International Handbook on the Economics of Integration, Volume III Factor Mobility, Agriculture, Environment and Quantitative Studies
Factor Mobility, Agriculture, Environment and Quantitative Studies
- Elgar original reference
Edited by Miroslav N. Jovanović
Chapter 3: The Integration and Fragmentation Roles of Transnational Companies
3 The integration and fragmentation roles of transnational companies 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...
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