Transnational Corporations
and Global Commodity Chains
Lecturer 7
Objectives of Lecture
• To assess the importance and nature of
major multinational corporations
operating in the contemporary global
economy
• To assess the insights and limitations of
using GCC approach to analyze the
contemporary global economy
‘Global’ Firms
• Critical Question to entire globalization
debate and this course is are
contemporary MNCs actually global
firms or are they essentially national
firms with units abroad
• Two ways we can attempt to answer
this question, through quantitative or
qualitative analysis
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Pre History of Global Firm
“East Indian Company”
International Financers, follow the ‘flag’
What (arguably) new about the current
era development of integrated global
manufactures
• Quantitative analysis basically involve
looking at growth of the global stock of
FDI and levels of particular firms assets
held abroad
• Peter Dicken essential conducts of
quantitative analyze of major MNCs and
argues that they remain rooted in
particular locations.
• The essential piece of evidence for
Dicken is that TNI ratio for 100 largest
MNCs only 52.6
• Actually Dicken’s own evidence is ambiguous
also there is a argument that it is static.
• In the 1980s global FDI stock grew at four times
as the speed of global GDP. This expansion was
modest, however, when compared to the increase
in the global stock of FDI from $1950 to $8895
billion which took place between 1990 and 2004
while the world economy as whole grew by
slightly under 3.5 percent per annum
• Although… important point about China
and India. China attracts over $50 billion
FDI year but GDP $7262 billion
• Basic qualitative analysis is important but it
has its limitations.
• There are a number of question which must
be asked about global firms that cannot
simply be answered through analysis of level
of FDI
• Franchising
• Simple Quantitative Analyses tells us a little
amount about how firms manage themselves
or organize their international activities
• Dicken’s argues that in terms of
corporate governance, levels of R&D
investment and strategies of expansion
distinct national MNCs remain distinct
• Sklair formulates a very different
argument
• On basis of Interviews with senior
management of Fortune 500 firms he
establishes the extent to which these
firms perceive of their future success as
being dependent on their capacity to
internationalize
• This does simply refer to increased
overseas investments but how they
perceive themselves and their
management structures
• Engage in global benchmarking
• In sense both Dicken and Sklair may
both be right but they are analyzing
different things
• Focus on Individual Firms inadequate in
attempting to understanding
contemporary transnational production
systems
• Nike, Wal-Mart subcontracting
• Global Commodity Chains analysis
provides useful tool
Commodity Chains Analyze
• Originally rooted in World Systems
Theory. As a alternative to analyze of
national economies (v broad approach)
• Follow a product from beginning to end
• Wallerstein et al work on development
of transnational commodity chains from
beginning of C16th
• Wallerstein claims are fairly modest
• Gary Gereffi (most famous chain scholar) has
greater ambition for GCC approach and sees
very different starting point
• Post-war development (Post Fordism and
Harvey)
• All chains have input-output structure, spatial
spread and governance structure
• Chains controlled by lead firms. Existence of
buyer driven (clothing) and producer driven
chains (chains). Buyer driven chains most
important for development and most closely
linked with Postfordism
• States must seek to upgrade position of their
firms within GCC
• Chains influenced by external politics
(different emphasis in different parts chains
literature)
• Advantages of GCC:
• Allows us to study economic
transactions as they land, prevents
statecentricism
• More sensitive to power than
conventional business studies ideas
about value chains
• More ‘real’ than orthodox trade theory
• Problems with GCC:
• An unresolved dilemma about you
understand the articulation into global
economy as a whole
• Policy relevance is highly questionable.
World Systems theory fallacy of
development. Also from micro to Marco
level
Conclusions
• Critical Issues that are is stake in these
debates is to what extent is which
autonomous national development and
viability of basing economic strategy on
FDI
• Some areas evidence is highly
ambiguous. For example, do we leave
in world of global firms
• Also developmental implications of FDI
and global integration is some way
limited and highly ambiguous
• Nevertheless, direction of change
appears clear
• I think that whatever the weaknesses of the
work on Commodity chains it is difficult to
deny that approach has some explanatory
value
• Link CC work back to Harvey and PostFordism
• Next week some biggest MNCs of them all
the International Private Financial Institutions