Blog Assignment 4 / Economic Globalization / Siyoung In

1) summarize in your own words of materials you read; 

The main content of this article is that the basis of economic globalization is transnational corporations and talk about why they are wrong to claim that they weaken the nation's autonomy.

This article talks in five parts: ①The scale and geographical distribution of transnational corporations ② Why and how corporations engage in transnational activities ③The geographical embeddedness of transnational corporations ④ ‘Webs of enterprise’ manifested in transnational production networks ⑤The power relationships between TNCS and other actors in the global economy

<The scale and geographical distribution of transnational corporations>

‘Transnational Corporation’ means that a firm which has the power to coordinate and control operations in more than one country, even if it does not own them. But this is wrong definition, and these corporations were called 'global corporations'. Global corporations are placeless, and there are no restrictions imposed by the state or region on global corporations.

However, TNCs have various forms and sizes, and the commonality is that they operate in different political, social, and cultural environments.

These TNCs are measured by statistics on FDI. Most of the world's TNCs originate from developed countries, and at the same time most of the world's FDIs are aimed at advanced countries. Still, even in developing countries, the number of TNCs continues to increase and their diversity is increasing.

<Why and how corporations engage in transnational activities>

Why

Although there are many reasons why corporations become a transnational corporation, it can be viewed as a 'market-oriented investment' and an 'asset-oriented investment'.

[Market-oriented investment]

Most investments are market-oriented, because companies in their countries have reached a saturation point. In order to increase profits, it is going to expand its market beyond its own country and become a transnational corporation. However, this market approach is not regulated by policy and both the size and nature of the market have a lasting effect on the positioning of the TNC.

[Asset-oriented investment]

Geographical imbalances in the market are one of the main reasons why corporations make transnational investments, and the other is because corporations are geographically unequal in producing and selling products and services.

The early TNCs were mostly natural resources, in which case corporations must find sources of supply. Thus, natural resource-oriented investment has a long history. Still, the advances in transportation, communication and production technologies have led to less natural resource-oriented investments and access to other assets, and that's when the 'human resources' came to notice. The problem of labor costs has been reduced because certain industrial companies need cheap labor and in developing countries they can get cheap and flexible labor. Instead of solving labor costs, however, the availability of well-educated, highly skilled, highly motivated workers has increased, and if these resources are coupled with cheap labor costs, this is the perfect choice.

How

There are two main ways for corporations to develop TNC activities : ① Through greenfield investments ② Through strategic cooperation with other corporations such as mergers and acquisitions

Greenfield investment is an investment through the construction of a whole new facility. However, because building a whole new facility is a dangerous adventure, most develop TNC activities through strategic cooperation with other companies.

In fact, the growth of FDI in recent years has been achieved through M&A, another widely used TNC expansion method in addition to this M&A is strategic alliances with one or more other companies. Working with more than one other company creates an alliance 'network' and the relationship between affiliated companies develops into a 'partisan' relationship instead of a two-way one. And this has spread to competition, creating a new 'network' of economic power, and collective competition. Unlike mergers and acquisitions, strategic alliances focus on specific business issues. Because only a portion of the business operations of the participating companies are involved, the firms remain separate and rather competitive in areas other than specific business issues. By building the network, they want to pursue strategic goals together to achieve goals that cannot be achieved by the enterprise alone.

While proponents of strategic alliance say this is a way for companies to win over each other, critics say there is a potential risk that strategic alliances can lose key technologies to competitors.

<The geographical embeddedness of transnational corporations>

While TNCs are now widely prevalent in the global economy, location and geography still have a significant impact on how TNCs produce and behave. Therefore, it is inevitable to take into account the location characteristics of the nation and the community. The place of origin of the TNC also has a dominant influence. It has enormous influence because a particular production social system is inherent in a particular society.

However, not all TNCs in the same country are similar. There is a unique corporate culture that results from the history of any particular corporation. Nevertheless, the global economy affects the organization and behavior of corporations.

<‘Webs of enterprise’ manifested in transnational production networks>

<The power relationships between TNCs and other actors in the global economy>

It is insufficient to regard corporations as independent. All corporations are made up of complex and dynamic networks such as production, distribution, and consumption, and are included in them. These networks are becoming more widespread geographically and controlled by the TNC.

The TNC is most correct to regard it as a 'a dense network at the center of a web of relations'. TNCs require a more sophisticated organizational structure than firms in a single country because of their geographical nature of dispersed across different political, cultural and social environments.

The geographic composition of TNC production activities is obvious.

① It is to concentrate production in one place. It creates an economy of production scale, but increases transportation costs, weakening corporations in remote markets.

② Special production for local/national markets. At this time, economies of scale are limited by market size.

③ Establish a specialized production structure for the local market.

④ It breaks down the production process and places each part in the form of a different regional, transnational vertical production integration.

The TNC is constantly involved in the process of restructuring, reorganization and rationalization. At any time, some parts may grow rapidly, others may experience stagnation, and others may be declining. TNCs rely on other companies to meet their many needs, and the relationship between TNCs and other companies as customers is fluid, both organically and geographically.

The geographic range of transnational production networks varies widely, but in fact few can be said to be truly 'global.'

However, the most noticeable trend in recent years is that these networks have a multinational network of neighboring market groups. Simple geographic proximity in itself is a strong incentive to consolidate operations. While these regional strategies provide many of the efficiencies and benefits of globalization, they can more effectively respond to organizational barriers. Thus, from the TNC perspective, regional strategies can provide an ideal solution for the competitive pressures for organizational response and global integration. The transnational production network, organized on this regional scale, is particularly evident in the three triad regions, in Europe, North America and East Asia, and represents North America's NAFTA and Europe's EU. There is no such thing as NAFTA or EU in East Asia, but there is a local production network mainly by Japanese companies.

The organization and geographic location of large TNCs, and their transnational production network, are extremely complex and dynamic. Since the TNC is networked across the country, it inevitably creates tension among other important actors in the global economy, such as the state, community, workers, consumers, and civic groups. All transnational production networks are affected and included by a multi-stage regulatory system. And since all the components of the super-state production network are regulated within the political structure of a nation, it is the nation that has the most important and profound impact. As a result, the TNC and the country continue to be involved in a complex process of negotiation.

Meanwhile, the TNC is trying to take advantage of the national differences in regulatory regimes in these situations, but the state wants to minimize such regulatory financial transactions and impose them through competitive bidding against other countries. The situation is particularly complex at this time, as the country is geographically fixed, but the TNC is flexible.

In other words, there is a territorial imbalance between the successive territories of the country and the discontinuous territories of the TNC, which develops into a complex negotiation process. However, the state does not fail to sanction these TNCs, and the state still has considerable authority. Therefore, it is nonsense to argue that the nation is powerless in front of the TNC.

In the end, the TNC may be powerful, but it does not have absolute power.

2) mention of any new, interesting, or unusual items learned; 

I learned about specific differences between TNCs and global companies, and newly learned that companies do not all become TNCs. And I've learned a new lesson about what TNCs mean in this globalization, and I've learned that they have to be sanctioned because they belong to the state, even if they're not powerful. I've already read a fourth article about globalization, and I didn't know before that if globalization was done through this complicated and complex process, I've learned from this article on Economic Globalization that the TNC is not just a simple and trivial issue in globalization.

3) identify at least one question, concern, or discussion angle;

It is a question that we have discussed in class, and this article deals with NAFTA in North America and the EU in Europe, but there is no such organization in East Asia at this time. There are many reasons why such an organization is not currently established in East Asia, but perhaps one day it will happen in East Asia, too? I think it doesn't happen in Asia for a variety of reasons. First of all, the difference in economic power between East Asian countries is too extreme, and the difference in national power is also huge. So I don't think it will work in East Asia, but I would like to discuss what it would look like if it happened.