Blog assignment 4 - Economic globalization / Sangwoo Jeon

 

 1. Summary

 With various discussions on economic globalization, it is clear that business corporation, especially transnational corporation(TNC) is the main issues of the global economy. We live in a world of global corporations that have a lot of impact on the world, not on the country. Therefore, it is very important to know the nature and importance of TNC in the process of economic globalization. 

 What we need to discuss is:  (1) the scale and geographical distribution of TNC in the global economy; (2) why and how corporations engage in transnational activities; (3) the geographical embeddedness of transnational corporations; (4) the ‘webs of enterprise’ manifested in transnational production networks; (5) the power relationships between TNCs and other actors in the global economy. 

The scale and geographical distribution of TNCs in the global economy

 By the end of the 19th century, no one had been involved in manufacturing and production outside the country. But in 1914, just before World War I, a significant number of manufacturing firm in the United States, the United Kingdom, and the European continent have gradually became transnational. For the last 50 years, the number of TNC has increased geometrically. The most comprehensive definition of modern TNC supports the discussion in this chapter: 'Companies with the power to coordinate and control businesses in more than one country'. Currently, about 61,000 TNCs are estimated to be producing international products from more than 900,000 foreign subsidiaries. It accounts for about one-tenth of the world's gross domestic product, accounting for one-third of the world's exports.

Why and how corporations engage in transnational activities
 There are two categories: market-oriented and asset-oriented.

From a market-oriented perspective, it is possible that a company has already reached saturation in a country's domestic market. Therefore, to increase profitability, the market must be able to extend beyond its own territory.
Asset-oriented investment stems from the fact that assets (resources) required by an entity to produce and sell products and services also need to be used in the present state because they are highly unequal geographical distribution. Natural resource-centric investments have a long history. However, advances in transportation and communication technologies and production process technologies have made companies more able to access other unequal resources of a broader geographical size. In particular, the importance of human capital has become very important, and the value of highly skilled workers located in quality communities has greatly increased.

The geographical embeddedness of transnational corporations

 Places and geography are still fundamentally important in the way companies produce and behave. All businesses produce their goods through a complex input process in which a country's cognitive, cultural, social, political and economic characteristics dominate. So TNC interact with the local characteristics of the nation and the community. It is already true that the modern world economy is highly relevant and the impact of the world is rapidly transmitted beyond boundaries. This inevitably affects how the business organization is structured and functioning. There is essentially a process of co-evolution where different business systems can converge on a certain level and divide into different attributes.

The ‘webs of enterprise’ manifested in transnational production networks

 It is not enough to regard companies as free, clearly bounded entities in some ways. Conversely, all businesses are composed of very complex and dynamic forms. So as a business in general, TNC can be considered as dense networks at the heart of the relationship. But because of the geographical nature of the different political, cultural and social environments, TNC is far more difficult to coordinate and control than the general firms limited to a single national space, which means they need a more sophisticated organizational structure.

The power relationships between TNC and other actors in the global economy.

 Inevitably this creates tensions between TNC and other significant actors in the global economy: states, local communities, labor, consumers, and civil society organizations.International regulators such as the WTO, which is part of the global government, have a huge impact on the transnational production network. In addition, in the complex process of negotiations between the TNC and the State, the TNC is trying to take advantage of the differences between the countries in the regulatory system. On the other hand, the state wants to minimize such regulatory differences. There is a territorial imbalance between the continuing territories of the state and the discontinuous territories of the TNC, which is interpreted as a complex negotiation process with no clear and completely predictable outcome, unlike past appearances.

2. What’s interesting points?

 Looking at the article, I learned how transnational corporations have been formed and what principles they use to pursue profit. The most interesting part was how power competition or strained relations between transnational corporations and existing ones would take place. The most impressive was that the nation and transnational corporations inevitably have conflicts because of the consistent and visible boundaries of the nation and the ambiguous and invisible boundaries of transnational corporations.

3. Discussion points

 I think transnational corporations and states can be cooperative. Politically and economically, when a government is considered a supplier of trade and trade policies, it is what the government also thinks as a member of the market. If so, such consumers would be transnational corporations and would try to increase their profits through various lobbying activities. The government will also have a close relationship if it says poorly in back-scratching while supporting them in ways such as subsidies.