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Globalization

While globalization is neither a new concept, nor a new occurrence, it has gained currency over the last two to three decades primarily due to the growth of emerging economies like China and India. In this connection, Gentry and Sparks (2012) have noted that, as a result of increasing foreign competition, organizations are sometimes forced to go global, whereby operating in a global context with a global mindset is an imperative, and not a choice. As these two economies have grown and become major exporters and also begun to attract foreign direct investment (FDI), innovation has played a critical role. Take the case of China, which has become a major exporter of all kinds of goods over the last two decades (Zhang & Roelfsema, 2014). In order to compete with the domestic producers of those goods, and exports from other nations, Chinese firms have naturally had to innovate, to ensure that their products meet global quality standards, while at the same time continuing to maintain low costs. Relatedly, the opening up of China’s economy has also seen a rush by almost all major global corporations to set up manufacturing facilities in China. The resultant infusion of FDI has had significant positive impact on innovation (Cheung, 2010). Similarly, the opening up of the Indian economy in the early 1990s led to a huge influx of FDI into India, though the two Asian giants were seen as being different. While China became the “factory” of the world, India came to be known as the “back office.” At least initially, many global corporations moved their service divisions to India, to capitalize on the English language ability of the workforce, and cheap labour costs. Indeed, India came to be known for BPOs (business process outsourcing), call centres, and software development work. However, this was soon followed by the establishment of research and development (R&D) facilities. As Jha and Krishnan (2013) have noted, “India has rapidly emerged as a hub of MNE innovation activity.” In order to take advantage of the vast over-supply of intellectual capital, many multinationals (MNEs) started establishing R&D facilities in India, again confirming that there is a strong relationship between FDI flow and innovation. We started this section by discussing how globalization affects, and often causes, innovation. We want to conclude the section by noting that innovation was one of the prime factors that allowed globalization to grow and flourish (see, e.g. Josephine, 2014). Some of the earliest innovations like boats and ships allowed intrepid souls to set out in search of for-off lands, while the airplane made it possible to travel around the world in much shorter time spans. Over the last two decades or so, several technological innovations, including the invention of the world wide web, have revolutionized the world as we know it, leading to a much more connected globe. In the following sections, we present a discussion of the various facets and nuances of innovation, followed by a discussion of the interplay of innovation and leadership.

 
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