Defining the Global Corporation
The term
global corporation has only recently begun to appear in the academic and business literature and is generally used to refer to the world's largest firms. Currently, there is no clear distinction between a
global corporation and a multinational or transnational corporation; however, the term
global corporation is generally used to suggest a firm that operates in many nation-states and that exhibits characteristics of being organized on a global scale in terms of its core functions.
(adapted from Jones, A., Dictionary of Globalization, Cambridge: Polity, 2006, p. 100)
According to various economists, the
global corporation, as opposed to the transnational corporation, is centralized around its headquarters. It follows the parent company's strategies, where knowledge and core competences are developed and kept. The transnational corporation, in contrast, is dispersed; it develops its knowledge and competence jointly, to be shared on a global scale. The multinational corporation, on the other hand, develops and retains these in each unit of the company.
According to Rugman and Verbeke, "one could classify as ‘global' all TNCs with a foreign-to-total sales ratio above, say, 50% and/or with some significant activity in each part of the Triad."
Very few TNCs are actually global companies; an increasing number of TNCs operate almost entirely at the regional level. In fact, after calculating the foreign-to-total sales ratio of the top 100 most transnationalized firms as reported by the UNCTAD, three TNCs have a truly balanced distribution of sales across all regions of the Triad: Nokia, Philips Electronics and LVMH.
(Rugman and Verbeke, "Regional transnationals and Triad strategy",
Transnational Corporations, 13, 3, December 2004, p. 11)
Critical View
Many authors argue that transnational firms are the key actors in globalization. As their numbers and size increase, they dominate global markets in all sectors of goods and services and account for an increasing proportion of total global output. For this reason, they are seen as having eroded the ability of nation-states to control economic activity within national territories as investment decisions about where to site production now fall to these corporations. TNCs' ability to open and close productive operations and to avoid regulation and taxes by shifting production to cheaper, less taxed and regulated locations, has led critics to argue that they have become too powerful in the context of contemporary globalization. In recent years, they have also become the target of campaigns, boycotts and protests by anti-globalization groups who see them as negative influences on democracy and the distribution of wealth.
(adapted from Jones, A.,
Dictionary of Globalization, Cambridge: Polity, 2006, pp. 218-219)
Many anti-globalization groups feel that the term multinational suggests wrongly that these firms spread their activities equally among several countries and therefore prefer the term transnational corporation:
"A
TNC will typically find countries with the cheapest labour, and the most relaxed environmental and labour laws, to keep down its costs. If a government tries to impose stricter laws, the TNC can threaten to relocate to another country. This intimidates poorer countries into accepting lower standards, because they do not want to risk losing the jobs and investment the company brings." In some cases, corporations may even influence or dictate government policy and many poor countries have been forced to privatise their services as part of structural adjustment conditions. This means that private companies (often TNCs) can take over water systems, railways, and telephone companies for profit and charge prices that restrict poorer people's access to these essential services."
(Global Village,
Transnational corporations, visited 2007-03-22)
