Economic globalization - Victoria

This article deals with the economic globalization with a focus on transnational corporations.

A transnational corporation (TNC) is a firm with a huge dimension, whose capitals are multinational, whose the headquarter is located in the State but whose a lot of institutions are implanted around the world, that allows to lead global strategies around the world.
TNC are in all the fields in the worldwide economy and are the most dynamic and efficient actors. They benefited the revolution of the transportation, the information technologies and the communication, as well as the liberalization of the international business, which allows exchanges at lower cost.

They have a major role in the globalization whether for :

      - Economic, through creating wealth that they provide

-        - Social through the number of persons that they employ

-        - Technologic through the permanent research and development that allows them to design new products

-       -  Politic through their influence with public authorities at all scales

The article has 5 points of connexion

-        - The scale and geographical distribution of TNC

-        - Why and how corporations engage in transnational activities

-        - The geographical embeddedness of TNC

-       -  The “webs of enterprise” manifested in transnational production networks

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

The scale and geographical distribution of TNC

The first TNC were born around the half of 19th century but it was at the eve of the first world war the number of TNC are substantially increased. TNC produce more than a quarter of the world wealth and provide the two-thirds of the international business, because of the intense exchanges that they realized between their subsidiaries and their consumption market. They provide most of the part of the direct foreign investment.

Why and how corporations engage in transnational activities

Two main reasons of why : market oriented investment and asset oriented investment.
First, the reason for the market oriented investment is that “a firm may have reached saturation point in its domestic market” so to extend their market abroad could be very interesting for them.
Then, for the asset oriented investment, that explain through the asset are unequally distributed because first, most of the TNC sells goods and services from the natural resource industries. But now, thanks to developments in transportation and communications technologies, firms are able to access other unequally distributed assets.

The geographical embeddedness of TNC

Although TNC have headquarter and an « origin », we can say in a way, they don’t have their own “nationality” especially the most geographically extensive TNC. Indeed, they intensively participate to the multiplication of flows, through them, to the distribution of goods nd services on all continents. TNC such as Apple, Samsung, Nike or Coca Cola are thus reached to consume similar products to people living around the world. TNC do not make their products uniform, they know how to adapt their products to the local culture to better fit in. We can take Mac Donald as an example which adapt their burgers recipes to countries in which it implants itself.

The “webs of enterprise” manifested in transnational production networks

Because of TNC doing their business abroad it means in different political, cultural and social environments, TNC are more difficult to coordinate and to control than local companies whose the activities are centered on only one space. So far, the development of the transportation and communication technologies allowed the facility of TNC’s geographical extension.

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

Finally, the author deals with the relationships between TNC and others actors in the global economy especially with States where we can find some tensions.
Indeed, TNC make profit thanks to the geographical differences, the availability and cost of resources but the States wish to keep an important power to control the access in their territory et define their performance rules. This leads a lot of complex negotiations.

Discussion point :

It was interesting to know how TNC have a huge place in the globalization but now  I want to know how the development of transportation and communication technologies contribute to the globalization.