Transnational Corporations and Global Commodity Chains

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

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 Post-Fordism • Next week some biggest MNCs of them all the International Private Financial Institutions

Transnational Corporations and Global Commodity Chains