W14 Economic Globalization - Sungmin Shin

Summary

Transnational corporation(TNC) plays important role in economic globalization. For correct understands of it, highly complex phenomenon, the author talked 5 related issues. The first thing is about the scale and geographical distribution of TNC in the global economy. There are more 60,000 TNC around the world. But we should know only the top 100 TNC own significant economic feature. Despite these top 100 TNC, they still retain more than half of their activities in their home country.

Such TNC has increased for few decades. They has extended their business to other countries. But they didn't mean to gain control over other countries' business. These foreign direct investment(FDI) was early form of international economy. Now they try to get control of it. These investments is considerable and will be increased.

The largely reasons why they extend their business to outside of their country are market-oriented investment and asset-oriented investment. Market-oriented investment is trial to develop other markets. When a market is saturated, their profit would be stuck. To maximize their profit they invest to other countries. Asset-oriented investment is because TNC wants to hire employees, whether they are well educated or not with, with reasonable wage. Reducing personnel would give high profit to TNC. That's why they invest to other countries.

Also, we should think about how they invest. There are two major ways. The one of them is 'greenfield investment'. It is direct investment in kind such as building factories or offices. Another widely used model is strategic collaboration. It doesn't build factories of offices. It is totally economical investment such as merging corporation. But we should get the sequences of these kind of investments is not inevitable.

Many companies still consider geographic matters even though it doesn't look like. The author gave us some examples about Asian and American corporation to explain how they care geographic matters. But we could imagine how change the world without geographic matters. Many globalizers say placeless is important factor of TNC.

Interesting points.

We can see many TNC in our life. But I have not thought about how they invest and what they do. Now I know why they do that and how they do. Also which factor should be considered when they try to invest to other countries. I could see all sequence through this reading. It made me get broaden sight to international economy and economic globalization.

Decision points.

I want to discuss about DFI for avoidance of tax. It is prime issue in real world. I think this problem would big obstacle to being economic globalization. We should think about this problem.