W14. Economic Globalization / Heo Yoonjae

Economic globalization: Focusing on Transnational Corporations

This article points out the importance and current situation about transnational corporations (hereinafter referred as TNC). The author, Peter Dicken described that the most important aspect of TNC is exerting international influence and engaging in multinational economic activities, and the ancestors of TNC with such characteristic was East India Company and the Hudson’s Bay Company. The details are different from the current TNC, however they had very important influence on internationally interconnected economy. 

The power to influence on more than one country is the importance point of modern TNC. In modern economic society, the most influential 100 TNCs account for 1/7 of the world’s economic activities. Most of this kinds of corporations are

There are two important reasons that many corporations becoming TNCs – Market-oriented investment and asset-oriented investment. Market-oriented investment means becoming TNC for expanding more opportunities because the domestic market of corporations is saturated. And asset-oriented investment means expanding the stage of activity to other countries with better economic assets such as lower labor wage or economic infrastructures.

Two ways to become TNCs, whether they are on their own or with the help, investment of other corporations. First way is green field investment: The way in which foreign companies enter into the investment target countries by directly establishing production facilities or corporations, it is one kind of foreign direct investment. This way the corporations should take responsibility for their own risks. The other one is to receive the investment of the domestic corporations which placed in the countries they want to enter. Typical example is Mergers & Acquisitions. Most of TNCs preferred second way. Also, recently TNCs are forming not just single alliances like M&A but networks of alliances in horizontal relationship.

Until now, TNCs were first to solidify their domestic market in order to enter foreign countries. However, recently some corporations –representatively knowledge intensive corporations- aim for global markets form the beginning before becoming the best in their own countries. This kind of companies are called “Born globals”.

Like “Born globals”, some corporations are aiming for global market form the beginning, but place and geographic are still important assets. Because TNC’s place of origins influence to the corporation. Wherever TNCs expand their territory, they operate based on the norms of their home territory, which means not uniformity but diversity. In a nut shell. The organizational architecture of the TNC is still linked to its geopolitical characteristics. Badaracco expressed it as 'a dense network at the center of a web of relationship'.

Interesting points.

I already knew that there were a lot of corporations that aimed at the world from the beginning like this “Born globals”. But it was interesting that geopolitical factors were still important factor. It will have a lot of influence, especially on organizational structure and in-house culture. In the “called International Strategic Communications” class, I learned about the difference in organizational culture between Samsung's overseas branches and domestic branches. Perhaps the difference in culture among branches is probably due to geopolitical factors.

Discussion

If this “Born globals” is combined with ‘a dense network at the center of a web of relationship’, the corporations will follow what structure or culture? They will follow the largest corporation’s culture? Or Or will each maintain their own domestic structure and culture?