Transnational Companies and their Role in Globalization
| Author | Liviu Radu |
| Pages | 397-406 |
Liviu Radu. Lecturer, Ph.D., “Nicolae Titulescu” University, Bucharest (e-mail: lgradu2005@yahoo.co.uk).
Page 397
The topic approached hereby focuses on the study of the interdependence existing between the occurrence and development of transnational companies and the evolution of the globalization phenomenon. The issue of interference between the economic activity’s globalization and transnational companies has always represented an outstanding challenge among researchers.
The complexity of the globalization’s implications has required a quite restrictive approach mainly related to the effects triggered by the evolution of the transnational companies on sectors specific to the global economic activity, such as the financial-banking sector or the international trade sector. Approaching this approach by means of the aforementioned implications, we can notice the establishment of power centers within the global financial-banking system and the international trade system, generated by the transnational companies, real monopoles which can control the activity of the respective systems. For instance, only in the global financial-banking system, these companies carry out foreign direct investments in amount of over USD 200 billion and they control over half of the activity of the global trade with goods and services.
Therefore, we can assess that the existence and development of transnational companies represent a sign of changes (managerial, technologic and human) initiated and imposed by the said, but appreciated and acknowledged by the countries where these companies expand their activity. In this respect, the recent dispute – highly detailed in the Romanian and German mass-media, started from the manufacture activity transfer of the Finish company Nokia from the German town Bochum in Romania, near Cluj (Jucu Locality) represents, probably the best example. The Finish company, which manufactures four of ten mobile phones sold worldwide, has a labor force comprising 113,000 employees and a profit of Euro 1.56 billion in the third semester of 2007, 85% increase. The withdrawal of the Nokia Company from Germany, highly industrialized country, but with an extremely high cost of the labor force and the manufacture’sPage 398 establishment in Romania, country with many legal and economic problems, but with cheap labor force, represents an event with deep implications on politic, economic and even diplomatic level.
In conclusion, we can say that due to the size of their manifestation on economic and social level, transnational companies may entail certain reactions both from their origin countries and, moreover, from host countries, the latter being motivated by the infusion of direct foreign investment flow carried out by such companies.
Starting with the question: “transnational companies – cause or effect of globalization?” the specialized literature has benefited from the competent answers of many notorious authors, among whom John H. Dunning (Multinational Enterprise and the Global Economy), William Northaus (Managing the Global Commons: The Economics of Climate Change) or Ngaire Woods (The Political Economy of Globalization). In the Romanian economic literature we can notice the remarkable contribution of the researchers Costea Munteanu and Alexandra Horobet (Finante transnationale), Anda Mazilu (Transnationalele si competitivitatea - o perspectiva est-europeana) as well as Liviu Voinea (Corporatiile transnationale si capitalismul global).
Without trying the place this work among the studies carried out by the field’s renowned authors, we attempt a personal approach of the topic in order to bring our humble contribution to the research of the respective topic.
The factors which influence the globalization process may not be seen unilaterally, but only within the historic context of the evolution of the globalization phenomenon. In such context, globalization is a historic phenomenon marked by the fall of the “iron curtain” and the beginning of the symbiosis between state and expansionist capitalism. We can say that the existence of the “iron curtain” was the element which has drawn the definitive characteristics of the global politics carried out until 1990. This period was characterized by the existence of a bipolar structure USAURSS. It is the period when there were established sophisticated systems of alliances and economic regimes in West and East which supported and strengthened this structure. The confrontation West-East surpassed the real level into the ideology level, taking place between the different “isms” of liberalism and socialism, each trying to shape the future in the name of a modern politics1.
Contrary to this trend, Western Europe began to shape a new continent architecture. Thus, the globalization of the concerns regarding the cold war and the fall of the iron curtain marked an intensification of the actions for European accession and abandonment of former structures. This process has begun issuing signals since the 70’s. At the same tine, the United States of America marked the development of a new highly industrialized economic sector, which concluded with the beginning of a new era of market economy (the 90’s).
The fall of the Cold War system, at the beginning of the 90’s made the global politics face new challenges2: “the black hole” entailed by the collapse of the Soviet Union, the occurrence of the new states in the Central and Eastern Europe, the radical changes of the governing systems and the transition towards a market economy of the same states, the U.S.A.’s position in the newly formed structure.
Page 399
These events have been specific to the beginning of a new globalization age characterized by the development of human relations, where the capacity to act in an innovative and collaborating way is proved after centuries of structural restrictions.
The end of the Cold War at the beginning of the 90’s made the global politics face new challenges: “the black hole” entailed by the collapse of the Soviet Union’s external power, the occurrence of the new states in the Central and Eastern Europe, the radical changes of the governing systems and the transition towards a market economy of the same states, the U.S.A.’s position in the new international structure.
These events have been specific to the beginning of a new globalization age characterized by the development of human relations, where the capacity to act in an innovative and collaborating way is proved after centuries of structural and intellectual restrictions.
In this historic frame, the globalization phenomenon has begun settling on certain sectors:
On global level3: globalization refers to the increase of the economic interdependence between states, mirrored by the increase of the trans-border flows of economic goods, services and know-how. A proof of this is the registered tendencies:
• In 1970, the trans-border transactions of capital markets, as percent of the GIP, were below 5% both in the USA and Germany or Japan. In 1996, the percents in the GIP increased to 152%, 197% and 83%.
• From 1980 to 1994, the volume of the foreign direct investments increased from 4.8% to 9.6% of the global GIP;
• In 1989-1996, the trans-border trade with goods and assets increased with a yearly percent of approximately 6.2%, almost double from the yearly increasing percent of the GIP for the same period.
This historic evolution from 1950 to 1970 may be considered as being the beginning of the crystallization of the globalization term, without loosing sight of the fact that the respective process occurred a lot earlier in the historic frame, together with the expansion of the goods exchange between states.
On the level of a certain country: globalization is manifested by means of the expansion of the interconnections between the country’s economy and the global economy. This may be proved by using certain markers to measure a country’s integration degree, such as the percent of the exports in GIP, the volume of the incoming and outgoing flows of direct and portfolio foreign investments, as well as the size of the incoming-outgoing payment flows like royalties associated to the international technological transfer.
On the level of industrial sectors: globalization manifests itself as position held by a company in an industrial sector in its country and the position held by the same company of the industrial sector in another country. As more globalized an industry is by its companies, larger the advantages the companies may held. Such advantages arise from using own technologies, manufacture capacities, plant brands, and not finally, available capital.
On the level of an individual company, globalization is expressed by the way a company increases its incomes from extern relations and how it manages to place immovable assets in various host-countries, thus, undertaking trans-border exchanges of goods, services and know-how with its branches.
Therefore, both in terms of historic evolution and positioning of the globalization on different markets, we can notice a series of factors which marked the understanding of this phenomenon.
Page 400
Firstly, we speak about4 the increase of the number of countries which have undertaken the mechanisms of the market economy. As mentioned in the beginning of this sub-chapter, many countries start to pass gradually from planned economy to market economy, which affects the decisions of the economic policy both in industrialized and developing...
To continue reading
Request your trial