Economic Globalization
1. Summary
Globalization is a phenomenon in which the world is integrated into one global village, forming a huge community and interdependent. With the development of transportation and information and communication technologies, globalization has spread as the space-time distance between countries has decreased. Due to globalization, the scope of cooperation required for the production of products is expanding all over the world. Accordingly, companies, workers, and governments in each country cooperate and pursue common interests by complementing their deficiencies. As a result, the competition among the countries became even more intense in the process of individuals pursuing profits. In particular, companies are more closely related to globalization. How then should we respond in the time of globalization? Companies should develop their global competitiveness by investing in R & D to secure international competitiveness and creating a creative corporate environment. TNC is a transnational corporation, the emergence of large corporations that transcend international and regional dimensions in the form of global corporations. The purpose of this chapter is to explain the nature and importance of transnational corporations in the process of economic globalization. This chapter focuses on several issues.
(1) THE SCALE AND GEOGRAPHICAL DISTRIBUTION OF TRANSNATIONAL CORPORATIONS
The development of a company that profits outside its own country was the beginning of the international economy. The number of transnational corporations in the world economy has increased exponentially. The most comprehensive definition of transnational corporations in this chapter is “a firm which has the power to coordinate and control operations in more than one country, even if it does not own them”. However, it is impossible to quantify it collectively because it involves many attributes related to the complex relationships between companies operating across borders where no comprehensive data is available. Transnational corporations are offered in all forms and sizes, from global companies operating in many countries to multinational corporations operating in one or two other countries than their own. The common point is that they operate in different political, social and cultural environments. Transnational corporations activities are generally measured using statistics on foreign direct investment (FDI). FDI is a simple direct investment that goes beyond national boundaries. A company in one country invests in one company in another country or establishes a branch or subsidiary in another country. FDI has grown rapidly over the past two decades. This shows that the importance of transnational corporations as a leading integration force in the world economy is growing. The share of FDI in developing countries has increased but still low. The number of transnational corporations in major developing countries is clearly increasing, although it is concentrated on a small number of developing countries.
(2) WHY (AND HOW) FIRMS ‘TRANSNATIONALIZE’
The activities of transnational corporations can be categorized into MARKET-ORIENTED INVESTMENT and ASSET-ORIENTED INVESTMENT. Despite the development of transnational corporation activities, much of the investment remains market-oriented. It is possible that companies have reached saturation in the domestic market. Therefore, companies need to expand their markets to increase profitability. The geographical imbalance in the market is one of the main reasons for companies to make transnational investments. With the development of transportation and communication technologies and the development of production technologies, companies have developed their ability to access distributed assets on an increasingly broad geographical scale. There is no doubt that transnational investment is still sensitive to labor costs. Labor is a major driving force. But also the importance of highly skilled workers, who have a significant impact on transnational corporations, is growing.
(3) GEOGRAPHY MATTERS: THE EMBEDDEDNESS OF TRANSNATIONAL CORPORATIONS
All business corporations, including geographically vast transnational corporations, have cognitive, cultural, social, political, and economic characteristics of their national hometowns. Chagall observed the birthplace of the painter and found that the homesickness of his hometown remained in his work. Chagall's observations show a better metaphor of the relationship between TNCs and place than many globalizers’ visions of the ‘placeless’ corporation. The place of transnational corporations has a dominant influence. Thus, in spite of the geographical changes in the world, at least in part due to the expansion activities of transnational corporations, we have not witnessed the convergence of business-organizational forms into a placeless type.
(4) ‘WEBS OF ENTERPRISE’: TRANSNATIONAL PRODUCTION NETWORKS
Transnational corporations, like corporations, can be viewed as 'dense networks at the center of relations'. There are many different ways in which the internal network of a transnational corporation is organized or geographically organized and connected to the external network of the supplier and the customer. Due to the dispersed geographical nature, transnational corporations are difficult to coordinate and control. That is why we need a more sophisticated organizational structure. The development of transportation and communication technologies, as well as production process technology, has facilitated geographical shifts that allow transnational corporations to separate various functions and precise geographical configurations. The headquarters of a transnational corporation is invariably in the home country of the company. Some types of headquarters functions can be distributed in major cities, which are key locations within the company's transnational network. Transnational networks are always fluid. Transnational corporations tend to depend on other companies depending on their needs. The recent trend is a network with a strong regional dimension organized on a multinational scale of adjacent markets. Transnational corporations are undoubtedly major formers in the global economy. The importance of transnational corporations is increasing. So the transnational corporations have a strong influence. But a simple view that transnational corporations always prevail needs to be avoided.
2. Mention of any new, interesting, or unusual items learned
“In particular, it is increasingly the availability of well-educated, highly skilled and strongly motivated workers located in ‘quality’ communities that are exerting a very strong influence on TNCs.” This point is interesting. In the future, not only cheap labor workers but also high-skilled workers will be important. I thought that it is related to the Fourth Industrial Revolution. The forth industrial revolution is expected to make workers' capabilities more important. There will be a focus on high-skilled workers with creativity rather than merely repetitive tasks. In that sense, I think transnational corporations may lead the labor in the Fourth Industrial Revolution.
3. Discussion
The power and market share of transnational corporations is increasing. While transnational corporation’s sales and profits are growing, workers do not get benefits. The size of the economy grows, and the contradiction that the benefits are not passed on to the workers arises. Transnational corporations such as Apple, McDonald's and Nike have turned outsourcing almost all but their core business, so it is a structure that makes profits only for headquarters. Transnational corporations that transcend regional and national boundaries seem to have both the negative side and the positive side. I would like to discuss the unusual gap between the power and market share of transnational corporations and workers.
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