Internet Boost the Economic Growth of Mainland China? Discovering Knowledge from Our World Wide Web

By Li, Rita Yi Man | Global Business and Management Research: An International Journal, July-October 2011 | Go to article overview

Internet Boost the Economic Growth of Mainland China? Discovering Knowledge from Our World Wide Web


Li, Rita Yi Man, Global Business and Management Research: An International Journal


Introduction

Internet generate a revolution in the economic geography in the 21st century, modern neighborhoods are not connected with streams and roads but with wires and microwave. Nowadays, more than a quarter of the world's planet (1.8 billion people) uses the internet on a regular basis (Leamer and Storper, 2001). The virtual revolution is in full swing and it changes many aspects of our lives (Nicholas et al., 2011): ranging from email to electronic shopping, cyberspace has become an indispensible part of everyday life. The economy now is depended on uncodified messages transmission which requires understanding and trust that historically have come from face-to-face contact (Leamer and Storper, 2001).

Numerous studies document various dimensions of the internet such as its growth, political, economic and social applications. While many of previous studies focus on the economically advanced parts of the world; few have studied in our less developed world (Warf, 2010) such as mainland China.

This paper firstly reviews the causes of economic growth in 18th-20th century, followed by an analysis on economic growth due to the presence of internet in literature. In view of the popular communication channel in World Wide Web, relevant knowledge on how the presence of internet leads to economic growth available in the internet will be discussed.

Causes of Economic Growth in 18th-20th Century

The economic geography in the 18th century was affected by the costs of moving raw materials to production locations where the raw materials were combined with capital and labor to make final products. Home and small workshop production were the norm until the end of the 18th century. Cities and towns were marketplaces and transportation nodes (Leamer and Storper, 2001). In the 19th century, better private property rights system protected the intellectual innovation; industrial revolution took place in Europe fastened the pace of machinery invention. Mechanization in manufacturing gained importance, and it created pressures on centralize production in factories and cities. A deeper division of labor allowed capital to operate many more hours each day which led to an increase in production (Leamer and Storper, 2001, Li, 2011, Li, 2009). Because of improvements in transportation network, transportation costs keep falling (Leamer and Storper, 2001, Ioannides et al., 2008), for instance, steam engine, railways, the combustion engine and the use of containers for transportation. All these lowered the cost of shipping goods. While the automobile, railways and the airplane have performed a similar role for lowering the cost of moving people (Ioannides et al., 2008).

In the 20th century, there was a tendency toward geographical fragmentation in the production chain. It was accompanied by the spatial agglomeration on parts of the chain, particularly the intellectual or immaterial activities such as marketing, accounting, legal and finance work. Intellectual activities have risen greatly as value added activities. Highly divisions of labor made it uneconomic for a single firm to employ all these specialists on full time basis. Businessmen outsourced many of these activities to specialized firms to produce intermediate intellectual inputs. As immaterial products could be transported virtually with limited cost, these intellectual activities were amenable to procurement at a distance: designed in New York, product made in China and advertised in Chicago. From this history we can conclude that economic progress over the past three centuries has come with an increasingly division of labor in the 19th Century and intellectual activities in the 20th century (Leamer and Storper, 2001). Furthermore, there were two innovations in the 20th century which had dramatically lowered the cost of communicating and transmitting information. The first one was the widespread adoption of telephony, fixed line first, followed by mobile.

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