1. Summary
In this chapter, the author claims that there is a widely held view that we increasingly live in a world of global corporations emasculating the autonomy of nation states. In reality, however, this is a highly misleading stereotype. Therefore, the author wants to provide a more nuanced depiction and explanation of the nature and significance of TNCs in the processes of economic globalization, an approach that is firmly grounded in the empirical reality of a highly differentiated geography whilst, at the same time, providing a theoretical basis for understanding what is, indeed, highly complex phenomenon.
1) The scale and geographical distribution of transnational corporations.
The development of companies with interests and activities located outside their home country was part and parcel of the early development of an international economy. East India Company and the Hudson's Bay Company are the examples. However, the first firms to engage in manufacturing production outside their home country did not emerge until the second half of the nineteenth century. The most comprehensive definition of a modern TNC 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 a definition that is impossible to quantify in aggregate terms. Very few of even the 100 leading TNCs can be regarded as 'global' corporations in terms of their geographical extent. The vast majority of the world's leading 100 TNCs still retain more than half of their activities in their home country. What they all have in common is that they operate in different political, social and cultural environments.
2) Why firms 'Transnationalize'
Although there may appear to be a bewildering variety of reasons for TNC activity, we can boil these down to two broad categories: market-oriented investment and asset-oriented investment.
Despite recent developments in TNC activity, much of their investment continues to be market-oriented. Increasing profitability may well depend on being able to expand its market beyond its home territory. Access to the market may be restricted because of political regulatory structures. The idiosyncratic nature of a particular market may necessitate a direct presence in order to understand such specific circumstances. Both for political, as well as cultural reasons, it may be desirable for a TNC to appear to be strongly embedded in a local market.
The geographical unevenness of markets is one major set of reasons why firms engage in transnational investment. The second set of reasons derives from the fact that the assets that firms need to produce and sell their products and services are also geographically very unevenly distributed and may need to be exploited in situ. Traditionally, it was the geographical localization of many natural resources that drove much of the early development of TNCs. Firms in the natural resource industries must locate at the source of supply generally close to the market.
3) Geography matters: The embeddedness of transnational corporations.
Place and geography still matter fundamentally in the ways in which firms are produced and in how they behave. All business firms, including the most geographically extensive TNCs, are 'produced' through an intricate process of embedding in which the cognitive, cultural, social, political and economic characteristics of the national home base play a dominant part. TNCs are 'bearers' of such characteristics, which then interact with the place-specific characteristics of the countries and communities in which they operate to produce a set of distinctive outcomes.
4) Webs of enterprise: Transnational production networks
All business firms are constituted as highly complex and dynamic networks of production, distribution, and consumption. Such networks have become increasingly extensive geographically and controlled primarily by transnational corporations. TNCs can best be considered as 'a dense network at the center of a web of relationships'.
2. Interesting point
It was interesting to me that the author mentioned about South Korea and China. He said the chaebol are being drastically restructured and the relationships with the state reduced. Moreover, the strong basis in family ownership and control is being challenged by both internal and external forces in China, which is the most interesting part of the reading.
3. Discussion point
TNCs obviously give a number of positive effects to the world. However, there should be a lot of responsibilities for TNCs as well, since they giving many effects on the world. What are the responsibilities that TNCs should take?
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