Economic globalization

1) summarize

The development of companies with interests and activities located outside their home

However, the first firms to engage in manufacturing production outside their home country did not emerge until the second half of the nineteenth century.

exponentially. The most comprehensive definition of a modern TNC, and the one that underpins the discussion in this chapter, is ‘a firm which has the power to coordinate and control operations in more than one country, even if it  does not own them’.

Firms like General Motors, Royal Dutch Shell, IBM, Toyota, Unilever and others, are often held up as being  more powerful than many nation-states, although the commonly used device of comparing the relative sizes (and, by implication, the powers) of TNCs and nation-states is a highly misleading comparison, not least because it is based upon a fallacious statistical argument. Very few of even the 100 leading TNCs can be regarded as ‘global’ corporations in terms of their geographical extent.

What they all have in common is that they operate in different political, social and cultural environments.

TNC activity is conventionally measured using statistics on foreign direct investment (FDI).

FDI growth has consistently outpaced growth of world trade – by a factor of between two and ten times over the 1986–2000 period – a clear indicator of the increasing significance of TNCs as the leading integrating force in the global economy.

Less than one-third of the world FDI total is in developing countries. Indeed, the vast majority of FDI consists of crossinvestment between developed countries. Of course, there is significant – and growing – FDI in developing countries. But this is far less than popular opinion suggests and is, in any case, highly concentrated in a very small number of countries, primarily in East Asia and to a lesser extent in parts of Latin America. Nevertheless, the number of TNCs originating from the leading developing countries is undoubtedly growing. There is an increasing diversity of TNCs in the global economy.

it was the attraction of cheap – and usually unorganized – labour that was the primary attraction for firms in certain industries, such as textiles, garments, footwear, toys and consumer electronics. The so-called ‘New International Division of Labour’ that sprang into prominence in the literature of the 1970s and 1980s was based upon the claims that firms in the Western industrialized countries were fl eeing the constraints of high-cost, militant labour to tap cheap and malleable labour in developing countries. TNCs do have the potential to shift at least some of their operations in response to changes in labour costs.

But it is not only labour costs that are the major driving force. human capital that have become more significant. In particular, it is increasingly the availability of well-educated, highly skilled and strongly motivated workers located in ‘quality’ communities that are exerting a very strong influence on TNCs.

Greenfield investment is simply the building of totally new facilities (an administrative office, a factory, a research and development facility, a sales and distribution centre and so on). By definition, it adds to the productive stock of both the firm itself and the country/community in which it occurs. For that reason, it is generally the type of investment most favoured by host countries.

Many firms, especially US and UK firms (though not only these) have preferred to merge with, or to acquire, another firm to establish, or to expand, their presence in a particular overseas location. In fact, in recent years, most of the growth in world FDI has been driven by merger and acquisition (M&A), rather than by greenfield investment.

Another widely used mode of TNC expansion is to enter into a strategic collaboration with one or more other firms. most strategic alliances are between firms that are, otherwise, fierce competitors. In other words, they reflect a new form of business relationship, a ‘new rivalry . . . in the way collaboration and competition interact’.

Advocates of strategic alliances claim that by cooperating, firms can combine their capabilities in mutually beneficial ways. Critics point to the potential risk of losing key technologies to competitors. Nevertheless, the proliferation of such alliances has greatly increased the complexity and variety of TNC operations in the world economy.

A sequence of TNC development?

Starting with achieving a position of strength in their domestic market and only after that has been achieved do they venture abroad. The sequence usually identified is as follows. First, overseas markets are served by direct exports, normally utilizing local independent sales agents. Second, as local demand grows, it may become desirable for the TNC to exert closer control over its foreign markets by setting up overseas sales outlets of its own.

Contrary to much of the received wisdom on the global economy, place and geography still matter and in how they behave.

According to networks adnavces

By the very nature of their dispersed geographical spread across different political, cultural and social environments, TNCs are far more difficult to coordinate and control than firms whose activities are confined to a single national space. They require, in other words, a more sophisticated organizational architecture. 

TNCs are constantly engaged in processes of restructuring, reorganization and rationalization. TNC networks are always in a continuous state of flux. At any one time, some parts may be growing rapidly, others may be stagnating, others may be in decline. The functions performed by the component parts and the relationships between them will alter. Such restructuring and rationalization inevitably causes tensions between TNCs and other ‘stakeholders’, notably governments and labour.

Transnational corporations are, without doubt, one – arguably the most important – of the primary shapers of the contemporary global economy. There is no doubt, either, that their significance is increasing; more companies are becoming transnational at an earlier stage of their development. But TNCs are a far more diverse population than is often recognized. Not all are ‘global’ corporations. Indeed, very few are. TNCs come in a whole variety of shapes and sizes and there remain significant differences between TNCs from different countries of origin.

2)Mention of interesting

Interesting thing, while i was reading was 'How do you want to use the term GLOBAL?'

I mean, how do you want to set up a range of GLOBAL. Global TNC is only few ,still nowdays. A lot of companies in Asia and Europe are coporating with companies which are located near their country. For example, SAMSUNG's major factories are in china and vietnam and headquarter of samsung is in seoul. In this view, SAMSUNG is Asian company, not Global company. (Although, they sell their product globally. Which company doesnt in 2015.)

3)Identity one question

I got a question on my head while i was reading part of netwroks. I want to ask 'what happen to the companies in MOBILE ERA?'. These days workfiled and geographical is not a problem any more. Apple company is located in U.S, but some of the workers works in Korea. And some of companies dont have their building physically. I mean, Air BnB is the biggest hotel-company in the world, but they dont have their own hotel-building. Mobile&SNS&Internet totally are devastating of the origin concept of company. They exist simultaneously they don't.