Transnational Corporations (TNCs)

Question 1

What do transnational corporations look like today?

Answer 1

• high importance in world economy (hold 25% of world GDP)
• many assumptions about the nature of TNCs:
  
  • > cheap labour, exploitation of resources, huge budgets…
  • > often true but not always. What makes a corporation transnational is only its multinationality
• largest/richest TNCs are mostly Western
• not all TNCs are really transnational (e.g. Microsoft: very little investment abroad)

Question 2

How is multinational defined?

Answer 2

registered and operating in more than 1 country

Question 3

What have been factors contributing to the recent rise of TNCs?

Answer 3

1. growth of foreign direct investment (FDI)
   -due to policy liberalization (increasingly easy)
2. patterns of TNC operations: increasing amount of host countries are the Global South (semi-periphery)
   (globalization)

Question 4

What is the product-life cycle? (Vernon)

Answer 4

• explains trade reversal of tech companies
• (Vernon)
  1. new advanced tech products needs lots of research: manufactured in advance economies
  2. first market to receive advanced tech products: advanced economies
  3. then outside market receives (mature product)
  4. once product is standardized, developing countries produce it

Question 5

What is the appropriability theory (Caves)?

Answer 5

• firms design and innovate in home country
• only do last manufacturing state abroad
• for fear that ideas will get stolen

Question 6

What are transnational companies strategies?

Answer 6

1. Branch factory syndrome (Hymer): although we think FDI helps host country, doesn’t actually due to appropriability theory
2. Politics and protectionist barriers: TNCs avoid taxes by opening up branch abroad, trade wars
3. Currency instability: for lower prices
4. Location-specific advantages: lower prices
5. global competition

Question 7

What are TNCs accused of?

Answer 7

1. agents of imperialism:
   Lenin: “imperialism = capitalism. state is instrument to TNCs”
2. agents of western hegemony

Question 8

What is Stopford and Strange’s ‘triangular diplomacy’?

Answer 8

• TNCs act almost like a state
• private authority triangle
• TNCS aren’t fixed to a specific state
• state-firm interaction
• -not only economic but also political actors