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The global political economy of transnational corporations: a theory of asymmetric interdependence
2003 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The aim of the thesis is to investigate the interdependency relation between transnational corporations and states, as actors in the international political arena. The thesis extracts a theory of asymmetric interdependence, which to some extent explains the nature of this relation. Transnational corporations now play a central role in creating values in the states in which they perform FDI projects. In many respects, this can be said to be a result of the globalisation of the world economy, and most distinctly from the globalisation of markets, making possible for these large transnational corporations to with ease shift production between increasingly similar national markets. This development has also given the transnational corporation the advantage of being able to, in line with the overall strategy of the firm, shift the activities in response to changing factor endowments or government policy and exploit differences between countries on a global scale. These firms’ decisions to invest or not invest in particular geographical locations and the resulting flows of capital, materials, components and finished products, as well as of technological and organisational expertise are clearly essential to economic development and welfare in areas in which these corporations operate. The world’s largest transnational corporations account for approximately four-fifths of world industrial output, and the 500 largest TNCs account for 90 percent of all the worlds’ foreign direct investment. About one third of world trade today consists of intrafirm trade within TNCs, and another third consists of TNC exports to nonaffiliates. In industries dominating worldwide foreign direct investment flows, the considerably increased mobility of the investments has eroded the ability of states to influence the activity of affiliates in line with state preferences. The power relation deriving from asymmetric interdependence is a function of scarcity, since the power of each actor is determined by the scarcity of the possessions sought by the other actor. Transnational corporations have a structural advantage: they control resources generating economic strength, can easily shift these resources between different locations, states are depending on these resources for reaching their objectives and there is a scarcity of these resources and of the actors controlling them. Since there is a scarcity of the value generating, mobile investments controlled by transnational corporations, and since economic growth is a superior political objective for states, which additionally compete for these investments, the states are not able to in a sovereign fashion pursue policies that affect their inflow of foreign direct investment. The ways states may decrease the asymmetry in the interdependence, and thus gain a better outcome in separate bargains and increase the long-term ability to pursue more sovereign policies in matters determining location of activities of transnational corporations, are to either, to some extent, substitute the economic benefits of transnational corporations with other value generating mechanisms, such as domestic firms, or in some way alter the relative scarcity of the firms through creating a real equilibrium between the two scarcities (the scarcity of TNC investments and the scarcity of state controlled markets sought by transnational corporations), i.e. wholly or partly remove the destructive competition between states for foreign direct investment and coordinate policies on such issues that may be used in a competitive way for attracting TNC activity. However, the thesis concludes that it is highly unlikely that governments would attempt to pursue policies aiming to restrict the activities of transnational corporations. A coordination of policies, constituting a form of international regulation of national policies on foreign direct investment, would be highly desirable for states as a group for neutralising the asymmetry of the interdependence, but is also very problematic to realise.

Place, publisher, year, edition, pages
Keyword [en]
Social Behaviour Law, Transnational Corporations, Foreign Direct Investment, Interdependence, Power, Global Political Economy, Relative, Scarcity, Competitive Bidding, International Relations, Political Science
Keyword [sv]
Samhälls-, beteendevetenskap, juridik
URN: urn:nbn:se:ltu:diva-46395ISRN: LTU-CUPP--03/047--SELocal ID: 406bd5df-09e9-437e-80e8-f70f94841897OAI: diva2:1019709
Subject / course
Student thesis, at least 15 credits
Educational program
Political Science, bachelor's level
Validerat; 20101217 (root)Available from: 2016-10-04 Created: 2016-10-04Bibliographically approved

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