transnational corporations significance??? coordinate and control various stages of production...
Post on 19-Dec-2015
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Transnational Corporations
significance???• coordinate and control various
stages of production chains• creates potential to take advantage
of geographical differences in price and quality of factors of production
• changes in allocation of resources drives changing geography of output and employment opportunities
Macrolevel explanations
• internationalization of productive capital is 3rd stage preceded by:– internationalization of commodity
capital (trade)– internationalization of money capital
(overseas investment of portfolio capital)
• the 3 phenomena are components of a single integrated system
Microlevel explanations--Stephen Hymer
• assumption: ceteris paribus, domestic firms have an advantage
• so a foreign firm needs a firm-specific advantage to offset– large firm size ---> economies of scale– market power and marketing skills– technological expertise– access to cheaper sources of finance– etc.
Microlevel explanations--Raymond Vernon
• grounded in product life-cycle concept• developed to explain American
overseas production (in 1960s and 1970s)
• Stage 1: American firms introduce new, labor-saving products for affluent households of their domestic market
Microlevel explanations--John Dunning
• ownership-specific advantages• factors creating incentive to internalize
the use of those advantages through overseas production, not licensing to foreign firms– imperfect markets– uncertainty
• location-specific factors– explain foreign investment rather than exports
Types of Overseas Investments
•market-oriented production– where?– Notion of typical evolutionary
sequence
•Supply-oriented production
–natural resource industries
•cost-oriented production– a relatively recent category
– encouraged by developments in transportation and production technology
– increased attraction of other factors like labor
But, remember
• differences in industry mix• differences in labor productivity• differences in labor militancy and
controllability may be as important as costs
Erica Schoenberger American transnational production in Western
Europein 1970s and 1980s
Alternative hypotheses
1. Cost-oriented production hypothesis
•Tariff barriers of 5-15%•but:
– production cost disadvantage of 17% or so
– transportation costs not significant
– product differentiation permits success despite tariff costs