Economic Globalization

1. Summary

There is a clear consensus that the business corporation is the central actor on economic globalization – specifically the transnational corporation (TNC). The development of companies outside their home country was part of the early development of early international economy such as the East India Company and the Hudson’s Bay company. they are the ancestors of today’s global trading and service company

 

However, the first firms to engage in manufacturing production outside their home country did not emerge until the world war 1. In 1914 US and many European manufacturing companies were becoming increasingly transnationalized. since then, the number of TNCs in the world economy has grown.

 

The ‘placeless’ giants global corporations like General Motors, Royal Dutch Shell, IBM, Toyota, Unilever and others are being more powerful than many nation-states. But the vast majority of the world’s leading TNCs still retain more than half of their activities in their home country. What they all have in common is they operate in different political, social and cultural environment.

 

Then why and how firms ‘transnationalize’? The reasons why TNCs extend their operation are complex. But we can boil these down to two broad categories. Market-oriented investment and asset-oriented investment.

 

Market-orientated investment

a firm may have reached saturation point in it’s domestic market. Access to the market can be restricted because of political regulatory structures or cultural reason.

 

Asset-oriented investment

The geographical unevenness of market is one major set of reasons why firms engage in transnational investment. Firms in the natural resource industries have to locate at the source of supply. labour cost is other factor. Many types of transnational investment have been very sensitive to geographical variations in labour cost.

rld. EU also has made considerable reorganization of existing corporate networks by existing and new TNCs. WTO is also influence on transnational networks as a regulation. we need to avoid the simplistic view that TNCs always prevail. it dose’t posse absolute power.

 

There are two major ways in which firms develop transnational activities: ‘greenfield’ investment and through engagement with other firms. Greenfield investment is building of totally new facilities. e.g., Japanese automobile firms – Nissan, Toyota, Honda in North america and Europe. The other strategy is to collaborate with one or more other firms. GM has collaborative ventures with Toyota, Ford, Fiat, Renault amongst others.

 

Place and geography still matter fundamentally in the ways in which firms are produced and in how they behave. Hence, over time, societies have tended to develop distinctively. Not all the capitalisms are the same. Forms of economic coordination and governance cannot easily be transferred from one society to another.

 

However, a few generalizations can be made. As in the cases of EU or NAFTA. States strive to minimize such ‘regulatory arbitrage’ The relationship between TNCs and states are complex. TNCs may be constrained in their freedom of action. They may be powerful. but they do not possess absolute power.

 

 

2. Interesting

 

TNCs are becoming powerful. But there are also very strong regulation by source of supply, labour, culture, and nation-states. TNCs are very powerful nowaday. And but still, they can not control global-size economy over nation-states.

 

3. Question

 

Since WTO(World Trade Organization) has established, many countries have attempted to make global agreement under negotiation. But many rich countries rather tend to reduce their economic barrier by joining individual agreement(FTA). The idea to unified trade regime for the entire globe seems to fail. I want to discuss that why WTO members have failed to agree global trade deal.