The role and importance of transnational corporations in international economic relations

Abstract: Transnational corporations are one of the most important subjects of international economics. They are directly affecting new trends in international business, global competitiveness on international markets as well as economies of states, nations. This article will analyze how important role transnational corporations play within the current global economic turbulent processes to assure sustainable economic growth in the world economy.

The article under discussion may be divided into several logically connected parts which are : -Transnational corporations as a main actor of international economic relations;

  • TNCs, Nation-states and globalization;
  • In-house version of the international production;
  • Negative impact on the economies;
  • The role of TNCs in IER.

Transnational corporations as a main actor of international economic relations.

International corporations have become key actors in today's global economy, playing a role that is difficult to overestimate the system of international economic relations. In this article we will consider the influence and importance of transnational corporations in international relations.

A transnational corporation is an enterprise that is involved with the international production of goods or services, foreign investments, or income and asset management in more than one country[1,c.1].

I’d like to mention briefly that transnationality also refers to the extent to which a firm engages in value-creating activities across national borders. Faced with accelerated globalization, managers often make decisions to expand a firm's transnationality in order to enable the firm to effectively compete with rivals on a global scale (e.g. Nestlé, Deutsche Post, Toyota, etc.)[2,c.3].

For leading industrial countries is foreign operation TNC determines the nature of their international relations. So, up to 40% of the value of the property 100 TNCs (including financial) is outside their home country.

If we compare the amount of foreign (international) manufacturing TNCs volume of their exports, cleared of intra-firm trade, then at the end of the 80s, the ratio for the United States, Japan and Germany are, respectively: 4.1:1, 2.6:1; 1,5:3. Great in the role of exports in these countries for supplies and services from local companies to their foreign affiliates. In the second half of the '80s for such intra-firm trade accounted for between 14 and 20% of U.S. exports, 23-29% and 2428% of Japan German exports[3,c.2].

TNCs, Nation-states and globalization.

The increasing domination of the world economy by TNCs directly challenges national sovereignty. Historically, the sovereignty and therefore the power of a nation-state lay in its ability to achieve compliance with whatever it commanded its territorially defined space. Borderlines physically defined what was territorially sovereign and what was not. If a state's sovereignty was challenged from outside its territory, it could resort to force to maintain control. However, as a result of various technological developments, the idea of a physically bounded and sealed state is now open to question. These developments underlie the transnational corporate threat to state sovereignty along the following three dimensions:

Permeability of borders. Borderlines between nation-states have been rendered permeable and porous in a number of innovative ways, erasing many of the traditional distinctions between "inside" and "outside." For example, what borders do electronic communications and atmospheric pollutants observe? Under whose borders do oil and gas reserves lie? Do space satellites invade territorial integrity? The new permeability of borders diminishes the capacity of nation-states to distinguish and determine what occurs "inside" their territory.

Mobility across borders. Developments in transportation, communication, and information technology not only have increased the rate of cross-border mobility among TNCs but also have increased the speed or velocity with which cross-border transactions take place. Concurrently measuring both the location and the velocity of TNC activity often produces "uncertain" results, generating "inderminacy" for a state.

Border straddling. To the extent that TNCs operate simultaneously in different sovereign jurisdictions, which jurisdiction has precedence over which corporate activities at what time? This complex issue blurs the legal boundaries between states. It also confuses the notion of "citizenship" and its attendant rights and responsibilities.

In-house version of the international production.

Actively participating in international production processes on the basis of the traditional international division of labor, TNCs have established their own in-house international production on the basis of a modernized international division of labor, with the connection of several developing new markets for their specialization. It is this in-house version of the international production was for the modern major international corporations[4,c.1].

Organization of international production in-house gives TNK number of advantages:

  1. the benefits of international specialization of production by individual countries;
  2. most of the tax, investment and other benefits provided by countries for foreign investors;
  3. maneuver capacity utilization by adapting their production programs in accordance with the situation on the world market;
  4. the use of its subsidiaries as a base for the conquest of emerging markets. So, for example, to sell its products through its' overseas subsidiaries of TNK much higher than world exports. While sales of multinational corporations outside the country home base grow by 20-30% faster than exports. By investing in many developing countries, TNCs are building factories, not in order to sell goods produced in their home country, and for the needs of the countries - recipients of capital;
  5. organization of its own international production enables TNCs extend the product life cycle, adjusting the production of the product as its obsolescence in overseas branches, and then selling the license for its production to other companies[5,c.4].

In addition, transnational corporations have increasingly become the determining factor in deciding the fate of a country in the international system of economic relations. The active production, investment, trading activity TNK allows them to perform the function of the international control of production and distribution of products, and even, according to UN experts, to promote economic integration in the world.

Negative impact on the economies.

In fact, the activities of TNCs leads to integration, internationalization only within those limits and boundaries that are defined maximum profit. While noting the positive aspects of the functioning of TNCs in the world economy and international economic relations, it should be said about their negative impact on the economies of the countries in which they operate[6,c.2].

Experts suggest:

To counter the implementation of economic policies of those states where TNCs operate;

A violation of state laws. So by manipulating the transfer price policy, subsidiaries, multinationals operating in different countries, cleverly circumvent national legislation to cover revenue from taxation by transferring them from one country to another;

The establishment of monopoly prices, dictate the conditions prejudicial to the interests of host countries[7,c.3].

The role of TNCs in IER.

From my point of view transnational corporations have increasingly become the determining factor in deciding the fate of a country in the international system of economic relations. The active production, investment, trading activity TNK allows them to perform the function of the international control of production and distribution of products, and even, according to UN experts, to promote economic integration in the world.

In general, I fully agree with with the opinion of experts about the negative impact of TNCs, however, as far as I am able to judge, TNK - it is a complex and constantly evolving phenomenon in the system of economic links, requiring constant attention, learning and international control.

Список использованных источников:

  1. 1.
  2. 2. A_Global_Language_-_David_Crystal.pdf
  3. 3.
  4. 4. maps/transnational-corporations
  5. 5. A_Global_Language_-_David_Crystal.pdf
  6. 7. international-corporations-1933


Year: 2020
City: Almaty
Category: Economy