Transnational Corporation Essay ⋆ Sociology Essay Examples ⋆ EssayEmpire

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The term transnational corporation (TNC) is often used interchangeably with that of multinational corporation (MNC) or multinational enterprise (MNE) to mean a firm that owns or controls income-generating assets in more than one country. Other transnational organizations include intergovernmental bodies such as the UNO, regulatory agencies and NGOs. The focus here will be on corporations.

Trading organizations spanning territorial frontiers predate the modern nation-state. Today they still serve to integrate world markets and, more controversially, may affect a convergence in lifestyles. In the 1980s the level of foreign direct investment (FDI) between countries overtook that of exports/imports. There was also a shift from previously dominant patterns of trade and investment. This took the form of i) a search for new, often cheaper, sources of labor ii) a search for new local product markets. In pursuing these opportunities TNCs have dispersed stages in the design, production and distribution of goods to form chains of interdependent activities undertaken in different countries. The emergence of information technology, as well as new transportation systems, has facilitated a ”reduction of time and space” between dispersed activities.

The effect on the sovereignty of host states is often seen as erosive. Governments can become increasingly dependent on FDI to provide both jobs and taxes. A global contest between national governments for the location of plants increases the risk of later withdrawal, thus shaping future policy. The local ”outsourcing” of services actually multiplies this dependency. Most governments seek to regulate these domestic activities. The more educationally ”developed” is the host economy, the more likely the exchange to be an equitable one.

The indirect effects of FDI can also be considerable. The pricing of the transfer of goods and services between plants is controlled within the MNC in a way that can significantly shape the trade balance of the host country. The effect of workplace organization on the self-identity of local communities can be significant. New employment disciplines may be unfairly exploitative – the so-called ”race to the bottom.” But in rural regions TNC employment regimes can also provide a ”modern” life-style and, with it, new collective aspirations. At the other end of the TNC hierarchy evidence of increased recruitment of senior executives across borders, together with professionals associated with other transnational agencies, suggest the emergence of a new global elite.

Bibliography:

Bartlett, C. A. & Ghoshal, S. (1989) Managing Across Borders: The Transnational Solution. Harvard Business School Press, Boston, MA.
Dicken P. (2006) Global Shift. Sage, London.