MNCs in the global affairs


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MNCs in the global affairs

  1. 1. M Nattawut Thammanukornsri N in the global affairs Cs
  2. 2. ● Meier, O. – Schier, G. (2001): Enterprises multinationales. Stratégie, restructuration, gouvernance. Paris, Dunod. ● Willetts, Peter. "Chapter 20: Transnational Actors and International Organizations in Global Politics." The Globalization of World Politics: An Introduction to International Relations. By John Baylis, Steve Smith, and Patricia Owens. 5th ed. New York: Oxford UP, 2011. N. pag. Print. ● Dunning, J.H. (1992): Multinational Enterprises and the Global Economy. Reading, Addison-Wesley. ● Ohmae, Kenichi. The Borderless World: Power and Strategy in the Global Marketplace. London: HarperCollins, 1994. Print. ● Doremus, Paul N. The Myth of the Global Corporation. Princeton, NJ: Princeton UP, 1998. Print. ● Vernon, Raymond. Sovereignty at Bay: The Multinational Spread of U.S. Enterprises. New York: Basic, 1971. Print. ● Hymer, Stephen. "The Efficiency (Contradictions) of Multinational Corporations." The American Economic Review 60.2, Papers and Proceedings of the Eighty-second Annual Meeting of the American Economic Association (1970): 441-48. JSTOR. Web. 10 Mar. 2014. < ref=search-gateway:3155314d62325eca10c1402fec26d26d>. ● Poynter, T.A. (1985a): Strategic Responses to Government Intervention in Developing Countries. In: Brewer, T.L. (1985): Political risks in international business: new directions for research, management, and public policy. New York, Praeger. ● Steinbockova, Martina. "MULTINATIONAL CORPORATIONS AND NATION-STATES: PARTNERS, ADVERSARIES OR AUTONOMOUS ACTORS?" Thesis. MASARYK UNIVERSITY IN BRNO, 2007. (n.d.): n. pag. Web. 10 Mar. 2014. <>. Book info
  3. 3. ● Transborder activity: operate somewhere else from ○ David E. Liliental: “corporations which have their home in one country but operate and live under the laws and customs of other countries as well.” ○ International Labour Organisation (ILO): "the essential of the MNC lies in the fact that its managerial headquarters are located in one country (home country), while the enterprise carries out operations in a number of the other countries (host countries)." Basic featureof Multinational corporation
  4. 4. ● International corporation ○ mainly exporting its products/services to foreign countries ● Multinational corporation ○ organizing production across borders ● World/global corporation* ○ their functions integrated on a global level Development Stagesby Meier and Schier (2001) They clearly state the enterprises generally expand through several stages: Christian Chavagneux (2001) describes the concept of a “world company” as a phantasm because according to him, the company which is a total stateless entity deprived of all possible linkages to territories, has not occurred yet. *
  5. 5. ● Horizontally integrated companies ○ which acquire additional business activities at the same level of the value chain. ● Vertically integrated corporations ○ which are composed of a network of operations in upstream and downstream activities in the production process. ● Conglomerate structure ○ when the corporate divisions operate as relatively autonomous businesses under a larger corporate umbrella and as such, constitute self-contained strategic business units while each of them produces a single product. Type of MNCsby Martina Steinbockova
  6. 6. ● Financial control ○ to change transfer prices means that they can evade taxation or government controls on their international financial transactions. ● Triangulation of trade ○ to use triangulation means individual governments cannot control their country's international trade. ● Regulatory arbitrage ○ to move production from one country to another means individual governments are constrained in regulating and taxing companies. Ability of TNCsby Peter Willetts With ability of those TNCs, we can consider them as transnational actors:
  7. 7. ● Extraterritoriality and clash of sovereignty ○ The structure of authority over TNCs generates the potential for intense conflict between governments, when the legal authority of one government has extraterritorial impact on the sovereignty of another government. ● Re-regulation at global level ○ In some areas of economic policy, governments have lost sovereignty and regulation now has to be exercised at the global level rather than by governments acting independently. Conflicting Regulationby Peter Willetts with TNCs feature of cross-border operation, new question rise over regulation:
  8. 8. 1. The Honeymoon phase (early 1950’s – mid 1960’s) ○ was characterized by a very positive approach towards multinational enterprises. ○ The relationships between MNCs and states were extremely mutually beneficial since the expanding companies found new markets for their products as well as sources of raw materials and energy. Three Phasesby John H. Dunning (1992) He identifies three fairly distinct phases in the development of nation-states – MNCs interaction:
  9. 9. 2. The Confrontation phase (mid 1960’s – late 1970’s) ○ The MNCs became most heavily criticized for their unacceptable behaviour resulting in uneven contribution to economic development and unfair distribution of world wealth. ○ This negative approach to the multinational entities was reflected in political activities of the nation-states, such as frequent expropriations, restrictions on new investment flows or heavy regulation of MNCs’ performance. Three Phasesby John H. Dunning (1992)
  10. 10. 3. The Reconciliation phase (late 1970’s till present) ○ By the end of 70’s, both implemented more constructive solutions and effective instruments from both sides. ■ Governments realized the necessity to refine, modify and extend the scope of their policies in order to make use of the inward investments. ■ The MNCs, on the other hand, reviewed their attitudes and activities in the acquired markets and focused on drawing up codes of conduct as well as easing the communication on both local and global activities, more and more often engaging in cross- border strategic alliances and transnational ventures. Three Phasesby John H. Dunning (1992)
  11. 11. ● The change of relations ○ With the patterns of relationships between the actors have changed fundamentally. ○ The world has become more integrated, interconnected and interdependent on all the levels. This process has had major impacts on the relationships between nation-states and MNCs. ● Two Approaches to explain ○ There’re two approaches present the extreme ends of a view on the nation-states and MNCs in the era of globalization which can be easily simplified by two important books titles: ■ The Borderless World (by Kenichi Ohmae, 1990) and ■ The Myth of the Global Corporation (by Doremus et el., 1998). Globalization & MNCs
  12. 12. ● Being stateless ○ Ohmae (1990) argues that global (stateless) firms are a natural response to the fully integrated, borderless world economy. ○ MNCs have disengaged from any linkage to national origins, thus becoming fully independent from any state control. Ownership frameworks, decision-making processes, corporate strategies, cross- national alliances. ● Untouchable ○ According to Ohmae, the governments have been deprived of their traditional roles: both economic and political since the MNCs have means how to circumvent governmental restriction. Therefore, the multinational companies are becoming true citizens of the world. The Borderless Worldby Kenichi Ohmae (1990)
  13. 13. ● More integrated, more power for state ○ Doremus and his colleagues (1998) state that the position of the nation-state has been reinforced because all the transnational forces, technical advancements and economic integration have caused the convergence of state policies. Thus, domestic factors such as national structures and economic ideology do have powerful impact on the strategies and operations of MNCs. ● National interest, national firm ○ Put in other words; the MNCs are seen as products of their home economy, the national market is always considered the primary one and the MNC’s activities are heavily influenced by policies of home governments. The multinationals tend to reflect economic and political interest of their home country while the governments promote the interest of their own national firms. The Myth of the Global Corporation by Doremus et el. (1998) Also be called as extremely state-centric approaches.
  14. 14. ● Nation-state as anachronism ○ The basic idea is that increasing economic interdependence, technological advances in communication and transportation have made the nation-state an anachronism. ● More effective at hand of private ○ The state is no longer in control over its economic affairs because MNCs have proven that they are able to provide domestic economic welfare and organize effective production of goods on a much more efficient scale than the governments. Sovereignty at Bay?by Raymond Vernon’s (1971)
  15. 15. ● Uneven development ○ Costs and benefits associated with the MNCs tend to be distributed unevenly within and across the states. This concern became the core of the “dependencia” theories elaborated mostly by developing countries in 1970’s and 1980’s. ● More connect, more dependency ○ Basically, it challenges Vernon’s conclusions of MNCs and nation-states being “partners in development”. According to Dependencia, accepting foreign private investments from developed states increases economical, technical and cultural dependency of less developed states, and therefore, contributes to a hierarchical and exploitative world order. Dependencia
  16. 16. ● Transfer of economic function ○ The concept was further elaborated by the Marxist economist Stephen Hymer (1970) into the concept of two rules through which will cause the final transfer of economic functions of the state to MNCs. ● MNCs as the Trojan horse ○ Poynter (1985b: 25) even compares the acceptance of FDI and the presence of MNCs in developing countries to a Trojan horse through which the outside states can exert their influence on the host nation. Dependencia
  17. 17. ● Mutually influence & co-existance ○ Both two actors (state and MNCs) still possess to control or at least influence the other and also, that the key attributes of the nation- state have not been fully destroyed by the global activities of MNCs. ● Mutual benefit & more cooperation ○ Also, the relationships between these two actors are not only antagonistic as it might seem at the first moment from their mutually different features, interests and strategies but, apart from the interdependence and autonomy, a great deal of their relationships are in a cooperative manner. ○ Not only does this bring hope that the world of nation-states and global business might survive within one system but also that through further cooperation, these two actors together with other entities will continue working on a global set of rules and thus, will improve the quality of the world system itself. Conclusionby Martina Steinbockova (2007)
  18. 18. M Nattawut Thammanukornsri N in the global affairs Cs