Institutional investor double standards led to 'new economy' Essay

Institutional investor double standards led to 'new economy' businesses receiving near limitless funding for investment whil - Essay Example This current scenario appears to point to a deep change in the way investment institutions think with shifts from traditional approaches and a new economy. However, it is not a certainty that these new economy businesses will lead to an economic heaven. The dawn of the new economy threatens the values that were inherent in the old economy. To investors, it now seems that all companies need to be new economy businesses or no businesses at all. This has been deciphered as a challenge to all companies to move towards new economy businesses via lowering costs, redefining supplier and client relationships, as well as entry into new markets (Edison & Slok, 2011: p22). Institutional investor double standards led to ‘new economy’ businesses receiving near limitless funding for investment while ‘old economy’ companies restricted investment. This paper seeks to show how the difference in funding has distorted the corporate strategy and performance of these economies I t is obvious that strategies that were successful in the old economy are no longer successful in supporting the new economy. In the old economy, businesses relied on growth and development as currency to attract investment for companies like manufacturing with significant plant capacities (Keha & Singh, 2009: p44). Businesses defined their economy by their infrastructure and the way they could accumulate old capital like lending capacity, land, and equipment. Potential employees, therefore, followed the jobs. Due to the high outlay of capital and the planning involved, which was a long term, to establish business facilities, the communities were able to keep the economic activities that they possessed. In old the economy businesses, keeping business costs low was a vital strategy since low wage communities and minimum taxes were more competitive (Keha & Singh, 2009: p45). The oversight of companies and people were based on the notion of control and management. The employee market wa s regional with community competition also being low, as was the talent market. However, the new economy has turned the old economy strategies on its head. Talent as economic growth’s major currency has replaced manufacturing plants. This talent is fungible; it is exchangeable like currency. Talent is driven by various factors, including diversity and tolerance, as well as innovative environments. Sustainability is also more embedded in the new economy business than it was in the old economy (Keha & Singh, 2009: p52). Therefore, economic development in the new economy does not come, necessarily, at the expense of social inequity and depleted resources, unlike the old economy. The new economy businesses are founded on the recognition that success and economic competition is now determined on a global scale. While the elements of the new economy businesses are not all global, the ones that will have the greatest importance in coming years are. For instance, most of the employme nt opportunities lost in the State of Michigan have been lost to the service industry. The service sector seeks to meet local needs, employee services, as well as resident care (Keha & Singh, 2009: p52). Some reasons exist as to why investment institutions are looking towards the new economy business, as opposed to the old economy businesses. The double standards in funding have seen the new economies shift to digitization, which requires higher capital