11.07.2019 in Economics

The Influence Of Innovation On Business And Social Community


Avent et al argued that The Third Wave ‘digitalization’ may prove to have greater impact on society than the Industrial revolution (First Wave) and the Information revolution (Second Wave). The First and Second Waves caused the pain of transition for the business and social community. The Third Wave it is suggested will be more problematical.
According to the statement described above, the purpose of the paper is to critically discuss the impact of the Third Wave to society and economy in terms of the replacement of the traditional form of the business organization. Additionally, the paper will discuss the impact the First and Second Waves have to the society and economy as well, in order to see the progress of the technological development and its limitations to day-to-day business operations and people’s lives.
The limitations of the essay are an advanced feature of the digitalization, which does not have a clear understanding of the main outcome the Third Wave may have on the society, as well as the problems it has caused to the world and not sufficient study research of the matter concerned. As for the methodology of the essay, it will be carried out through a critical review of such information sources as books and periodicals.
The problems that arise in connection with the unprecedented pace of development of information technologies affect the formation of information culture and business organization all over the globe. Thus, the emerging importance of the debate is related to people’s need to use information technology in order to form a personal worldview and transfer business processes to new levels. At the same time, people tend to forget about the negative aspect of such a requirement as it has a great impact not only to business operations but their lives as well.

Literature Review

An educated person can only enter the 21st century if he has a good command of information technology as human activities are increasingly dependent on their awareness, as well as the ability to effectively use the information. The information is being discussed as the strategic course of the society, a resource that determines the level of the development of the state. Computerization has ensured the transition from an industrial society to an information type of development. Information market has provided consumers with all the necessary information products and services, while their production has been achieved by the industry of computer science that is often called the information industry. Additionally, the issue with the displacement of the traditional form of the business organization and job positions has remained open. All these issues are being actively discussed these days, though there is still no consensus on the development and understanding of a particular priority areas, language and concepts, etc.
The areas involving paperwork and professional services operate with less dramatic changes but potentially much greater impact on employment. Such technologies as Web, artificial intelligence, large amounts of data and advanced analytics – all of this have become possible to implement with the help of ever-increasing computing power and memory capacity as they automate many routine tasks. Arthur calls this phenomenon an autonomous economy. According to him, the digital process communicates with other digital processes and creates new processes allowing people to perform more cases with the involvement of fewer human resources. It causes a die back of all job positions.
At the same time, there are many researchers who have doubts that technologies are those responsible for a decade of low growth of employment. Thus, there is a belief that the data is at best far from being convincing. The reason for the relative decline in the rate of the creation of job positions since the beginning of the 21st century may serve some plausible explanations, including events related to global trade and the financial crises at the beginning and the end of the 2000s.
Friedman argues that it is very difficult to distinguish the impact of technology separately from other macroeconomic factors. He is also skeptical about the assumption that the technology would change a wide range of business areas quickly enough to explain the latest data in employment.
Autor carefully studied the link between jobs and technologies and has also had doubts that technologies may be responsible for such a sudden change in total employment. According to him, the sudden slowdown in job creation is a great mystery but still there is little proof that it is connected with computers. Indeed, computer technologies change the type of available job positions and such changes are not always come for good. Computers have captured more such tasks as accounting, clerical work and mass production in the factories since the 20th century. Performing such tasks brought income to the middle class that time. At the same time, high-paying jobs that required creativity and ability to solve problems, which were often resolved with the help of computers, flourished. The need for employees to restaurants, cleaners, staff to provide medical care at home and other professions also increased. The result was the polarization of labor and devastation of the middle class – something that has happened in many industrialized countries in recent years. However, there is a big difference between this fact and the fact that technologies have an impact on the total number of job positions as jobs can vary greatly without much change in the proportion of employment.

The Third Great Wave

According to Avent, the digitalization of business activities will lead to the displacement of 2 Billion job/roles and the displacement of the traditional form of the Business organization.
The spectacular innovations in computer technology, from advanced industrial robots to autonomic translation services, have been largely to blame for slow employment growth in the last 10 – 15 years. Particularly, they are predicting gloomy prospects for many occupations related to the pace of appearance of new technologies that have been more deeply embedded not only in manufacturing, clerical jobs and sales, but also in such areas as legal and financial services, etc.
McAfee supports this statement by a graph representing the productivity and total employment. According to the author, the productivity and overall employment in the US are presented by different lines in the graph. The two lines had been closely nearby for many years after World War II as the productivity corresponded to an increasing number of jobs. As businesses created more benefits with the help of their employees, the entire country was getting richer stimulating a greater economic activity and creating even more job positions. Beginning 2000, the productivity went up but overall employment fell down unexpectedly. A significant gap between the two lines had increased by 2011, which demonstrated the economic growth without a concomitant growth in the number of job positions created. McAfee and Brynjolfsson called the effect a ‘great decoupling’.
Brynjolfsson is confident that technology affects both a strong growth performance and a weak increase in the number of jobs. Such alarming news undermines faith in the technological progress. Although the technologies increase productivity and make society richer, they still can also have a negative side that the technological progress eliminates the need for many types of work and leaves an average employee in a worse situation than before.
Great examples of how digital technologies threaten job positions are presented everywhere. Thus, robots and an advanced automatic processing have taken place in different industries for decades. Industrial robots capable of performing simple work for small entrepreneurs in various fields have been represented recently. They are more flexible and much cheaper than their predecessors like, for example, Rethink Robotics designed by Baxter.

The Limitations of Technology Revolutions

Even if modern digital technologies inhibit job creation, the history suggests that this is likely although painful but a temporary shock. As workers adapt their skills and employers create opportunities based on new technologies, the number of jobs will be restored. At least, this has always worked in this way. The question is whether it will be different with the invention of modern technologies when creating a long-term unintended unemployment. The improvements in technology have changed the nature of work and destroyed certain types of jobs in the process since the 17th century. Thus, there were 41% of the Americans employed in agriculture, while it was only 2% engaged into the same area in 2000 in the US. The same was with the percentage of the Americans employed in manufacturing, which has fallen down from 30% in the post-war years to about 10% these days partly because of the increasing automation, especially during the 80s of the 20th century. The effect of the implementation of the automation process in services over decades is presented in Figure 1.
Comparing the Third Great Wave with the First and Second Waves, which are the Industrial and Information revolutions, it is possible to see the dynamics of the impact of the development process and economic life of the society. Thus, the existence of the Industrial revolution gave the society a chance to produce more goods and services with the invention of the assembly line, etc. The First Wave was favorable for the rise of the level of employment rate since the main employee’s productive force had become a radical transformation. Such changes included the advantage of mental effort, an individual’s spiritual facilities in an organization and the management of production, and others.
The Second Wave called the Information revolution has allowed considering certain concerns that developed countries will not be needed in the workforce in the next century. The wave of the technological changes is different in its nature and pace that the previous wave. Dosi and Galambos support this fact by the impact on employment that was limited to a fairly small part of the economy, although mechanical inventions throw people out of the production.

The Rise of the ‘Technology Barons’

About 540 million years ago, the planet Earth experienced some extraordinary effect. Thus, the form began to proliferate, leading to what is called the Cambrian explosion. Before that, there were a lot of sponges and other simple lives. However, the animal kingdom had become diverse within a few million years. According to Euchner, something similar happens in a virtual reality these days, which is called the entrepreneurial explosion. Technological start-ups appear as bubbles in the water when it rains, penetrating every corner of the economy. They completely change the industry and even the face of the company. Andreessen, a venture capitalist from Silicon Valley, emphasizes that programs devour the world. All this digital hype has enabled the emergence of a global movement. Most of the major cities from Berlin and London to Singapore and Amman have already created a serious ecosystem of startups. All these ecosystems are interconnected, which explains why Internet entrepreneurs are a crowd on a global scale.
Today’s entrepreneurial boom is based on a more solid foundation than the one that was in the 90s and, therefore, the future looks less sad than it has been now. One possible reason for the Cambrian explosion 540 million years ago is that the basic building elements of life forms were perfect at the time, allowing more complex organisms to evolve continuously.
Despite to the fact that the development of technological innovations has allowed the existence of a huge number of startups contributed to the evolution of modern progress, the most progressive companies have risen to international corporations advantageous for the society but brought negative impact to national economies of the countries in which they operate. This is the main reason for such corporations to be called ‘thief barons’, which are those protected by the law and operated for personal gain.
According to a large-scale study conducted by an American non-profit organization ‘Citizens for Tax Justice’, the companies listed in the Fortune 500 including Apple, Google, Microsoft and other IT companies understated their own tax base every year accumulating money on the accounts in the offshore areas. Thus, the companies managed to accumulate more than $2.1 trillion in cash allowing them to avoid paying more than $620 billion in case the funds were back to the US. For instance, Apple, which is an example for millions of people all over the globe not only philosophically but in a purely pragmatic way of doing business and approaches to daily activity, holds the very large amounts of cash on its offshore accounts comparing to other companies, which is $181.1 billion. The one-time tax amount would have been $59.2 million in case the company had paid the taxes to the US. At the same time, Microsoft holds about $108.3 billion on its offshore account, while Google’s part is $47.4 billion there. Facebook showed £20.4 million of revenue in the United Kingdom in 2011, although the British analysts interviewed by the Guardian called an approximate amount of income at £175 million in the UK the same year.

The Impact of the Third Wave

As for the building material in the age of digitalization, some of the building blocks are pieces of code than can be easily copied from the Internet, along with easy for understanding programming languages. Others are presented by the services for developers, testing and others. There are application programming interfaces, plug-ins growing exponentially. They allow one service to use another one, like voice calls (Twilio), maps (Google) and payments (PayPal). The most important are the platforms that are services, on which start-ups offers may be represented like Amazon cloud services, or intended for distribution like Apple’s App Store, as well as its promotion like Facebook and Twitter. To say more, there is the Internet, which acts as the repository and the source of all platforms that has become more facts, convenient and wireless.
The Internet gives access to the affordable and unified information about how to run a start-up. Global standards appear in all start-up things, from programming to models of investment, dress codes to dictionaries, which allows entrepreneurs and developers to move freely around the world. The Third Great Wave has actively contributed to the Cambridge moment of the phenomenon. However, there is a negative side of the effect since the failure can be deafening.
Start-ups can destroy more jobs than create, at least at the initial stage. The development of digital technologies has allowed rising start-ups offering specific products to multinational companies, as well as becoming true monopolists in the digital industry. Such conglomerates has already expanded its business all over the globe and taken leading positions in many markets, which sometimes allows them to violate their influence in order to gain benefits for the companies themselves. As a response to that, government have actively been looking for the tools to fight such abuse activities, as well as penalize and bring to justice digital monopolists. Additionally, most of the digital monopolists are the US based companies that have been expanded all over the globe and implemented the features of proprietary rights allowing them to violate customers’ personal data as well. Governments of different states have also been trying to find the ways to be against such measures. For instance, it has been not the first attempt for the European government to limit the influence of the US services on the Internet market. Thus, the provision of the right to require the removal of personal data from the results of the search delivery for the European customers, claims to the privacy policy, the mechanism of spread of mobile applications and so on have resulted to a public call on initiated by the European Union. As a result, the division of the US company can potentially become the greatest threat to Google businesses and other Internet companies, according to the claims initiated by the EU in 2014.
Oreskovic, Fioretti and Macdonald stated that the draft document of the European Parliament did not mention the names of specific Internet search engines. However, Google’s share in the volume of processes search requests in Europe is around 90%, which makes the company the most attractive under the potential antitrust claims. According to Mance, Barker and Ahmed, the influence of the European Parliament to the European Commission as the body that triggers the adoption of all laws common to the countries of the EU has increased in recent years. The pressure that has come from the European Commission forced Google to consider the right of the European users in terms of search results and to abandon the mark ‘Free’ related to mobile applications with the built-in shopping.


A briefing paper has discussed the process of technological evolution within time, particularly the impact of the Third Great Wave on society and global economy. The report has uncovered different researchers and economists’ points of view to the problem of employment rate the digitalization has caused and whether it is the only factor contributing to the creation of the issue. Thus, the spectacular innovations in computer technology, from advanced industrial robots to autonomic translation services, have been largely to blame for an employment growth in the last 10 – 15 years.
The world offers start-ups today to see how the economy will be held tomorrow. The prevailing model will be a platform with small, innovative firms. This template has already showing itself in such sectors as banking, telecommunications, electric and even the governmental sectors. This can act as both a fulcrum for further development of the era of digitalization and the creation of digital monopolists that can violate consumers’ rights and the policies of national economies by means of innovative technologies and the establishment of various tricky schemes designed to gain personal benefits for such companies.

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