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Earlier this year, I wrote about how locavores may end up encouraging local firms to persist in doing what they are not great at doing.
Yet such persistence is not necessary. In today’s interconnected environment, local firms can focus on doing what they are good at and leave the rest for others. A local firm does not hit the mark in providing web-based services? Companies from abroad can step up to the plate.
In other words, global connectivity equals local specialization.
Yet, this conclusion needs to be nuanced.
Because the devil lies, as so often, in the details: what does it it mean for a local firm to be “not great” at something?
Consider a foreign firm that provides the same web-based services as local firm, but at a lower price. There can be various reasons for this good deal. The employees of Foreign Firm may be faster at generating a higher quality service. Foreign Firm may incur lower cost in paying its employees, purchasing computer hardware, renting office space.
Does what Foreign Firm pays its own employees, suppliers, landlords, etc. represent a fair amount that allows these individuals to earn a decent living in a safe work environment? If not, Foreign Firm may offer a better deal than Local Firm because it engages in questionable practices.
Yet, would the employees, supplies, landlords better off without the business of Foreign Firm?