Economic Globalization

1)    Summary

Purpose of this article is to provide TNCs (transnational corporation) in the processes of economic globalization. It looks TNCs in economy globalization in focusing on five related issues.

The scale and geographical distribution of transnational corporations

 In past, there are some companies located outside their home country such as the East India Company and the Hudson’s Bay Company. However, the first firms to manufacture production outside their own country didn’t arise until the second half of the nineteenth century. These are called global corporations and TNC like General Motors, Royal Dutch Shell, IBM, and Toyota, What they all have in common is that they operate in different cultural, social, and political, and environments. The number of TNCs originating from many countries is growing. There is an increasing variety of TNCs in the global economy.

Why (and how) firms ‘Transnationalize’

The reasons why firms extend their operations outside their own countries, are two categories : market-oriented investment and asset-oriented investment.

Despite recent developments in TNC activity, their investment mainly continues to be market-oriented. Firms may have reached saturation point in their domestic market. So they identify new market. In this situation, both the size and the particular characteristics of markets influence TNCs.

The geographical unevenness of markets is one of reasons why firms engage in transnational investment. Other reasons derives from the fact that the assets that firms need to produce and sell their products and services are also geographically distributed.

Geography matters: The embeddedness of transnational corporation

Geography matter fundamentally in the ways in which firms are produced and in how they behave. All firms, including the most geographically widespread TNCs, are produced through an intricate process of embedding in which the cognitive, cultural, economic, social, and political characteristics of the national home base play a dominant part.

Nevertheless the unquestioned geographical transformations of the world economy, driven at least in part by the expansionary activities of transnational corporations, we are not witnessing the convergence of business-organizational forms towards a single ‘placeless’ type. This is because, over time, and under specific circumstances, societies have tended to develop distinctive ways of organizing their economies, even within the broad, ideology of capitalism, apparently unitary..

‘WEBS OF ENTERPRISE’: TRANSNATIONAL PRODUCTION NETWORKS

All business firms are constituted as highly dynamic and complicated networks of production, consumption, and distribution and Such networks have become increasingly widespread geographically and controlled. Therefore TNC can be defined as ‘a dense network at the centre of a web of relationships’. Internal networks of TNC are composed, both organizationally and geographically, and how they are connected into the external networks of customers and suppliers varies considerably. Because of complexity, TNCs are more difficult to systematize and control than other firms whose activities are confined to a single national space.

THE POWER RELATIONSHIPS BETWEEN TNCs AND OTHER ACTORS IN THE GLOBAL ECONOMY

The basis of power of TNC lies in their potential ability to take advantage of geographical differences in the availability and cost of resources and in state policies. However, this recognition of power of TNC lead to some very hasty generalizations because it does not necessarily mean that TNC always have the advantage. TNCs do not always possess the power to get their own way because there are complex relationships between TNCs and states. So, the opinion that states are universally powerless in the face of the unstoppable juggernaut of the ‘global corporation’ is nonsense.

2)    Interesting thing I learned

I thought global corporations has a long history, but I got to know the first firms to manufacture production outside their own country didn’t arise until the second half of the nineteenth century. Before reading this, I had thought that global corporations and TNC is free from geographical constraints Because of the meaning of ‘global’ term. But I learned that Geography matter fundamentally in the ways in which firms are produced and in how they behave.

3)    Discussion Point

These are many global corporations and TNC like General Motors, Royal Dutch Shell, IBM, and Toyota in the world. The number of TNCs originating from many countries is growing. In this situation, What are the Effects of TNC on domestic firms? If it had a negative impact, how would it overcome?