International Handbook on the Economics of Integration, Volume III
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International Handbook on the Economics of Integration, Volume III

Factor Mobility, Agriculture, Environment and Quantitative Studies

Edited by Miroslav N. Jovanović

With this Handbook, Miroslav Jovanović has provided readers with both an excellent stand-alone original reference book as well as an integral part of a comprehensive three-volume set. This introduction into a rich and expanding academic and practical world of international economic integration also provides a theoretical and analytical framework to the reader, presenting select analytical studies and encouraging further research.
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Chapter 3: The Integration and Fragmentation Roles of Transnational Companies

Grazia Ietto-Gillies


Grazia Ietto-Gillies1 1 INTRODUCTION The popular image sees transnational companies (TNCs) as huge and all-powerful companies based in developed countries and investing in developing countries. This profile may never have been fully accurate and it is increasingly less so. Most large companies are indeed transnationals. However, an increasing number of smaller companies are also setting up production facilities abroad and becoming transnationals. This trend has been facilitated by developments in the cultural, political and technological environments that are enhancing internationalisation in many spheres of life: from production to consumption, from culture to business. UNCTAD (2008) gives 78,817 as the total number of TNCs worldwide. Of these, 72 per cent are located in developed countries, a share that has been declining steadily from 91.3 per cent in 1994, to 76.9 per cent in 2000, to 74.3 per cent in 2007 and 72 per cent in 2008. The same developments that facilitate the transnationalisation of smaller companies may also facilitate the branching out of companies from developing countries often into neighbouring countries and within the regional confines. The volume of foreign direct investment (FDI) has been increasing considerably in the last three decades. A large percentage of it takes the form of mergers and acquisitions (M&As) by companies based in different countries. With regard to the geographical pattern of FDI, the developed countries are both home and host to the largest shares of FDI, that is, they are the main originators and the main recipients of investment by TNCs. In...

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