Reading Assignment 4: Economic Globalization --DENG HUICHEN

 

Economic Globalization 

 - CorporationsPeter Dicken

1) Summary

From the perspective of economic globalization, transnational corporations (TNC) are leading the global economy, which are mainly distributed in developed countries, and there are many transnational corporations in developed countries. However, nowadays, there are many multinational companies in developing countries, and the number of multinational companies is increasing step by step. The author explains the influence and purpose of transnational corporations (TNC) in economic globalization through five questions.
 (1) the scale and geographical distribution of TNCs in the global economy; (2) why and how corporations engage in transnational activities; (3) the geographical embeddedness of transnational corporations; (4) the‘webs of enterprise’ manifested in transnational production networks; (5) the power relationships between TNCs and other actors in the global economy.

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. In aggregate terms, TNC activity is conventionally measured using statistics on foreign direct investment (FDI). ‘Direct’ investment is an investment by one firm in another with the intention of gaining control over that firm’s operations. ‘Foreign’ direct investment is simply direct investment that occurs across national boundaries, that is, when a firm from one country buys a controlling investment in a firm in another country or where a firm sets up a branch or a subsidiary operation in another country. It differs from ‘portfolio’ investment, which refers to the situation in which firms purchase equity in other companies purely for financial reasons and not to gain control. The idiosyncratic nature of a particular market may necessitate a direct presence in order to understand, and to cater to, 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. In other words, both the size and the particular characteristics of markets continue to influence the locational decisions of TNCs.  developments in transportation
and communications technologies, as well as in production process technologies, have increased the
ability of firms to access other unevenly distributed assets on increasingly wide geographical scale.  More significantly, the emergence of a new generation of TNCs, particularly in the knowledge-intensive industries, has produced a developmental sequence in which firms are not necessarily large and/or with a dominant domestic market position before embarking on the establishment of overseas operations. From the perspective of economic globalization, transnational corporations (TNC) are leading the global economy, which are mainly distributed in developed countries, and there are many transnational corporations in developed countries. However, nowadays, there are many multinational companies in developing countries, and the number of multinational companies is increasing step by step. The author explains the influence and purpose of transnational corporations (TNC) in economic globalization through five questions.


2) Interesting items

Many companies are forming not just single alliances but networks of alliances, in which relationships between partner firms are increasingly multilateral, rather than bilateral, polygamous rather than monogamous. In effect, they are creating ‘new constellations’ of economic power and adding a new component – ‘collective competition’ – to the economic landscape.

3) Discussion angle

What are the advantages of multinational companies in developing countries compared with developed countries?

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