The Market Integration, Global

Inter-state System,
Contemporary Global
Governance
TCWD111
 OBJECTIVES

The students are expected to:

 Understand market integration through
interactions of different global
corporations
 Identify remarkable periods in history
that define the creation and evolution of
global corporations
 Assess countries whose leading in terms
of global corporations in the near past
and today
 The Historic Rise Of The
Global Corporation—three
Periods
 First Period

Period of early patterns of trade

and exchange

 In early historical periods as cities and

countries extended their reach beyond their
own borders, a form of globalization was
initiated which then followed complex patterns
of interactive engagements organized through
trade and directly influenced by the emergent
and subsequently dominant technologies,
especially in shipping and navigation (Harvey,
1990).
Second Period

Period prior to the end of WW II

 The modern nation state system

emerged in ways that allowed
invention and social organization to
combine that vastly increased world
capital and the wealth of nation
states.
Second Period

Coupled with an extraordinary rise in

global population that attended the
industrial revolution, the societies that
arose would invent new ways to organize
the world itself through colonialism and
imperialism that vastly attenuated their
interactions between peoples, states and
regions such that a clearly differentiated
era of global interaction can be said to
exist (Harvey, 1990).
 Third Period

End of WWII to the present

 WWII, economic recovery and expansion

were led overwhelming by American
corporations which for a period from the
end of the war until the re-entry of
Japanese and European corporations onto
the global scene essentially stood for what
by then had come by then to be viewed as
multinational corporations (MNCs)
(Barnet and Muller, 1974).
 Third Period

 reflecting changes taking place

within the broader structural
dimensions of globalization itself
and at the same time significantly
contributing to those continuing
changes.
 How do global
corporations function?
What constitutes a
global corporation?
Global Corporation

 The contemporary global

corporation is simultaneously and
commonly referred to either as a
Multinational Corporation (MNC),
a Transnational Corporation
(TNC), an International Company,
or a global company.
Global Corporation

International companies
 importers and exporters, typically
without investment outside of their
home country
Multinational companies
 have investment in other countries,
but do not have coordinated
product offerings in each country.
Global Corporation

Global companies
 have invested in and are present in
many countries. They typically
market their products and services
to each individual local market.
Global Corporation

Transnational companies
 more complex organizations which
have invested in foreign operations,
have a central corporate facility but
give decision making, research and
develop (R&D) and marketing
powers to each individual foreign
market.
Global Corporation

Transnational companies
 “enterprise that engages in
activities which add value
(manufacturing, extraction,
services, marketing, etc) in more
than one country (UCTC, 1991).”
Global Corporation

The beginning of contemporary

globalization, however, dates from
the economic recovery of capital
structures in Japan and Europe
and the re-entry into global markets
of their national corporations.
Global Corporation

The overall structure of this system

would stay in place and continue to
develop throughout the 1970s and
1980’s—a period that stands
chronologically just prior to three
fundamental innovations that have
substantially changed the character
of the global corporation:
Fundamental Innovations

 the advent and impact of digitalization

and instantaneous global
communications
 the structural transformation of global
commerce from producer-driven
commodity chains to buyer-driven; and
 the increasing role performed through
the global system by financial
elements and the emergence of the
global financial firm
Three Structural Periods of
Postwar Market Integration

 Investment-based globalization
(1950-1970)
 Trade-based globalization (1970-
1995)
 Digital globalization (1995
onwards)
Foreign Direct Investment

 Throughout these periods, the

progressive growth of the global
corporate structure is through efforts to
define, measure and assess the extent
and consequences of Foreign Direct
Investment (FDI), defined initially and
primarily as the entry of private capital
from a source external to a country
into a receiving country.
Foreign Direct Investment

 Usually referred to in terms of “out-

ward” and “in-ward” flows, supplies of
FDI were viewed as the major
elements of global economic
development.

 Periods of intense FDI changed the

global corporate landscape. During the
period 1985-1990 FDI grew at an
average rate of 30% a year.
US, Europe and Japan

 Many corporate structures, especially

those in the United States, operating
within the frame of the producer-driven
commodity chain had been organized
by what came to be recognized as
“fordist” management principles.
US, Europe and Japan

 The emergence of Japan as a major

producer nation, especially of automobiles
and consumer electronics from the 1970’s
on, brought onto the scene new models of
effective production focused especially on
quality and regimes of flexible production—
a move that was echoed within European
firms rejoining the global commodity chains
US, Europe and Japan

 In 1998 only one of the top 100 global

corporations was located outside the
US, Europe or Japan (Oatley 2008).
What is different about this
phase of
Global corporate
development?
BRICS Economies

 The so-called “developing economies”,

and especially those of Brazil, India
and China—the so-called BRICS
economies, have become the most
dynamic sector of global corporate
growth, represented in part by their
significant FDI over the three decades
BRICS Economies

 The fact that the global economic

slowdown resulting from the financial
crisis of 2007 has had a lesser impact
on many developing economies,
especially the BRICS, indicates the
extent to which they have become a
new and important source of capital
within the global system.
BRICS Economies

 Capital flows in general over the past

decade and a half have begun to
change from the dominant North-
North/North-South dynamic to one in
which South-South and South-North
capital flows are significant (Rajan
2010)
BRICS Economies

 Examples:
 China’s Lenovo corporation’s purchase
of IBM’s PC business
 India’s investment in various
historically British firms including
Jaguar Land Rover (Economist, 2011).
BRICS Economies

 Hawksworth and Cookson (2008),

predict that “middle class”
consumers in China and India will
grow from some 1.8 billion in 2010
to 3.2 billion in 2020 and 4.9
billion by 2030.