Global economic integration is an arrangement whereby countries or nations agree to manage and direct their trade, fiscal, and monetary policies so as to benefit symbiotically (Lloyd, 2010). There are various degrees of economic integration like free trade. In global economic integration, no country issues payments for custom duty or tax in the integrated region.

Significantly, lack of custom payments results in reduced prices for both customers and producers. Therefore, the key aim of global economic is to minimize costs for sales and purchases and to raise trade among countries in the agreement. Some of the outstanding economic benefits of global economic integration include; increased trade, employment opportunities, and rise in foreign direct investment (FDI).

Trade Increment

Due to global economic integration, countries participating in the agreement get vast collection of goods and services. They are able to select from the large assortment of products. Besides, global economic integration enables the acquisition of goods and services at reduced prices or low costs. The reduction in cost is because of the elimination of trade barriers that removes or minimizes tariffs wholly. Further, reduced prices or duties enable a country to have more savings that might be essential in purchasing several goods and services hence increasing trade.

Employment creation

Global economic integration liberalizes and improves trade, which results in market expansion. An expansion of the market makes greater opportunities for employment of people globally. Significantly, people are able to migrate from one nation to the next in look for jobs or higher pay.

Foreign Direct Investments (FDI) Increase

Global economic integration increases the amount of money in FDI. FDI enables firms to become global enterprises through merger, acquisition and new operations. Therefore, global economic integration is sustainable and creates a win-win scenario for the firms and people involved in the model.

Liability of Foreignness

Liability of foreignness (LOF) refers to extra or additional expenses that companies undertaking activities outside their native countries undergo above those experienced by the domestic firms (Barnard, 2010). The additional costs emanate from the lack of knowledge of the local country and discrimination from the local stakeholders. Besides, there are challenges of managing institutions whose departments are detached by distance and time. Importantly, liability of foreignness makes domestic organizations to have an upper hand over the foreign colleagues. The local companies have effective knowledge of their social, legal, cultural, and economic conditions. However, foreign firms undergo several challenges in creating an effective understanding of the new country’s cultural and social policies and unwritten regulations. The native firms incur no cost in acquiring appropriate knowledge as they attain it through education hence adopt the appropriate information easily. Foreign firms do not know where to get beneficial information. Further, regular practice, feedback, and shared occurrence is necessary for a foreign firm, and this is expensive to attain. The foreign firms lack continued flow of information in the host nation hence a challenge.

Liability of foreignness is not a positive factor to a firm. It highly negates the development or growth of a foreign firm. The additional costs incurred by the foreign company due to LOF could be directed to other development programs in the company. For instance, the expense costs can be used to purchase proficient equipment for the company or hire qualified personnel to assist in the operations. Besides, LOF consumes a lot of time in trying to understand the native knowledge, culture and policies hence hindering efficient and effective performance.

However, LOF is only positive to a domestic firm. Therefore, for a firm to succeed in a foreign land, it has to initiate proper strategies that will ensure sustainability irrespective of the LOF.