(1) The scale and geographical distribution of TNCs in the global economy.
The development of companies with interests and activities located outside their home country was part and parcel of the early development of an international economy. Nevertheless, by the eve of World War 1, in 1914, considerable numbers of US, UK and some continental European manufacturing companies were becoming increasingly transnationalized. Since then, the number of TNCs in the world economy has grown. TNC is ‘a firm which has the power to coordinate and control operations in more than one country, even if it does not own them.’ This definition is impossible to quantify in aggregate terms. Using more restrictive definition, UNCTAD estimates that around 61,000 TNCs currently carry out international production in over 900,000 foreign affiliates. In fact, TNCs come in all shapes and sizes. In aggregate terms, TNC activity is conventionally measured using statistics on foreign direct investment (FDI). During the past two decades, FDI has grown at an accelerating pace. The number of TNCs originating from the leading developing countries is undoubtedly growing. There is an increasing diversity of TNCs in the global economy.
(2) Why and how corporations engage in transnational activities.
We can boil down to two categories. Market-oriented investment and asset-oriented investment.
∙ Market-oriented Investment: Despite recent developments in TNC activity, much of their investment continue to be market oriented. Both size and particular characteristics of markets continue to influence the locational decisions of TNCs.
∙ Asset-oriented Investment: The geographical unevenness of markets is one major reasons why firms engage in transnational investment. The second reasons derives from the fact that the assets that firms need to produce and sell their products and services are also geographically unevenly distributed. Developments in transportation and communications technologies have increased the ability of firms to access other unevenly distributed assets on increasingly wide geographical scales. It is only in the past 50 years or so that these kinds of assets have come to play a significant role in transnational investment.
Modes: There are two major ways in which firms develop transnational activities. One is through what is known as ‘greenfields’ investment, the other is through engagement with other firms, through merger and acquisition or some form of strategic collaboration.
The sequence of TNC development is usually identified as follows. First, overseas markets are served by direct exports. Second, it may become desirable for the TNC to exert closer control over its foreign markets by setting up overseas sales outlets of its own. The nature of TNC networks is a critical influence on the potential for development of firms seeking to operate beyond their home territories.
(3) The geographical embeddedness of transnational corporations.
All business firms, including the most geographically extensive TNCs are produced through an intricate process of embedding in which the cognitive, cultural, social, political and economic characteristics of the national home base play a dominant part. This will affect the way business organizations are configured and behave.
(4) The ‘webs of enterprise’ manifested in transnational production networks.
TNCs like firms in general, can best be considered as ‘a dense network at the center of a web of relationships. TNCs are far more difficult to coordinate and control than firms whose activities are confined to a single national space. Developments in transportation and communications technologies have facilitated the transformation of the geographical configuration.
(5) The power relationships between TNCs and other actors in the global economy.
The basis of TNCs’ power lies in their potential ability to take advantage of geographical differences in the availability and cost of resources and in state policies and to switch and re-switch operations between locations.
2. Interesting
Even I performed Wikipedia assignment ‘The world is curved’ which subject is world’s economy, I didn’t know about the ‘TNC’. I think TNC is very interesting concept of global economy. I really glad that I can learn more about the global economy. The development of technology changes a lot in global culture, political, economy. In the book ‘The world is curved’ suggested that global economy also really dangerous. The scale of world’s economy grow bigger, the risk of the global economy gets bigger. So, when I think of global economy, I only think about the risk.
3. Discussion point
Since I read ‘The world is curved’, the idea is fixed as ‘dangerous’. So I really wonder if the global economy works properly. And if the global economy is falling down, can the global economy revive?
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