unavailability, the model may miss some potentially important variables. Besides, the system GMM model could not entirely take into account the network correlation between the explanatory variables and spillover effect within a cluster. Especially for EMCs, the number of MNEs tends to increase in both quality and quantity, and they are also considered as either host country or investors. In further research, the gravity model could be employed since it could effectively consider the interactive effects between countries, and multilevel structural equation modelling (ML-SEM) could also solve the problem of structural interactions between control variables in the model. Besides, a new research orientation is to measure the extent to which trade openness and other determinants affect FDI during a crisis, with separating the investigation period into three sub-periods of pre-crisis, crisis and post-crisis, in the interaction with structural economic vulnerability.

Appendix See Tables 4, 5, and 6.

Logarit of FDI inflow as percentage of GDP = (FDI inflow)/GDP*100 Lag (1) of logFDI Logarit of GDP per capita (current US dollar) The change of real GDP (%) = (GDPt/GDPt − 1)*100 Trade openness (%) = (Import + Export)/GDP*100 Logarit of Trade openness (%) = (Import + Export)/GDP*100 Economic vulnerability index (FERDI, UN-CDP) Exchange rate (local currency units per U.S. dollar) Inflation, consumer price (annual %) Proxy of trade policy liberalization = Trade freedom score (0–100) by Heritage Foundation based on two components of “the trade-weighted average tariff rate and non-tariff barriers”. Higher TFI reflects higher trade liberalization Proxy of investment restriction = Investment freedom index (0–100). Higher IFI reflects lower investment restriction Proxy of institutional quality in host country based on Political stability index (−2.5 weak; 2.5 strong) Proxy of institutional quality in host country based on control of corruption (−2.5 weak; 2.5 strong) Component of EVI to measure the exposure to external shocks

logFDI l.logFDI logGDPC Growth TO logTO EVI ER INLA TFI

EXPOSURE

CORR

PolStab

IFI

Definition

Definition of variables

Variables

Table 4

−

+

+

+/−

+ + + + + − − − +

Sign of effect (expected in theory)

80 C. Q. NGUYEN AND T.-H. LE

Sub-component of EVI in the exposure index = the size of population reflecting the size of market Sub-component of EVI in the exposure index = the remoteness to the international market Sub-component of EVI in the exposure index = the export concentration Sub-component of EVI in the exposure index = the share of population living in the low elevated coastal zone Sub-component of EVI in the exposure index = the share of agriculture, forestry, fishery in GDP Component of EVI Sub-component of EVI in the shock index = the share of agricultural production Sub-component of EVI in the shock index = the victim of natural shocks Sub-component of EVI in the shock index = the instability of export goods and services Income from natural resources rents, per cent of GDP (sum of oil, coal, gas, mineral, forest rents)

pop_size

RENT_NR

Disaster Instab_exp

SHOCK Instab_agri

Agri_share

Exp_cont LECZ

Remote

Definition

Variables

−

− +/−

− +/−

+/−

+/− −

−

+/−

Sign of effect (expected in theory)

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81

3.683 5000.8 7.889 90.972 4.448 5.12 6.01 0.81 1.695 33.699 65.563 52.119 237.024 43.066 8.057 −0.101 −0.253

Mean 7.684 6600.3 1.146 32.605 0.36 12.659 12.733 3.166 3.235 11.35 15.55 19.183 755.101 616.61 12.409 0.864 0.790

Std. Dev −62.076 102.59 4.631 20.431 3.017 −37.155 −38.155 −4.75 −5.749 11 13 0 0 −30.243 0.00 −2.97 −1.83

Min 149.97 47,740 10.774 274.97 5.617 254.22 255.22 65.95 66.95 71 90 90 11,786 23,773 84.23 1.39 1.72

Max

ODCs: Other Developing Countries / EMCs: Emerging Market Countries

1,710 1,729 1,729 1,732 1,732 1,705 1,705 1,705 1,705 1,580 1,256 1,260 1,694 1,713 1,725 1,196 1,197

Obs

ODCs ( n = 60)

Descriptive statistics

Growth GDPC logGDPC TO logTO FDI logFDI FDIin logFDIin EVI TFI IFI ER Infla RENT_NR PolStab CORR

Variable

Table 5

826 836 836 841 841 839 839 839 839 778 684 676 836 838 834 580 580

Obs 4.492 10,069 8.471 79.542 4.148 2.916 3.852 9.72 10.653 24.913 69.192 49.808 1318.9 113.98 11.659 −0.38 −0.1

Mean

EMCs ( n = 29)

4.506 13,411.5 1.301 66.155 0.64 3.761 3.842 18.809 18.847 6.335 13.652 18.396 4293.71 2279.05 13.086 0.908 0.766

Std. Dev

−20 95.19 4.556 13.75 2.621 −4.625 −5.625 −5 −5.550 8 13 5 0 −4.863 0 −2.81 −1.47

Min

33.99 85,076.1 11.351 437.33 6.081 29.015 30.015 138.305 139.305 46 90 90 40,864.3 65,374 61.95 1.62 2.33

Max

82 C. Q. NGUYEN AND T.-H. LE

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Table 6 List of countries in the study sample

EMCs

ODCs

United Arab Emirates Argentina Bahrain Brazil Chile China Colombia

Bahamas, The

Egypt, Arab Rep Indonesia India Iran, Islamic Rep Korea, Rep Mexico Malaysia Nigeria Oman Pakistan Peru Philippines Qatar Saudi Arabia Singapore Thailand Turkey Venezuela, RB Vietnam South Africa Kazakhstan Kuwait

83

Maldives

Belize Bolivia Barbados Brunei Darussalam Botswana Cameroon

Mongolia Mauritius Namibia Nicaragua Panama Papua New Guinea Congo, Dem. Rep Paraguay Congo, Rep El Salvador Cabo Verde Suriname Costa Rica Swaziland Dominica Seychelles Dominican Syrian Arab Republic Republic Algeria Tonga Ecuador Trinidad and Tobago Gabon Tunisia Ghana Uruguay Equatorial Guinea St. Vincent and the Grenadines Guatemala Samoa Guyana Armenia Honduras Antigua and Barbuda Israel Azerbaijan Jamaica Cote d’Ivoire Jordan Cyprus Kenya Fiji Lebanon Georgia Libya Kyrgyz Republic St. Lucia Togo Sri Lanka Tajikistan Morocco Uzbekistan

References Abeysinghe, T., & Forbes, K. (2005). Trade linkages and output-multiplier effects: A structural VAR approach with a focus on Asia. Review of International Economics, 13(2), 356–375.

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De-globalization and Its Effect on International Joint Venture Nakul Parameswar

1

Introduction

International Joint Ventures (IJV) have proliferated during the early 1990s owing to the opening up on markets across the world for foreign investment (Ebers & Maurer, 2016; Pangarkar, 2003; Reuer, 2002; Yan et al., 1998). Globalization effort by firms for developed countries was an important factor in the increasing number of IJV during the 1990s– 2000s (Buckley et al., 2008; Glaister & Buckley, 1998; Holtbrügge & Berning, 2018). Over a period of time, IJV have been seen to facilitate to various motives including knowledge transfer, gaining resources and capital apart from market entry mode (Holtbrügge & Berning, 2018; Idris & Tey, 2011; Pan, 2017). Further, as many countries completely liberalized the foreign investment regime for their respective country, IJV created earlier began to be terminated and foreign firms started its operations through greenfield or brownfield investment (Cui & Kumar, 2012; Madhok et al., 2015; Nielsen, 2012; Pangarkar, 2009; Pedada et al., 2020). Also, with increased domestic competition and challenges

N. Parameswar (B) Department of Entrepreneurship and Management, Indian Institute of Technology Hyderabad, Kandi, Sangareddy, Telangana State, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_5

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posed by institutional voids and cultural differences, many IJV terminated prematurely either through mutual agreement or by the actions of external entities (like regulators) prior to the complete opening up of the industry (López-Duarte & Vidal-Suárez, 2013; Meschi & Riccio, 2008; Paik, 2005). In the above-mentioned scenarios, the need to globalize and keep pace with the accessing new markets, gaining more resources and knowledge, was an important aspect for IJV to be created or terminated (Albino et al., 2004; Chen et al., 2020; Park, 2011). With the advent of time and proliferation of Information and Communication Technology (ICT) especially internet, firms across the globe can provide their products and services to different markets without its physical presence in the target market (Nguyen & Bang, 2019; Oliner & Sichel, 2000; Stern et al., 2014). Increased ICT resources in emerging and developing markets led to a situation in which IJV were primarily required to few industries in order to cater to the target market (like defence, automobile, pharmaceuticals, etc.) which were governed by other industry-specific regulatory norms (Kalotay, 2005; Carolina Rezende de Carvalho Ferreira et al., 2016; Parameswar, Dhir, & Sushil, 2020). This situation is further augmented by the effect of the COVID-19 pandemic and its influence on the de-globalization trend in the world (Gong et al., 2020; Parameswar, Arun et al., 2020; Parameswar, Chaubey, & Dhir, 2020). The COVID-19 pandemic forced countries across the world to enforce lockdown to contain the spread of the virus that negatively hampered the functioning of organizations in these markets. With an extended lockdown and minimal clarity on the timeline for containment of the virus, the economic viability of organizations’ functioning was reduced thereby forcing them to close down a part or whole of their operations, especially in foreign markets and refocus on their domestic markets. The COVID-19 pandemic forced countries across the world to enforce lockdown to contain the spread of the virus that negatively hampered the functioning of organizations in these markets. With an extended lockdown and minimal clarity on the timeline for containment of the virus, the economic viability of organizations’ functioning was reduced thereby forcing them to close down a part or whole of their operations, especially in foreign markets and refocus on their domestic markets. With increased de-globalization, the need for IJV will evolve and the same needs to be explored by researchers across the world. This article attempts to conceptualize the effect of de-globalization on IJV—its formation,

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purpose, termination and interaction post IJV termination and develop actionable propositions that can be taken up for further research.

2 Literature Review and Development of Propositions IJV has been an important component of research done in the domains of strategic alliances and strategic management. Extant literature has studied the different stage of IJV lifecycle name—pre-formation (Doz & Hamel, 1998; Idris & Tey, 2011; Tong et al., 2008), formation (Hamel, 1991; Hsieh et al., 2010; Idris & Tey, 2011; Inkpen & Currall, 1998; Lee et al., 1998; Yan & Duan, 2003) process (Hsieh et al., 2010; Inkpen & Beamish, 1997; Luo et al., 2001; Park & Russo, 1996; Reuer et al., 2002; Shenkar & Yan, 2002; Westman & Thorgren, 2016) and termination (Asgari et al., 2018; Kumar, 2005; Makino et al., 2007; Peng & Shenkar, 2002; Rajan et al., 2020) along with limited research on interaction post IJV termination (Parameswar et al., 2018; Parameswar, Dhir, & Sushil, 2020). Over a period of time, there has been significant research effort on IJV formation and management stage aided by the rapid globalization and internationalization of firms across the world (Annushkina & Colonel, 2013; Beamish & Lupton, 2009; Cui, Jiang, & Stening, 2011; Geringer, 1991; Holtbrügge & Berning, 2018; Makino & Neupert, 2000). 2.1

De-globalization and IJV Formation

Over the past few decades, the increasing number of IJV formation across the world has aided the growth in the IJV literature especially in the pre-formation, formation and process stage. As the de-globalization trend sets in the world along with the rapid advancement in the ICT infrastructure has reduced the need for IJV as a mode of market entry. With increased ICT coverage, foreign firms will attempt to remain in their home country and undertake their business and gain support of ICT to extend their offerings to other geographic markets. With deglobalization and increased ICT coverage, foreign firms need not have its physical presence in the target market thereby reducing the need for IJV to be established. This in turn points to the fact that with increased deglobalization, the number of IJV formed will likely reduce as compared to the globalization era. Further, matching the pace of globalization with

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that of de-globalization, it is evident that pace of globalization was influenced by factors beyond the control of an organization like FDI limits in the target market and existence of regulatory provisions to create IJV. However, in case of de-globalization, the choice to restrict their operation to their home market, regional market and undertaking business to other parts of the world using ICT infrastructure remains with the organization and is not influenced by external factors (Contractor, 2021; Luo & Witt, 2021; Witt, 2019). This leads to the development of the first proposition: Proposition 1: “De-globalization will reduce the number of IJV formed across the world”. This proposition can further be contextualized to the level of specific geographic regions and the type of market (say emerging market) in which the IJV are formed. 2.2

De-globalization and Purpose of IJV

IJV are formed to fulfil a purpose for its parent firms (Das & Teng, 2000; Kogut, 1988). Purpose of IJV directs the functioning of the new legal entity created, determines its performance and influences its longevity and termination (Cui & Kumar, 2012; Glaister, 1998; Makino et al., 2007; Nielsen, 2010; Triki & Mayrhofer, 2015). Literature on IJV has identified key purposes for IJV into four categories—resource seeking, capital seeking, market seeking and strategic asset seeking (Dunning, 2000, 2015; Luo & Park, 2001; Makino et al., 2007; Rudy et al., 2016). With inherent difference in the way business function in the globalized and deglobalized world, the purpose of IJV will evolve over a period of time. The role of IJV as a mode of entry to markets will reduce and IJV will become a primary vehicle to facilitate the access and transfer of strategic assets (knowledge and technology) across different firms. The role of IJV to facilitate access to scarce resources will be valid in the de-globalized as resources will be core for firms to undertake its operations. Next, IJV formed to gain access to knowledge and technology will be relevant in the de-globalized world as it is in the globalized world. Organizations across the world will attempt to gain access to strategic assets (knowledge and technology) and internalize it through IJV and thereafter terminate it. Finally, IJV formed to access financial markets in the partner firm’s

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Table 1 Snapshot on the Evolution of Purpose of IJV from Globalized to De-globalized world

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Purpose of IJV

In the Globalized World

In the De-globalized World

Resource seeking

Relatively Important

Market seeking

Relatively Important

Capital seeking

Relatively Important

Strategic Asset seeking

Relatively Important

Relatively Important Relatively Not Important Relatively Important Relatively Important

country and financial resources of partner firm will be relevant in the deglobalized world as firm’s will be competing for accessing limited financial resources available in the world. Refer Table 1 providing a Snapshot on the Evolution of Purpose of IJV from Globalized to De-globalized world.

Proposition 2: IJV in de-globalized world will likely be formed for resources and capital more than market entry. Proposition 3: IJV in de-globalized world will likely be formed for gaining strategic asset than market entry. 2.3

De-globalization and Termination of IJV

The literature on IJV identifies various causes of instability in IJV that leads to their termination—changes in interdependence between parents during the course of IJV (Fang & Zou, 2010; Isidor et al., 2015), unequal equity contribution by parent firms (Dhanaraj & Beamish, 2004; Mata & Portugal, 2015; Park & Ungson, 1997; Triki & Mayrhofer, 2015), asymmetric learning and knowledge transfer (Nakamura, 2005; Steensma & Lyles, 2000), inter-partner competition (Gill & Butler, 2003; Kogut, 1988), IJV performance (Robson et al., 2002; Valdés-Llaneza & GarcíaCanal, 2006), attainment of IJV objective (Makino et al., 2007) and external environmental challenges (Makino et al., 2007; Cui, Calantone, & Griffith, 2011). This list seldom includes de-globalization as a factor in

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the external environment and limited studies have explored its effect on organization’s functioning in general and IJV in specific. Literature has identified two types of IJV termination—intended termination and unintended termination (Gulati et al., 2008; Makino et al., 2007). Intended termination of IJV is a mutual decision by parent firms on achievement of IJV objective or realization of non-viability of business by IJV parent firms. On the other hand, termination of IJV due to unforeseen contingencies in internal or external environment is termed as unintended termination. With the advent of de-globalization, parent firms of IJV will be faced with a new force in the external environment and each of the parent can individually view it as a challenge or opportunity and accordingly plan their course of action. Differences in the view of the parent firms will lead to instability in IJV, eventually leading to its unintended termination. The industry type, type of business and the purpose of IJV will influence the way the parent firms in IJV view the effect of de-globalization on IJV functioning or termination. The longevity of the IJV is determined by the interest of both the parent firms, and in case the parent firms have divergent views, then the IJV will suffer (Nemeth & Nippa, 2013; Pangarkar, 2003; Parkhe, 1991; Rahman & Korn, 2014; Sklavounos & Hajidimitriou, 2014). With the very essence of internationalization being questioned by the discussion on de-globalization, IJV termination, especially unintended IJV termination, is likely in the future. Proposition 4: De-globalization will lead to an increase in IJV termination. Proposition 5: Unintended IJV termination is more likely in deglobalized world than intended IJV termination. 2.4

De-globalization and Interaction Post IJV Termination

With an increased attention by organizations to their local and regional market, the need for IJV will reduce, eventually leading to IJV termination. As the need for a separate legal entity with equity contribution by parent firms minimizes in the de-globalized world, organizations will realize the need to reconfigure their relationship established in IJV to that of supplier–buyer or complement with an attempt to gain a part of the total value created during the IJV (Parameswar & Dhir, 2019; Parameswar, Dhir, & Sushil, 2020). Parent firms of terminated IJV can

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interact as supplier–buyer in order to secure access to resources and support from their partner firm (Goffnett, 2018; Morais & Silvestre, 2018; Neumüller et al., 2016). Being a complement, parent firms can utilize their partner firm’s manufacturing capacity, distribution network etc. and co-exist along with its partner in the target market (Deitz et al., 2010; Lin et al., 2009; Rothaermel, 2001). The choice of interaction post IJV termination will be influenced by the parent firms IJV experience (Dan & Zondag, 2016; Ebers & Maurer, 2016; Gulati et al., 2009). In certain situations, the parent firms of a terminated IJV can decide to not interact with each other and be self-dependent or gain support from firms other their IJV partner. Both supplier–buyer and complement interaction will allow parent firms to benefit from their partner through a non-equity alliance and allow them to create a part of the total value created during the existence of the IJV. Further, with differences in the view of deglobalization by parent firms of terminated IJV, a parent firm can enter the domestic market of the partner firm through greenfield investment, formation of IJV with another firm or through Mergers and Acquisitions and compete with the erstwhile partner firm. This establishes a competitor interaction post IJV termination between parent firms of terminated IJV. Specifically, supplier-buyer interaction supersedes complement interaction owing to the fact that supplier-buyer relationship is considered as an arm’s length transaction that requires relatively low level of coordination and integration between parent firms as compared to complement interaction, thus it is much more feasible to operational for undertaking international transactions in a de-globalized world. Proposition 6: Interaction post IJV termination as supplier–buyer is likely amongst parent firm of terminated IJV in the de-globalized world more than complement interaction followed by competitor interaction.

3

Conclusion

Over the past few decades, organizations across the world have embraced globalization and internationalized to different parts of the world (Deng et al., 2019; Luo et al., 2019; Michael et al., 1998; Petricevic & Teece, 2019). IJV have been an important mode for foreign firms to enter new markets, gain material and information support from domestic firms in the

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target market and gradually establish their foothold in the target market (Contractor & Reuer, 2014; Harrigan, 1988; Kang & Liu, 2016; Kogut, 1989). In the recent past, the world has been witnessing to unprecedented challenges posed by nature and socio-economic factors leading to growing concern towards localization and regionalization (Antipova, 2020; Parameswar, Arun et al., 2020; Parameswar, Chaubey, & Dhir, 2020; Sniedovich, 2012). This has entailed the organizations across the world to refocus on catering to its home and regional market and minimize their risk by undertaking business in different markets and increasing the exposure to uncertainty (Luo & Witt, 2021; Witt, 2019). IJV literature until 2020 has limited discussion on de-globalization and its effect on IJV. With the gradual de-globalization, the need for IJV and the purpose for its formation will evolve and researchers need to proactively conceptualize and undertake studies to further support the practitioners in their decision-making. Moreover, at present when the debate on globalization vs. de-globalization is gaining momentum, researchers working on IJV literature in specific and alliance literature in general must explore the effect of de-globalization on IJV and strategic alliances. This article attempts to develop propositions to be further explored by researchers on the effect of de-globalization on IJV formation, purpose of IJV, IJV termination and interaction post IJV termination. With limited literature on de-globalization linked to IJV and strategic alliance, the propositions developed in this article will sow the initial thoughts on the academicians and practitioners for the need to undertake further research in this area. Academicians should be able to creatively think, conceptualize and undertake research in order to be of support to practitioners who might experience the effect of deglobalization on their decision-making in the upcoming few years. For the policymakers, the article identifies four distinct aspects of IJV that is affected by de-globalization. The effect of de-globalization on these IJV aspects can be further fastened or slowed down by the regulatory and policy decisions. Next, for the practitioners, this article suggests that the contemporary theme of de-globalization must be included by managers while discussing and deciding about forming, managing and terminating IJV as well as conceptualizing interaction post IJV termination. Being among the very few articles discussing about de-globalization and its effect on IJV, this article has few limitations that can be minimized by future research effort. First, the article does not suggest any

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theoretical lens to study the four aspects of IJV being affected by deglobalization and takes a general standpoint. Future research can link the effect of de-globalization to various theoretical underpinnings of IJV like resource-based view (Das & Teng, 2000), transaction cost economics (Reuer, 2001; Reuer & Ariño, 2007), etc. Second, the article is limited to developing propositions and does not undertake quantitative or qualitative testing of hypotheses to conclude on the effect. Future research can attempt to find relevant data (quantitative or qualitative) that allows the testing of hypotheses formed from the propositions suggested in this article.

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Analysing Covid Adjustments in Hospitality Business Models: Insights from Indian Hospitality Sector Through Social Media Analytics Saurabh Srivastava

1

Introduction

Covid-19 has brought an extended uncertainty in the world economy and every sector and industry has created its own course of action to embark on the journey to deal with it effectively. This pandemic can also be construed as a “Black Swan” event due to its huge adverse impact and unpredictability. Preparing for such events is generally not part of ongoing business strategies and firms have struggled to manage the adverse impact, especially in today’s highly connected and global business environment. The Hospitality sector is one of the biggest casualty of this pandemic. This sector’s impact on global GDP and employment is very high. While this sector has seen regular adverse events in form of diseases (SARS) and natural calamities (cyclone) (Chen et al., 2007), the impact of this current pandemic is multi-fold. It is global in nature, and travel has drastically reduced and is right now limited to business and essential travel only. The

S. Srivastava (B) Department of Management Studies, Indian Institute of Technology (IIT) Delhi, Hauz Khas, New Delhi, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_6

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overall economy has come to a standstill position which has affected the reduction of all non-essential spends including hospitality. Lastly, there is a possibility of structural changes in emerging business models in the sector. The sector has seen new platform-driven business models in the past decade where platform based firms used to provide a marketplace to select the facility suited for one’s requirement. This business model is asset-light and had grown rapidly and many country-specific variations have emerged as well. Due to this pandemic, hospitality businesses have put various initiatives to bring back their visitors, and doing so has been ever challenging due to travel bans, event cancellations, and quarantine requirements. For platform-based businesses, it was more challenging as properties listed on their platforms are not fully owned and controlled by them (Dolnicar & Zare, 2020). These platform firms in the hospitality sector have taken various initiatives to mitigate the adverse impact of the pandemic and their effectiveness will determine the short-term behavior of this sector and its recovery. This can have-a long-term impact on the structural dynamics of the sector as well. While various country-level studies are conducted on how the hospitality sector is impacted in specific countries (Nguyen & Van Hong, 2021), the analysis of firm response is not studied in detail. Thus, we propose to study these initiatives of platform-based hospitality firms in the Indian context and analyze its short- to medium-term impact on the hospitality sector. The remaining portion of this chapter is structured in five sections. In the first section, we have presented the key research question, which we intend to answer in the current context of the pandemic situation and how hospitality sector-specific business models are responding to this crisis. Next, we discuss the research methodology used in this research and its relevance. In third section, we discuss the details of analysis and key observations aligned with main research questions. In the fourth section, implications of our findings on various stakeholders like the managerial workforce in these firms and policymakers is discussed. In last section, we provide a summary of our research including suggestions on improvement areas in future research.

2

Key Research Questions

In this chapter, we present the key questions, which we are proposing to answer via this research work. Our main intention is to observe and

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analyze the hospitality sector’s response to this Covid crisis in India. First, it is required to observe the response as communicated in social media by hospitality firms in India following different business models by various business model-based firms. The hospitality sector in India includes stand-alone global (i.e. Taj Group of Hotels) and local hotel chains (i.e. Treebo Hotels), travel aggregators (i.e. MakeMyTrip), sharing models like Airbnb, and hybrid models like OYO Rooms. We intend to identify the keywords and themes in these communications and the overall sentiment of these social media communications by these firms. Second, we are interested in knowing if the response is different based on the business model of the hospitality firm. The response of a sharing platform-based firm is expected to be different from travel aggregators, and firms who choose a hybrid business model. This difference can be in terms of the focus areas targeted by the firms while communicating with the consumers and the overall tone and sentiment of the communication. We intend to focus on these areas to see the difference in the communication and its dependency on the business model chosen by the firm (sharing/ platform or dedicated hospitality firm). Third, we will observe the key changes in the strategies for these firms in pre- and post-pandemic era. Lastly, we intend to study if the communicating and focus area of the firms has changed due to the black swan event of Covid-19 pandemic crisis and whether these changes and ratifications are tactical or they could lead towards a broader shift towards de-globalization.

3

Research Methodology

We have used social media analytics (SMA) as the preferred research methodology for this research. In today’s digital era, social media has become the main medium for interacting with business stakeholders. Social media analytics is an interdisciplinary research field, which helps in analyzing management decisions by reviewing communication on social media platforms (Hamouda, 2018; Odoom et al., 2017). SMA has been used for various research objectives ranging from customer dissatisfaction analysis (Fan & Gordon, 2014), predicting consumer interest (Feng et al., 2015), and knowledge sharing (Leonardi, 2017). We will be adapting the SMA methodology for investigating the responses of the hospitality sector in the current pandemic situation. SMA is a three-stage process for capturing the social media data, understanding the extracted data, and presentation of the analysis of the data

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using the CUP framework (Fan & Gordon, 2014). We have used Twitter as the social media source for our data. We have extracted the tweet data using Twitter APIs from the official Twitter accounts and handles of the selected hospitality firms. Once data is captured, we prepare the data for further analysis and perform data cleaning, tagging and classification. In Step 2, we will use descriptive analysis of extracted tweets and the associated hashtags. The content of the tweets will be analyzed through content analysis using word clouds and sentiment analysis (Chae, 2015). The comparison of the word cloud of firms having different business models provides us the unique and common business strategies being incorporated by these firms to manage pandemic adverse impacts. In Step 3, we discuss our findings and present the insights from our study as strategic decisions by hospitality firms to manage businesses in the post-Covid scenario.

4

Analysis and Discussion

We have selected five companies with the different business models and positioning in the hospitality sector. Brief details of those firms along with their business model are listed in Table 1. We have fetched the tweets for these five firms using standard Twitter APIs for both pre-Covid and post-Covid first wave scenarios. For preCovid scenario, we have taken a 6-month period of July–December 2019 for fetching the tweets. This pandemic event had started showing its effect on India in mid Feburary and the entire country went into a strict lockdown for almost a quarter (April- June 2020), This lockdown event was the extreme measure by government and entire country was under strict lockdown. By July 2020, nation wide lockdown was relaxed and regular business activities also started gradually in India. Firms across sectors had also settled with the new normal of doing business and prepared their strategies for it. While the first wave of Covid 19 peaked around Sept 2020 in India, we have observed the gradual opening of economic activities from July 2020 onwards itself. Therefore, we have taken tweets for the period June–December 2020, as the post-pandemic response for these firms. The seasonality of the hospitality sector is also normalized by taking the same 6-month period data in pre- and post-Covid first wave scenarios. Henceforth, in this chapter, we will refer June-December 2019 as the pre-Covid period and June-December 2020 as the post-Covid first wave period for our analysis.

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Table 1

List of firms selected for this study

Airbnb India

MakeMyTrip

OYO Rooms

Taj Hotels

Treebo Hotels

This is a market place platform for lodging purposes with operations in 190+ countries worldwide. It has a two-sided network for providing informal lodging activities which were never part of the traditional hospitality sector. While Airbnb started in 2008 in USA, its India operations started in 2016 only MakeMyTrip is an online travel company founded in 2000. It provides travel services like travel (flight, bus, and rail tickets), domestic and international holiday packages, and hotel reservations. It generally doesn’t own these services and only aggregates and presents them through its platform for users to select from OYO Rooms started operations in 2013 and is a hospitality chain of leased and franchised hotels, homes, and living spaces across countries. On the supply side of their platform, OYO brought standardization in key essential features of lodging and thus created the biggest chain of such lodging options without owning a single asset. This is a hybrid platform model and the supply side of the network is well-curated, managed and offered as a service under the OYO brand Taj Hotels is a luxury hotel chain and is a subsidiary of Indian Hotels Company Limited (IHCL), which was founded in 1903. Taj Hotels operates 100+ hotels and resorts across the world (84 in India) with five-star facilities. They own and fully control all these facilities and manage them closely as a traditional hospitality chain Treebo Hotels is a budget hotel chain with over 600+ hotels under its umbrella across 113 cities in India. This company was founded in 2015

In Table 2, we have presented the consolidated summary view of tweets collected in pre- and post-Covid periods. While total tweets have reduced by more than 50% in the post-Covid scenario (from 1931 to 936), his Table 2

Summary view of Tweets in the pre- and post-Covid scenarios Post-Covid period H2 2020

Type of tweets Reply Retweet Tweet Retweet to original tweet ratio Total Tweets by firms

Tweets

%

452 24 460

48.3 2.6 49.1

936

Pre-Covid period H2 2019

Retweets

Tweets

%

Retweets

41 0 2013 4.4

1375 33 523

71.2 1.7 27.1

278 0 4138 7.9

1931

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reduction is mainly due to fewer activities in replies by these firms. In the pre-Covid scenario, 71.2% of tweets were the replies to the queries by consumers, and it has reduced to 48.3% in the post-Covid scenario. If we remove the tweets designated as replies and retweets, the reduction is just 12.1% (from 523 to 460 tweets). Thus, the messaging frequency of these hospitality firms has decreased by 12.1% from the pre-Covid scenario. Firms do not want to create anxiety among its consumers by either a disproportionate increase or decrease in their regular communication. We have also observed the tweeting behavior and media files used while creating the tweet content. Overall 57% of tweets have photos and 21% of tweets used to have video files embedded in them in the pre-Covid scenario. Media content is preferred in tweets as this leads to positive engagement from users in form of retweets and mentions. In the pre-Covid scenario, video tweets have on average 15 retweets and photo tweets have 8 times retweets compared with normal tweets where retweeting was only 1.4 times. However, we have seen some deviations in tweet trends by selected firms in the post-Covid scenario. Airbnb used to have 94% of tweets with either photo or video ads in the pre-Covid scenario. However, the percentage of the normal tweets have increased from 6 to 53% in the post-Covid scenario. It was mainly done to focus on sending a reassuring and positive message to its ecosystem for its readiness. A similar approach seems to be taken by MakeMyTrip as well which is an online aggregator. On the other hand, traditional business models of luxury and budget hotels (Taj Hotels and Treebo) have taken a contra view and focussed more on photo and video tweets. Since these firms own the hotels rather than providing a platform for them, they assured users of the efforts they are making to make these facilities clean and hygienic. They also want to convey the users about the experience they might be missing. OYO Rooms, which has a hybrid model where they have a platform but curate the supply side on it, continued on its balanced approach. Their normal tweets are 24% in the post-Covid period while traditional business models like Taj Hotels and Treebo Hotels have less than 10% normal tweets. Airbnb and MakeMyTrip have more than 50% normal tweets in the post-Covid period (Table 3). In the next phase, we have identified the keywords being used by these firms in their tweets. The results are presented in Table 4 where keywords and their associated words are observed based on correlation. Airbnb, which offers a sharing platform, used to focus on the key unique selling feature for both buyers and supply-side partners. Associated words

ANALYSING COVID ADJUSTMENTS IN HOSPITALITY …

Table 3

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Firm wise Tweets descriptive analysis based on media used in Tweets Post-Covid period H2 2020

Airbnb India Normal Tweets Photo Video MakeMyTrip Normal Tweets Photo Video OYO Normal Tweets Photo Video Taj Hotels Normal Tweets Photo Video Treebo Hotels Normal Tweets Photo Video Consolidated Normal Tweets Photo Video

Pre-Covid period H2 2019

# Tweets

%

# retweets

# Tweets

47 25

53

373 94

16 1

30 249 73 56

10 5 39 14

63 31

3 14 378 82

12 13 341 60

31 33

232 64 1032 58

221 59 84 19

65 17

593 381 157 13

34 31 43 19

40 37

18 5 521 113

42 12 22

22 10 4124 155

295 113

57 22

2259 1710

21 1 45 41

45 2

1 3 202 48

2 7

91

24

136 18 98 9

67 9

33 56 68 7

34 57

52 9 460 130

76 13 28

102 42 2013 303

243 87

53 19

960 750

9

10

%

6

36

18

23

44

# retweets 1288 0 303 985 86 12 22 52 1261 125 594 528 1470 17 1318 135 33 1

like unique, authentic, proud are used to drive more suppliers to its platform as it offers a long-term association. Moreover, it is used to associate with its buyers with keywords like love, experience and excitement as Airbnb lodging options are non-traditional and offer hedonic attributes to its buyers. In post-Covid scenario (H2, 2020) also, Airbnb followed a similar tone and focus areas in its messaging on Twitter and there was no drastic observed change in its Twitter communications. The focus is

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Table 4 Keywords and their associated words in the pre- and post-Covid first wave scenarios Pre-Covid period Airbnb Airbnb

Find Partner

Tourism Royal

Make My Trip Travel

India

MakeMyTrip

Destination

Post-Covid period

Love, experience, exciting, world

Airbnb

Love, away, couple, creative Authentic, festive, offer, unique, proud Proud, heritage, cultural, rich Empower, Rajasthan, princess, glimpse

Home

Trip, group, Indian, away, gift

App

MyIndiaMy trip, picture perfect, NetGeo, wildlife Eclipse, tourism, homestay, trip

Travel

Domestic, monsoon, picture perfect

Get

Travel

Experience Art

Stay

Find, skylight, stargazing, stimulating Green, minimalist, spring, explore Nomad, reconnect, staycation, FICCI Athlete, impact, social share Class, culinary, passion, lesson

Driveup, getaway, sanitize, readiness, certified Ensure, new norm, gradual, normal, safeairtravel Perfect, offer, nature, stunning, sanitize Readiness, active, explore, sanitize

Trip

Hassle free, plan, need, safe

Sanitized stay at oyo

Book

Hotel, oyorooms, click, travel with oyo Sale, meal offer

Now

Click

Oyoforsafety

Road trip, rahomast, staysafe, staying Staysafe, cashback, sanitize Rahomast, vocal for local, all for local, stay safe

OYO rooms Oyo, oyoforyou, oyoeverywhere

Oyo

(continued)

ANALYSING COVID ADJUSTMENTS IN HOSPITALITY …

Table 4

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(continued)

Pre-Covid period

Post-Covid period Rahosafe

Raho mast, Dekho Apna Desh, staysafe, all for local

Open, plan

Tajhotel, Taj

Khazana, explore, exotic, gorgeous, shop Highlight, glad, happy Glad, champagne

Experience

Renew, back, reflect, home, signature Home, gastronomy, win, beyond

Live

Tomorrow, charm, royal, join

Trend, luxury, resort, budget stay

Treebo/treebohotel

Check

Prior, cancel, effective

Stay

NewCity launch

Tiger, up, Staysafewithtreebo Maharashtra, Kerala

Like

Always, hassle free, smooth, deep, understand

Hygiene, shield, winner, IPL, safety first Safe, protect, fine, background, amenities, comfort IPL, safety, safety first, celebrate safe, love Protect, protocol, safety, guarantee

Taj Hotels Book now

Taj

Stay Experience Treebo Hotels Treebo, treebohotels

Treebohygieneshield

Book

Call, visit, perform, comfort, break

observed to be less on the partner ecosystem in this period, as Airbnb transaction volumes were low and it was focussing more demand to come back. We have observed keywords like staycation as travelers were opting out for the options for longer period stay while working in Work from Home (WFH) mode. For travel aggregators like MakeMyTrip (MMT), in pre-Covid period, the focus was more on Indian travel destinations with keywords like myindiamytrip, netgeo, wild life, events like eclipse, etc. In the post-Covid period, MMT was sensitized towards new normal for travel and started presenting travel options with cautious keywords like new norm, gradual, safeairtravel and sanitize. It also added a feature of Covid-certified facility in its app and used that feature for promoting its

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offerings. The tone was more cautious and aligned with the new norm for gradual opening of travel. OYO Rooms, which has a hybrid model where it tightly controls the supply side of the platform, was used to highlight sale offers and its broad coverage in the pre-Covid period. However, OYO has observed the change in the travel pattern and concerns by travelers and changed its messaging drastically in the post-Covid period. In the second half of 2020, it has positioned OYO as a safe stay option with keywords like staysafe, rahomast, rahosafe, sanitize and oyoforsafety. It was also quick to adopt new Vocal for Local slogan for Atmanirbhar Bharat in its communications in the post-Covid period. Taj hotels, known for their high-end hotel chain, used to emphasize their luxurious and experiential stay in the pre-Covid period. They, however, continued to position its offerings with similar communication in the post-Covid period as well with possible nostalgic keywords like renew, reflect, home, etc. Treebo hotels also follow the traditional business model but focus on business and budget travel used to put focus on its hassle-free and comforting customer-centric processes in its Twitter messages in the pre-Covid period. It is also used to emphasize its range of luxury and budget stay. However, in the post-Covid period, Treebo has also changed its positioning on safe stay by using keywords like Treebosafetyshield, protect, protocol, hygiene, and safetyfirst. Thus, we have observed drastic positioning changes in OYO Rooms and Treebo. Airbnb and Taj Hotels continued with their old positioning with a slight moderation in the communication. We have also conducted the sentiment analysis of tweets by these firms in pre-Covid and post-Covid scenarios. We have used the Syuzhet tool box to get the overall sentiment score for the tweets by each firm. We have consolidated the sentiment score at the firm level in both pre- and post-Covid periods and presented in Table 5. As per Table 5, in the preCovid period, all the five firms used to have positive sentiment in their tweets and Taj Hotels used to have the most positive tweets. Considering it as a high end hotel chain, it was also expected to post positive sentiment-based tweets. The lowest sentiment score was of MMT as it is a travel aggregator and its positioning is more transactional in that sense. However, there was a need to change the sentiments of communication in the post-Covid period so that business can come back to the pre-Covid transactional levels. OYO Rooms and Treebo Hotels have reduced the positive sentiments in their tweets. As we have observed earlier as well, these two players have focussed more on the safety and hygiene aspects of

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Table 5 Firms

Sentiment analysis of Tweets by various firms Pre-Covid scenario

Airbnb MMT OYO Treebo Taj Hotels

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Post-Covid scenario

Min

Median

Mean

Max

Min

Median

Mean

Max

−0.25 −0.80 −2.90 −0.75 −0.25

0.00 0.00 0.00 0.00 0.50

0.84 0.47 0.64 0.85 1.03

7.20 5.10 7.25 5.60 6.40

−0.50 −0.25 −1.25 −0.85 −1.00

0.50 0.33 0.00 0.00 0.00

1.03 0.89 0.26 0.43 0.69

4.75 4.90 5.50 5.00 5.80

their stay and were first to be ready for business so that travelers can be comfortable with the new normal. Airbnb and MMT on the other hand created more positive sentiments from their tweet communications. While Taj Hotels had most positive sentiments in their tweets in the pre-Covid period, their tweets in the post-Covid period present a more balanced view on sentiments of their tweets. Their choice of keywords has not changed but the tone is kept down to adjust with new normal.

5

Discussion and Implication of Insights

Using the CUP framework, we have analyzed the pre- and post-Covid communication and positioning of key hospitality firms in India following different business models. We have observed that social media communication is aligned with the business model of the firms in the pre-Covid period. Airbnb used to put photos and videos in its tweets a lot as its business model is revolving around unique experiences by staying in those lodging options. MMT being an aggregator has a balanced approach while putting across its tweets as it always wanted to present its catalog of high-end listed properties. OYO Rooms and Treebo have the positioning of budget hotels. Still, they used to have 80% tweets with photos and videos. One logical reason can be high engagement with consumers on photos and videos. However, all firms have changed their tweet composition in the post-Covid period. Taj and Treebo had traditional business models and hence they have increased the photos and videos of their property to bring assurance in the mind of travelers. Other players have a platform approach and hence could not pitch to end-users with photos and focused more on verbal communication only.

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In terms of keyword analysis, we have observed that Airbnb has not changed its positioning and messaging in the post-Covid period while other budget hotel players like OYO and Treebo were fully sensitized about new normal and could adapt quickly to the new normal for travel. One observed reason is that Treebo and OYO have tighter control on their inventory which Airbnb does not have. Therefore, Airbnb could not adjust its strategies with new post-pandemic scenario. On the other hand, Taj has also not changed its positioning in terms of communication and continued to be focussed on high-end luxurious staying experiences. In terms of sentiments of the tweets, as OYO and Treebo have changed their positioning on communication and on-ground safety measures, the sentiments and tone have also reduced to a lower level aligned with consumer sentiments. Airbnb has made tweets with more positive sentiments as it could not control its on-ground operations. MMT again does not have control over its inventory (similar to Airbnb). Hence, it also pushed more positive tweets to communicate its intent to continue its operations. For managers in these hospitality firms, the key take way is to have dynamic capability to change the strategic positioning. This adapted new strategy need to be operationalized well with the on-ground arrangements as done by firms like Treebo and OYO and also need to reflect in the communication to the end user. Overall, a business model impacts a lot on the operations and strategy of a firm. We have seen the differences in tweet composition, its keywords and their association and over sentiments of those social media messages, the pre-Covid scenarios and mapped with business model elements. In the post-Covid scenario, it was firm’s ability to identify the need for change and seizing that opportunity which has reflected in the way companies transform themselves quickly to such adversities. The change in the tweet profiles is just the reflection of that on-ground changes in firm’s operations. For researchers, this study has two insights. Mapping of business model and strategy of firms with their social media communication is a new area and few studies are done. If there is a greater synergy between the two, the firm will operate successfully in a given business environment. This mixed-method research also provides grounds for future studies in this direction. This study also proposed a way in which the impact of any future event can be analysed. By using SMA in the pre- and post-event scenario, researchers can further explore the business model and strategy domain research. For the policymakers, this research provide a useful

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insight that policy makers can use the changes in social media communications by companies to sense the changes in the sentiments for any industry segment. Earlier they used to rely on the macroeconomic data which is only available after a lag. If these sentiments and transaction based emotions are analyzed using SMA by policymakers, the policies will be more aligned with expectation of firms and consumers. Moreover, these interventions will be more efficient and timely as well.

6

Conclusion

In this chapter, we have analyzed the strategic actions taken by hospitality firms given the unprecedented Black Swan event of Covid-19. These actions are observed in the context of the business model of these firms. The actions are also analyzed based on the construct, focus area, and sentiment of social media communications by the firms having different business models in post-event scenarios. As we discussed in the earlier section, we have analysed the changes in social media communication and mapped that back to the business model and firm’s on-ground operational capabilities. This study can be further augmented by many improvements. We have not examined the post-pandemic performance of these firms. If we can map the performance with changes in social media communication, we can identify if these strategic changes have helped these firms in times of crisis. We have taken a block of 6 months before and post-pandemic periods. We can also see the time series study of the tweets to observe how the sentiments have changed progressively during this period. While we have also studied the firm’s tweets on their positioning, if we study the tweets where these firms are tagged, then we will be able to see if the operational strategies of these firm were successful or not. Overall, this study has used SMA as a research tool to observe the impact of the pandemic on strategic actions by firms in the hospitality sector. As hospitality sector has many business model, we have presented a comparative assessment of the social media communication and the changes in the strategic positioning with the business model of the firms.

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References Chae, B. K. (2015). Insights from hashtag# supplychain and twitter analytics: Considering twitter and twitter data for supply chain practice and research. International Journal of Production Economics, 165, 247–259. Chen, M. H., Jang, S. S., & Kim, W. G. (2007). The impact of the SARS outbreak on Taiwanese hotel stock performance: An event-study approach. International Journal of Hospitality Management, 26(1), 200–212. Dolnicar, S., & Zare, S. (2020). COVID19 and Airbnb—Disrupting the disruptor. Annals of Tourism Research, 83, 102961. https://doi.org/10. 1016/j.annals.2020.102961. Fan, W., & Gordon, M. D. (2014). The power of social media analytics. Communications of the ACM, 57 (6), 74–81. Feng, H., Tian, J., Wang, H. J., & Li, M. (2015). Personalized recommendations based on time-weighted overlapping community detection. Information & Management, 52(7), 789–800. Hamouda, M. (2018). Understanding social media advertising effect on consumers’ responses: An empirical investigation of tourism advertising on Facebook. Journal of Enterprise Information Management, 31(3), 426–445. Leonardi, P. M. (2017). The social media revolution: Sharing and learning in the age of leaky knowledge. Information and Organization, 27 (1), 47–59. Nguyen, B. N., & Van Hong, T. H. (2021). Impact of Covid-19 on Airbnb: Evidence from Vietnam. Journal of Sustainable Finance & Investment. https://doi.org/10.1080/20430795.2021.1894544. Odoom, R., Anning-Dorson, T., & Acheampong, G. (2017). Antecedents of social media usage and performance benefits in small-and medium-sized enterprises (SMEs). Journal of Enterprise Information Management, 30(3), 383–399.

De-internationalization in the Sky: Aeroméxico and the COVID-19 Pandemic José Satsumi López-Morales

1

Introduction

The COVID-19 pandemic has seen airlines globally facing unprecedented challenges due to the drop in passenger demand worldwide. Companies in the sector have taken actions to keep operating and to survive under this new normal so that they can have expectations for the future. This paper analysed the novel de-internationalization process that the Mexican airline Aeroméxico carried out to deal with the pandemic. Since the 1960s, most of the international business literature has focused mainly on examining the internationalization of companies from a positive and incremental perspective (Alserus & Tykesson, 2011; Johanson & Vahlne, 1977). Every day there are more service options, especially in the air sector and specifically where airlines fulfil a double function of enabling companies to sell their goods and facilitating tourist flows (CEPAL, 2017). Airlines today have implemented different strategies to increase their markets and to offer higher flight frequencies and better services to passengers. This paradigm was suddenly transformed when the World Health Organization

J. S. López-Morales (B) Tecnológico Nacional de México/IT de Veracruz, Veracruz, México e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_7

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(WHO) declared the disease caused by the COVID-19 virus a pandemic in March 2020 (Jun et al., 2021). This generated a radical change in the way airlines operated worldwide, reducing their operations and in some cases causing them to cease functioning for several months (Garrow & Lurkin, 2021), in addition to implementing strict biosecurity protocols for passengers, cargo and aircrafts. Within this context, the airline industry has had to adapt to the new regulations and policies in their countries of origin and in the countries where they operated. This was not beneficial for the airlines, given the reduction in passengers, airport closures and general uncertainty (Czeny et al., 2021). The airlines’ decisions have been focused on survival, and to reduce expenses, airlines have had to reduce their national and international operations. Aeroméxico was no exception to this trend, and it has been significantly affected by the pandemic (Garrow & Lurkin, 2021). As a result of the new conditions, during 2020 Aeroméxico saw a fall in passenger numbers of 55.8% (SCT, 2020), which generated various problems that the company had to face to continue operating on a regular basis. The central question addressed in this chapter is: How did Aeroméxico carry out its de-internationalization process to face the environment generated by the COVID-19 pandemic? The remainder of this chapter is structured as follows: the next section comprises a literature review on the phenomenon of deinternationalization, which is followed by an overview of Aeroméxico. The methodology applied to achieve the objective of the study is then explained, and the results are presented. Finally, the main conclusions and contributions of the paper are presented.

2

Literature Review

The term de-internationalization was first proposed by Welch and Luostarinen (1988), who noted that once a company begins to internationalize, this process is not always sustained in a continuous manner. Since then, various definitions and studies have been applied and carried out to explain and understand this phenomenon, which is key in the strategies of companies operating in international markets. Benito and Welch (1997) defined de-internationalization as a set of voluntary or forced actions that reduce commitment to cross-border activities. It

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has been described by different authors in terms of divestment, deglobalization and reverse internationalization (Calof & Beamish, 1995; Flejsterki, 2018). The literature on internationalization has focused on processes, stages, theories and entrepreneurship to explain why companies decide to internationalize (Gnizy & Shoham, 2018). The literature on deinternationalization is, however, scarce, perhaps because the idea of internationalization is associated with continuous expansion in which the resources initially allocated are assumed to increase continuously (Benito & Welch, 1997). De-internationalization is not easy to study, given its negative connotations and its association with business failure (Turcan, 2013). One way to deal with these negative connotations is to view de-internationalization as a trial and error mechanism (Casson, 1986). According to the literature, de-internationalization occurs for two main reasons. The first is for specific company reasons, such as low profitability, difficulties with the parent company, starting or expanding operations in new markets, lack of management resources and differences with local partners (Berry, 2010; Dauth et al., 2015). The second is due to factors related to the market, including adverse environmental conditions, changes in competitive conditions, high risk, and uncertainty and instability in exchange rates (Wan et al., 2015). Although de-internationalization can be considered to be the opposite of internationalization, various authors have pointed out that it can also be studied using the theoretical foundations of the latter (Gnizy & Shoham, 2018), because de-internationalization does not yet have its own theory. Traditional theoretical approaches in the literature include international entrepreneurship (Oviatt & McDougall, 1994), the eclectic paradigm (Dunning, 1988), the networks perspective (Musteen et al., 2010) and the gradual model (Johanson & Vahlne, 1977). Regarding the pace of de-internationalization, a company can decide to withdraw resources from international markets at any time (Welch & Luostarinen, 1988). It is important to mention that a company’s opportunities for de-internationalization are strongly related to the resources (human, financial, technological and infrastructure) that it has allocated to internationalization (Kuiken et al., 2020). This means that the more resources a company has committed to international markets, the longer the decision to withdraw or reduce its presence in those markets can be postponed (Song & Lee, 2017). According to the literature, there are various ways in which a company carries out the de-internationalization

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process. Benito and Welch (1997) have identified five methods: (a) withdrawal or reduction of operations in a specific market; (b) use of entry forms with a low resource commitment; (c) sale or closure of subsidiaries; (d) reduction in ownership; and (e) seizure of company assets by local authorities. Kuiken et al. (2020) have identified three of the consequences of de-internationalization: (a) total withdrawal of international activities; (b) partial withdrawal; (c) total withdrawal of international activities and total cessation of trade, either at the same time or immediately after.

3

Aeroméxico

In 1934, Antonio Díaz Lombardo founded Aeronaves de México. The maiden flight was from Mexico City to Acapulco using a Stinson plane piloted by Julio Zinser. Because of a shortage of aircraft parts in 1941, the company had to sell a 25% stake to Pan American World Airways. In December 1959, the Eagle Knight was adopted as its emblem, and the company’s planes began to be named after Aztec warriors. In 1960, a contract was signed with the Douglas factory to acquire DC-8 aircraft, because long-range aircraft were required to fly to Canada. Aeronaves de México changed its name to Aeroméxico in 1971 with the arrival of new General Director Raymundo Cano Pereira. On 1 October 1988, the Aerovías de México SA de CV company was established, with 25 aircraft and 3,500 employees. In 2000, Skyteam was born, an alliance of shared codes between airlines: Aeroméxico, Air France, Delta and Korean Air. They expanded their destination networks and gave added benefits to customers. In April 2011, Aeroméxico began trading on the Mexican Stock Exchange after setting an initial price of MXN31 (USD2.62) for its securities. In 2013, Aeroméxico added seven new Boeing 787-8 Dreamliners, one of the most modern and innovative aircraft models on the market (Aeroméxico, 2020a). The company operates using a hub and spokes network model on its national and international routes. This refers to the consolidation of traffic in an airport (hub) from which it is distributed to different destinations worldwide (spokes), thereby improving efficiency (Informe de Sostenibilidad, 2019). Aeroméxico consists of the main airline and five subsidiaries: Aeroméxico Cargo, which handles air cargo; Aeroméxico Connect, a regional airline focused on regional flights; Aeroméxico Formación, a training centre that offers aeronautical careers, training courses, consultancy and personal evaluation; Aeroméxico Servicios, which offers ground

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services at airports; and Club Premier, which manages the company’s loyalty programme (Aeroméxico, 2020e). Aeroméxico is one of the main Latin American airlines in the international market. In 2020, its revenues amounted to USD3.648 billion, second only to Latam (Chile) and Avianca (Colombia; Statista, 2021). Since the start of the COVID-19 pandemic, the company has carried out various activities, such as collaborating with the Mexican government to transport more than 150 tons of medical supplies, and in coordination with the Ministry of Foreign Affairs, it supported the repatriation of 1,400 Mexicans and 3,100 foreigners who were stranded when governments carried out border closures (Aeroméxico, 2021). Aeroméxico has a leading 24.3% share in the national market—budget airline Volaris is in second place—and a 15.8% share in the international market—a 20.3% share overall (Reporte Anual, 2019). Currently, Aeroméxico offers flights to 45 different countries on three continents thanks to the new fleet, which comprises more than 130 aircraft, including 69 Boeings (manufactured in the United States) and 63 Embraers (manufactured in Brazil; Aeroméxico, 2020b; López-Morales et al., 2018). The company employs around 15,000 people (Aeroméxico, 2020c).

4

Methodology

A qualitative case-study approach was taken to achieve the general objective of this study. This method is helpful in answering how and why questions. Another benefit of using a case study is that the subject being studied (de-internationalization) has occurred in a very particular context (a pandemic), and this methodology allowed us to analyse in greater depth how context affects a particular phenomenon (Yin, 2009). The case-study approach was selected for three reasons: first, case studies provide knowledge that emanates from real life; second, it can be helpful in finding effective solutions to problems from real situations; and third, it overcomes the scarcity of data due to the vertiginous escalation of the COVID-19 pandemic. The unit of analysis was Aeroméxico. The company and the sector in which it operates were selected for the following reasons: (a) the flight industry is one of the most globalized in the world (LópezMorales et al., 2018); (b) the industry is one of the most affected by the COVID-19 pandemic; (c) Aeroméxico is one of the main airlines in Latin America (Banco Interamericano de Desarrollo, 2016), a continent

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where de-internationalization has been little studied; and (d) according to WHO data, Mexico has some of the highest case and death rates from COVID-19 worldwide (Ibarra-Nava et al., 2021). The uncertainty that the COVID-19 pandemic has generated in the world and a lack of databases showing the real magnitude of its impact on business have meant that the use of secondary sources of information was essential. These sources included company reports and news, the official institutional website and media interviews with executives. The search parameter was 2020 through to the present—that is, the time of the pandemic. The timeline in Fig. 1 covers the period from March 2020 to February 2021. The actions identified in Fig. 1 are classified in Table 1 according to the classification of forms of de-internationalization proposed by Benito and Welch (1997): the withdrawal and reduction of operations in a specific market, use of entry forms with a low resource commitment, the sale or closure of subsidiaries and reduction of ownership (the seizure of assets by local authorities was omitted due to lack of relevant data).

5

Results

Figure 1 presents the results of the de-internationalization carried out by Aeroméxico to deal with the pandemic. In general terms, it can be seen that its actions were designed to lessen the effects of the reduction of its operations by restrictions imposed by governments on people’s mobility. Although there are not many actions taken by Aeroméxico (nine were identified), they had a significant impact on its operations and financial situation. It is worth observing that an airline offers services that have very particular characteristics such as intangibility (Lovelock, 1996). This means that decisions can be made more quickly than in sectors where the degree of commitment of resources has been greater. These results coincide with other actions taken by airlines in other parts of the world (Garrow & Lurkin, 2021). As airlines are highly regulated locally, their decisions in response to the crisis varied greatly at the global level, but, in general terms, the specific effects and benefits were very similar. The actions taken by Aeroméxico were closely linked to government responses to the pandemic. For example, it had to suspend its operations to Canada because the government banned flights from Mexico and the Caribbean. The announcement was made on 29 January 2021, and entered into force on February 8, which forced the company to

4. Aeroméxico registered 1,733 flights during May, a historic minimum for the airline

2. Flights to Panamà cancelled definitively

November 2020

6. A court approved the request of use of Chapter 11 for financial restructuring

February 8, 2021

October 20, 2020

9. Due to Canadian government restrictions, Aeroméxico cancelled all of its flights to Canada until April 30, 2021.

8. The company agreed with the lessors of its airplanes and motors to the temporary modification of lease contracts into agreements paid for hours (PPH agreements).

7. Due to government restrictions, the strategic alliances, or codeshares, could not take advantage of the situation, for example, Skyteam and Oneworld.

July 1, 2020

(Cancel in advance leasing contracts of 19 airplanes)

Reduction of 36.5% of its fleet.

5. Started a voluntary process of financial restructuring under Chapter 11 to face the impact of COVID-19 pandemic.

June 2020

Fig. 1 De-internationalization actions carried out by Aeroméxico. Note The data are drawn from Aeroméxico (2020d), Americaeconomia (2020), Businesstriper (2020), Expansion (2020a), Expreso (2020), Garrow and Lurkin (2021), Milenio (2021), and Resultados del 3T20 (2021)

May 2020

3. Laid off international operations to Buenos Aires, Argentina; Santiago, Chile; Barcelona, Spain

March 31, 2020

March 24, 2020

Madrid 17 to 5 flights weekly; Barcelona 5 to 3 flights weekly; Paris 11 to 7 flights weekly; Amsterdam 7 to 5 flights weekly

1. Reduced the frequency of international flights:

March 17, 2020

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Table 1 ture

Aeroméxico’s de-internationalization policies according to the litera-

Strategy

Activities

Withdrawal/Reduction of Operations in Specific Markets (1)

Reduced the frequency of international flights (see Fig. 1) Cancelled all flights to Canada until 30 April 2021, due to Canadian government restrictions Contract modifications with lessors (pay-per-hour agreements) Historical minimum number of flights in May 2020 (1,733) Flights to Panama cancelled definitively Cancelled international operations to Buenos Aires, Argentina; Santiago, Chile; Barcelona, Spain Started voluntary financial restructuring under chapter “Business Beyond COVID-19: Towards Open Innovation” (court approved) Fleet reduced by 36.5% Advance cancelation of leasing contracts for 19 airplanes

Low Resource Commitment (2)

Sale/Closure of Subsidiaries (3)

Reduction of ownership (4)

Note The information is adapted from Aeroméxico (2020b), Americaeconomia (2020), Benito and Welch (1997), Businesstriper (2020), El Financiero (2020), Expansion (2020a), Expreso (2020), Garrow and Lurkin (2021), Milenio (2021), and Resultados del 3T20 (2021)

adapt its operations rapidly (Milenio, 2021). Something similar happened with operations in other Latin American countries during the first wave of infections. Traditionally, codeshares are a way for airlines to obtain operational and financial benefits. These are strategic alliances between airline groups, so they can offer better service and destination availability to passengers (Never & Suasu-Sanches, 2020). This has, for many years, been a form of internationalization. In the case of Aeroméxico, it was not possible to obtain the expected benefits because of low passenger demand after March 2020, so de-internationalization was carried out through a reduction in the use of codeshares. In contrast to the usual processes of internationalization and associated theories, this was neither gradual nor sequential (Johanson & Vahlne, 1977). It is possible that, given the suddenness of the pandemic and the speed with which it spread globally,

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the de-internationalization of Aeroméxico had to be carried out in this way. De-internationalization negatively affected Aeroméxico’s operational and financial situation. As has been mentioned, the numbers of passengers fell by 55.8% (SCT, 2020). Its income subsequently fell during the third quarter of 2020—a reduction of 74.5% compared with the same quarter in 2019 (Resultados del 3T20, 2021). It is important to clarify that, given the results, de-internationalization was not a negative process, but a measure necessary to be able to confront the sector’s new normal. These results, however, are not definitive, for two reasons. First, at the time of the present investigation (December 2020 and January/February 2021), the pandemic was still active and causing great damage in Mexico globally, so Aeroméxico may have to undertake further de-internationalization actions in the future. Second, many international flights mentioned in Fig. 1 have been resumed, although some less frequently—that is, deinternationalization in the pandemic has been temporary, and in most cases, operations have already resumed (Expansion, 2020b). Table 1 shows the forms of de-internationalization followed by Aeroméxico ordered according to Benito and Welch’s (1997) classification. It is important to note that the company focused on actions included in the withdrawal and reduction of operations in specific markets. It is possible that this form of de-internationalization was more frequent because it allows a more rapid reaction than the other strategies. It is also interesting that the activities involving a low commitment of resources (strategy 2) are being used in an emergent way. Aeroméxico sought to reduce its expenses by paying by the hour for the use of its airplanes, when previously they were rented by the month. As Table 1 shows, it laid on a historically low number of flights during May 2020. The company was also forced to cancel flights on different routes. This generated the closure of offices in certain countries, which generated significant savings that were needed for survival. In the end, Aeroméxico filed for chapter “Business Beyond COVID-19: Towards Open Innovation” bankruptcy in the United States, which allowed it to reorganize and renegotiate its debts with suppliers without suspending its operations. It was able to cut its fleet by 36.5% during 2020 (El Financiero, 2020), reducing its ownership of the planes with which it offered its services.

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6

Conclusions

This chapter analysed the de-internationalization process carried out by the Mexican airline Aeroméxico to face the COVID-19 pandemic. The general conclusion is that its actions were negative, because they reduced the company’s operating capacity, thereby affecting its income. Although the consequences of the firm’s activities were negative in the short and medium term, in the long term they are expected to be positive, because the company is seeking to survive the market volatility brought about by the pandemic. It is also important to mention that, although the results indicate that the company’s de-internationalization is temporary, it is very difficult to predict whether this represents a trend and whether it will intensify or decline. The findings also demonstrated that de-internationalization is not the opposite of internationalization. It has been a similar process, because it has taken place in stages gradually. For example, suspending flights involved the least commitment of Aeroméxico’s resources, so this was undertaken first (in March 2020). The reduction of its aircraft fleet, however, was a more complex procedure, as it involved the renegotiation of aircraft leasing contracts to improve its operational and cost efficiency (El Financiero, 2020). The de-internationalization of Aeroméxico is not definitive. It is possible that when the pandemic presents more favourable indicators, this process will gradually be reduced or reversed. Indeed, given the suddenness of the pandemic, Aeroméxico (and many other companies) will surely have to consider de-internationalization as a strategy when facing adverse situations in the future. This chapter contributes to the international business literature by providing additional insights into the actions followed by companies in emerging markets (in this case Mexico) in their de-internationalization processes. It also reveals the relationship between the COVID-19 pandemic and de-internationalization; in this case, it can be concluded that the actions taken were a reaction to the pandemic, so these may be important for the present and future viability of the company. Likewise, the focus on the phenomenon of de-internationalization in Mexico and Latin America also revealed that the company itself is more important than its country or region of origin, since Aeroméxico’s actions were no different from those of other airlines around the world (Czeny et al., 2021; Garrow & Lurkin, 2021).

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The main limitations of this research are three. Because of the uncertainty caused by the pandemic, the data are still scarce. It is possible that, in the medium term, more data will be made available. The second is the lack of access to primary sources given the lack of key informants. In the future, these limitations can be taken into account when another study on this topic is undertaken. The third limitation is the lack of external validity because only one company (Aeroméxico) in one country (México) was examined. In addition to the above, it is necessary to mention other areas for future research. Because internationalization has been studied more than de-internationalization, the publication of this chapter represents a contribution. The results reflect the rapid changes in the data brought about by the pandemic; the term de-internationalization is itself associated with speed, specifically its acceleration and deceleration (Johanson & Kalinic, 2013). Another area of research is related to the specific role that the company’s environment plays in its de-internationalization activities, because the results of the present study suggest an important relationship with the environment—in this case the COVID-19 pandemic. The relationship between traditional theories of internationalization should also be investigated (Dunning, 1988; Johanson & Vahlne, 1977). Finally, it is important to inquire more deeply into the relationship between the COVID-19 pandemic and de-internationalization, so that its effects on Aeroméxico and the airline sector as a whole can be more thoroughly understood.

7 Implications for Business Practice, Society and Research This chapter has several implications for business practice. Company decision-makers will be able to develop a more positive vision of deinternationalization and regard it as a strategy to face contingencies, crises and business survival. The results will also help make the learning process of companies more effective and efficient, which will make the companies more stable and less vulnerable to the effects of shocks that trigger unexpected events. Finally, the results of this research will provide decision-makers in the airline sector with de-internationalization actions that can be used and hopefully improved upon in the future. Regarding the implications for society, the COVID-19 pandemic has been an unprecedented event in the last century. The lockdowns around

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the world have affected the speed of globalization, given the restrictions in the mobility of people. In this context, airlines have had to change their methods of operation, for example, by taking on new activities such as renting out aircrafts to transport vaccines or supplies to face the pandemic and people have changed (and reduced) their habits to travel. For these reasons, analysing the strategies of de-internationalization is important issue to aid our understanding of how global companies (in this case Aeroméxico) have adapted to global societal changes. Finally, this chapter has several implications for research. First, the research paradigms with negative contexts have to be addressed in greater depth. De-internationalization is a topic that has to be considered as a useful strategy to reduce and avoid risks; it is therefore necessary to analyse de-internationalization strategies to understand how companies can be supported. Second, the COVID-19 pandemic remains a challenge for researchers due to the current scarcity of large, longitudinal databases that researchers can use to test research questions. Researchers have thus had to devise new ways to research the phenomena related to the pandemic. Third, due to the importance and impact of the COVID19 pandemic in multiple research areas, a multidisciplinary perspective is necessary for this research.

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Expreso. (2020). Retrieved from https://www.expreso.info/index.php/not icias/transporte/74771_aeromexico_reduce_un_60_su_operacion_internaci onal Flejsterki, S. (2018). Globalization and deglobalization – costs and benefits, winners and losers. Logistics and Transport, 3(39), 80–86. Garrow, L., & Lurkin, V. (2021). How COVID-19 is impacting and reshaping the airline industry. Journal of Revenue and Pricing Management. https:// doi.org/10.1057/s41272-020-00271-1 Gnizy I., & Shoham A. (2018) Reverse internationalization: A review and suggestions for future research. In L. Leonidou, C. Katsikeas, S. Samiee, & B. Aykol (Eds.), Advances in global marketing. Springer. https://doi.org/10.1007/ 978-3-319-61385-7_3 Ibarra-Nava, I., Cárdenas-de la Garza, J. A., Ruiz-Lozano, R. E., & SalazarMontalvo, R. G. (2021). Mexico and the COVID-19 response. Disaster Medicine and Public Health Preparedness, 14(4), 17–18. Informe de Sostenibilidad. (2019). Retrieved from https://www.vuela.aerome xico.com/ISO2019/informe/InformeDeSostenibilidadAeromexico2019.pdf Johanson, J., & Vahlne, J. E. (1977). The internationalization process of the firm: A model of knowledge development and increasing foreign markets commitments. Journal of International Business Studies, 8(1), 23–32. Johanson, M., & Kalinic, I. (2013). Acceleration and deceleration in the internationalization process of the firm. Management International Review, 56, 827–847. Jun, S. P., Yoo, H. S., & Lee, J. S. (2021). The impact of the pandemic declaration on public awareness and behavior: Focusing on COVID-19 google searches. Technological Forecasting and Social Change, 166, 120592. Kuiken, A., Wentrup, R., & Schweizer, R. (2020). Attitudinal commitment in firms’ de-internationalization processes. Multinational Business Review, 28(4), 567–568. López-Morales, J. S., Montañez-Cuevas, M. A., Zertuche-Zertuche, J. A., & Paez-Aguirre, D. G. (2018). Internacionalización en el sector aéreo de América Latina: Estudio multicaso de Aeroméxico Avianca y LATAM. Innovaciones De Negocios, 15(30), 243–258. Lovelock, C. (1996). Adding value to core products with supplementary services. In Services Marketing (2nd ed., pp. 337–359). Prentice-Hall. Milenio. (2021). Retrieved from https://www.milenio.com/negocios/aerome xico-suspendera-todos-sus-vuelos-a-canada Musteen, M., Francis, J., & Datta, D. K. (2010). The influence of international networks on internationalization speed and performance: A study of Czech SMEs. Journal of World Business, 45, 97–105. Never, J., & Suasu-Sanches, P. (2020). Challenging the interline and codeshare legacy: Drivers and barriers for airline adoption of airport facilitated inter

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Effects of Covid-19 on De-globalization Pooja Chaudhary and Kulwant Kumar Sharma

1

Introduction

Most of the authors and economists describe globalization as a universal integration of multi-lateral and multi-layered international trade and investments, facilitated by information technology spectrum across the nations. It is also an integration of socio-culture processes into trading blocs. De-globalization is the anti-thesis of globalization. Since these are largely driven by the policies of respective nation-states, it requires governments to open up or tighten domestic economies to everincreasing international competition. Globalization has been considered as a harbinger of unprecedented development in developing countries, but has its negative fall-outs. This implies that the decisions are intricately linked to the political economy of a nation, because it is all about political eco-system of a nation. However, there is a realization amongst the emerging economies and poor sections of even developed nations

P. Chaudhary (B) Chitkara Business School, Chitkara University, Chandigarh, India e-mail: [email protected] K. K. Sharma Chitkara University, Chandigarh, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_8

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that globalized free market has mostly benefited multinational corporations and is perceived to have harmed smaller businesses. This was further aggravated to a greater extent by the Covid-19 triggered global lockdowns and suspension of most of the economic activities in 2020. The pandemic has triggered another round of rethink on the efficacy of globalization process. Since the decisions are more political than economical, it is important to view the process of de-globalization through a political prism. Collinson (2003) had explained that political economy primarily relates to the distribution of riches in terms of wealth and political power between groups and people in a society.1 Political economy focuses on coordination of creation, sustenance and transformation of relationships between the society, accumulated or created wealth and political empowerment. In the 2020 lockdown scenario with multiple restrictions on global travels and commerce, this distribution came under stress. The pandemic panic influenced various political forces within or outside a country, thus disrupting the economic outcomes. Depending on the perceived benefits by the population, political economy will always influence the choices of governance and thus globalization or de-globalization in a country.2 After the collapse of Cold War in 1990s, there was a euphoric welcome to the globalization movement. While the wave of globalization largely ebbed after 2008 meltdown of economies, its limited upturn has now encountered reverse processes due to the ongoing pandemic. Concepts of political economy and its emergence after the Cold War 3 period have been used as a global prism to view the emergence of globalization process (Schulzinger, 1994).4 Period of economic downturns in 2008–2009 was considered a consolidation phase with stricter regulations and processes put in place for a better management. In the second decade of twenty-first century, many political economies turned towards

1 S. Collinson (Ed.). “Power, livelihoods and conflict: Case studies in political economy analysis for humanitarian action”. Humanitarian Policy Group. London: Overseas Development Institute. Retrieved from http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/ publications-opinion-files/289.pdflison. 2 Collison, “Power, livelihoods and conflict” (2003). 3 The Cold War was a decades-long struggle for global supremacy that pitted the

capitalist United States against the communist Soviet Union. 4 R. Schulzinger. American Diplomacy in the 20 th Century. New York: Oxford University Press (1994).

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ultra-nationalism, isolation and junked the multi-lateral trade. The US led this onslaught on the globalization with President Trump calling “make America great again” through restrictions on foreign goods and services. Europe witnessed Britain’s Exit (Brexit), assertive right-wing politics in France, German and Italy clamouring to go it alone. Everincreasing US-Russia-China frictions contributed immensely to destabilize the international business environment even before Covid-19. The period of pandemic after February 2020 caused fastest decline in international trade, brought in a new phase of isolationism across the globe and adversely affected the globalization efforts (Altman, 2020).5 Objective: The objective of the chapter is to assess effects of Covid19 on the globalization and whether the effects have accelerated deglobalization efforts across the world. The chapter looks at the role of political economy on globalization and world trade and discusses the possible effects of Covid-19 on the de-globalization. Methodology: The study for the chapter is in a meta-analysis form, culled out from the review of relevant literature and assessment of effects of Covid-19 on the overall global network of businesses, services and economy. The study takes into consideration the available literature and tries to frame systematic review on different aspects of Covid-19 and de-globalization. The researcher used Google Scholar, SAGE Online, EBSCOhost, ERIC, Pro Quest, Science Direct, Taylor & Francis Online, and other databases, to find recent peer-reviewed articles with appropriate content linked to the current topic. Keyword searches were performed using terms de-globalisation, international trade, COVID-19 and globalisation, globalisation and political process, protectionism. The inclusion criteria were peer-reviewed research studies of the last 10 years, with some exceptions.

5 S. A. Altman. “Will Covid-19 Have a Lasting Impact on Globalization”, Harvard Business Review (May 20, 2020).

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2

Globalization Driver: Political Economy

The Levin Institute defines globalization in terms of integration and dialogue amongst companies, governments and global individuals.6 It is a combination of international trade and capital investments and facilitated with the assistance of free-flowing information technology. UN specialized agency, World Health Organization defines globalization through open borders to enable free trade and institutional changes and various policies at all levels facilitating trade flows. Government policies are responsible to create a design for open economies, so that these policies respond to various global trends and emerging demands from different multi-lateral institutions. Objectives of all such initiatives are and should remain taking more people out of their subsistence living and raising standards of life. It has been universally accepted as a way to make markets more efficient, as globalization helps to develop competitive and efficient markets. There is no denying the fact that with the enabling political processes, information technologies, World Wide Web to emerging artificial intelligence and data sciences have a major role towards globalization. It is the flow of information across globe in a seamless manner, which has created and enhanced the public and institutional awareness of investment opportunities. Financial transactions have become easy and instantaneous. The trade liberalization, financial convergence and availability of many online traders have blurred the physical borders. This borderless environment represented by e-commerce giants like Alibaba or Amazon has changed the classical nuances of globalization. O’Hara (2012) describes political economy as a system of general science in a unified way, which is home to our historical legacy of various institutions.7 The author also relates political economy to the quality of life of people and sources of wealth. The earlier literature about political economy, including the contribution of Marx, is more focused towards understanding the capitalism and its role in making a society. Political

6 The Levin Institute. “What is Globalisation?” Globalisation 101, The State University of New York (2020), http://www.globalization101.org/. 7 P. O’Hara. “Principles of political economy applied to policy and governance: Disembedded economy, contradictions, circular cumulation and uneven development” (2012). Journal of Economic and Social Policy; Canberra, 15(1), 1–38.

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economy is essentially the study of means of production and distribution of goods and service within a network of people engaged in social and economic activities. Structured study of political economy started in middle of eighteenth century and the concept was studied in a systematic manner by famous Scottish philosophers Adam Smith (1723–1790) and David Hume (1711–1776). French economist François Quesnay (1694– 1774) also contributed in a greater detail on the subject in his writings. These authors and philosophers explained that the distribution of wealth and power was complex interaction of political, economic, technological, natural and social forces against the popular belief of God’s will. Allencompassing and comprehensive details were covered by Adam Smith in his nature and causes of Wealth of Nations (1776). The theory of comparative advantage, in particular propounded by Ricardo, emphasizes that comparative advantage can be achieved by nations only when they are producing and exporting goods at a low-cost efficiency. This in turn has to be reciprocated by importing goods produced efficiently and at a low cost by other countries. British mercantilism was undermined by these concepts of free trade. Smith, Hume and John Stuart Mill later established the relationship of economics and political economy. Agnew (2000) had redefined political economy in regional and city region terms, rather than national economic perspective. Author studied British and European political economies, and the same is evident in India with states and regions vying with each other on development issues. The author stated that “the focus has shifted from administrative to city-regions, from central government regional policies to regional competition, and from taken-for-granted permanent regional definitions to historicized units whose boundaries and political economic significance change historically” (Agnew, 2000, p. 101).8 In the parlance of international trade, we can see a clear distinction between economics and political economy. The study of tariff policies under economics is more concerned on the impact of tariffs on scarce resources and their efficient use in different types of markets, such as perfect competition, monopoly, monopsony and oligopoly. On the other hand, political economy studies how tariff policies get affected by social, political and economic pressures. These pressures further influence the 8 John Agnew. “From the political economy of regions to regional political economy. Progress in Human Geography” 2000, 24(1), 101–110. https://doi.org/10.1191/030 913200676580659.

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political process which will lean on various social priorities. International negotiation instruments, treaties, agreements and various developmental strategies are all interconnected to the political economy. Tariff policies for any political economy will be a strategy to influence the globalization regimes and international trade. Rowley, C. (1997) in his analysis on public choice and constitutional political economy had considered the former as a positive policy, while the latter is a normative line.9 Both have a major role to play in acceptance of globalization debates.

3

Globalization and World Trade

During the Cold War lasting till 1990s, there was a fierce rivalry between erstwhile Soviet Union and US through their proxies, supported regimes and distinct economic and social orders. Cold War also witnessed transformations of the liberal (or capitalist) international political economy around 1970s and 1980s. Growth periods of the 1950s and 1960s were largely dependent upon industrial productions and had analysed influence of Cold War during the 1970s in terms of transitional decade Sargent (2013).10 This was a period when globalization and financial deregulation were conceptualized, and service sector started replacing production centres. This decade also witnessed reduction in Soviet Bloc’s economic muscle and diminishing returns on its industrial productions. Political events of the Cold War period in the US reveal that administrations under all presidents were playing on the public opinion supporting or opposing wars, a political economic expediency. President Truman lost his popularity during the Korean War as it dragged on with high casualty (Meernik & Ault, 2001).11 Eisenhower succeeded in his presidency on the promise to end the same war. Nixon administration worked on China, ending war in Vietnam and finally withdrawing all US troops from Vietnam, which resulted in his victory in 1972. Reagan too used Soviet threat to shore up his brand of liberal market and capitalist

9 C. Rowley. “Constitutional Political Economy in a Public Choice Perspective” (1997). The Choice - 90. Kluwer Publishers. 10 D. Sargent. “The Cold War and the international political economy in the 1970s”, (2013). Cold War History; 13(3). 11 Meernik, J., and Ault, M. (2001). Public opinion and support for US. Presidents’ foreign Policies. American Politics Research, 29(4), 352–373.

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agenda. Trump used America first against globalization and the sentiment of rust-belt and American workers to win his election in 2016. The Cold War period also saw a build-up of EU, its multilateral forum, the Organisation for Economic Cooperation and Development (OECD); International Monetary Fund (IMF) and oil cartel of Organization of the Petroleum Exporting Countries (OPEC) reach a stage where they became important arguments in favour or against the globalization. Power politics has always been responsible to determine the shape of international trade, globalization and political economy during and after the Cold War. This was also a period, where economists looked at Breton Woods12 Institution for bringing rule and order in the international economy. An extensive study on the causal linkages of FDI inflows to the gross domestic product-based economic progress in Brazil, Russia, India, China and South African economies was done by Gupta and Singh in 2016.13 The study developed on the endogenous growth model of Romer and Lucas, wherein external FDI inflows, a part of the global trade, are supposed to influence domestic growth including human capital, managerial excellence and process improvements. FDI inflows are based on political decision-making and policy framers need to understand the factors influencing such decisions. The study showed a positive correlation between FDI inflows and GDP growth in India, Brazil and China. On the other hand, Russia and South Africa did not witness much impact. The predominant reason of globalization has been to help multinational corporations gain competitive advantage from low-cost operations and access cheap and new resources from emerging markets. In return, emerging or developing markets presumably get new technologies, welltested processes of business and huge fillip to employment, which remains the mainstay of development of local economies. This also facilitates multinational companies to source material, manufacture in different destination closer to the markets and buy or sell in a global arena. Automobile manufacturers from Germany, US, Japan, Italy, France or Korea are able to manufacture auto parts in other developing countries where the operating and labour cost is low. These parts get shipped to other countries or hub centres for final assembly and are sold in 12 World Bank and International Monetary Fund. 13 Gupta, P. and Singh, A. (2016). Causal nexus between foreign direct investment

and economic growth: A study of BRICS nations using VECM and Granger causality test Journal of Advances in Management Research; Bingley, 13(2), 179–202.

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other markets. This phenomenon facilitated China to emerge as a manufacturing destination for many international brands from automobile to computer hardware and cellular phones during the beginning of twenty-first century. All theories about development of under-developed third-world countries had an inherent desire for a faster globalization and reaching out to the untapped markets. Same arguments continue now, out of which two main themes have been played out on all countries. These are democratization of the polity and connecting markets and financial institutions to the global system. Both facilitate and increase in global trade across the borders.

4

De-globalization and Covid-19

Much of the criticism against globalization has been that it brought prosperity to a few countries, but have largely benefited the multinationals. Amidst growing economic inequality, there has always been an undercurrent of anti-globalization process. Dismantling of the established globalized treaties and processes fall under the de-globalization process (Kessler, 2016).14 There are conditions inherent in the globalization, which tend to trigger a surge towards de-globalization. One of the mandatory requirements of interconnectedness is a compromise with national sovereignty, which played a bigger role in the discourse on Brexit. Countries are required to surrender a part of national sovereignty while getting into these trade agreements. This has been the raison d’etre for a rise in right-wing politics across the globe, including in India, Philippines, Indonesia or Brazil. Interdependence is another essential factor of a globalized world, with its inherent drawbacks, which was well displayed during 2008 and 2020. The domino effect of 2008 and spread of pandemic in 2020 are some of the proven negative effects. Over dependence and market-driven economy always cause inequities. Glorious revolution in England, and later in France, Soviet Union, Long March of Mao Zedong and Spring revolutions of Arab nations stemmed from the perception of inequality in wealth distribution and prosperity. To the electoral advantage of former President Trump, the net estimated effect of all globalization indicators was a “reduction of three and six percentage points in the manufacturing labour share from 1999 to 2009 in the US” (Juann

14 J. K. Kessler. “Globalization” (2016). Texas Law Review; Austin, 94(7), 1527–1554.

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& Hammett, 2016). This was an effective tool during his running for the president’s office and Trump camp used it to create an isolationism verdict.15 Dependency School Theory also discusses the disadvantages of Globalization (Bornschier, 1980).16 It establishes that FDI or any external financial assistance has a negative impact on recipients’ economy. The theory studies two contradicting parameters, creation of dependency for the receiver and exploitation of resources by the giver (O’Hearn, 1990).17 On the political economy front, globalization is disadvantageous to the struggling middle class even in the developed world like the US. As the US elections of 2020 showed, economic and political polarization undermined the presidential elections. Right-wing leanings in Europe are the result of a globalized world and strong nationalists wanting their own countries to be the first. In a globalized world, most financial markets are integrated, to a larger extent, affecting political decision-making and autonomy of the domestic institutions (Gabriel, 2011).18 Brexit from the EU is one such outcome of EU stranglehold over the economy and financial decision-making. The globalization process has established supranational corporations, commercially active giant social media networks and Breton Woods type of institutions, attempting to dominate the markets and trades. In the times where economies driven by companies using technologies such as Block chain and data science which gave Globalisation new direction. Facebook, Amazon and Google have monopolized the content distribution and are increasingly being challenged for their role in EU. Recent spat with Australia is a cause of worry for most independent nations. These transnational institutions created to facilitate and control are hardly accountable to democratic processes or national governments. The world 15 H. Juann, and P. Hammett. Globalization and the labor share in the United States (2016). Eastern Economic Journal, 42(193–214); Retrieved from www.palgrave-journals. com/eej/. 16 V. Bornschier. “Multinational corporations and economic growth: A cross national test of the decapitalisation thesis”, (1980). Journal of Development Economics, 7 (2), 115– 135. 17 D. O’Hearn. “TNCs, intervening mechanisms and economic growth in Ireland: A longitudinal test and extension of Bornschier model,” (1990). World Development, 18(1), 417–429. 18 A. Gabriel, “Economic security: New approaches in the context of globalization”. (2011). CES Working Papers – 7(2), 232.

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moved from globalization of the late 1990s to various countries breaking free and taking control of their own economies. Consequently, globalization is witnessing a new normal with different kinds of multilateral, regional or bilateral engagements and a changing World Trade Organization (WTO). The 2008 downfall in world economy brought up state as a main actor and gave new regulatory regimes like the Sarbanes Oxley Act to settle the crisis and restore the economy (Brandt & Sekler, 2009).19 The author had traced a fall of capital flow from $11 trillion in 2007 to almost $3 trillion by 2012. Countries brought in an anti-globalization measures in the form of tariffs, to ensure their financial system were safe and strong. Some countries perceived global integration of economy as a threat and brought in protection measures (Das, 2015).20 Trans Pacific Partnership (TPP) announced with a fanfare during the Obama regime was nullified by the US under Trump. The North American Free Trade Agreement, amongst Canada, Mexico and the US, was replaced by the US-Mexico-Canada Agreement in July 2020. Though de-globalization was on the horizon much before the Covid19 pandemic in 2020, the pandemic accelerated the process. The trade tensions between the US and China marked an upward turn under President Trump in technology field. Year 2020 witnessed shrinking of multi-lateral treaties and reduction in the influence of the WTO. As per a detailed study on the global treaties and trade practices, the pandemic year witnessed an increased intervention in restrictive trade which was counted at a staggering 1,800 measures (Seric et al., 2021).21 In many views, the cost of globalization largely outweighs the benefits. The cost can be in terms of environmental degradation, loss of domestic jobs, fear of losing control over the populace or false flags and paid news inimical to the population, or capital flight (Pettinger, 2019).22 Another 19 U. Brandt, and A. Sekler. “Postneoliberalism - catch-word or valuable analytical and political concept? (2009). Development Dialogue, 51, 5–13. 20 D. Das, “Another perspective on globilization” (2015). Journal of International Trade Law and Policy”, 9 (1), 46–63. Emerald Group Publishing Limited; https://doi. org/10.1108/14770021011029609. 21 A. Seric, W. H. Görg, Liu, and M. Windisch, “Risk, resilience and recalibration of global value chains”, (2021), VoxEU.org, 2021, https://voxeu.org/article/risk-resilienceand-recalibration-global-value-chains. 22 Tejvan Pettinger, “Costs and Benefits of Globalisation (June 27, 2019). Retrieved from: https://www.economicshelp.org/blog/81/trade/costs-and-benefits-ofglobalisation/.

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view is that the international free markets have mainly benefited various multinational corporations but harmed smaller businesses around the globe. Under this kind of vicious cycle, many developing or emerging economies relaxed or even eliminated worker-protection labour laws and environmental protection measures in order to attract investment through foreign direct investment (FDI) route (Balaam & Vesath, 2017).23 Even before Covid-19 pandemic influenced the political economy and decisionmaking processes of governments, idea of de-globalization was looking attractive to the international big players. Yaya, Otu and Labonte in their study of 2020 described this influence through the regional groupings. The African Continental Free Trade Agreement (AfCFTA) with 54 nations has moved into a closer regional level trade. The AfCFTA came into force as on 1 January 2021 and has an objective of reduction of tariffs for 90% of goods in next five to eight years.24 Globalization showed the adverse effect of mass movements of people and goods during the Covid-19 pandemic. Movement across borders went unchecked in the initial stages from November 2019 to March 2020. This resulted in the virus spreading over to 221 countries25 within a short span. The policymakers had to note the health risks associated with the increasing trend of globalization of markets, migration, movement of people and goods. This in affect helped the de-globalization movement of right-wing politicians and allowed nations to resurrect the borders even within clos-knit states like the EU to keep foreigners out (Toulan, 2020).26 Bonefeld (2012) had felt that individual in his personal space is only interested about himself, though there is an inherent obligation to one another.27 To a lesser degree, same is the case of nation-states.

23 D. Balaam, M. Vesath, M. Encyclopaedia Britannica (2017). Retrieved from https:// www.britannica.com/topic/political-economy. 24 S. Yaya, A. Otu, and R. Labonte, (2020). Globalisation in the time of COVID19: Repositioning Africa to meet the immediate and remote challenges. Globalization and Health (2020), 16(51), 2–7. Available at: https://doi.org/10.1186/s12992-02000581-4. 25 https://www.worldometers.info/coronavirus/ as on 22 February 2021. 26 P. O. Toulan. “Globalization after Covid-19: What’s in store? Tomorrow’s Chal-

lenges”; (2020). International Institute for Management Development. 27 Bonefeld, W. (2012). Adam Smith and ordoliberalism: On the political form of market liberty. Review of International Studies, 39, 233–250. https://doi.org/10.1017/ S0260210512000198.

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With the euphoria of globalization diminishing due to the pandemic, deglobalization has been resurrected as a policy. A survey on the perception of globalization was done by the WEF and showed some contradictory responses (Fig. 1). WEF survey of 2020 highlights the scepticism about globalization in the wake of Covid-19 pandemic. There is more business within the national borders as per policymakers and nation-states. Nearly 30% of G20 nations’ top business leaders felt that the global value chains would be less globalized in future. The data of Fig. 1 in Chapter 4 displays responses on “In your country, over the next five years, how do you expect supply chains to evolve? 1–3 = less globalized than today, 4 = same as today, 5–7 = more globalized than today”. Leaders showcase that commitment to international collaboration is less attractive, further highlighting the current disengagement from the international community. However, an

Fig. 1 Business leaders’ perception on globalized world (2020) (Source: World Economic Forum Executive Opinion Survey 2008–2020 series [WEF 2020])

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aggregate result shows a balance view of equal responses on more globalized versus less globalized world outlook, with sizable percentage as neutral. Effects of Covid-19 on De-globalization. There is no denying the fact that Covid-19 has affected the global trade, commerce, movement and bilateral or multi-lateral relations across the globe in an adverse way. The impetus to the de-globalizations stemmed from the right-wing, nation-first political economies across the world, led by President Trump and many similar leaders. It was only enhanced by Covid-19, bringing in a legitimacy to the earlier efforts, with a realization of spread of virus through travel, movement of goods and absence of any preventive or treatment measures. This forced most countries to close their borders, reduce imports and generate capacities within own countries. As Coy (2021) had argued, the virus spread globally because people came in contact with each other. But the argument is equally true that global interconnectedness has helped fight Covid28 where India alone became the manufacturing and distributing hub of Covid vaccines.

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Future of De-Globalization

The WEF survey and its “less globalized” responses (Fig. 1 in Chapter 4) may need a rethink, if the world has to meet the UN 17 Global Sustainable Developmental Goals (SDGs) by 2030.29 This will definitely need harmony amongst the political leaderships to find common solutions. Besides the SDGs, world also faces collective issues like the environmental degradation, environmental migrations, complex international taxation and vaccination against pandemics. The UN and WEF have repeatedly emphasized that globalization and openness are important factors for global prosperity. Indian economic progress after opening up of the economy in 1990 is largely attributable to the globalization phenomenon and inflows of FDI, which remained high even during the pandemic. China benefitted hugely from this global reach and every large store in 28 P. Coy (March, 23, 2021). Talk of De-Globalization Is Fashionable But Wrong. Bloomberg Business week. Available at: https://www.bloomberg.com/news/articles/202103-23/talk-of-de-globalization-is-fashionable-but-wrong?utm_medium=social&utm_sou rce=twitter&utm_content=businessweek&utm_campaign=socialflow-organic&cmpid=social flow-twitter-businessweek#skip-to-main-content. 29 Undp.org.

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Europe or North America has Chinese goods. China’s rise is considered as the most critical global development of the recent economic history, largely attributable to the globalization and interlinked markets. Integration of markets and economies at global scale has paid rich dividends to the Asian and Latin American economies. Recently, African economies are also benefitting from this open system and have created a regional market at a global scale. Business process outsourcing and its many alternatives have been a boon to many rural or semi-urban areas in India, Vietnam, Bangladesh or Philippines. As reflected in a study of Dhoot (2021), the WTO estimated a dip in the global trade nearly 32%, which indicates the expected dislocation of large economies.30 When compared to the 2008 financial meltdown, Covid-19 crisis presents a bigger challenge for the world economy. As per many estimates, the world trade never really recovered since the global financial crisis as it went down from a 10% growth to nearly 2%. Pandemic brought in focus existing and broken health services. It was a global effort to move colossal PPE kits, sanitizers and now the vaccinations. Countries will need to reconfigure their domestic economies by resorting to substitution, but global linkages will still continue to stay. Notwithstanding the critics, globalization assisted in ensuring and advancing social justice on a global scale as many advocates have pointed towards human rights abuses and child workers in textile, glass or leather factories in the third world. Various forms of popular culture and fine arts have spread far and wide. There is no denying the fact that Covid-19 pandemic has caused the world economy to slide down to recession phase due to its spread across the nations and consequential vulnerability of the economy (Leiva-Leon et al., 2020).31 On the contrary, recession, instant communication and an urgent need for coordination of vaccinations and saving millions from the epidemic require national governments and international organizations

30 V. Dhoot (February, 13, 2021). Will COVID-19 affect the course of globalisation? The Hindu. From: https://www.thehindu.com/opinion/op-ed/will-covid-19-affect-thecourse-of-globalisation/article31303655.ece. 31 D. Leiva-Leon, G. Pérez-Quirós, and E. Rots. (2020). Real-Time Weakness of the Global Economy: A First Assessment of the Coronavirus Crisis. London: Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp. php?dpno=14484.

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to strengthen cooperation (Abraham, 2020).32 In the face of clamour for de-globalization due to Covid-19, raw materials and equipment to fight the virus moved internationally to help different nations. Personal protective equipment and ventilators from across the globe were supplied and tried to fight the shortages in worst-hit nations. China exported 3.1 million monitors in the first quarter of 2020, a fourfold increase on the year before. As per Jaishankar, India’s external affairs minister, India sent out millions of doses of vaccines to 72 countries as commercial deals or gifts.33 As against the symptoms of de-coupling of economies due to Covid19 pandemic, Israel and some Arab nations are moving towards integral economies. “Abraham Accords” have normalized diplomatic and national linkages between Israel and the two other West Asian countries (UAE and Bahrain) for the first time in their history (Hashmi & Rose, 2021). Kosher restaurants and catering are now being advertised in Dubai, and two gyms have opened to teach Krav Maga, the Israeli-developed selfdefence practice. “Business can be the path to peace and vice versa, peace is the path to business so both as an Israeli and as a businessman I feel proud having our products as the path to the peace there”. The effects of the pandemic should serve as a catalyst for changing course—away from competition and towards cooperation. Making progress on immediate priorities, including developing and distributing Covid-19 vaccines and effecting economic and societal recoveries, all while taking more ambitious action on long-standing challenges, such as climate change and inequity, requires purposeful, coordinated effort. Greater collaboration is needed at times of emergencies and it can develop better resilience (WEF, 2021).34 There is need for international institutions to account for new changes that present challenges in terms of changing new technologies or emergence of different new players to reconsider; preexisting systems would

32 Abraham, J. E (2020). Emerging Innovative Thoughts on Globalization amidst the Contagion of COVID-19. Munich Personal RePEc Archive. Available at: https://mpra. ub.uni-muenchen.de/101789/. 33 https://www.dnaindia.com/india/report-indias-vaccine-outreach-raised-its-standinggenerated-goodwill-says-eam-jaishankar-2881646. 34 World Economic Forum (2021). Principles for Strengthening Global Cooperation. World Economic Forum 91–93 route de la Capite CH-1223 Cologny/Geneva, Switzerland. www.weforum.org.

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not be sufficient to provide for these new and novel transformation. Hence, there is a requirement for guiding principles to be framed by world leaders as a beacon to serve a stable path instead of turbulence. Hence the members of the World Economic Forum’s Global Action Group had agreed on a set of principles to help guide leaders towards greater global cooperation as against isolationism. These include seven principles—strengthening of global cooperation, advances in peace and security, re-globalize equitably and to promote gender equality, rebuilding by sustainable measures, deepening of public–private partnerships and increase in global resilience by avoiding protectionism. These principles were agreed to by members of the World Economic Forum’s Global Action Group and are meant to help guide leaders towards a greater global cooperation. With a new leadership in the US and rebooting of trans-Atlantic relationship, there is an increased understanding and cooperation on these principles. G-8 meeting of 2021 in the UK, and OECD and EU meetings have re-emphasized collaboration on most of the issues facing the world. One major outcome has been setting a 15% global minimum corporate income tax to discourage companies from shifting their profit-booking bases to tax-havens. The OECD had hosted the talks which has been endorsed by 130 countries, to be effective from 2023 onwards. Implications: The effects of Covid-19 on the nations and society are forcing them to look within own borders and attain self-sufficiency in all respects. The society is networked on the social media and through 24 × 7 news reports, thus being aware of the measures to fight the virus. While de-globalization has been on the policy tables due to Covidrelated restrictions, countries need to be prepared for a life after Covid-19. The discussions and various findings of other research studies given in the paper can be used to develop further research fields. Researcher can study measures for a better preparedness of various countries to the future Covid-19-like pandemics, making society self-sufficient and self-contained, keeping the trade and commerce flow uninterrupted and ramping up health services at the lowest levels. On the other side of argument, Coy (2021) has wondered about the de-globalization predictions, due to Covid-19 pandemic. Much against the claims of nations looking inward, to decouple from one another, these forecasts have proved to be

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exaggerated, because as the author reasserts, globalization still benefits humanity.35

6

Conclusion

Bonefeld (2012) had argued that it was not Adam Smith who provided the economic theory but the political economic theories emanated from commercially inclined social structures. Smith had only laid emphasis on the moral, social and legal securities by the state for its commercial citizens (Bonefeld, p. 236). Under political economy, laissez-faire is considered to be a political process, though it cannot prevent decay or destruction of commercial activities. Martin Wolf (2001) had argued in this case that “liberalising success of globalization cannot be built on “pious aspirations but on honest and organized coercive force” (Wolf, FT, October 2001). Notwithstanding the arguments in favour or against globalization, it is going to stay forever, unless catastrophic events force the world into isolation. There is a strength in the argument that new economic order can be usefully employed for the benefit of entire humanity. Adam Smith always considered economic autonomy as a political task, where the political class has to work on removing barriers to commerce by keeping national interests in mind. The governance must ensure level playing field, fair competition and regulating with a well-defined legal and oral process. Process of globalization has given better utilization of resources in an effective and efficient manner. It kick-started better productivity and more efficient governance of our means of production. It also brought internationally recognized norms and better productivity of even domestic firms. In the last three decades, multilateral trade flows have gathered speed and benefitted everyone. Since mid-1990s, growth in GDP around the globe accelerated and it impacted all sectors in a positive way. In a post-Trump era of US political economy and right of the centre policies in other parts of the world, there will always be clash of values between the centre-left political economists and right of the centre groups. Parmar (2017) identifies the biggest challenges in liberal international order established and

35 P. Coy (March, 23, 2021). Talk of de-globalization is fashionable but wrong. Bloomberg Business Week. Available at: https://www.bloomberg.com/news/articles/202103-23/talk-of-de-globalization-is-fashionable-but-wrong?utm_medium=social&utm_sou rce=twitter&utm_content=businessweek&utm_campaign=socialflow-organic&cmpid=social flow-twitter-businessweek#skip-to-main-content.

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nurtured by the US, to honestly accept and honour own diversity and respect the same elsewhere. In a radicalized polity, maintaining a balance between dominant class economic interests with the elite political power is a huge political and economic challenge. But in essence, the globalization is likely to stay longer with ever flattening of the world than ever. Covid19 looks like a “bend but won’t break crisis” for globalization. Like in the aftermath of earlier crises, international flows go down for some time, before picking up the pace again. Proponents of globalization and isolation will continue to discuss various business opportunities available due to globalization or challenges seen by de-globalization.

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Digital Marketing as a Tool of De-globalization: A Study During Covid-19 Pandemic Ila Sharma, Rahul Dhiman, and Saurabh Jha

1

Background

In the years of 1970s, the process of current globalization initiated which comprises of mutation, contraction as well as growth. Among these, several of them resemble the structural variations which are brought in the economy of the world and also in the geopolitical orders. This also comprises of the rising of the developing powers (Dhiman & Sharma, 2019, 2020; Grinin & Korotayev, 2013). Since the beginning of the Covid-19 pandemic, the global economy has severely suffered a large downfall and all the individuals and communities are seriously impacted because of this pandemic. The virus has moved across the borders and damaged the heart of the world’s economy. The virus has rapidly spread and all the countries of the world had to imply

I. Sharma (B) Indira Institute of Management, Pune, India R. Dhiman Dr YS Parmar University of Horticulture and Forestry, Solan, India S. Jha Sharda University, Greater Noida, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_9

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their own rules and regulations depending upon the severity of the situation. These rules and regulations have affected the interconnectedness and frailties of the globalization and initiated a major health crisis for the world economy. Those who were most vulnerable suffered the most. This coronavirus pandemic has paralysed the economies and the societies and it has derailed all the global efforts which were implemented for growth of the world economy. De-globalization can be defined as a process of fading of integration and interdependence among specific units around the globe, generally the nation states (Postelnicu, 2015). This term is extensively brought in use for describing those times of history when the investment and trade among different countries declined. Even though the terms deglobalization and globalization are opposites, it is not like they are mirror reflection of each other (Nayyar, 2006). De-globalization causes major disturbance across the countries and damages the economic flow of the businesses. It has been observed several times that impact of de-globalization takes a huge amount of time to recover from. There are several reasons which cause de-globalization (Afzal, 2008). In this study, de-globalization occurring because of the pandemic of Covid-19 is observed and studied.

2

Covid-19 Causing De-globalization

The world has got all the reason to get worried about the fact that a wave of de-globalization has stepped in the world economy. The poor countries seem highly vulnerable to this wave especially those countries that were highly dependent on trade for running their economy (Mengzi, 2020). This worst scenario continues with the silence or the support of the world economists. As the concerns of globalization as well as global trade are rising because of the Covid-19 pandemic, countries have started looking for domestic growth of the economy. This has frayed the global value chains. The world started to see an economic change in the global market since the beginning of the 1990s on the other hand, the poor and underdeveloped countries had just started to make significant changes in their economies. In the last three decades, the ration of global export to GDP hiked from 15 to 25% because of the hyper-globalization. The growth of those

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countries which are still developing got fuelled because of this export hike. The global economy has been driven by the pandemic of the coronavirus in retreating towards the world economic disintegration. It has now been a concern for the business leaders and policymakers that the international supply chains have been over extended. Within a situation, where it is unclear about the alliances and no co-operation on an international level is present, these business leaders and policymakers are also raising the concern of reducing the interdependence of the economy. Public health and national security concerns are giving novel justifications for isolationism, especially for food, medical gear and other health-related utilities along with highlighting over the domestic sourcing. Since the process of globalization is decades old and has reached at a very high level, such retreats will not completely end the globalization. However, it is possible that globalization gets reversed even though just partially. Before the recession period 2008–2010, the growth of the economic integration of the world was very high but this period changed the degree of the growth (WEF, 2020). Currently, because of the major economic and health crisis occurring due to the pandemic, the policymakers reinforced the movements towards the process of deglobalization. It is a widespread view that the Covid crisis will accelerate trade de-globalization, including through industrial reshoring and shorter value chains. Although it is too soon to make any prediction about the final impact of the globalization, the initial impacts can be seen. These impacts are in form of interruption in consumptions as well as productions which is greatly affecting the process of trade (A. Development Bank, 2020). The reduction in the international flow of people can be anticipated as the impact of de-globalization which is forcing people to search for their needful around them.

3

Covid De-globalization Trends

Given this context and a number of behavioural tendencies and responses, we typically see during pandemics and recessions, we have already started to see some de-globalization dynamics take shape (FAO & WFP, 2020), these include: Closed Borders. To secure our borders for fear of “contamination” and foreign-induced outbreaks, most countries have locked

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down borders and implemented severe containment measures and quarantines on returning residents and citizens. Controlling Critical Supply Chains. We have already seen countries demonstrate their risk aversion by intervening in supply chains, for medical and other critical supplies to ensure national security and continuity of supply. Consumers Buying Local. As consumers see what is happening in their local economies, it is normal to see a level of “in-group” bias where consumers place a premium on local supplies, supply chain transparency and preference and support for “locally sourced” products and services. Given the challenging economic situation for small business in particular, trends in a number of countries are already suggesting consumers have increased their support for local SMEs. Exports Significantly Down. As consumer demand and production have fallen around the world, particularly for discretionary-type categories, exports have fallen around the world. Most countries have seen household spending levels go down by 20–50% and are not recovering beyond 80–90% even months after re-opening. Trade-mobility reduced. The regulatory context and definition of “essential services” are not uniform around the world. This in combination with various border closures has limited commercial trading and transportation quite significantly in the past 2 months. In fact, over the past 2 months Canada is operating at 79% of normal commercial transportation activity, with the Maritimes operating at 70%. Basically, it can be stated that Covid-19 is causing de-globalization because of border sealing, avoidance of physical marketing and similar other reason which can be the reason of spreading the disease. This problem of pandemic can continue for a longer period of time and can be the reason for major breakdown because of increasing de-globalization. In other words, de-globalization has separated the consumers from all the options they can get through the presence of globalization. This study focused on eradicating these impacts of de-globalization from the market and regenerated globalization with the help of digital marketing (Song & Zhou, 2020).

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Digital Marketing

Digital marketing is defined as a process of selling as well as promoting the services and goods through bringing the approaches of online marketing like email, social media, SEO, etc. It uses all the online-based digital technologies along with the other digital media modes like television, radio, public displays, etc. (García et al., 2019). This approach of both internet channels and non-internet channels creates the difference among the online marketing and the digital marketing. 4.1

Aspects of Digital Marketing

Digital marketing has several aspects which benefit both the consumers and companies in several ways (Song & Zhou, 2020). Few of them are mentioned below: (a) Email marketing (b) Affiliate marketing (c) Social media marketing (d) Paid search (e) Content marketing (f) Display advertising (g) Influencer marketing (h) Search engine optimization (SEO) 4.2

Globalization with Digital Marketing

Currently, the world is in the middle of the wave of de-globalization. There has been a large hike in the uncertainties of trade, fading of the globalization process as well as hike in the redistribution costs. The initiation of the de-globalization is generally measured when there is a financial crisis. The occurrence of the process of de-globalization takes place in the FDI, international trades and other global flow economy. The recognition of de-globalization can be made in nearly all the dimensions (Gawade, 2019). Digital marketing helps in reaching to every section of the world without hampering the rules and laws of digital marketing.

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5

Literature Review

Literature reviews form part of research studies for the purpose of bringing out the gaps in the studies and also for critically understanding the different perspectives employed in the reviewed literature and analysing their findings. The major purpose of the review is to assess the knowledge and information which may be of help in understanding the current thinking and findings on the different aspect of deglobalization, digital marketing and this current Covid-19 pandemic. We have made use of various reputed databases such as Scopus and ProQuest to refer scholarly articles. The keywords used to identify relevant articles are Covid 19, De-globalization and Digital Marketing. Digital marketing has been considered the best tool to end this de-globalization and also to globalize the economy again. The previous studies intended towards addressing the impact of the crisis generated from the Covid-19 pandemic over the purchasing behaviour of the consumers as this behaviour of the consumers shifted towards purchasing the fresh vegetables from the local producers and vendors (Bala & Deepak Verma, 2018). This conclusion was presented after observing the behaviour of the consumers for 30 days beginning from the enforcement of the state of emergency in Romania. The study area was chosen as Suceava. The study was dependent over the responses received from 257 respondents. The authors also focused on the changes occurred because of the crisis of Covid-19 over the buying intention of the consumers. A novel uncertainty has been accompanied with the Covid-19 pandemic. This uncertainty has fuelled isolationism. A previous paper stated globalization under a major threat because of the action taken by the government for reducing the impact of the virus through restricting the movement of the individuals and international trade (Butu et al., 2020). As the government of Africa has closed its borders and measures for migrating have been made strict, the supply chain of the nation has been badly affected and poverty as well as unemployment has gained hike. In addressing the socio-economic impact of the Covid-19 over Africa, the authors argued that more digital programmes should be introduced to make the people available with the knowledge of availability. The authors also suggested various other measures for the improvement of the de-globalization occurring in the nations of South Africa.

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With the help of the diffusion models, another paper revealed the approach through which the globalization policies had occupied the centre of attraction of the policies stage at the time of the bloom of the world’s economy (Yaya et al., 2020). However, these policies are not blamed when the economy suffers a downfall. The policy of deglobalization and globalization resurfaces in accordance with the flow of the trade, mobility of the capital generated from cross border, diffusion of the technology and sustainability of the current account. This have caused an initiation of a debate over the financial crises occurring because of the de-globalization and demands for change in policies to overcome the economic downfall. Another study observed the impact of the Covid-19 pandemic over the global stock market’s trade volume (Karunaratne, 2012). The authors documented a huge spike in the volume of trade in a total of 37 international equity markets. The flows in the volumes of trade are obtained in association with individual countries’ institutional environments and national cultures. Generally, it is the tendency of the investors of trading in bulk within those societies which are branded with high level of trusts and individualism, and also which are branded with lower uncertainties. However, due to impact of the pandemic, fall of these volumes exhibits the initiation of a chain of de-globalization. The authors suggested that this can be fought with proper planning and implementation of effective planning in the policies. Globalization has an effect on healthcare facilities, economy and mobility (Chiah & Zhong, 2020; Shrestha et al., 2020). The assessment of individuals’ mobility along with its magnitude was made by bringing seaport and airline trade data along with the information of travel. The measurement of the economic impacts was made on the basis of the supply chains, academic institutions, agriculture and food, event cancellations and the available workforce. The assessment of the healthcare facilities was made bringing the indicators of the healthcare systems as well as every country’s preparedness under consideration. The authors calculated the “pandemic vulnerability index (PVI)” through making quantitative measures of the potential global health. Because of the pandemic, an extraordinary burden over the economy of the world has been placed which caused the fading of the globalization. The authors stated that the results obtained from their study can help to plan and implement the major strategies at country level for helping in easing the burden of de-globalization.

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6

Methodology

Research is an organized attempt to gain knowledge and deduce a certain phenomenon. This study is based on a survey methodology. For conducting the survey, primary data has been collected to get a realtime data. Owing to the nature of the study, it was decided to personally administer the structured research instrument developed for the study. Since the research method in this study is survey, therefore a questionnaire is designed in accordance with the hypothesis of the study. The questionnaire is designed in English language and was sent on email. There were 15 questions which were designed and asked from the respondents. With the help of these questions, it is attempted to cover all the objectives of this study. We have made use of five-point Likert scale, in which five means strongly agree (SA) and one strongly disagree (SD). 6.1

Sampling Design and Sample Size

The universe of the present study comprises of businessman, entrepreneur and employees. The sampling design for the current research study is nonprobability-based purposive sampling. In that the items for the sample are selected deliberately by the researcher, his choice concerning the items remains supreme. The next footstep is determining the enough sample size. The sample size depends on a number of factors such as the techniques of data analysis, financial support and access to sampling frame. Considering the Covid restrictions, it was not feasible to reach respondents in person. Other limitations were in terms of funds and time. So it was decided to reach 260 respondents. Therefore, 260 were randomly approached during the month of March 2021, of these 247 agreed to participate in the study. During editing phase of the questionnaires, it was observed that no responses were incomplete in various respects. This resulted in a total of 230 responses. 6.2

Source of Data

To achieve the objectives of the study, primary data and secondary data are taken into consideration. A primary data is considered as an original source of data as this data source allows the researcher to collect the real-time data and interpret the results in accordance with the current

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situation. There are various ways of collecting the primary data but the most general ways are experiments, field observations, interviews, surveys, etc. This study is based on the primary source data and all the collection of data was made with the help of the survey only. Secondary data in terms of published and unpublished articles, news, reports, etc., was also used in this paper. The quantitative data is the collection of such data whose measurement of values is made in the form of counts or numbers having a unique numerical value in association with every data set. This study is a quantitative study as data is collected through participants’ observance and views, and analysis is made by themes from descriptions provided by the informants. The reliability of data has been examined using Cronbach’s alpha.

7

Result and Discussions

This section of the paper deals with the analysis and interpretation of collected data. With the help of the survey conducted for this study, responses from 230 respondents were collected and analysed. The respondents’ subjective perceptions have been examined by noting their perceptions systematically. After that, both descriptive and inferential statistics have been used for the analysis purpose. Percentage has been used as a measure for noting the descriptive characteristics of the sample. Appropriate tests have been used to analyse the significance for testing hypothesis and drawing inferences about the strength of the findings. Inferential statistics allow inferences to be drawn about the similarities or differences between the sample and the population, or between samples or between subsets of a sample. The responses are analysed and exhibited below: 7.1

Descriptive Statistics

Descriptive statistics presents straightforward summaries concerning the sample and also the measures. In this section, we have observed respondents’ demographics in terms of age, gender and occupation; total duration is the same profession and education level. From Tables 1–3, we can say that 63% of participants are between 25 and 35 age group. There are 53% male and 47% female participants among all population. Among all participants 35% are entrepreneur, 35% are employee and 28%

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Table 1

Descriptive statistics

Frequency table for age Age

Frequency

Percent (%)

Missing 25–35 36–45 46–60 61 and above Total Frequency table of gender Gender Female Male Total Frequency table for occupation Occupation Missing Entrepreneur Businessman Employee Total Frequency table for total duration in same profession Profession Duration Missing Less than 2 years 3–5 years 6–10 years Total Frequency table for highest education level Education Missing 12th Graduate PG Other Total

20 144 57 6 3 230

9 63 25 3 1 100

108 122 230

47 53 100

5 80 65 80 230

2 35 28 35 100

6 128 51 45 230

3 56 22 20 100

2 49 118 47 14 230

1 21 51 20 6 100

Source Authors’ own calculations

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Table 2 Reliability of instrument

Construct De-globalization Digital Marketing and De-globalization

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Reliability 0.769 0.819

Source Authors’ own calculations

are businessman. Most of the participants, i.e. 56%, are less than 2 years in same profession. While 19% of the participants are more than 6 years in same profession. 51% of the participants are graduate, 51% are PG, 21% are 12th pass and 6% have other degrees. In the next section, we intend to capture the response using 5 point Likert scale. Before presenting these results, the data was analysed for reliability and provided a Cronbach’s alpha ranging from 0.792 to 0.881. Reliability indicates how consistent the responses produced by the scale are expected to be. The results of reliability are presented in Table 2, and the results of these perceptions are presented in Table 3. From Table 3, it is clear that 43% of the participants are agree that Covid-19 has initiated a chain of de-globalization across the business world, while 4% disagree. 45% of the participants are agree that the steps taken by the governments of all the countries for controlling the spread of Covid-19 have shifted the businesses related to exports and imports towards a downfall, while 7% disagree. 53% of the participants agree that de-globalization has caused a major economic downfall, while 4% disagree. 50% of participants agree that the conventional ways of marketing have shown its limitations and won’t be much effective at least in near future. Almost 58% participants agree that because of deglobalization, many consumers are not getting much option to purchase their needs, while 13% disagree on this opinion. 38% and 43% of the participants strongly agree and agree that many companies lost their business or suffered a huge financial loss because of de-globalization. On the aspect of digital marketing as a support for de-globalization, it is found that 47% of the participants agree that digital marketing can be brought in use for overcoming the issues of de-globalization. 12% of the participants disagree that all the aspects of all types of conventional marketing strategies can be replaced by digital marketing, while 43% agree on this. Similarly, 43% of the participants are preferred and marketed by digital means than that of conventional marketing. 3% of the

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Table 3 Statement

Respondents’ view on de-globalization and digital marketing Strongly Agree

De-globalization Covid-19 has initiated a 82 chain of de-globalization across the business world The steps taken by the 70 governments of all the countries for controlling the spread of Covid-19 have shifted the businesses related to exports and imports towards a downfall 65 De-globalization has caused a major economic downfall The conventional ways of 1 marketing have shown its limitations and won’t be much effective at least in near future 1 Because of de-globalization, many consumers are not getting much option to purchase their needs Many companies lost 88 their business or suffered a huge financial loss because of de-globalization Digital marketing and de-globalization Digital marketing can be 65 brought in use for overcoming the issues of de-globalization All the aspects of all types 43 of conventional marketing strategies can be replaced by digital marketing Consumers will prefer 53 marketed by digital means than that of conventional marketing

Agree

Neutral

Disagree

Strongly Disagree

100

32

10

5

104

34

15

5

121

29

10

4

114

73

35

7

133

55

31

8

100

26

10

5

108

39

10

5

99

54

27

6

96

63

11

5

(continued)

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Table 3

167

(continued)

Statement

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

Digital marketing will be evidently a better approach to reach the consumers on a global level

77

24

44

44

24

Source Authors’ own calculations

participants also strongly agree that digital marketing will be evidently a better approach to reach the consumers on a global level. Hence, it can be concluded that most of the participants agree that Covid-19 has become one of the reasons for the de-globalization of global economy. Also, respondents are of the view that digital marketing can be brought in use for overcoming the issues of de-globalization. 7.2

Inferential Statistics

In order to draw some inferences, following hypotheses are proposed to check the association between demographics and respondent opinion on Covid-19. To test this hypothesis, we have made use of Chi-square test. In the next section, Chi-square test has been used for testing if two categorical variables are related in some population. This test is conducted to test the hypotheses as stated above. H 1: H 2: H 3: H 4:

H 5:

There is a significant association between age and opinion about impact of Covid-19 over the global economy. There is a significant association between gender and opinion about impact of Covid-19 over the global economy. There is a significant association between occupation and opinion about impact of Covid-19 over the global economy. There is a significant association between age and opinion about digital marketing can significantly impact the de-globalization issue of the world business. There is a significant association between gender and opinion about digital marketing can significantly impact the deglobalization issue of the world business.

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H 6:

There is a significant association between occupation and opinion about digital marketing can significantly impact the de-globalization issue of the world business.

From Chi-square test, p-value is more than 0.01 for all the hypotheses. Hence, we may not reject null hypothesis and conclude that there is no significant association between age and opinion about impact of Covid19 over the global economy. Similarly, there is a no significant association between gender and opinion about impact of Covid-19 over the global economy. Also, there is no significant association between occupation and opinion about impact of Covid-19 over the global economy. On the digital marketing as solution to de-globalization, test p-value is more than 0.01; therefore, we may not reject null hypothesis and conclude that there is no significant association between age and opinion about digital marketing can significantly impact the de-globalization issue of the world business. Also, there is no significant association between gender and opinion about digital marketing can significantly impact the de-globalization issue of the world business. Additionally, there is no significant association between occupation and opinion about digital marketing can significantly impact the de-globalization issue of the world business.

8

Conclusion

The purpose of this paper is to study whether digital marketing can de-globalize the impact of Covid-19. The results obtained from this study confirm that Covid-19 has significantly initiated a chain of deglobalization. The study also confirms that this occurrence of deglobalization has badly affected all types of businesses across the globe. The global economy has suffered a major downfall because of the pandemic and the rules and regulations imposed to stop it from spreading. The received responses from the respondents also show that digital marketing can significantly impact the de-globalization issue of the world business. Therefore, it can be concluded that digital marketing will stop the de-globalization and support the globalization process. This will help in gaining the growth of the world economy. Businesses will be able to reach their consumers and consumers will get all the options available for them and won’t have to depend on their local requirement. This study also concluded that digital marketing has the capability of completely

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replacing the traditional marketing approaches and consumers will prefer getting marketed by digital means. These benefits of digital marketing can be very effectively brought in use to fight de-globalization. The information that we attempted to present in this paper may be of help to policymakers and practitioners to understand and alleviate the local and world economies.

9

Limitations and Future Scope

Like all studies, this paper also has a few limitations. First, the sample size cannot be generalized across all the sectors of an emerging economy, like India. Therefore, future researchers are encouraged to undertake studies having more sample size so that the results can be generalized as a whole. This will provide the better picture whether digital marketing can deglobalize the impact of Covid-19. Second, our attempt presented in this paper is not industry specific. Industry-specific study will bring in comprehensive insights on which industries have witnessed a severe downfall. Therefore, we also encourage future studies to be conducted on diverse contexts with diverse methodologies to check whether digital marketing can have a significant impact on de-globalizing the world business.

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Chiah, M., & Zhong, A. (2020, June). Trading from home: The impact of COVID-19 on trading volume around the world. Finance Research Letters, 37, 101784. https://doi.org/10.1016/j.frl.2020.101784 Dhiman, R., & Sharma, M. (2019). Relation between labour productivity and export competitiveness of Indian textile industry: Cointegration and causality approach. Vision: The Journal of Business Perspective, 23(1), 22–30. Dhiman, R., & Sharma, M. (2020). The textile industry and exports in postliberalization India. Routledge India. FAO & WFP. (2020, September). Impacts of COVID-19 on food security and nutrition: Developing effective policy responses to address the hunger and malnutrition pandemic. HLPE Issues Paper, pp. 1–24 [Online]. Available http://www.fao.org/3/cb1000en/cb1000en.pdf,www.fao.org/cfs/cfs-hlpe García, J. J. L., Lizcano, D., Ramos, C. M. Q., & Matos, N. (2019). Digital marketing actions that achieve a better attraction and loyalty of users: An analytical study. Future Internet, 11(6), 1–16. https://doi.org/10.3390/fi1 1060130 Gawade, M. S. (2019). Fostering innovation, integration and inclusion through interdisciplinary practices in management. International Journal of Trend in Scientific Research and Development, Special Issue(Special IssueFIIIIPM2019), 91–94. https://doi.org/10.31142/ijtsrd23072s Grinin, L. E., & Korotayev, A. V. (2013, January). Part I. GLOBALIZATION IN HISTORICAL RETROSPECTIVE origins of globalization. Global Studies Journal, pp. 8–35 [Online]. Available https://www.hse.ru/mirror/ pubs/lib/data/access/ram/ticket/50/15437030513531ecce2fd0a5efb77b 4efe16012d1e/008-035.pdf Karunaratne, N. D. (2012). The Globalization-deglobalization policy conundrum. Modern Economy, 03(04), 373–383. https://doi.org/10.4236/me. 2012.34048 Mengzi, F. (2020). The future of globalization under the impact of COVID-19 Pandemic. Nayyar, D. (2006). Globalisation, history and development: A tale of two centuries. Cambridge Journal of Economics, 30(1), 137–159. https://doi.org/ 10.1093/cje/bei090 Postelnicu, C., Dinu, V., & Dabija, D. C. (2015). Economic deglobalization From hypothesis to reality. E a M: Ekonomie a Management, 18(2), 4–14. https://doi.org/10.15240/tul/001/2015-2-001 Shrestha, N., Yousaf Shad, M., Ulvi, O., Hossain Khan, M., KaramehicMuratovic, A., Nguyen, U.-S.D.T., Baghbanzadeh, M., Wardrup, R., Aghamohammadi, N., Cervantes, D., Nahiduzzaman, K. M., Zaki, R. A., & Haque, U. (2020). The impact of COVID-19 on globalization. One Health, 11, 100180. https://doi.org/10.1016/j.onehlt.2020.100180

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Deglobalization in COVID-19 Times: New Routes for Global Business Marián Arias, Renato Carrillo, Romina Gómez, María Alejandra Leiva, Thalía Pineda, María de las Mercedes Anderson-Seminario, and Aldo Alvarez-Risco

1

Introduction

COVID-19 has generated various impacts in the world, both in the health environment (Alvarez-Risco et al., 2020; Chen et al., 2020; QuispeCañari et al., 2021; Román et al., 2020; Yañez et al., 2020; Yáñez et al., 2020) as in the economic sphere (Ashraf, 2020; Iacus et al., 2020; Laing, 2020; Martin et al., 2020; Sarkodie & Owusu, 2021; Yan et al., 2021). It is impossible to calculate what the global and local effect of the pandemic is, since they do not have previous data that allows accurate calculations to be made; however, this forces companies to think about how they want to face this pandemic time and especially when the pandemic can be completely controlled. Many companies have changed the way they manage the care of their products. When at the local level it can be seen that different restaurants have prepared the materials for delivery with

M. Arias · R. Carrillo · R. Gómez · M. A. Leiva · T. Pineda · M. de las Mercedes Anderson-Seminario · A. Alvarez-Risco (B) Universidad de Lima, Lima, Peru e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_10

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the least contact, causing the delivery to be generated in a shorter time than usual, it suggests that this logistical modification could have occurred before but that it was preferred that the logistics chain is slow, since finally customers are used to it. However, when they check that they make their computer sales through Web pages, it can be seen that there are quite long delivery times because in many cases the products are brought from other countries; these times usually embroider the 20 days, which can be seen that in this sector the delivery time worsened, which is opposite to the previous example. When we see these changes at an international level, the panorama is similar, with various difficulties for deliveries in the usual times, with the various programming changes that this generates. Among these changes we can mention the decrease in the volume of international merchandise trade, which showed a decrease in 2020 and despite its recovery so far in 2021, these tend to be well below expectations. Therefore, it is quite possible to think that by the end of 2021 the world’s product tends to grow as a consequence of a growing US GDP and at the EU level a moderate increase as long as it is possible to control COVID-19 and within the holding back possibilities. While Japan will continue in moderate and constant growth while China as an emerging and developing economy will continue its solid recovery as long as the debt of the corporate sector does not generate high financial risks. But it should be noted that the global recovery will be uneven because it will depend on how the different economies deal with vaccinating their population, and in this way, their economies will be able to improve their economic levels. While the impact of the pandemic will continue in emerging markets due to the levels of poverty and informality, the limited multilateral support and the great difficulties they have to control COVID-19 due to lack of resources. COVID-19 has revealed new challenges for global politics, such as reducing inequality gaps between countries, how the future of governance will be consolidated and its new role within the world’s economy, as well as how to achieve sustainability worldwide. We have established to answer the next question: 1. What are the main concepts of globalization and deglobalization? 2. What are the influence of COVID-19 in globalization of the economy and politics? 3. Is the deglobalization a disadvantage against COVID-19?

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4. What are the characteristics of globalization and deglobalization in health systems? 5. What is role of deglobalization between countries?

2

Methodology

The research uses a documentary research method to the analysis of sustainable initiatives in international markets. For the collection of the information, we searched articles linked to deglobalization, COVID-19 and global business. It used the articles indexed in Scopus and Web of Sciences. It used the articles with relevant information for the chapter.

3 3.1

Results

Globalization and Deglobalization

Globalization has represented an advantage for human development, generating economic, political and cultural transformations (Tang et al., 2020; Ulucak et al., 2020). As there was also an exponential growth of trade through the production of goods and services, as well as financial flows, and the growth of a large global middle class. However, it is relatively questionable whether the scope provided by such a trend has generated a benefit for society from the COVID-19 pandemic. In addition, it must be recognized that there have been currents of antiglobalization, where economic globalization is identified as the cause of social inequalities at the global level. Nowadays, with the changes that have been taking place, these transformations are being questioned by the arrival of deglobalization, which has its beginning in the global financial and economic crisis of 2007– 2010. Where it is considered that deglobalization is the process of development of an economy that after having interacted and there is a global interdependence, passes to a regional one where nationalisms reappear such as Brexit. According to Yeganeh (2020), globalization creates systemic risks and the fact of slowing down globalization does not mean that climate change, pandemics and other risks that could arise were stopped. Systemic risks such as the financial crisis and COVID-19 have overloaded the processes that have weakened and overloaded governance, the systems and methods used to manage risks. Also having to consider that other dangers, such as

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climate change, also advance, although more slowly, but also the measures and processes must also be coordinated and not stop acting. Also having to consider that the greater the connectivity, the greater the complexity, the greater risk and the less possibility of making informed decisions, which leads to the loss of responsibility (Goldin & Mariathasan, 2014). The arrival of COVID-19 is presented as a generator of a greater imbalance in and between economies, but it also opens the opportunity to reformulate economies where there is the possibility of change. 3.2

Globalization Applied to the Economy and Politics from COVID-19

Bosoer and Turzi (2020) state that there are two stages of globalization, the first one that was basically focused on commercial development, global supply chains, the reduction of extreme poverty and an increase in digital communications such as global mobility (first decade of the twenty-first century). Likewise, Bosoer and Turzi (2020) explain that during the second stage a political gap could be seen between countries, each one participating in an ideology or inclination, considering that each of the economies could have their own adaptations or particularities according to the needs of each country, what could be concluded that globalization could be considered negative, which could have given rise to deglobalization. The various political ideologies form a basic foundation for governments to function; however, each ideology has an ideal adaptation for each country and its society; likewise, define a political position based on the example of other countries to “promote sustainable development” which we might be considering is inappropriate. Each country has social peculiarities, of behaviour that is similar among citizens; therefore, Hayek’s position that indicates how it is that men (in this case, coming to be called “political authorities”), seek social orders similar to developed countries and lose the particularities of each country, this means that the problem It is not the capitalist current itself, but the political adaptation that is stipulated to capitalism. This is how Yeganeh (2020) indicates that resilience to these situations can be improved as long as governments, companies and people are able to make their own decisions. In relation to COVID-19, globalization is also a disadvantage that applies to dividing the whole world into blocks with different ideologies;

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it is thus assumed that, during the COVID-19 conjuncture, various countries will lean towards certain political measures adopted. However, the measures applied by certain countries do not always have the same positive impact on the rest. As mentioned above, each country has a social particularity and that is what means that not all economic and political models can adapt strictly the same to each one, so globalization during COVID-19 supposes a possible decrease in the economy of a country as a possible recession. COVID-19 would not have posed an implicit threat in countries had it not been for a political dependency. Saracho López (2020) maintains that the economic crisis is caused by the “slowdown in the movement of everyday life, the stasis of ‘the natural’ form of the world of capital” (p. 4). While Davis (2020) argues how capitalism has been a setback for various economic crises such as 2008 and stipulates, how is it that the political measures adopted from COVID-19 are no exception. In such a way, a critique of capitalism is generated; this action could be questioned by Hayek and Torrente (1998) who mention that men, instead of trying to improve their knowledge and application of those basic principles, have more often sought substitute social orders. Only when confronted with other different systems do we discover that we have lost the clear concept of the objective pursued and that we lack unshakable principles to support us in combating the ideological dogmas of our antagonists. This situation allows us to understand that during the COVID-19 pandemic, different economies gave their measures, many of them being adopted by other countries, which were not necessarily the appropriate ones, causing not only a problem due to the measures adopted, but also a crisis of ideological identity. Therefore, each country represented a stagnation and/or setback in its fight against the global pandemic. Díaz Arias (2020) mentions a criticism of the neoliberal system in relation to how it took actions regarding the coping with the crisis in Central American countries; these criticisms mention that: “Central American societies, impoverished and with selfish elites and in some cases corrupt, have greater problems economic and social, which go beyond just imagining the effects of the pandemic”. However, it is essential to highlight that most of the arguments put forward against the neoliberal system state that a decentralization of the power granted to companies should be carried out, inserting the State to obtain greater support. This assumption is totally dismantled when recognizing that the powers of Central America and Latin America come with a high rate of corruption;

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therefore, providing greater power to the State and taking power away from the companies will only achieve an investment withdrawal. Likewise, promoting a more liberal system such as political and economic reform from COVID-19 would generate the insertion of a greater number of companies, which would be followed by increased competition and a decentralization of power. In order to counteract the previously stipulated arguments and make a precision of why a different application is necessary to each political and economic ideology, detaching itself from globalization as the main source, Von Mises and Greaves (2011) mentions that supporters of interventionism assume that governments can find a profit in the market of certain groups. Mises defines these benefits as important because when these benefits are not enough, the interventionist measures adopted do not allow the market to function; depression, strikes and capital consumption are generated. The decentralization of business intervention could not occur in the context of globalization during the COVID-19 pandemic. If carried out, it could have generated great risks such as acts of corruption and, in the absence of legislation, it could generate greater poverty and uncertainty in the economies. 3.3

Deglobalization as a Disadvantage Against COVID-19

During the current period and that of the 90s and early 2000s, important changes can be observed such as the fall in the share of trade in world GDP, changes in the balance of power between economies, which has led to criticism of globalization and its negative effects have increased, these being favourable to globalization. The global expansion of the current epidemic may serve to fuel criticism against globalization. We can mention trade disputes, nationalisms, policies to reduce foreign dependence, climate change, automation, the economy of proximity and circular as some of the reducing factors of globalization (Khan et al., 2019). It is also possible to observe not only a deglobalization of trade and direct investment abroad (FDI) but also of technology: different digital and telecommunications systems. From an economic perspective, deglobalization is evaluated as a slowdown that directly and negatively affects trade, investment and capital movements, which can mean a disadvantage in the time of COVID-19 for those countries that depend on other

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countries in economic terms and characterized by weak social structures, food insufficiency as well as poor access to health and education, making its population extremely vulnerable to all types of risk. However, (Sapir, 2020) observes that economic and financial interactions have tended to stagnate in recent years and the crisis caused by the coronavirus epidemic could accelerate the movement of offshoring of activities. Deglobalization means the reduction of global economic and financial interactions. These phenomena overlap only imperfectly and this is the trend towards deglobalization. Therefore, we can think of a governance repoliticization process that is perfectly compatible with a high level of globalization (Sapir, 2020). The current health crisis has an impact on international relations and on the globalization process itself. There are variables that have been suffering strong decreases such as production, consumption and, therefore, trade and others as a consequence of the drastic reduction in the international flow of people. The deglobalization generated by COVID-19 will not make exchanges disappear; they may even increase, but under a new context. These exchanges could be determined by national strategies, sometimes opposed, sometimes coordinated, which suggests deglobalization. Kvint (2016) reveals the concept of economic strategy, which is directly opposed to the notion of a globalized universe in which everything is governed by norms and rules, and the importance of the concept is linked to that of radical uncertainty. Radical uncertainty arises from the accumulation of complex influences in a given situation. Kvint (2016) states “The strategy continues to be surprisingly underestimated, misused or misunderstood within certain powerful corporations, governments and military bodies”. In his study, the countries that have deliberately adopted strategies have been China, India, Japan, Korea, most of this globalization. Therefore, the question arises if the globalization process itself generates the forces that push it to the contrary and that the disappearance of politics and the triumph of impersonal rules and norms arises. This is because globalization generates dependence on supplies from different geographical locations in the world, so deglobalization leads to an economic slowdown in the short term and an uncertain future in the long term, which would be detrimental to both companies and countries. In the same way, the economic dependence of the lower-income countries on the developed countries is undeniable, since every event, good or bad, that occurs in these great powers, such as the fall of the stock markets,

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the increase in the prices of tariffs, the rise of the dollar, end up having repercussions in underdeveloped countries (Bravo Miranda, 2020). It is for this reason that deglobalization in times of COVID-19 would have caused greater economic problems due to dependence, which is significant, and if health problems increased this disconnection, companies and countries would have faced unexpected uncertainties. It is for this reason that deglobalization in times of COVID-19 would have caused greater economic problems than those that have occurred and continue to occur in underdeveloped countries. Well, it has been seen that dependence is significant to such an extent that, if health problems were increased this disconnection, companies and countries would have faced undesirable uncertainties. An important aspect to touch on the impact of the pandemic on the global economy is the blow or interruption that the supply chains received. While the aforementioned logic function has become increasingly sophisticated, it is also more vulnerable, having less room to absorb increased costs or delays in deliveries. Salas-Navarro et al. (2019) state that each business depends on other businesses in its own field, so that good supply chain management allows companies to improve performance by coordinating business functions and achieving higher levels of competitiveness. Coveri et al. (2020) affirm that the interconnection of the productive structures between different countries at the international level led the economies to notably increase their interdependence, which today may mean a problem in the midst of a global pandemic. In this sense, the coronavirus has led to deglobalization since it affected supply chains. In the production area, for example, according to Coveri et al. (2020), the slowdown in production was due to the social isolation decreed by most countries in the world, which led to an increase in the unemployment rate. Countries of East Asia, considered as the productive heart of the world, China in particular, which is dedicated to the industrial production of massive goods, generated a reduction of 13.5% between the months of January and February 2020 due to the arrival of COVID-19. This situation will lead to structural changes that will affect the supply chains of companies worldwide, and new challenges will appear with regard to purchasing and change and risk management that will push companies to decide how to act in the face of changes to the time to define new chains or the supply networks of the future.

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Globalization and Deglobalization in Health Systems

On the other hand, the health sector is one of those that due to globalization has been allowed the acquisition of medical equipment, medicines, among others to provide efficient services. Globalization has allowed greater control of health, since not all countries have technological tools to manufacture solutions to the health system. Technology advances year after year, bringing improvements in medical matters for the collective benefit. However, deglobalization in the health field according to Barreto (2017) would have a direct impact on the population of poor and developing countries, since diseases could not be controlled, and there would not be enough equipment to execute surgeries, among others. In other words, inequality would widen and the least favoured would be the third world countries. It is worth mentioning that within Peru there are communities that are far from civilization and, therefore, are excluded from globalization. These forgotten provinces lack efficient health systems, which is why they are forced to migrate to Lima in order to obtain better service. In Burneo (2018) analysis, one of these communities is Awajún, where they usually use medicinal plants to treat certain diseases. It should be noted that the population demands more efficient health posts with equipment so that in their own community they can treat diseases. Deglobalization would not have allowed the International Health Regulations to be signed according to Pons (2020), it has the obligation to notify “events that may constitute a public health emergency of international importance”, as well as to provide capacities to respond and avoid health risks. Due to this, it was possible to notify in time and take measures for the prevention of COVID-19. However, it is important to consider that globalization has allowed diseases to spread around the world due to the migrations of groups of people carrying diseases to their destinations. This resulted in diseases, in the last 50 years, such as Marburg, Nipah, Hendram, H5N1 Bird Flu, Ebola, H7N9 Bird Flu, MERS, SARS, 2019-nCoV, H1N1. Figure 1 shows the mortality rate of these, in addition to the years in which they arose. The first case of COVID-19 was registered in November in China, and by December 9, the disease was already present in different continents such as America and Europe, in addition to various countries in Asia as shown in Fig. 2. Agree with Statista (2020), the United States by that date had more than 15 million cases, leading the list despite being thousands of kilometres away from China, the country where COVID-19 emerged.

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Fig. 1 Mortality rate of the main virus outbreaks worldwide in the last 50 years (From “Death rate of major virus outbreaks worldwide in the last 50 years starting in 2020”, by Statista [2020])

Fig. 2 Number of coronavirus (COVID-19) cases worldwide as of April 21, 2020, by country (From “Number of coronavirus [COVID-19] cases worldwide as of April 21, 2020, by country”, by Statista [2020])

So, although it is true, globalization allows medical improvements, but it has allowed the spread of various diseases, and with this, the deaths of thousands of people, as with COVID-19. In this sense, it is necessary for each country to evaluate the situation in which it finds itself and implement measures that appear to be protectionist, which ensure the well-being of the country, and this being extremely important, since each country presents different responses to different situations.

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Deglobalization in the Face of Disproportionate Interdependence Between Countries

Globalization was considered for many years a process that involves a logic of world welfare connecting the economic, the technological, the political, the social and the cultural with a progressive interconnection and interdependence between countries. For more than a decade, the term deglobalization began to emerge in silence or also according to the economist Stephen Roach, in three of his articles he admits, after a previous dithyrambic defence, that globalization has entered a twilight zone of “transition” and is irrevocably heading towards its “localization” (…) “From globalization to localization” is more defining and marks a clear turning point of an ineluctable trend of “deglobalization” that is heading towards the “localization” that it defines as the “political revire” that highlights the “individual interest of nations” and the institutional foundations of globalization, such rules that oblige governments to keep their markets open, as well as the domestic and international policies that allow the makers of the policy to liberalize their economies, they have weakened considerably in the past years (Jalife-Rahme, 2007). As a result of the health crisis of international importance that took place this year with the expansion of COVID-19, the idea of a globalization without restrictions weakened, people doubt and are dissatisfied by the evident inequality in the distribution of benefits, within and outside the countries; limited socioeconomic development, increased unemployment and/or informal employment. The creation of more barriers to reduce or restrict trade is an assumption that in a world with a strong and developed trade interdependence between countries, it would disturb and greatly affect developing countries, which depend in many sectors on exchange and multilateral negotiations. On the other hand, it is necessary to reflect on the measures that should be applied to face those risks generated by social inequality and the serious ecological imbalance generated by globalization. Torreblanca et al. (2013) points out that Sicco Mansholt, a Dutch politician, assumed different positions in the European Commission between 1958 and 1973. He is considered the father of the Common Agricultural Policy, becoming President of the European Commission between March 1972 and January of 1973. In 1972, he affirmed that we must reduce our economic growth and replace it with the notion of

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another culture of happiness and well-being (…) growth is only an immediate political objective that serves the interests of the dominant minorities (Latouche, 2006). As if this were not enough, in 1973 Mansholt said that the most important question is how we can achieve zero growth in this society. For me there is no doubt that in our Western societies we must achieve zero growth […] If we do not achieve it, the distance, the tensions between rich and poor nations will increase […] I am concerned if we will manage to keep it under control these powers that fight for permanent growth. Our entire social system insists on growth (Sorá, 2008).

4

Practical Implications

Assessing the impacts of the deglobalization of the world needs to be considered by governments in order to support the development of companies, with incentives and research and development activities, to find practical solutions to national and international commercial activity. Knowing the regulations of the new normal implies having to regulate in a flexible way since the deglobalization and globalization processes generate a dynamic that requires the support of the managers and the support of the stakeholders.

5

Conclusions

Growth is seen as the obvious and infallible engine of development, and development as the obvious and infallible engine of growth. Both terms are, at the same time, an end and a means of each other […] In the conditions of neoliberal globalization (privatization of public services and state companies, decline of public activities in favour of private activities, primacy international speculative investment, widespread deregulation), the explosion of unbridled planetary capitalism since the 1990s has amplified all the negative aspects of development. The permanent increase in income from capital to the detriment of income from labour constantly increases inequalities. Development has therefore increased the number of enslaved workers in China, India and many regions of Latin America. The abandonment of subsistence agriculture in favour of industrialized monocultures for export expels small peasants or artisans, who enjoyed relative autonomy in disposing of their polycultures or their tools of work and transforms their poverty into misery in the bidonvilles of the

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megalopolises […]. Development, which claims to be a solution, ignores that Western societies themselves are in crisis precisely because of this development, which has segregated an intellectual, physical and moral underdevelopment. Intellectual, because the disciplinary training that Westerners receive, by teaching us to dissociate everything, has made us lose the ability to relate things and, therefore, to think about fundamental and global problems. Physical, because we are dominated by a purely economic logic, which sees no other political perspective than growth and development, and we are bound to consider everything in quantitative and material terms. Moral, because egocentricity dominates over solidarity. In addition, hyperspecialization, hyperindividualism and lack of solidarity lead to discomfort, even within material comfort (Morin, 2011). During the development of globalization, we can identify numerous consequences; different crises were overcome in the past; power, control and property also passed from one nation to another, radically transforming the world. Together with constant technological innovation, great insecurity was added to issues of great vulnerability such as the most fragile populations, energy as the most globalized product and climate change. So, we can think that deglobalization is a response to the insecurity of a reality that is not very supportive of the idea of a safe and prosperous global society. Therefore, approaching the term deglobalization as the total and severe rejection of the interrelation of states would not be ideal. In any case, the aim is to reduce that dependence on the outside, directing a greater internal effort to the strengthening and recovery of the local and national market; seek to put safety, equity and social and environmental solidarity first. Deglobalization is a process that proposes a new turn to behaviour, strategies and structure in international business, agreements and policies, in search of a less centralized global power and broad and flexible interrelated systems.

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Business Beyond COVID-19: Towards Open Innovation Asha Thomas

1

Introduction

Due to the spread of COVID-19, drastic changes are observed in the lives of people and the economy of the world in just a couple of months. As per the World Bank Global Economic prospects (2020a, b) forecasted in June 2020, the economy of the world would shrink by 5.2% in 2020. This would signify the “deepest recession” after the Second World War (an imminent economic crisis and recession). Since 1870 (the Second World War), there was a fall in per capita outcomes (World Bank, 2020a). Moving forward, countries need to take proper care relating to the health crisis and prioritize reforms relating to the enhancement of productivity like helping in investing in “human and physical capital”; investigation and growth; supporting redistribution of resources for more production; promoting technology adoption and advancement; and encouraging a “growth-friendly macroeconomic and institutional environment” (World Bank, 2020b). The workforce has declined due to social distancing, selfisolation and constraints relating to travel across all economic sectors and has led to unemployment (Thomas & Gupta, 2021b). Schools and

A. Thomas (B) Jagan Institute of Management Studies, New Delhi, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_11

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universities have been closed and the demand for goods and manufactured products has reduced. Contrary to this, there is an increase in the demand for medical supplies and food items because of “panic-buying” and “stockpiling” of food items. Companies struggle to become accustomed to the consequences of the COVID-19 disaster (Sharma et al., 2021). Many companies opened advancement—a combined approach that works towards all companies’ strengths and can produce original and unforeseen explanations. The long-term impacts of COVID-19 are still undetermined but its direct effect on both large and small and medium enterprises (SMEs) is important. The COVID-19 impact on business is such that it provides a chance for helpful collaborations between well-settled companies and beginners in demanding business circumstances. But companies are in a catchsituation—how to “maintain that focus” and control costs, and keep options for growth alive for the future (Drew‚ 2020; Dean‚ 2020). The open problem-solving solution, “Open Innovation” (OI), plays a significant role (Ahn et al., 2017). By overcoming usual corporate limits, “OI” allows intellectual property, thoughts and individuals to move liberally in and out of a company (Chesbrough & Garman, 2009). As per Chesbrough and Rosenbloom (2002), “OI” is “a profit-maximizing strategy that targets both value creation and value appropriation”. Innovation opportunities from other companies must be looked into by organizations and they must make the best use of the available information and new ideas to cultivate modern policies, speed up organizations’ “innovation and commercialization”, and generate more value. Despite the OI significance, the complete research that brings significant moderators and outcomes in large organizations and SMEs is very rare. This research discusses the OI considering the present recession in the world. The primary aim of this research is to ascertain the known significant features of OI and realize how these features may be associated to achieve conceptual development in the literature relating to OI. Thus, it was important to review the literature relating to this subject for assessing the present knowledge and collecting scattered researches for exhibiting OI in a more significant, dependable manner. This research also presents combined insights and understanding of scholastics, professionals and decision-makers as a significant process during COVID-19. The structure of this paper is as follows: Sect. 2 addresses the method of research whereas Sect. 3 discusses the concept of OI and organizations’ response to COVID-19. Section 4 discusses OI for large organizations

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and SMEs and Sect. 5 talks about the significant moderator. Section 6 outlines the outcome whereas Sect. 7 presents a conceptual model and finally, the conclusion is provided in Sect. 8.

2

Research Method

The source of articles in this research is Google Scholar and electronic databases like Web of Science (WoS) and Emerald. These are the most popular and globally acknowledged databases. Duplicate and non-English articles were removed from the list of items for analysis purposes. Papers published in peer-reviewed journals were considered for this research as the primary aim was to select high-quality scientific papers. Only those academic journal articles were employed in research that had an impact greater than 1 (Table 1) based on selected papers a thematic analysis is performed. The titles and abstracts of all these articles were analysed and a few articles were discarded as they did not deal with the theme. The selected articles were published by Elsevier, Emerald, Taylor, etc. A few books and articles related to recent reports like the World Bank Report and articles published in the newspapers were used and analysed in the review. A Word Cloud was created for assembling the major keywords sourced from the literature (Fig. 1).

3 3.1

Review of Literature Open Innovation: An Overview

Open Innovation is “a distributed innovation process based on purposively managed knowledge flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with the organization’s business model” (Chesbrough & Bogers, 2014). Gradually, the OI concept is substituting conventional innovation procedures that are centred around in-silo ideation, with organizations sharing knowledge across the boundaries (Chesbrough, 2003a). This means that OI symbolizes a combined approach to innovation across various organizations (Table 2). A closed innovation involves the absolute combination of research and development (R&D) within the organization’s boundaries. OI is an efficient way of achieving the renewal of an organization and also have a competitive edge over other organizations (Bellantuono et al.,

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Table 1 journals

List of

Name of Journals Academy of Management Review Baltic Journal of Management British Food Journal California Management Review European Journal of Innovation Management European Management Journal EuroMed Journal of Business Harvard Business Review IEEE Transactions on Engineering Management Industrial and Corporate Change Industrial Marketing Management Information Systems Management Innovation: Organization and Management International Journal of Management Review Journal of Business & Industrial Marketing Journal of Business Research Journal of Engineering and Technology Management Journal of Knowledge Management Journal of Management Studies Journal of Product Innovation Management Journal of Small Business Management Journal of Strategy and Management Knowledge Management Research and Practice Management Decision Measuring Business Excellence MIT Sloan Management Review R & D Management Research Policy Research-Technology Management Strategic Management Journal Technology Analysis & Strategic Management Technological Forecasting and Social Change Technovation The Journal of Technology Transfer The Journal of Technology Transfer

2013; Bican et al., 2017; Lowik et al., 2017; Ma Fu et al., 2019; Saebi & Foss, 2015; Vanhaverbeke & Cloodt, 2014). Literature relating to OI conveys Chesbrough’s (2003a) inputs and emphasizes external sources for organizations (West & Bogers, 2014). The OI is further strengthened by knowledge inflow and outflow (Chesbrough & Bogers, 2014). According

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Fig. 1 Word cloud

Table 2

Definitions

Author(s)

Year

Definitions

Chesbrough

2003a

Chesbrough and Crowther

2006

Lichtenthaler

2011

Perkmann and Walsh

2007

“OI means that valuable ideas can come from inside or outside the company and can go to market from inside or outside the company as well. This approach places external ideas and external paths to market on the same level of importance as that reserved for internal ideas and paths” “OI is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively” “OI is defined as systematically performing knowledge exploration, retention, and exploitation inside and outside an organizsation’s boundaries throughout the innovation process” “OI means that innovation can be regarded as resulting from distributed inter-organizational networks, rather than from single firms”

to Randhawa et al. (2017), a synergic relationship can be created between the internal and external innovative knowledge sources with the help of OI in organizations. OI as a business plan direct towards ill-using the

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advantages from outside the organization and sending the less popular intellectual capital (Dodgson et al., 2006). Substantial time and effort are needed in OI for investigating the external environment and internal knowledge base. This turns externally obtained information into product innovation. OI can present a wider knowledge base and create planned breaks for organizations to enhance the efficiency of innovation (Chen & Liu, 2018; Hung & Chou, 2013). There are three types of OIs, namely inbound, outbound and coupled. Inbound tasks aid an organization to attain and shift resources like technologies or knowledge (that are considered external) into an organization. In outbound OIs, an organization transfers its opinions, notions or technology to “external partners” in exchange for their capabilities. Coupled OI amalgamates the internal use of resources available externally (inbound) with improved internal resources externally (outbound) (Chesbrough, 2006). According to Chesbrough and Garman (2009), organizations are impacted positively by outbound OI, like IP licensingout or spin-offs, during the recession. Enkel et al. (2009) state that the OI approach researches have talked about inbound OI procedures, while there is less research conducted on outbound and coupled OI procedures, and these need to be explored in the future. Inbound and outbound innovation procedures are simultaneously covered under the coupled innovation process. A few corporations are practising a long-standing, planned OI approach to create a “regionally bounded innovation” environment. This approach is far ahead of the typical OI, which stresses on giving a chance to firms’ boundaries for the flow of inbound and outbound knowledge. OI comprises a horizontal and vertical association with the help of various alliances and this leads to the creation of other innovative products/services (Wang et al., 2015). 3.2

Companies Respond to COVID-19 with Open Innovation: A Vital Strategy in Times of Crisis

Open Innovation has progressed since the last ten years in terms of quantity and quality. In bound knowledge flows from other structures and presumptions have improved the initial idea of OI in advancement, plan and economics. Outbound flows from OI, on the other hand, have formed and affected innovation researches and other areas of social science research. OI is an important strategy in the present scenario of catastrophe. Organizations have approved of OI to deal with a

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fast-changing business surrounding. Organizations joined hands to work openly by giving more importance to creating value than earning a chance to make profits. Large organizations support national economies and talk about consumer well-being. Presently, COVID-19 is also inspiring OI as it can aid firms in finding novel methods to resolve serious issues and building an encouraging status. The intricacy of the issues depicts that it is not possible for a single organization to continue and flourish without any help. Organizations with excessive ability are acting towards the common goal of helping COVID-19 workers like lodging is provided to healthcare workers by hotels and public transport is made available as a lifeline during this crisis. Organizations having the know-how in chemicals or fashion or automotive parts are now concentrating on the making of personal protection equipment (PPE), sanitation items and other medical kits/apparatuses. National agencies managing the division are also sharing their skills and knowledge cost-free with other corporations and boundary-less OI. Technically advanced health facilities are aiding patients without their physical presence (Table 3). Trace Together, Table 3

Companies’ response to COVID-19

Companies’ response to COVID-19: OI perspectives Bill and Melinda Gates Foundation, Well come, Mastercard and the Chan Zuckerberg proposed to set up a new $150 million COVID-19 research accelerator to “help speed-up the response to the COVID-19 epidemic by identifying, assessing, developing, and scaling-up treatments” Siemens, the German multinational, has made available its Additive Manufacturing Network to people requiring aid in medical device design Ford with the United Auto Workers, GE Healthcare and 3 M are building ventilators in Michigan employing F-150 seat fans, portable battery packs and 3D printed parts Microsoft and C3.ai (California-based AI company) have proclaimed a public–private group in association with MIT, Carnegie Mellon, Princeton and Universities of California, Chicago and Illinois, to provide funds and access to advanced supercomputers for finding answers to COVID-19 to scientists The US Food and Drug Administration (FDA) and the European Medicines Agency (EMA) are also commencing “regulatory convergence strategies” to avoid this crisis and achieve treatment responses to COVID-19 with sharing of data and regular statements with regulatory bodies around the world relating to preclinical and clinical risk mitigation plans

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introduced by Singapore (https://www.mobihealthnews.com/news/ apac/singapore-government-launches-new-app-contact-tracing-combatspread-covid-19) is a mobile contact tracing application, and voluntary public registration forms the basis for it. This application uses Bluetooth to note nearby human contacts within two meters for approximately 30 min. The source code is made by Singapore and the said application has been freely installed by more than 620,000 people. This application is available to global developers. Chesbrough and Garman (2009) note that financial disasters can be managed by growing openness. Presently, organizations are participating actively in associating with new partners exhibiting organizational adaptability while protecting advancement abilities for the growth in future (Chesbrough & Garman, 2009).

4 4.1

Role of Open Innovation

Examining Open Innovation in Large Organizations

Large multinational organizations like IBM, Lucent, and Intel (Chesbrough, 2003a, 2003b), Swarovski (D˛abrowska et al., 2019), and Nokia (Dittrich & Duysters, 2007) adopted OI with positive impacts (Brunswicker & Chesbrough, 2018; Remneland Wikhamn, 2020). Dittrich and Duysters (2007) examined how innovation systems are employed by organizations to deal with the changing technology. Their research depicts how Nokia has efficiently employed OI to manufacture goods and services and laid down technology criteria for utilizing mobile communication applications. DSM (Kirschbaum, 2005) understands innovation and says that it is a culture, not a process. Even the P&G Connect and Develop plan covers numerous features of the OI model like TAG formation and undertaking and participation of many “Internet-based innovation brokers” (Dodgson et al., 2006). As per P&G, “Connect and Develop” will be the next leading model on innovation in the twenty-first century (Huston & Sakkab, 2006). According to Zhu et al. (2019) organizations that adopted a business model should become accustomed to numerous OI plans to increase innovation advantages. Twelve firms in the USA recognized as “early adopters” of OI in the aerospace, chemicals, inks and coatings, and consumer packaged goods industries were researched by Chesbrough and Crowther (2006). They explained that OI practices are not extensively used, though firms

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on which the survey was conducted have sharply boosted the innovation towards influencing their external sources to balance their internal R&D performances during the past years. The research was conducted by Chesbrough (2007) to show how big organizations like IBM, P&G and Air Product and Chemicals transferred their closed business model to OI. More studies examined the probability of the functioning of OI practices (Lopes & de Carvalho, 2018). Big organizations have opened up their limitations for knowledge inflow and outflow to improve innovativeness and absorptive capacity, i.e. the capacity of organizations to identify the worth of information obtained externally, incorporating and using it on goods that are costly and marketable (Chesbrough, 2003a, 2003b; Yun et al., 2018), and to refresh their business models (Foss & Saebi, 2017). The OI model like leveraging external knowledge speeds up internal improvements and provides bigger markets for external improvements. Amazon has proposed its internal information technology (IT) structure to meet the needs of external website clients (Chesbrough, 2020; Huckman et al., 2008). Guoand Zheng (2019) researched three top home appliance manufacturers in China, namely Haier Group, Midea Group and Gree Electronics. They concluded in this OI age, organizations can attain better “positions, depth, and scope of catch-up with higher efficiency”. Elia et al. (2020) researched how organizations apply OI using the virtual brand community (VBC) in multinational corporations that function in the semiconductor industry. Such organizations apply a VBC as a tool for peer support and sharing of knowledge. Numerous organizations force VBC to attain OI like SAP with its SAP Community Network, Dell with its Dell Community, Philips with SPICE, Procter & Gamble with Connect & Develop community, etc. According to Elia et al. (2020) four types of initiatives, namely association and interacting with industries, education and partnership for R&D, IP as well as sale and acquisition of technology, and entrepreneurial initiatives and investments, help an organization maintain good relations with clients, partners, providers and research centres to chase and expand their goals relating to innovation. 4.2

Examining Open Innovation in Small and Medium Enterprises

In the advanced ecosystem, the role played by small businesses is also relevant as they add to the rate of employment and economy (Zutshi et al., 2021). Numerous studies relating to small and medium businesses have

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talked about the rising curiosity to examine OI (Colombo et al., 2014; Vagovic et al., 2012). Though SMEs largely contribute to the economy, most OI studies have been conducted on large organizations. The first article relating to OI on SMEs appeared in 2009. Batterink (2008) discusses OI implementation in SMEs. SMEs need to work and improve continuously to stay organized globally (O’Regan et al., 2006). If new plans to increase operating competence and new practises towards better performance in business are accepted by SMEs, it will help these enterprises to earn profits (Vagovic et al., 2012). There is a massive demand for OI in SMEs under “limited resources, markets and time” (Yun et al., 2018). It has been found that OI in big organizations is planned to avail complimentary advantages and abilities by their partners whereas, in SMEs, OI is required for resource and asset reimbursements (Hossain & Kauranen, 2016 A sample of Dutch innovative SMEs was researched by Vanhaverbeke (2006) while working in mature industries, and it was observed that procedures for retrieving external sources of technologies and knowledge were applied, while there were blockades for commercializing technologies disembodied from substantial objects, like in licensing agreements or technologies sales. According to a few researchers, SMEs are more reliant on OI in comparison with big organizations. To some extent, this is true for the commercialization purpose. SMEs have to keep convenient networks as there are insufficient funds, limited networking time and scarcity of other resources. Research conducted on small and medium manufacturing enterprises in Germany, Austria and Switzerland by Lichtenthaler (2008) depicted that 32.5% of the respondents were involved in OI performances. After exploring OI in SMEs, Vagovic et al. (2012) offered a model to explain how innovation can be promoted in developing countries. They were of the opinion that governments should promote association processes to join gaps between SMEs and individual inventors. According to Mei et al. (2019), SMEs’ connections with suppliers, customers, competitors, universities and research institutes, government agencies, science and technology service agencies have positive impacts on their innovation activities. Many researchers believe that where firms are interacting with multiple organizations, there is added innovativeness and a higher degree of organizational “ambidexterity”. Thus, it is essential for researchers to study possible advantages arising from OI that are available to SMEs (Radziwon & Bogers, 2019). According to a few researchers, direct assessment of combined strategic

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plans, relationships and intense knowledge of the reasons why it is important to strengthen absorptive capacity is a significant requirement for OI (Bougrain & Haudeville, 2002; Igartua et al., 2010). Cooperative strategies are hardly followed in developing countries like Nepal, India, etc., as it leads to very few associated business procedures between two or more organizations. Thus, it is not easy for SMEs in developing countries to connect in “collaborative networks”. Communication is often started by the government and its “collaboration process” building helps in bridging gaps between interested SMEs that concentrate on market demands (Vrgovic et al., 2012). Recent researches concentrate on how enterprises help in crowdfunding (Cillo et al. 2019) and how the CEOs of SMEs help OI. These studies convey that CEOs’ traits like “positive attitude, entrepreneurial orientation, patience, and education” are significant in helping OI research (Ahn et al., 2017). Today, in the Digital Age, OI has considerable capability (Enkel et al., 2020), where data, an external asset, can be employed to develop and create new goods and services. Digitalization has aided organizations digital ecosystems with opportunities by collecting big data from outside and building “engagement processes” by important stakeholders. With this, SMEs accepted plans with the help of e-collaboration tools, the internet community and big data platforms to obtain new plans for the creation of products and services and interacting with significant stakeholders (Papa et al., 2018; Santoro et al., 2019; Scuotto et al., 2017). An exception to this is provided by Huber et al. (2020) who studied SMEs’ open data and to get primary abilities that are required to conquer active hindrances for employing this data for novelty.

5 Moderating Role of Universities/Research Institutes To bring novelty in industries, universities’ knowledge production is essential (Johnston, 2020; Thomas & Paul, 2019). There is the conveyance of knowledge to organizations by “unintended flows” that produce spillovers from researches conducted in universities or through market interactions, like contract and associated research (D’Este & Patel, 2007; Huggins et al., 2019). Universities are a significant source of novel knowledge, especially in science and technology. The association between universities and organizations is considered for enhancing novelty in the economy with the help of the flow and employment of knowledge

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relating to technology and understanding across industries (Perkmann et al., 2011). Links between university and industry and their effect on novelty processes were analysed in many studies relating to management, novelty economics, industrial firms, the science and science studies sociology, and science and technology policy. Many advantages arose due to the association of universities and the economic environment actors. These advantages have a positive effect on “business competitiveness”. More attention is being paid to university-industry collaboration (UIC) due to excessive innovation and economic growth (Thomas & Paul, 2019). There can be “university-industry partnerships” in “small-scale, temporary projects to permanent, large-scale organizations” comprising many industrial members (Perkmann & Walsh, 2007). For instance, Intel’s focused on research and innovation cooperation by acquiring resources from universities. In multi-purpose issues and new learningfocused science projects, organizations prefer to work with universities as R&D partners to produce long-term advantages, like supporting their “absorptive capacities and radical innovation” (De Fuentes & Dutrenit, 2012; Maietta, 2015). University-industry collaboration is capable of improving the capacity of an organization in the OI particularly in firms that use external networks as a balance to traditional internal R&D in enhancing novelty and knowledge (Inauen & Schenker-Wicki, 2011; Dess & Shaw, 2001; Harvey & Tether, 2003). OI firms encompass networks combined with knowledge resources available with managers in universities/research institutions. This helps in the enhancement of performance and attaining competitive benefits (Naqshbandi, 2016). A new insight into OI approach in relation to university-industry relationships was provided by Perkmann and Walsh (2007). Distinct university-industry relationships, like “collaborative research, university-industry research centers, contract research and academic consulting”, were researched by them. High openness is provided by universities/research institutes (nonvalue chain partners) that perform long-term R&D in science. These universities bring in novel knowledge and “research intuitions’ openness” by organizations for recognition of new opportunities in technology and attaining growth (Ahn et al., 2018). Many researchers suggest that the more intense the relationship with the university is the more it will impact the profit. It is suggested that SMEs in developing countries should build good relations with universities for achieving incentives from joint innovations.

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Based on many authors’ opinions, large and small industries will associate with institutes (Laursen & Salter, 2006) as they have high research abilities, capital and strong networking. A major OI perspective player is academia. If an organization’s absorptive capacity is improved, it will aid in interacting with academics (Greco et al., 2017a). Maietta (2015) observed a positive impact on universities, public research laboratories, etc., association by employing “innovation subsidies as a dummy control variable”.

6

Open Innovation and Performance

Many firms have accepted OI as a powerful tool. As per Laursen and Salter (2006), organizations opting for external sources or search channels will have higher innovative functioning. External sources bring in new ideas to firms with technological opportunities. In a large UK survey of 2707 manufacturing firms, it was depicted that extensive and deep search for innovation sources is “curvilinearly” connected to the performance of innovativeness. Simply put, excessive OI will have a negative impact on the performance of a firm. According to Zhang et al. (2018), there is an “inversed U-shape relationship” between OI and profits earned by an organization. This depicts an edge for the efficiency of OI plans. If there is an increase in the firm’s investment in OI, it will affect a firm’s finances negatively. Numerous researches have examined the connection between “openness and performance”. Organizations that apply internal knowledge resources may fail to see opportunities, as innovation can be achieved with the necessary OI knowledge sources available outside the organization (Chesbrough, 2003a, 2003b). To increase sales, it is crucial to have openness towards customers, manufacturers/dealers and universities in R&D management (Lichtenthaler, 2009). An organization is at an advantage with inbound OI as it brings new ideas and knowledge combinations, novel market openings and mended solutions to problems (Greco et al., 2017b; Hung & Chou, 2013; Zahra et al., 2006). Outbound OI allows financial and non-financial advantages from the usage of knowledge and technology available with them. It also allows them to remain updated (Hung & Chou, 2013). According to Lee et al. (2010), SMEs can attain benefits from less marketing time, access to complementary assets, systematic and long-term processes, supporting strength or novel innovative opinions, OI in total sales, collaboration in product sales, dropin rates and working ration services. According to Wang et al. (2015)

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firms with outside connections can boost the inbound OI in improving the firms’ functioning. The impact of fundamental associative innovation networks on an organization’s knowledge transfer was studied by Xie et al. (2016). It was found that the impact of the innovative network on “knowledge transfer performance” is a systematic regular and lasting procedure. Many earlier researches talk about the positive impact of OI on the performance of an organization (Carayannis & Grigoroudis, 2014; Popa et al., 2017). Chiesa et al. (2009) observed OI’s positive impact on R&D functioning based on the fact that it can lead to low costs, short time to market, enhancement of sales, increased technological position and availability of new markets. According to Crema et al. (2014) , if SMEs want to get better performance, reliance must be placed on internal competencies’ exploitation and OI. Thus, if contacts are made with numerous external parties to source novel ideas, it can aid managers to improve radical innovation performance. Data from 136 industrial firms was used by Lichtenthaler (2009) and they held that outbound OI plans affect an organization’s performance positively. Liao et al. (2020) observed that in a highly technological industry, the maximum level of inbound OI and technical ability with a few “market information management” abilities results in better functioning in comparison with a low or high level of “market information management” ability. As per Verbano et al. (2013), in opened-type model organizations, the performance of the firm is high. This talk about the profitability of invested capital, ROI; profitability of sales, ROS; and overall profitability, ROA. According to Fu et al. (2019), OI plans impact differently at different times: (1) in the case of organizations’ short-term performance, inbound OI affects negatively (1–2 years) and a reversed U-shaped curvilinear relationship occurs after 3 years approximately. (2) The positive impact of outbound OI is present in the long-term performance of an organization whereas the negative effects are visible on short-term performance. Thus, it is essential for organizations to have a reasonable inbound OI level and a better outbound OI for longterm functioning. Chaston and Scott (2012) held that the functioning of the business is higher in OI organizations (Table 4).

7

Conceptual Model

In innovation management, the OI phenomenon is most widely studied. This research reviews OI literature. Major contributions of theoretical,

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Table 4

203

A summary of empirical studies

Literature

Year

Key findings

Laursen and Salter

2006

Popa et al.

2017

Singh et al. Wang et al.

2021 2015

Crema et al. Chiang and Hung Liao et al.

2014 2010 2020

Lichtenthaler

2009

Chaston and Scott Zhang et al.

2012 2018

Hung and Chou

2013

Sisodiya et al.

2013

Evidence of a firm’s external search strategy (breadth and depth) is curvilinearly related to innovative performance Evidence of outbound OI and inbound OI contribute positively to the firm’s performance Evidence of OI influences organizational performance Evidence of inbound OI influences organizational performance Evidence of OI influences organizational performance Evidence of OI influences organizational performance Evidence of the influence of inbound OI on firm performance Evidence of outbound OI’s positive effect on firm performance Evidence of OI’s influence on business performance Evidence of inversed U-shape relationship between OI and performance Evidence of external technology acquisition positively affects firm performance Evidence of inbound OI for enhanced performance

experiential and review articles are made in this content and a model is presented (Fig. 2).

8

Conclusion and Implication

There is a fast global change and major uncertainty is prevailing. It is becoming impossible to adjust to theories and structures relating to traditional organizational design because of these fast and intense changes. The small and large enterprises will take advantage of this disaster doubling the best OI practices. There can be a transformation in important organizational designs across firms to innovate regularly. With the increase in virus cases, there is also a boost in the number of promising partners. At the time of this global crisis, there are numerous better partners available now in comparison with the earlier ones as suggested by combinatorial exercise. Organizations are required to search for more partners in case of an emergency. To be on top of innovation, organizations are required to protect new partners and have an

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Fig. 2 Conceptual model

“open-minded attitude” towards them after the disaster. The main attention shifted from internal R&D functioning and the academic society suggested the implementation of outside innovation. “Not all the smart people work for us. We need to work with smart people inside and outside our company” (Chesbrough, 2003a, 2003b). Openness allows organizations to keep required innovation sources at a distance (Lichtenthaler & Lichtenthaler, 2009). This preservation of knowledge will help organizations from losing their ability of innovation and allow the organization to finally recover from recession (Chesbrough & Garman, 2009). There are many advantages of open approaches for innovation like accessing complementary assets, etc. These are available in SMEs and large organizations and improve an organization’s functioning in the universityresearch institutions that can be a moderator to conquer losses and recover quickly. Organizations can obtain and employ external sources of knowledge by following the OI approach. This aids in accessing and incorporating complementary reserves, experience and abilities; developing new ideas for the development of products; searching for ways of using commercially internal knowledge and Intellectual Property Rights (IPR); growing profits and revenues from innovation; and increasing

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knowledge base and client’s satisfaction (Chesbrough & Crowther, 2006; Thomas & Chopra, 2020). Besides the impact on economic growth, COVID-19 will also leave socio-economic effects. The predictions relating to long-term growth in investment will decline due to indecision, unemployment and the possible break in trade and supply linkages (World Bank, 2020a). Time has arrived to shift from closed innovation to OI (Cammarono et al., 2019; D˛abrowska et al., 2019). Having set up novel ways of doing OI during this disaster can bring the required suppleness and, finally lead to the company’s viability. Organizations are required to take help from other partners like firms related to universities, research institutions, governments, etc., to speed up the transfer of knowledge between them (Gupta & Thomas, 2019; Thomas & Paul, 2019). Corporate culture should be promoted by managers as it is important for OI’s success and doubly linked with organizations’ adopted models of business (Chesbrough & Crowther, 2006). For maximum effect, increasing spin-outs and investment is important (Davies et al., 2020). If good performance in radical product innovations is needed, then managers are required to come up with novel ideas from numerous external knowledge sources (Thomas & Gupta, 2021a; Thomas et al., 2020). Planning for a new normal and not the old normal is in demand. The open approach helps in organizational flexibility that can be attained by adding novel innovation (Dahlander & Wallin, 2020) and this can help organizations to move onto a new and healthy equilibrium point against global recession. Future researches can concentrate on the needed alteration opportunities to get incentives from OI with the required infrastructure in times of emergency. This can aid in understanding which areas are the most significant achievers with OI.

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Combating COVID-19 with Digital Marketing: Strategies for the Marketer Meenu Chopra and Neha Saini

1

Introduction

The Coronavirus pandemic 2019 has ushered the world into a spin. Every aspect of life, thought of as normal, seemed to alter. Economists from across the world have expressed concerns on the falling GDP’s as the pandemic touches’ new peaks every passing day. Businesses across the globe have faced disruptive changes like never before. Due to this sudden change in events, focus is now on building strategies that can help organizations combat this crisis. This has attracted the attention of the research community towards building and proposing solutions to survive in these unexpected challenges. Research studies conducted over a period of time have focussed on organizational capabilities, human resource management, corporate response, corporate social responsibility, the research findings of which

M. Chopra Department of Business Economics and Management Studies, Guru Gobind Singh College of Commerce, University of Delhi, New Delhi, India N. Saini (B) Netaji Subhas University of Technology, New Delhi, India e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4_12

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are quite significant for crisis management, but marketing innovation, as a strategy for crisis management, has not received enough attention. Though, research has shown that marketing interventions could serve as a solution during crisis (Naidoo, 2010). The COVID-19 pandemic has led to a marked change in consumer behaviour due to the very nature of it—social distancing, isolation and quarantine have never been experienced earlier (Kantar, 2020). These times have come with a series of business and investment risks and crises, but as every dark cloud has a silver lining, these times too come with a hidden opportunity. ‘Marketing innovation strategy’ refers to introduction of measures to reach out to the customer in novel ways so as to add value to the product offering (Manual, n.d.). If we analyse the situation, we might be able to observe the importance of technology-driven innovative ways using digital platforms for providing tailor made services to customer segments. Digital services and digital marketing have emerged as saviours during these tough times, which might help sinking organizations turn around their falling fortunes by redesigning some business processes. Despite huge economic and business losses, where thousands of business units have had to shut down their operations and several others have declared bankruptcy, some organizations have shown remarkable growth even during these tough times (Fairlie, 2020; Blackburn et al., 2020). The study of these organizations and the innovative measures they have adopted can serve as successful case studies in order to develop a framework for others to follow. The study proposes a “digital marketing” typology so they can market their products through innovative ways taking into consideration the current state of pandemic. Many international business managers initially failed to understand and manage this uncertainty, due to unavailability of a comprehensive framework that might help in overcoming this crisis period (Santos et al., 2020). In this lacuna, the inability of business managers to propose innovative strategies might have slung the business to huge losses. But the scenario was not the same for all the business units. EdTech start-ups BYJUS, WhiteHat Jr, Zoom and many more have shown remarkable increase in their revenues during the period. Ministry of Corporate Affairs, India reported a surge of 234% in the number of active companies. These organizations were able to look beyond the current haze and focus on the opportunity that lied ahead. One can observe similar circumstances in other emerging economies, where too, some businesses have grown by leaps and bounds during these times, a case in point is China which has emerged as a digital

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giant not only in business but also in marketing innovative strategies during this pandemic. The study begins by presenting the situational challenges faced by firms due to COVID-19 and how, due to its characteristic features, digital marketing fits the bill and may be able to provide some combat strategies; followed by development of four innovative digital marketing typologies. Further, the chapter discusses these strategies in detail and draws a comparison between them for firms to analyse, choose and implement. Finally, the chapter concludes with a presentation of theoretical and practical implications.

2 Digital Marketing: Contending the Challenges Posed by COVID-19 2.1

Disappearance of Traditional Media

The complete and sudden disappearance of all offline channels, events, conferences and programmes, with little or no social physical contact, whatsoever, posed a massive challenge for marketers (De’ et al., 2020). Business environment became extremely volatile and things changed at a rapid pace. COVID-19 has shown us new norms, a new-found uncertainty is hovering around each one of us. Business houses are constantly struggling to remain in touch with their customers—providing simple pieces of information like business operating hours, safety protocol/policies, whether delivery options are available or not or something as simple as—whether the organization is still in business or not, turned out to be an uphill task for regular businesses. Digital presence, thought of as optional before, ceased to exist that way, it became a necessity, it was the only way out if you had to remain in touch with your customer. 2.2

Being at Home and Social Media

COVID-19 quarantined everyone inside their houses and the only one thing that was not quarantined was the internet. With consumer demands and purchase behaviour changing fundamentally during this pandemic (Kantar, 2020), organizations had to innovate their marketing strategies to remain relevant. People were constantly at their homes and marketers needed to remain in touch with them. The one boundaryless medium

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which could act as a bridge between the two was communication through internet marketing. People were forced to remain indoors, which led to a sudden and drastic change in their needs and desires; it became quickly clear that demand patterns would change—with no moving out for travel, leisure, fun and entertainment—consumption of a number of goods would be badly affected—all contact businesses suddenly became a scare. Regular planning processes became irrelevant almost overnight and the focus shifted to replace the traditional linear approach with a more flexible iterative philosophy where planning and implementation would work closely, as there was nothing tried and tested, experiments in business strategy had to be done in the field now. For all of these novel problems, digital technology seemed to provide answers, it simply fits the bill—contactless, available over the internet, high reach and penetration, accessible remotely, instantaneous feedback and possibility of one-to-one connect with the customer were some of the features which gave a boost to “Digital” this pandemic. It is believed, due to the above factors, that digital can transform business models quicker than ever before. 2.3

Creating Combat Strategies: Ousting “Best Practices”

The need of the hour is to adopt novel and innovative marketing practices—either by collaborating with other digital businesses or by setting up units to meet the new trends in customer demand. Collaboration or diversification is two survival paths marketers may adopt and remain afloat in these times. The purpose is to implement improved and better marketing methods, enabling the firm to use their existing resources efficiently and deliver satisfaction to the customer by adopting an appropriate a strategic path. While choosing this path, the firm must deploy their own internal resources with the opportunities available outside. The firm must align itself with the demand pattern of target customers to remain in business and sustain this crisis. Being at home, maintaining social distancing, no gatherings, parties or get-togethers—“contact-less” is the new keyword. Some sectors of the economy have simply taken a flight due to these circumstances. As a case in point—education sector has huge significance in any economy, and around 40% of the population of the whole country is involved in the education sector (India Brand Equity Foundation Report, 2021) where in knowledge sharing is generally done with the help of lecture method. The most challenging job for a teacher is to keep students involved in the

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classroom considering the health crises we are all in, keeping the student body involved is an uphill task. Digital platforms have come to the rescue of the teaching fraternity, the education sector has taken a leap and with the use of these upcoming technologies broken all barriers of time and distance. Digital marketing has proposed innovative ways and has been a ray of hope for many business marketers to reach out to their existing customers and also target the newer ones (Bello et al, 2020; Sneader & Singhal, 2020; Stoll, 2020). Digital marketing has evolved as a saviour for many businesses in the current situation. As the saying goes—“Necessity is the mother of invention”—you put the marketer in a tight spot and he reaches out and expands in all directions possible—“Digital Marketing” seems to be the chosen direction this time around (Coreynenet al., 2017; Yooet al., 2012). The pandemic has reinforced the thought that “Best Practices” are never set in stone, what might seem logical today may become absolutely irrelevant tomorrow morning.

3 Digital Marketing-Based Business Transformation (DMBT) These sudden, dynamic, complex and disruptive changes in the business environment act as triggers for businesses to adopt innovative measures to reach out to their customers. Transforming the core business processes of an organization to meet these challenges is no mean job; it requires massive investments in R&D and introduction of major alterations in some of the central processes of the firm, while a marketing innovation strategy refers to an organization’s decision to employ completely novel or significantly improved marketing ways so as to fulfil the needs and demand of their customer groups in a better and more effective manner (Hurley & Hult, 1998). COVID-19 pandemic has hit business badly, specifically small and medium enterprises; adoption of novel marketing strategies which enable firms to use their resources efficiently in order to survive the times and satisfy the needs of the stakeholders can act as a saviour for these firms (Blackburn et al., 2020; Fairlie, 2020). The introduction and adoption of Digital Marketing-based business transformation would be far quicker and cost-effective owing to the features of “Digital”. The authors define DMBT as organizational transformation triggered by

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adoption of digital technology to transform marketing processes of a firm. A thematic map of DMBT is presented in Fig. 1 The core of all strategies lies in introducing Digital Marketing-based interventions for transforming businesses. Wang et al. (2020) proposed a typology matrix of Marketing Innovation Strategy for firms to adapt to the changing market circumstances. The authors, after the study of literature and observation of various aspects and trends in the macroenvironment, integrate a combination of six factors which should be used for analysis and making a choice from amongst the four strategies this chapter presents. These strategies aim to help struggling firms gain ground during these tough times. Based on six significant dimensions, namely Nature of product offering, Technology backup, Adoption of Digitization in business processes, Value creation through digitization, Business Intelligence dissemination, Level of collaboration and Key success factors, Digital Marketing-based business transformation (DMBT) strategies will be proposed. Nature of product offering —works on a continuum where the product/service offered by the marketer can range from being a pure tangible, physical like grocery to a pure intangible offering like education and consultancy.

Fig. 1 DMBT thematic map

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Technology backup refers to the alternatives the firm has access to support a shift from traditional methods to digitization, the presence of alternative technology for use in case of a shift. Usage of electricity in business unit is regular, but access to and possession of technology to use solar power in case of need is an example of technology backup. Use of “anydesk software” to be able to access and control second party laptop to examine the working of software/hardware from any part of the world, this is an alternative to physical presence of technical team to handle software or hardware problems onsite. Adoption of Digital transformation in production process involves reduction in human involvement and maximizing use of digital technology. Using digital prints, dyes, digital cutting, handling and distribution in production processes minimizes time and resource wastage. All of this requires a lot of capital investment and this acts as a major constraint for organizations to adopt complete digitization and automation of organizational processes. Hence, the adoption of new technology must be well planned and aligned with other processes of the organization. Firms have chosen to find best fit for digitization of certain processes keeping in mind their resources and requirement. Some might decide to use in initial stages of procuring raw material using different technologies, while others may transform some activities of their production process. Completely made possible by the web, contactless delivery right at the doorstep, where products are not handled by humans at any stage of entire process, is in place in massive warehouses of Amazon already. We are already witnessing trials of complete automation for delivery of products right at the doorstep of the customer through drones in some parts of the world. Value creation through digitization—Porter’s Value chain analysis categorized digitization under support activities. With the advent of twentyfirst century, the involvement and dependence of technology in business processes have both grown exponentially. It has come to play important roles and acts as a primary value adding activity for a large number of businesses today. The value creation process of the firm is largely becoming dependent on the use of digital technology. This feature aims to understand the extent and importance of digital technology in the value creation process of the firm. Business intelligence dissemination—expectations of the stakeholders may be met by embracing the institutional logic as “institutional isomorphism” (DiMaggio & Powell, 1983; Kauppi, 2013; Liang et al., 2007;

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Lin et al., 2020). Institutional isomorphism occurs via three stages, first in coercive pressure, then normative pressure and finally with mimetic pressure. Coercive pressure refers to the pressure from external sources resulting from governmental or regulatory sources, from cultural expectation of the community or any other association which turn around the ways of doing business. The current crisis period has forced the business firms to change their marketing strategies making it contactless, named it as coercive isomorphism. DiMaggio and Powell (1983) defined normative pressure as “…the collective struggle of members of an occupation to define the conditions and methods of their work, to control the production of the future member professionals, and to establish a cognitive base and legitimation for their occupational autonomy” hence leading to normative isomorphism, which is developed via professional, education and training purpose. The last one is called Mimicking strategy, wherein the firm decided to copy competitors without gauging its own capabilities and hence there is poor alignment between the mission and vision of such an organization and their actions. Level of Collaboration—this feature was adopted from Wang et al. (2020). Wang defines level of collaboration as “distinguishing whether the firm innovation strategy is based on firm itself or based on collaboration with others ”. This feature talks about the dependence of firm on another business units for resources and capabilities. Low level of collaboration signifies firm is capable enough to sustain independently, however, higher level of collaboration signifies the dependence on others for capability and resources. Key success factors, the last dimension, refer to factors that act as triggers for potential business units to adopt digitization. It involves the important dynamics that a company must have in order to compete in its target markets. These factors play a critical role in determining the rate at which technology disruption is going to be successful, like digital development, willingness to participate and collaborate with market leaders and many more. Based on the analysis of the above six dimensions, four Digital Marketing-based Business Transformation (DMBT) strategies have been proposed presented along with the different case scenarios (Table 1). A firm must decide to choose one of the DMBT after conducting a thorough SWOT analysis and considering its adaptation and absorption capabilities.

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Table 1 Transformation approaches Business feature

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Digital marketing-based business transformation strategies Alliance approach

Pre-emptive approach Level from strong to weak

Consequences of adopting this strategy Already possesses organizational capabilities

Level from strong to weak

Consequences of adopting this strategy Already possesses organizational capabilities

Reactive approach

Co-operative approach

Level from strong to weak

Consequences of adopting this strategy

Level from strong to weak

Consequences of adopting this strategy

High physical contact

Need to reconfigure organizational capabilities

High physical contact

Need to reconfigure organizational capabilities

Product offering

Low physical contact

Technology backup

Strong backup

Huge investment

Moderate backup

Moderate investment

No backup

No investment in digital transformations

No backup

Adoption of digitalization in business processes

Adopted already at various stages before pandemic

Competitive edge

Adopted for some processes

Less effect of COVID-19 crisis

Not adopted for any process

Huge lossesbusiness shutdown if appropriate actions not taken

Not adopted for any process

Value creation through digitization

As primary activity

Easy to adapt to disruptive situations

As a different activity (not part of business operations)

Huge transformation required to adopt digitalisation

As a different activity (not as a part of business operations)

Revitalize existing business

Business intelligence dissemination/stra tegic path

Normative strategy

Can achieve market leadership

Mimicking strategy

May lock down/or incur huge loses or deploy newer way of doing business

Mimicking ad normative strategy

Survival through alliances and encashing innovation opportunities

Level of collaboration

Low

Economic sustainability

Low

Firm may escape shut down

High

Able to sustain in market with normal profits

Key success factors

Digital development

Low physical contact

Moderate efforts required to adapt to disruptive situations Develop new business by Normative and combining mimicking internal strategy advantages with external opportunity Recover from losses and learn High competitiveness from leaders Vertical/horizontal digital partnership

3.1

As a support activity

Strategic way to transform small part of business to digital

Hit hard due to insufficient resources and capability to upgrade Ready to collaborate towards marketing innovations with other market giants

Alliances with diverse business to overcome bottlenecks

Pre-Emptive Approach

The first DMBT strategy is Pre-emptive approach that can be adopted by a firm which has already integrated digital technology in its business processes. Under this transformation strategy, firms use hybrid technology, both offline and online mode of operations, and have a competitive advantage in online strategy. They are using social media to reach out to their customers, e-commerce to sell their products— business models are maybe completely internet or app based. They have strong technology backup and have invested huge capital in it. These firms are pioneers in their respective fields, they are the front runners who possessed a vision for digitization, when others were unsure about it. The top-level executives and other stakeholders realized the potential that digitization had to offer and decided to ride the tide. Digitization has been integrated into every aspect of the economic value chain of the firm— from the supplier to end-user. The whole credit goes to their visionary approach to go for digital maturity to effective decision making. These firms have changed digital services of their value chain from support system to primary activity by following the business intelligence dissemination through normative approach and provide professional

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training to their employees and other stakeholders. With this investment in their value creation system, such firms have led the market towards economic sustainability. Another very important feature is the ability of these firms to take advantage of existing accumulated resources, leveraging their existing organizational capabilities and optimize the business independently in order to respond to the changes in environment, truly makes these firms market leaders. So, in times like today—emergent circumstances where the business environment is like a whirlpool—ready to engulf any and every organization, these firms stand tall and in fact have seen a massive jump in their business operations due to their flexibility and adaptability. By implementing Pre-emptive DMBT strategy, organizations can not only serve their current customers better but also acquire new ones. For example, Netflix, online streaming platform, has become a hot favourite during the COVID-19 pandemic. People were home, they couldn’t visit malls, cinema halls or concerts, so entertainment had to come home. The features of the product were such that it was well suited for these current times. Netflix added 15.8 million new customers in the first quarter of 2020. This momentum was kept up the entire year by the intelligent use of social media. The social media team asks questions and creates polls stimulating viewers to have casual conversations about shows making this a trending topic, they let everyone know what is new on Netflix through their social media handles and provide suggestions on what to watch, collaborations with a large number of companies to run multi-channel campaigns so if you have an account with a partner bank of Netflix, you not only get a 50% discount but it also creates photo effects on Snapchat and Instagram for these app users. Netflix made the entire content free for a 30-day trial before it would start charging—bridging the gap for hesitant users instantly and provoking a lot of trials. Suggestions are constantly given to current users based on their choices and preferences which puts the viewer in a loop of moving from one show to another. Netflix partnered with social media influencers to create promotional content for their shows which is constantly put up on YouTube. Another example of Pre-emptive DMBT is that of recognizing business opportunity and acting proactively to encash it well in time. We have seen many pandemic success stories unravel this year. The ban of several Chinese apps, including the very popular TikTok, left a huge void in the Indian market. TikTok was immensely popular for short videos presenting entertainment content. The customer base was massive, and hence a huge

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number of people were left without a social media outlet due to the ban. This came as an opportunity for app developers to encash on this active user base of TikTok who were left floating without a medium to connect to their audience. This led to the rise in Made in India apps and platforms like MX Takatak, Moj, Chingari, Josh and Roposo. YouTube launched “Shorts” which were in a way another outlet for TikTok users to be able to create similar content, Instagram’s “Reels” were aimed at the same thing. These apps provide customized content in regional languages which contributes hugely to their success. In India, the success story of these homegrown apps has been nothing short of a dream run. This has been due to aggressive digital marketing and user acquisition by these platforms. The Daily Active Users (DAUs) have reached 97% of what this number was in June 2020. 3.2

Alliance Approach

The second DMBT strategy is Alliance approach. Businesses following this approach are less affected by the pandemic wave as they partially adopted digital transformation before pandemic. The primary activities of these firms have a strong technology support system in place. Digital transformation has been adopted in vertical and horizontal integration process; however, they need more consideration toward full system implementation. Such firms are not completely self-reliant; hence, they need a helping hand to pull them out from these circumstances. Such firms usually analyse their core competencies using SWOT analysis and develop new channels of business in collaboration with market leaders. The business intelligence dissemination is followed either by copying the strategy of market leaders or by arranging for professional training and development for such integration. The main motive for adopting such strategy is to escape potential business losses and earn normal profits for example, Rebel foods has disrupted the food business during the pandemic by successfully creating the largest chain of “internet restaurants” around the world. The model on which this success story is based is novel to India— they run “Cloud kitchens” across their markets. They have no brick and mortar presence, but own a plethora of brands—Oven Story, Fassos, Behrouz biryani just to name a few. The organization, it seems, has been able to build and sustain a number of extremely efficacious brands. Not that the company did not face challenges during this pandemic— the company could not operate all its kitchens as neighbourhoods did

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not want them to operate, there were government restrictions along with the problem of public transport unavailability for staff to commute. The pandemic has caused many troubles—decrease in demand by 40%, trust issues had to be addressed, delivery options were limited and had to be done carefully, revamping the marketing communication, kitchen hygiene, etc. Many of these were addressed by small interventions: – Workforce was optimized based on the closest kitchen. – Measure body temperature of delivery persons and 24/7 tracking of the kitchen hygiene through CCTV cameras. – Since the organization runs a number of food brands, the employees are not locals—and every measure was taken to retain the staff. – Marketing messages have shifted from taste and flavour to trust building communication. – The organization has tied up with some hotels too which are more than willing to lend their kitchens as they remain under-utilized. 3.3

Reactive Approach

The third strategy, i.e. Reactive approach, is apt for firms hit hard by the pandemic due to their unwillingness to go digital. These firms were extremely successful pre-pandemic, had efficient business processes and huge share in market due to their expertise and performance in offline mode. In response to COVID-19 pandemic, these firms have had to adopt digital services in their value chain. Such firms already have strong market base, but they need to deploy their business strategy for considering market innovative practices to realize the survivability of their existing business unit. Due to lack of business vision for digitization, they may follow the strategy adopted by market leaders by copying their business moves. Firms that choose to follow this strategy have a high-contact product offering and are in a position to independently integrate and re-align their resources by adopting Reactive DMBT by shifting from their original offline channels to online. In this backdrop, they are bound to follow mimicking approach to disseminate their business intelligence. They may decide to also adopt the electronic channels to ride over this crisis. The onset of SARS crisis in the year 2003 was deemed largely responsible for initiating the success story of Alibaba and other similar

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organizations in e-commerce in Asia. It was during this time that Alibaba launched its online delivery model when people were struck at their homes. One can find many organizations going online. When COVID19 hit the globe, many businesses were not equipped to handle such a situation. As lockdowns eased, guidelines were laid down for operating retail outlets, cinema halls, restaurants and other similar businesses and since then many of them have learnt to cope. Big budget movie makers mobilizing their marketing operations and deciding to release their movies through online streaming platforms is a well-found way to reach their audience. It has been seen that firms which partnered with successful digital providers and worked on automating their business processes have exhibited maximum resilience during this pandemic. An example of a Chinese retail outlet that deployed its sales staff as hosts of live streamed events to combat low sales was able to achieve the same level of sales during these times too. This DMBT strategy has been the most exploited—anything and everything— groceries, yoga classes, cooking videos, baby food delivery and preparation, fitness, zoos, museums have used Reactive strategy and adapted their business to suit online streaming and producing video content to promote their products offerings to keep their business alive and kicking. 3.4

Co-operative Approach

Partially similar to Response strategy, the fourth DMBT is the Cooperative approach, where the firm is facing massive losses due to current pandemic and the only way out is exploring possibilities for collaborations. The very nature of the product offering is high contact and the demand has completely slackened during these times. Such firms have not made any investment for digitally transforming their business operations. The adoption of this strategy would mean collaborating with another organization to have synergistic effect. Shell fuel stations have been in business for decades but this situation is extraordinary for them. The demand for fuel turned negligible for some time during the pandemic, to keep up their service record for the customer and maintain their relationship, shell extended their product offering from fuel to ready to eat food items, milk, bread, eggs, etc. They also introduced safety essentials like disinfectants and sanitizers. The company collaborated with “Dunzo” to ensure delivery services were not only provided but done well too.

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4

COVID-19 and Consumer Behaviour Insights

The digital marketing space is booming, every brand wishes to have a presence online, but one point which is going to differentiate leaders from laggards is the understanding of consumer behaviour. Considering the world has not witnessed a pandemic of this scale in nearly a century, the consumer behaviour needs to be studied. This pandemic is having a serious impact on economic and cultural characteristics of the world at large, as it is directly hitting, both, market dynamics and consumer’s state of mind. This behaviour, though not permanent, but brings structural changes in way of living, spending, working and consumption patterns. Some of the notable consumer behaviour trends that have been observed are discussed below: i. Consumers view this situation as a threat and have indulged in hoarding essentials. The pandemic has elicited fear in people, they were seen frantically purchasing cleanliness, hygiene and staple products to outmanoeuvre this uncertainty. It has been observed that people are spending much less on non-essential and luxury goods, compared with pre-pandemic patterns. Food, medical and financial security have taken a leap. ii. Due to home quarantine and work from home culture, customers prefer to opt for e-commerce platforms like official sites, social media including Facebook, Instagram, Twitter, WhatsApp, online shopping apps and many others for ordering the required goods and services (Accenture, 2020). Consumers have moved to online shopping—grocery, medicines, food items, domestic services and help, education, medical consultancy are only some of the sectors which have not only survived but grown exponentially due to consumer’s shift to online channels. iii. Delivery services have also thrived during these times, struck at homes, people have sought deliveries for a range of products (•Poland: Growth in Online Sales of Hobby and Leisure Items Due to COVID-19 2020 | Statista, 2020). Many businesses are gliding through this pandemic due to the presence of functional delivery businesses adept at reaching a large chunk of population. iv. Studies have shown that consumers have stayed more in touch with their family and friends in comparison with earlier, through the use of social media. They adopted technology to stay connected—as

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mentioned earlier—internet was the only place not quarantined, staying in touch with loved ones in times of a crisis was made possible and people were making good use of it. v. Health and fitness have been another area of consumer interest during this time, the consumer was shaken by the threat the virus posed, and started binging on health and fitness content from all sides, which resulted in the same pattern being observed in consumption too (Kirk & Rifkin, 2020). There are suggestions pouring from all sides—social media, news channels, family and friends, etc., which led to increase in consumption of this content and products alike. vi. ‘Work from home’ was a revolution in the initial phases of the lockdown, never had the entire world’s population stayed and worked from home for so long, which led to changes in consumption patterns—home redecoration products were suddenly selling more, people were re-doing and re-thinking their living places much more than earlier (Antúnez et al., 2021). Demand for home office products went up with creation of workplaces at home. vii .As a result of staying at home, rise in inculcating new or reviving old hobbies has also been observed, people were purchasing more books, gardening equipment, etc., rise in hobby and leisure products to spend time at home is a trend. viii. Rise in conscious consumption—there is thought about sustainability, food wastage, cost awareness—people have risen to think about higher good, the feeling of mankind as “one” seems to have emerged and care for the environment is also exhibited more in consumption patterns. ix. Preference for ethical brands—one’s which are able to look beyond profit, help people in times of need, plough part of their profit for societies well-being—has also risen. Consumers have closely observed the behaviour of brands during this time and chosen to opt for the ones which have been empathetic and caring. Evolving consumer needs have created new digital habits—consumers are turning to the internet for everything. Digital platforms are playing a strong role in creating awareness and reaching out to fulfil the needs of the customers. Contact-less deliveries of every product and access to all

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kinds of services have been made possible due to these digital platforms. This consumer trend has tightened its grip on the market and is here to stay post-pandemic too.

5 5.1

Conclusion

Digital Marketing: “A Strategy for Keeps”

Digital marketing-based business transformation has been documented as an important strategy to respond to disruptive environmental changes. Now is the time for businesses to reset and adopt digital marketing. Digital services have, overall, upped their game in the value-chain of organizations—from support services to primary activities; they are here to stay and will keep transforming business models from new to newer, year on year, in fact month on month. The current study offers significant contributions by proposing strategies for organizations to ride this wave to not only survive this pandemic but take it higher in post-COVID times too. The authors try to study the challenges faced by business units caused by pandemic and the solution in the form of digital transformation strategies to survive in this disruptive situation. “Agility” and “Flexibility” is the key—business operations must be able to adapt and respond quickly to market forces. As said earlier, no best practices are laid in stone—digital interventions have introduced fast paced changes in the way products are produced and consumed, modifying the entire value chains of organizations on the way. This is going to have overarching effects on all traditional business models. With real-time data on consumer behaviour accessible to marketers, targeting will graduate from calculating averages to understanding individual behaviour, old business models would break and new ones will be set up, and it won’t be long when organizations will be able to track actual and potential customers real-time. Digital Marketing offers a “window of opportunity”—there will come normal times, when advertising budgets return to their original figures and offline events will provide the same benefits as Pre-COVID times, but digital marketing will be a “strategy for keeps” for smart marketers, and not just fall in the contingency plans. These, sure, are challenging times for business houses that are not willing to think about how they will replace the lost opportunities. Businesses should adopt this shift to “Digital Marketing” strategically, instead of thinking of it as an emergency

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fill-in, this strategy must be recognized as one that adds long-term value and should be integrated in the overall marketing communication, even when the world gets back to normal. Mehta et al. (2020), have so rightly said, COVID-19 is a handbrake for mankind to pause, look back and ponder on how we have tried to skew nature’s equilibrium in our favour and can we sustain it any longer! The answer to this question will determine how we redefine, strategize and reshape our product offerings and the direction in which we propel our business transformations. Nevertheless, these answers should be sought by all; for businesses to manoeuver successfully through the current times, DMBT strategies may come to rescue.

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Index

A Aeroméxico, vii, 117, 118, 120–122, 124–128 Airbnb, 105, 107–114 Airlines, vii, 117, 118, 120–122, 124, 126, 127, 161 B Business, v–viii, 1–4, 6–8, 10, 11, 13, 14, 22, 24, 25, 28, 38, 42, 47–53, 56, 57, 63, 89, 90, 92, 94, 103–106, 108, 112–115, 117, 119, 122, 126, 127, 134, 135, 139, 143, 144, 146, 147, 150, 156–158, 165–169, 175, 178, 180, 185, 190, 191, 193, 195–198, 200, 202, 203, 205, 214–226, 228, 229 C Channel, vi, 49–52, 56, 57, 159, 201, 215, 222–224, 226, 227

Consumers, viii, 105, 108, 113, 114, 158–160, 165–169, 195, 196, 214, 215, 226–228 Countries, vi, vii, 1, 3, 8–12, 22–25, 30, 37, 38, 42, 49, 58, 61–64, 66–71, 74, 78–80, 83, 87, 89, 91, 104, 106, 107, 118, 121, 124–126, 133, 134, 137, 139–143, 145–148, 155–158, 161, 165, 166, 174–181, 183, 189, 198–200, 216 COVID-19/COVID, v–viii, 1, 2, 6, 21, 23, 24, 26, 28, 30, 38, 39, 41–43, 47–58, 62–64, 79, 88, 103, 115, 117, 118, 121, 122, 126–128, 134, 135, 142–148, 150, 155, 156, 158, 160, 161, 165–168, 173–183, 189, 190, 194, 195, 204, 214, 215, 217, 222, 224–226, 229

© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2021 J. Paul and S. Dhir (eds.), Globalization, Deglobalization, and New Paradigms in Business, https://doi.org/10.1007/978-3-030-81584-4

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INDEX

D Deglobalization, v–viii, 1–8, 10, 11, 13, 14, 21–23, 25, 26, 28, 30, 88–95, 119, 133–135, 140, 142–145, 147, 148, 150, 156–161, 165–169, 174–176, 178–181, 183–185 De-internationalization, vii, 1, 3, 4, 14, 117–122, 124–128 Developing, v, vi, viii, 57, 61–64, 71, 78, 79, 88, 95, 133, 139, 143, 147, 155, 157, 174, 181, 183, 195, 198–200, 204 Digital, vii, viii, 105, 158–160, 165–169, 176, 178, 199, 214–220 Digital marketing-based business transformation (DMBT), viii, 217, 218, 220–225, 229

E Economies/Economy, v, vii, viii, 1, 5, 22, 23, 25, 37, 41, 45, 57, 58, 62–66, 69, 70, 74, 78, 103, 104, 133–143, 145–147, 149, 155–161, 167–169, 174–178, 180, 183, 189, 195, 197, 199, 214, 216

F Factors, vi, 3, 11–13, 22, 23, 25, 26, 28, 30–32, 53, 61, 62, 65, 67, 71, 79, 87, 90, 91, 94, 119, 120, 139, 140, 145, 146, 162, 178, 216, 218, 220 Firms, vi–viii, 1, 11, 13, 14, 22, 24, 37–41, 43–50, 53, 54, 56–58, 66, 67, 87–93, 103–108, 112–115, 126, 149, 193–196, 198–205, 215–225

G Globalization, v, vii, viii, 3, 8, 11, 13, 21, 22, 25, 30, 37–39, 87, 89, 90, 93, 94, 105, 128, 133–136, 138–147, 149, 150, 155–161, 174–179, 181–185 Gross domestic product (GDP), 23, 41, 42, 45, 62, 67–72, 74, 77, 78, 80, 81, 103, 139, 149, 156, 174, 178, 213 Growth, viii, 10, 22, 23, 25, 61–64, 67–72, 74, 75, 77–80, 82, 89, 138, 139, 146, 149, 155–157, 168, 174, 175, 183–185, 189, 190, 196, 200, 204, 214 H Health, vii, viii, 21, 22, 143, 146, 148, 156, 157, 161, 173, 175, 179–181, 183, 189, 195, 205, 217, 227 Hospitality, vii, 103–108, 113, 115 Hotels, 105, 107, 108, 110, 112–114, 195, 224 I Impact, v–viii, 3, 9, 10, 14, 24, 25, 28, 38, 39, 42, 43, 47–49, 51–53, 56–58, 63, 67, 68, 71, 78, 103, 104, 106, 110, 114, 115, 122, 128, 137, 139, 141, 149, 155–158, 160, 161, 167– 169, 173, 174, 177, 179–181, 184, 190, 191, 194, 196, 198, 200–202, 204, 226 Index, v, 1, 2, 63–66, 68–71, 74, 76, 78, 80, 81, 161 Inflows, vi, 61–65, 67–69, 71, 74, 78–80, 139, 145, 192, 193, 197 Innovation, viii, 21, 66, 185, 190, 191, 193, 194, 196–198,

INDEX

200–202, 204, 205, 214, 217, 220, 230 Inputs, 38, 40, 45–50, 52, 53, 55–57, 63, 66, 192 International, viii, 1–3, 6, 7, 9, 14, 22, 24, 28, 39, 40, 42, 63–65, 67, 79, 81, 107, 117–121, 124–126, 133, 135–140, 143–147, 149, 150, 157, 159–161, 174, 175, 179–181, 183–185, 214 Internationalization, 7, 14, 41, 89, 92, 117, 119, 124, 126 International joint ventures (IJVs), vi, 87–95

K Knowledge, viii, 4, 8, 11, 14, 61, 87, 88, 90, 91, 105, 121, 160, 162, 177, 190–195, 197–202, 204, 205, 216

L Location, 38–40, 43–48, 50, 53, 54, 179 Lombardy, 39, 41–45, 48, 49, 56

M Management, 4, 7, 10, 13, 14, 61, 89, 105, 119, 134, 180, 199, 201, 202, 213, 214 Manufacturing, vi, 9, 10, 13, 22, 24, 25, 28, 38, 39, 41–44, 46, 47, 50, 53, 56, 121, 139, 140, 145, 181, 190, 195–198, 201 Market/Markets/Marketing, vi–viii, 2, 3, 7, 9, 10, 13, 14, 22, 37, 38, 40, 41, 57, 61–65, 67, 69, 71, 81, 87–94, 117–122, 124–126, 134, 136–141, 143, 146, 156, 158–161, 165–169, 174, 175,

235

178, 179, 183, 185, 193, 197–199, 201, 202, 214–218, 220, 222–226, 228, 229 Media, vii, 105, 106, 108, 109, 113–115, 122, 141, 148, 159, 221–223, 226, 227 O Openness, vi, 1, 2, 41, 42, 61–64, 66–72, 74, 76–80, 145, 196, 200, 201, 204 Operations, vii, 1, 3, 13, 44, 87, 90, 107, 114, 118–120, 122, 124–126, 128, 139, 214, 221, 222, 225, 228 Organizations, vi, viii, 7, 11, 90, 92–94, 146, 190–202, 204, 205, 213–215, 219, 222, 225, 228 Outsourcing, 38–40, 46, 47, 50, 54, 56, 57, 79, 146 P Pandemic, v–viii, 1, 2, 6, 21–25, 28, 30, 38, 39, 41, 42, 47–49, 51–57, 62, 63, 88, 103–106, 114, 115, 117, 118, 121, 122, 124–128, 134, 135, 140, 142–148, 155–158, 160, 161, 168, 173–175, 177, 178, 180, 213–217, 222–226, 228 Participants, 163, 165, 167 Performance, 1, 3, 90, 91, 115, 180, 196, 198, 200–203, 205, 224 Political, 3, 7, 65, 67, 69, 70, 80, 133–139, 141–143, 145, 149, 150, 175–178, 183–185 Processes, v–viii, 3, 7, 13, 14, 23, 26, 28, 30, 37, 46, 48, 50, 56, 63, 89, 105, 112, 117–120, 124–127, 133, 134, 136, 138– 143, 146, 149, 155–157, 159,

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INDEX

168, 175, 176, 179, 183–185, 190, 191, 193, 194, 196, 198, 199, 201, 214, 216–219, 221, 223–225 Production, 21, 22, 24, 25, 28, 37, 38, 40, 42, 46, 48–50, 56, 63, 67, 81, 137, 138, 149, 157, 158, 175, 179, 180, 189, 199, 219 R Research, v–viii, 2–4, 6, 8–11, 13, 14, 26, 30, 39, 54, 58, 65, 79, 89, 94, 95, 104, 105, 114, 115, 127, 128, 148, 160, 162, 175, 184, 190, 191, 194–202, 204, 205, 213, 214 Restrictions, vii, 21, 23–25, 28, 42, 48, 49, 63, 74, 80, 122, 124, 128, 134, 135, 148, 162, 183, 224 Review, v, 2–4, 6–10, 15, 23, 26, 39, 64, 67, 105, 118, 135, 160, 190, 191, 202 S Shocks, vii, 38, 57, 58, 62–67, 70, 73, 74, 76–81, 127 Small and medium sized enterprises (SMEs), viii, 158, 190, 191, 197–202, 204 Sourcing, vi, 38–41, 43, 45–48, 50, 51, 53, 54, 56–58, 157 Strategic, v, vii, 3, 11, 64, 90, 94, 106, 115, 124, 198, 216, 228 Strategy, vi, viii, 2, 3, 5, 13, 21, 25, 30, 45, 48, 51, 54, 56, 57, 114, 125–128, 138, 179, 190, 194, 203, 214, 216, 217, 220–225, 228, 229 Supply, vi, 1, 21, 22, 24, 25, 28, 49, 53–55, 57, 58, 63, 79, 107, 108,

112, 157, 158, 160, 161, 176, 180, 204

T Technology, 9, 10, 21, 43, 79, 90, 133, 136, 142, 161, 178, 181, 189, 194, 196–201, 203, 214, 216, 218–221, 223, 226 Termination, vi, 3, 89–94 Theory, 7, 8, 40, 80, 81, 137, 141, 149 Tourism, 5, 9, 10, 24, 26, 28, 110 Trade, v–vii, 1, 3, 10, 21, 22, 25, 37, 41–43, 61–72, 74, 76, 78–80, 120, 133, 135–143, 145, 146, 148, 149, 156–161, 174, 175, 178, 179, 183, 204 Transformation, viii, 68, 134, 138, 175, 204, 217, 221, 223, 228, 229 Travel, 9, 21, 23, 24, 28, 103–105, 107, 110–112, 114, 128, 134, 145, 161, 189, 216 Tweets, vii, 106–109, 112–115

V Ventures, 67 Vulnerability, vi, 63–69, 78–80, 146, 185

W World, v, vi, viii, 21, 22, 25, 37, 57, 68, 87–94, 103, 107, 110, 121, 122, 126, 128, 133, 135, 140–142, 145, 146, 149, 150, 155–159, 161, 165–169, 173, 174, 176–181, 183–185, 189, 190, 195, 213, 219, 223, 226, 227, 229