Transnational Corporations: Fragmentation Amidst Integration

By Grazia Ietto-Gillies | Go to book overview

2

The role of TNCs incross-border transactions

2.1Introduction

At the end of the previous chapter mention was made of the major components of international transactions and thus of the major mechanisms of globalisation and international integration. The present chapter will present evidence on the growth of TNCs and their activities and on the role that the TNCs play in all the major flows of international transactions.

The TNCs are, in fact, responsible for all FDI and the related profits originating from them. They are also responsible for a large share of portfolio investment and for most of world trade. The TNCs contribute also to movements of highly skilled labour, some of which take place within the company itself thus via internal labour markets at the international level. The organisation of production across borders results in networks which sometimes are fully internal to the firm, sometimes are external and contractual as we shall see in chapter three.

In some cases the activities are part and parcel of the nature of the TNC (as in the case of FDI). In others the activity was historically well established before the advent of the TNC, though transnationals now make a (or the) major contribution to it, as in the case of international trade.

The rest of the chapter will proceed as follows. The next section will give evidence on growth of TNCs and their direct activities. The various flows of international transactions will then be analysed, namely: international trade; foreign direct investment; financial investment; profits from international investment; movements of labour across countries and interfirm and intra-firm networks. The analysis will focus mainly on the role of TNCs and their activities in each type of transaction. A concluding section summarises.


2.2The growth of transnational companies and theirdirect activities

The number of transnational companies worldwide has increased considerably in the last three decades. Table 2.1 gives the number of TNCs for

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