session #7 - transnational corporations + book Flashcards
transnational corporations in context (TNCs)
- are they important?
represent 25% of the global GDP (production of wealth) + 1/3 of the entire world export’s
- they have a significant share of global wealth
- we shouldn’t believe that everything is a transnational corporation
transnational corporations are important
! not all corporations are transnational
definition transnational corporation
Any corporation that is registered and operates in more than one country at a time; also called a multinational corporation
A transnational, or multinational, corporation has its headquarters in one country (preferably in countries with tax benefits) and operates wholly or partially owned subsidiaries in one or more other countries
the recent ris of TNCs
three factors
seen in: growth of Foreign Direct Investment (FDI)
- policy liberalization (trade made easier)
- technological change (easier to manage a company from abroad)
- increasing competition (partly due to policy liberalization + partly because local markets have become full)
patterns of TNC Operations: Host Countries of FDI:
- 1990: 17% developing countries
- 2011: 53% developing countries
FDI
Foreign Direct Investment
- way of measuring diffusion of transnational corporation
an investment in a business by an investor from another country for which the foreign investor has control over the company purchased
- you become the owner, you purchase the company abroad and you come to control that country
Product Life-Cycle Theory
- Vernon
explaining trade reversal of tech products
3 phases:
look at graph in powerpoint (or if you printed it)
developed countries take it over from inventor’s country: have developed own products, less R&D cost -> cheaper product
developing countries start importing later than developed countries + start producing cheaper (+ lesser quality) because of low R&D cost
explains why companies want to relocate their production
Appropriability theory
- Caves
why firms produce abroad rather than take on local partners
when you want to delocalize production, you can pick licensing abroad or partnership locally
high R&D invested products/industries are afraid that partners will stop being partners and start building their own products based on the info they learned
companies want to keep control over the whole proces -> become transnational
- e.g. don’t want to share recipe
Explaining the behaviour of TNCs
- product life-cycle theory (Vernon)
- appropriability theory (Caves)
TNCs Strategies
- Hymer: Branch factory syndrome (looks at effect appropriability problem: TNCs don’t participate in the diffusion of technology and know-how in order to prevent competition -> technology stays within the branch + doesn’t benefit the society or community around it (no knowledge production))
- politics and Protectionist Barriers (they like low tarrifs, but barriers can also be useful to avoid certain taxes (e.g. use Brazilian windows and then call the car Brazilian))
- currency instability
- location-specific advantages (producing selling locally avoids taxes)
- global competition
Hymer: Branch factory syndrome
looks at effect appropriability problem:
TNCs don’t participate in the diffusion of technology and know-how in order to prevent competition -> technology stays within the branch + doesn’t benefit the society or community around it (no knowledge production)
Imperialism (Lenin)
imperialism is capitalism at that stage of development at which
- dominance of monopolies and finance capital is established
- in which the export of capital as acquired pronounced importance
- in which the division of the world among the international trust has begun
- in which the division of all territories of the globe among the biggest capitalist powers has been been completed
TNCs and imperalism
some see TNCs as agents of imperialism
or as
agents of Western Hegemony
Triangular diplomacy
- Stopford and Strange
different types of diplomacy
- state-firm
- state-state
- firm-firm
we call the relations ‘‘diplomacy’’ because of the importance to international relation
difference: companies are footloose, can switch territory easily
TNCs as state-level actors
- Triangular diplomacy (Stopford and Strange)
- '’footloose’’ corporations vs territorialized state
conclusion
- TNCs have existed for a long time, but have risen in the last wave of globalization
- their emergence is linked to the lowering of trade barriers, and technological innovation
- TNCs are increasingly homed and hosted in the South (semi-periphery)
theoretical approach of the book (dependent development - Peter Evans)
marxism
