THE SAGE HANDBOOK OF GLOBALIZATION

The Rise of the Global Corporation the characteristics of the global corporation that we
examine directly in this chapter date from this period (for
Deane Neubauer example, patterns of equity ownership, corporate
ownership and management of subsidiaries, the
The Historic Rise Of The Global Corporation - Three relationship of 'central' organizational functions' to supply
Periods
and distribution chains, etc.) as attlibutes of corporate
As indicated throughout this text, global corporations are structures in the most prosperous and globally-engaged
inseparable from the more general phenomenon of nations (largely through colonial and imperialist
globalization itself. It follows that how one identifies relationships).
globalization serves to flocate' global corporations, both As the world emerged from the vast destructions
in the complex interactive pattern defined by of World War Il, economic recovery and expansion were
globalization and within given historical periods. This led overwhelmingly by American corporations which for
chapter situates the global corporation in three broad a period from the end of the war until the reentry of
historical periods, of which the last two have become the Japanese and European corporations onto the global scene
most relevant, essentially stood for what by then had come to be viewed
The approach to the study of globalization as multinational corporations (MNCs) (Barnet and
sometimes termed 'historical globalization' locates the Mueller, 1974). This period from the end of World War Il
phenomenon itself in early patterns of trade and exchange to the present can be viewed, therefore, as a third and
(Bentley, 2003; Gills and Thompson, 2006; Moore and distinct period in the transformation of the global
Lewis, 2000). In early historical periods as both cities and corporation. As the next parts of this chapter detail, the
countries extended their reach beyond their own borders, transformations of the global corporation occurring within
this view holds, a form of globalization was initiated this third period have been far-reaching and distinctive,
which then followed complex patterns of interactive reflecting changes taking place within the broader
engagements organized through trade and directly structural dimensions of globalization itself and at the
influenced by the emergent and subsequently dominant same time significantly contributing to those continuing
technologies, especially in shipping and navigation changes.
(Harvey, 1990). As Moore and Lewis contend, the entities
operating within this environment were functionally and
organizationally not so very different from contemporary
HOW DO GLOBAL CORPORATIONS
organizations, being possessed of 'head offices, foreign FUNCTION? WHAT CONSTITUTES A
branch plants, corporate hierarchies, extraterritorial GLOBAL CORPORATION?
business law, and even a bit of foreign direct investment
and value-added activity' (Moore and Lewis, 2000: 31-2). The contemporary global corporation is simultaneously
The vast heterogeneity of this long period, and commonly referred to either as a Multinational
however, leads a majority of scholars to situate the direct Company (MNC), a transnational corporation (TNC), an
antecedents of the contemporary global corporation international company or a global company. While much
within the dynamics of a two centuries-plus long duration of the remainder of this chapter will serve to clarify some
spanning the period prior to the end of World War Il in of these distinctions, those offered by Iwan (2012) are
which the modern nation-state system emerged in ways practically useful.
that allowed invention and social organization to combine International companies are importers and
exporters, typically without investment outside of
that vastly increased world capital and the wealth of
their home country.
nation states. Coupled with an extraordinary rise in global Multinational companies have
population that attended the industrial revolution, the investment in other countries, but do not have
societies that arose would invent new ways to organize coordinated product offerings in each country.
the world itself through colonialism and imperialism that They are more focused on adapting their
vastly attenuated their interactions between peoples, states products and services to each individual local
and regions such that a clearly differentiated era of global market
interaction can be said to exist (Harvey, 1990), Many of
 2 THE SAGE HANDBOOK OF GLOBALIZATION

Global companies have invested in and are commodity chains to buyer-driven; and the increasing
present in many countries. They typically role performed through
market their products and services to each Figure 17.1 The organization of producer-driven and consumer
individual local market. driven commodity chains
Transnational companies are more
complex organizations which have invested in
foreign operations, have a central corporate facility the global system by financial elements and the
but give decision making, research and development emergence of the global financial firm. The post-war
(R&D) and marketing powers to each individual
period can be delineated in a number of ways. Geriffl, for
foreign market.
example, emphasizes three structural periods: investment
More formally the TNC has been defined by the United based globalization (1950—70); trade-based globalization
Nations Centre on Transnational Corporations (UNCTC) (1970—95); digital globalization (1995 onwards). Within
as an 'enterprise that engages in activities which add value this analysis the nature of the global corporation changes
(manufacturing, extraction, services, marketing, etc.) in accordingly, being driven in each case by its evolving
more than one country (UNCTC, 1991). This chapter will purposes and by its extended reach and abilities (Geriffi,
employ the term 'global corporation' to refer to all of these 2001 : 1616—18). Another method of projecting this
types, seeking within specific contexts to be clear about growth is to examine the sources and levels of Foreign
which usage most applies. As many of the citations Direct Investment (FDI) most of which was of corporate
employed below indicate, however, these distinctions are origin. As Hedley indicates, in 1900 only European
often not employed within the literature. corporations were major investors, to be joined by some
An understanding of how global corporations American firms in the 1930s, Citing UN data he dates
operate within contemporary globalization requires a brief 1960 as the principal turning point for FDI as the major
recounting of some of the major changes that have taken driver of extended global corporate development. In each
place over the almost 70 years since the end of World subsequent decade until the turn of the century, FDI
War Il. As indicated above, US corporations operating would triple (Hedley, 1999b
internationally had enormous advantages in the immediate
post-war period as they — virtually alone in the world Producer-driven Commodity Chains
emerged from the war with their productive, organization
and distributional capacities intact. What would take
shape as the beginning of contemporary globalization,
however, dates from the economic recovery of capital
structures in Japan and Europe and the reentry into global
markets of their national corporations. By 1974, Bat-net
and Mueller in a path-breaking volume could both define
the MNC as a major economic global actor and begin an
effective description of how this particular corporate form Domestic and Foreign Subsidiaries and Subcontractors
was coming to dominate various aspects of global
production and exchange (Barnet and Mueller, 1974). A Buyer-driven Commodity Chains
considerable amount of other scholarly work documents
various 'waves' of global corporate development through
the subsequent six decades to the present.
The overall structure of this system would stay
in place and continue to develop throughout the 1970s
and 1980s — a period that stands chronologically just
prior to three fundamental innovations that have
substantially changed the character of the global
corporation: the advent and impact of digitalization and
instantaneous global communications; the structural
transformation of global commerce from producer driven
 THE RISE OF THE GLOBAL CORPORATION 3

manufacture transformed the dominant manufacturing

Throughout these periods economists, other firms of these older developed companies into more fully
scholars and government actors at both the national and extended and integrated organizational forms that moved
transnational level tended to 'frame' the progressive many such firms from a self conscious understanding of
growth of the global corporate structure (again, referred themselves as 'national firms operating internationally'
to almost indiscriminately as either MNCs or NCs) into more authentically global firms that required
through efforts to define, measure and assess the extent extensive corporate integration of their activities
and consequences of FDI, defined initially and primarily throughout the world.
as the entry of private capital from a source external to a Many corporate structures, especially those in
country into a receiving country. Usually referred to in the United States, operating within the frame of the
terms of 'out-ward' and 'in-ward' flows, supplies of FDI producer-driven commodity chain had been organized by
were viewed as the major elements of global economic what came to be recognized as 'Fordist' management
development, and during various policy periods as principles. US firms in particular, had sought to transport
'essential' for the development of what was then viewed these models abroad to their international manufacturing
as the 'third' world, even if in reality the vast majority of holdings. The emergence of Japan as a major producer
FDI in the 1990s was between countries of the 'developed' nation, especially of automobiles and consumer
world — primarily North America, Europe and Japan. electronics from the 1970s on, brought onto the scene new
Since 1964 the United Nations Conference on Trade and models of effective production focused especially on
Development (UNCTAD) has focused on the various quality and regimes of flexible production — a move that
roles that FDI plays in the development process and has was echoed within European firms rejoining the global
maintained an extensive policy library of global FDI commodity chains. These activities were experienced by
statistics as well as the dense structure of regulation that US firms as unwelcome challenges to their previously
frames global etc. corporate cross-border engagements virtually unchallenged positions on product design,
(Fredriksson, 2003). Periods of intense FDI changed the production efficiency, and quality — and ultimately on
global corporate landscape. During the period 1985—90 the ability of these corporate structures to maintain their
FDI grew at an average rate of 30 per cent a year. One accustomed returns on investment. The result was a
result, unsurprisingly, was the changing landscape of progressive reinventing' of the American business model,
corporate units and their relationship to each other. especially the industrial model a challenge that would
DeAnne Julius indicates that the expansion of FDI, dominate the curricula of US business schools for over
intercorporate alliances, and intrafirm trade during this two decades (Risi, 2005) and which is also continuously
period reached a level at which 'a qualitatively different associated with the global value shift from manufacturing
set of linkages was created among advanced economies capital to finance and human capital in progressively
(Julius, 1990). It was estimated that some 20,000 new networking societies (Castells, 2009).
corporate alliances were formed just in the period 1996— Gereff has argued persuasively that 'how global
8 (Gilpin, 2000: 170). corporations work is largely determined by whether they
The investment-based period was dominated by are situated in producer-driven or buyer-driven
producer-driven commodity or value chains, which in turn commodity chains. Figure 17.1 drawn from his work on
tended to be dominated by firms characterized by large US firms suggests indirectly that the more buyer-driven
amounts of concentrated capital focused on large-scale or they are, the more nodes exist within their networks and
capital-intensive manufacturing or extractive industries. the greater either their interdependence on other actors or
The organization of the dominant global funds during this their imperative to establish extensions (by whatever
period was powerfully influenced by the transformation ownership or contract means) of supply, finance, etc.
within national economies of the older ing The degree to which these generalizations were
companies wrought by what was viewed as the apt has intensified with each extension of digital reach
progressive 'de-industrialization' of these economies throughout the world. Commodity chains now need to be
through wide-scale offshoring of labour applications and conceptualized as existing within extraordinarily complex
its related costs. (See, for example, Bluestone and Han- information structures in which communications are
ison, 1984.) This progressive shift in the siting of virtually instantaneous and appear to grow exponentially.
 4 THE SAGE HANDBOOK OF GLOBALIZATION

Global corporate structures and operations can be viewed development, legal services, inventory control etc. These
within the ever-changing digital environment as framed extensive capabilities of control and management at a
by the constant need to develop and adapt. Equally, one distance blend many of the differentiated aspects of
can envision corporate activity as being propelled into product and service based firms. Digitalization is
extensive communication environments in which the transforming the classic value chain of manufacturing
dynamics of competition frame much of their behavior focused on innovation in which:
and make activities such as the ability to establish,
maintain and extend corporate brands an intrinsic element Product design and innovation are replaced with
of global capital literally the point at which material driving innovation through digital product design
Labour intensive manufacturing is replaced by
capital (that required to produce, deliver and make a
digitizing the factory shop floor Supply chain
product or service known) becomes inseparable from
management is replaced by globalizing through
symbolic capital (Reich, 1991, 2010). For a wide variety digital supply chain management
of so-called service activities that had previously been Marketing sales and service is replaced by digital
deemed 'in place', for example many aspects of medical customization. (Capgemini, 201 2)
care, software design, etc. and thereby bound by time and
space, current digital technology has worked to 'dis-place'
Buyer-driven value streams have Increasingly become
into a digital global world that makes possible the
digital with companies' specialization in Internet retailing
maximization of various corporate goals, such as 24/7
of goods and services continuing to gain market share
activity on common tasks through linked global sites, the
over fixed in place marketing and selling. The past three
targeting of optimal cost labour markets, etc. (Gautam
decades have borne witness to a fundamental
and Batra, 2011).
transformation of the apparel industry in which not only
The status of symbolic capital within the global
has apparel manufacture moved out of the older industrial
marketplace is evident in the increasing value and
economies (which are still its biggest markets), but have
importance being placed on the branding created and
also become fundamentally driven by digital operations
owned by global corporations. In a world of continuous
from design, to ordering, to factory processing, to
and instantaneous communications, corporate brands
inventory control, delivery and perhaps most importantly
come to symbolize the entire range of corporate activity
branding, marketing and advertising. Commonly known
to the extent that individuals who know virtually nothing
as the Quick Response (QR) management system the
else about a corporation but its brand come to interpret its
dominant system operates within and between global
status in the world and the value of its products and
corporate structures consisting of three steps wherein
services through the brand. Known as 'Brand Finance' , a
retailers adopt integrated electronic point of sale
new discipline now ranks corporations in global league
technologies, which allow for instantaneous
tables on the value of their brand, in a manner parallel to
communications between sales, reordering and production
their ranking by various entities in terms of their
units, and delivery control. In a second process films have
aggregate revenue, earnings, etc. (Brand-Finance, 2012).
redesigned internal management practices that allow for
In this regard, for instance, technology brands had
faster turnaround of merchandise and allow for more
become the most valuable global corporate brands in
effective inventory control. In the third stage, retailers and
2012 with Apple lauded for having 'leapfrogged' Google
manufacturers establish an integrated supply chain 'with
for the honour of placement at Number 1 with a brand
joint product development planning and inventory
finance valuation of US$70.6 billion, whereas another
control' (Cammett, 2006: 32).
success story, Amazon, saw its brand finance value rise
Another, somewhat different approach to the
by 61 per cent over the previous year.
question of what global corporations do and how they
Digitalization has affected the entire structure of
function is to view them as a complex collective activity,
how global corporations operate. Producer driven streams
constituting either a 'global system' of corporations or a
have progressively integrated their corporate structures to
network of global corporations that as a structure
reduce the effects of time and distance, especially for
interacts in complex ways, doing much to constitute the
services performed within corporate structures such as
global economic system as a result. In this regard, for
design, finance and accounting, advertising and brand
example, Kentor examined the critical period from 1968
 THE RISE OF THE GLOBAL CORPORATION 5

to 1998 in which global corporations were developing agreeing that global corporations are vast in size, no
much of the structure replicated in current operations. His reason exists to conclude that they are 'bigger than
goal was to empirically examine the 'economic and nations', or that their size relative to nations has increased.
spatial expansion of transnational corporate networks A related issue that often figures within policy debates
overtime, in terms of both individual countries and the carries the presumption that the arena of all global
global network as a whole' by charting the shifting corporations is effectively represented by their best
linkages of the globe's 100 largest transnational known, larger exemplars, no matter how size is measured
manufacturing corporations (Kentor, 2005). In terms of relative to nation states. To clarify the extent of global
both growth and concentration the results were startling. corporation activities Stopford points out that by 1998
Whereby these largest industrial corporations owned cross border economic activity had become so
I ,288 subsidiaries in 1962, by 1998 the top 100 industrial commonplace that fully 45,000 firms could be categorized
corporations owned nearly 10,000 subsidiaries (Kentor, as such, most of which operated with fewer than 250
2005: 266). Varieties of subsequent research replicate the employees; and with many service companies operating
essential findings using other methodologies and in as many as 15 countries with 100 or fewer employees
indicators. The Global 100 firms, a listing that includes (Stopford, 1998: 2).
all sectors of the global economy, grew from a 0.09 share Another approach to estimating the concentration
of global GDP in 1983 to 0.13 in 1998. Expanding the of global corporations has been to examine the interlocks
sample somewhat, the revenues of the Global 500 grew that exist between their boards of directors, often referred
from 0.15 to 0.28 of GDP between 1983 and 1998 to as 'the network of corporate control'. Utilizing a vast
(Kentor, 2005). data set and complex network models and analyses,
Another indicator of concentration estimates that Vitali, Glattfelder and Battison (2011) sought to move
in 2009 of the world's largest economic entities 44 are beyond well-known concentrations of existing wealth and
corporations; if one examines the top 150 units the income, and explore the actual degree to which
percentage that are corporations rises to 59 per cent. The interlocking membership results in control of global
44 corporations in the top 100 in 2009 generated revenues corporations. Employing a very large data set of 43,060
of US$6.4 trillion, equivalent to I l per cent of GDP TNCs their analysis indicated a network of all ownership
(Global Trends, 2013). Such questions about the relative 'originating from and pointing to INCs' with the resulting
size of global corporations and their impacts on the world network pointing to 600,508 nodes and 1,006,987
economy figure strongly in making an assessment about ownership ties
their relative 'net value' or 'worth' to the world. It is useful (2011: 2). Their findings revealed a very highly
to note that like so many issues having to deal with the concentrated structure of ownership and interlocks and a
vast complexities of global corporate structure, how one network structure dominated by a very dense core in
chooses to look at the data does much to determine what which three-quarters of the ownership of firms in the core
one actually sees. The data cited above, for example, remained in the hands of firms within the core itself. As
which compares corporate sales with GDP has become they conclude: 'This is a tightly-knit group of
one of the most common ways of seeking to assay the corporations that cumulatively hold the majority shares of
relative size of global corporations, and from that to infer each other. '
their relative influence. Perhaps the most common citation Framed another way, approximately 40 per cent
is to the work of Anderson and Cavanagh who in 2000 of the control over the economic value of TNCs in the
determined that of the world's largest 100 economic units world is 'held via ownership relations by a group of 147
51 were corporations (Anderson and Cavanagh, 2000). De TNCs in the core which has almost full control over itself'
Grauwe and Camerman (2003), however, argue that (Vitali, Glattfelder and Battiston, 2011: 4).
corporate sales and GDPs are not in fact directly or When one attempts to assess the overall role of
usefully comparable. GDP is calculated as the sum of all global corporations, it is clear that they constitute such
values added by each producer, not the sum total of all the an essential part of the economy that their various and
sales of all producers. Calculating in this manner, they multiple activities in fundamental ways determine what
contend, results in significant amounts of double counting that economy is going to be. This was amply
and would create much higher GDP figures. While demonstrated in the financial crisis of 2006—7 that was
 6 THE SAGE HANDBOOK OF GLOBALIZATION

triggered by events that would merely two decades firmly within those of the historically more developed
earlier have been regarded largely as phenomena internal economies. The number of global corporations from the
to the US economy and from which the 'rest' of the world emerging market economies listed in the Fortune Global
might arguably have distanced itself, That, however, is 500, which ranks corporations by revenue, rose from 47
all too obviously not what happened — in large part firms in 2005 to 95 in 2010.
because global financial firms, among them leading US These companies have also become active in the
firms, had created a variety of financial instruments broad pattern of global mergers and acquisitions (M&A),
organized around US real-estate values to be traded a primary vehicle by which corporate concentration takes
within a global market as hedge able securities. As the place. To cite Ahem:
International Monetary Fund (flvfF) has concluded in a
In 2010 these companies accounted for 2/447
recent report on the financial crisis of 2007 and beyond,
acquisitions, or 22% of global M&A transactions,
the prosperity of the preceding two decades owed much
which is up from 661 acquisitions, or 9% of total
within the US economy to total credit market borrowing M&A acquisitions, in 2001 , Of the 1 1,1 1 3
that grew from approximately 160 per cent of GDP in deals announced in 2010, 5,623 (50%) involved
1980 to 350 per cent in 2008. This increasing debt emerging market companies, either as buyers or as
structure focused on the one hand at the household level take-over targets of MNCs 'n advanced countries.
where borrowing roughly doubled from 45 per cent of (Ahern, 201 1 : 23)
GDP in 1984 to 97 per cent in 2008 and on the other on
financial sector debt which grew from 19 per cent of The fact that the global economic slowdown resulting
GDP in 1964 to approximately 115 per cent in 2008 from the financial crisis of 2007 has had a lesser impact
(frv1F, 2012). on many developing economies, especially the BRICS,
However, numerous commentators agree that indicates the extent to which they have become a new and
had this debt not been securitized through novel and important source of capital within the global system.
widely traded instruments in the period prior to 2008, the Capital flows in general over the past decade-and-a-half
extent of the global crisis may have been substantially have begun to change from the dominant
mitigated (Hamrey, 2011; Stiglitz, 2010). However one north-north/north-south dynamic to one in which south—
interprets the actual playing out of the financial crisis and south and south—south capital flows are significant
estimates of its potential severity, it is clear that global (Rajan, 2010) with most of the south—north capital flows
financial firms and the 24/7 trading markets they have coming from China and India. Examples include China's
created constitute a new form of global corporation whose Lenovo corporation's purchase of IBM's PC business and
activities are capable of impacting the global economy in India's investment in various historically British firms
powerful and novel ways. including Jaguar Land Rover (Economist, 2011).
Increased north—south investments during this period
allowed global north corporations to rebound quickly
WHAT IS DIFFERENT ABOUT THIS PHASE from their profit losses and restore income growth. The
OF GLOBAL CORPORATE relative robust nature of the emerging economies has
DEVELOPMENT? continued to attract FDI and to create conditions leading
to the rapid expansion of their nationally based global
The so-called 'developing economies', and especially corporations (UNCTAD-R, 2011: 26). China is the largest
those of Brazil, India and China the so-called BRICS developing country outward investor with estimated
economies — have become the most dynamic sector of holdings in 2009 of approximately US$ I trillion (OECD,
global corporate growth, represented in pall by their 2010). The differential impact of such emergent global
significant FDI over three decades. While the total of FDI dynamics has moved some observers to suggest that our
flows is still less than that which passes between fully previous distinctions between global north and south are
developed countries, Table 17.1 demonstrates the rapidity no longer adequate to suggest the overall dynamics of
of capital flows to developing countries. growth and inactions within the global system.
The relative size, growth and range of activity of Wolfsensohn, for example, has suggested a
global corporations from the emerging economies suggest characterization that he terms 'a four-speed world' that
that they are on a trajectory that will soon situate them differentiates countries as Affluent, Converging,
 THE RISE OF THE GLOBAL CORPORATION 7

Struggling and Poor, with the BRICS dominating the Tata Chemicals (India) is an inorganic-chemicals
growth of the convergent group (Wolfsensohn, 2007). producer with a significant global market share of soda ash
The importance of global corporations in Brazil, Techtronic Industries Company is the number one supplier of
power tools to Home Depot Wipro (India) is the world's largest third-
India and China to the current and projected global party engineering services company. (The Boston Consulting Group
economy is singular. With 40 per cent of the world's 2009)
population the BRICS represent a primary force in both
global production and consumption. Hawksworth and While BRICS are host countries to the largest number of
Cookson predict that 'middle class consumers in China global corporations among developing countries, these
and India will grow from some 1.8 billion in 2010 to 3.2 corporations are also distributed across other market areas
billion in 2020 and 4.9 billion by 2030 (Hawkswofth and with Mexico, Russia, the United Arab Emirates, Turkey
Cookson, 2008). The relative import of their global and Thailand next in order of frequency (Ahern, 2011). In
corporate cultures can be gauged in part by the fact that in 2009 China became the leading trade partner of Brazil,
2012 global corporations in China made up 73 of the India and South Africa, and Tata of India became the
largest in the Fortune 500 list (CNN Money, 2012), and most active investor in sub-Saharan Africa, OECD data
whereas Brazil and India with eight apiece currently indicate that over 40 per cent of researchers are now in
account for a small share of such corporations, emergent Asia. The OECD has examined the growth of developing
market countries are projected to account for a near economies in terms of their share of the global economy
doubling of their share of world trade over the next 40 in purchasing power party terms. Based on this analysis in
years, reaching nearly 70 per cent by 2050 (Ahern, 2011). 2000 the non-OECD member countries' share of Global
In 1998 only one of the top 100 global corporations was GDP was 40 per cent; in 2010 it was 51 per cent; and in
located outside the United States, Europe or Japan 2030 it will be 57 per cent (OECD, 2010), However, even
(Oatley, 2008). with the relatively enormous growth of the emerging
Rising global corporations in the BRICS are economies, the massive population size of their largest
j0Lned by emergent large companies in other developing countries dilutes the per capita effect of growth. Dadush
economies throughout the world such as Malaysia, and Shaw project that in 2050 China will have the largest
Mexico, Russia, Turkey and Vietnam. The following list economy overall, but its per capita income will be only 37
suggests some exemplary cases employing 2009 data. per cent that of the United States; India as the third largest
economy with have per capita income of just 1 1 per cent
Emerging Market Global Corporations: (Dadush and Shaw, 2011: 30).
State-owned corporations, which may be defined
Basic Element (Russia) is a world leader in alumina as 'enterprises comprising parent enterprises and their
production Bharat Forge (India) is one of the world's largest foreign affiliates in which the government has a
forging companies controlling interest (full, majority, or significant
BYD Company (China) is the world's largest manufacturer minority), whether or not listed on a stock exchange' are
of nickel-cadmium batteries CEMEX (Mexico) has developed into one
of the world's largest cement producers China International Marine playing a significant role in these emergent economies
Containers Group (China) is the world's largest manufacturer of (UNCTAD-WIR, 2011: 28). 'State-owned' may include
shipping containers both national and sub-national governments such as
Cosco Group (China) is one of the largest shipping regions, provinces and cities. UNCTAD in 2010
companies in the world Embraer (Brazil) has surpassed
identified at least 650 state-owned global corporations
Canada's
Bombardier as the market leader in regional jets Galanz Group (China)
with more than 8,500 affiliates operating around the
has a 45 per cent share of the European and a 25 per cent share of the world of which 345 (52.8 per cent) are in developing
US microwave market countries and 235 (36 per cent) in Asia. State-owned
Hisense (China) is the number one supplier of flat-panel TVs corporations differ remarkably in structure and function
to France
by country. Overall China has the largest number of such
Johnson Electric (China) is the world's leading manufacturer
of small electric motors Nemak (Mexico) is one of the world's leading corporations that are completely state- funded — some
suppliers of cylinder head and block casings for the automotive industry 154,000 in 2008. Of these only a small percentage attains
Sistema (Russia) is a conglomerate with a focus on the status of global corporations (UNCTAD-WIR, 2011:
telecommunications 30—1). In many other countries it is more common to
 8 THE SAGE HANDBOOK OF GLOBALIZATION

have a majority of state funded global corporations distorting competition by the use of state regulatory or
having less than sole state ownership. supervisory powers (OECD, 2005).
The entry of such corporations into the global Non-equity modes of production (NEMS) have become
corporate world has created a variety of concerns, many an increasingly important form of global corporations
of them focused on China. Concerns take different forms. within the emerging economies. The traditional mode of
Some view such firms as unwelcome market competitors organization for global firms in these economies was
willing to employ their potential and actual enormous through FDI, which manifested itself through equity
capital resources to create dominant stakes in various holdings and created structures by which parent firms
national industries, especially those involving the owned and directly managed their subsidiaries — an
extraction and organization of natural resources. In such organization form known as internalization because
cases the 'full weight' of state ownership is seen to give control and list reside with the parent, as do the vast
such corporations unfair competitive advantages. Another majority of revenues and profits. However, throughout
characterization Of China's state-owned global the latter twentieth century period of vertical integration
corporations views them as legacy institutions ('relics') of of global value chains by advanced economy global
China's state socialist system that perpetuates in its corporations, the 'seeds' of non-equity relations had been
revised neo-capitalist form institutions that lack the well established:
essential features of economic efficiency and competitive
discipline that the global corporate structure promotes how and whether firms can capture value depends in part
they are in effect subsidized by the whole of the Chinese on the generation and retention of competencies (that is,
state in all their inefficiencies, and this property gives resources) that are difficult for competitors to replicate. In
practice, even the most venically integrated firms rarely
them unwarranted market advantage within global internalize all the technological and management
competition, being e shielded' as it were from true market capabilities that are required to bring a product to market if
discipline (Woetzel, 2008: Greenacre, 2012). an input, even an important one, is required frequently,
Another view characterizes these firms as a 'new then it will likely be acquired externally', (Gereffi,
Humphrey and Sturgeon, 2005)
face' of global corporate reality as their strong domestic
markets and abilities to gain capital from within their host
countries contribute to an overall expansion of global NEMS represent an increasingly vast network of
corporate reach, especially when viewed in the context of relationships in which global production chains are
their likelihood to invest in south—south ventures and assembled through contract manufacturing, services
their propensity to invest in so-called Greenfield ventures outsourcing, contract farming, franchising, licensing and
(that form of FDI in which the parent firm starts a new management contracts. NEMS are viewed as
venture in a foreign country by creating new operational externalization for the corporation, which gains access to
facilities from the ground up). Yet other concerns focus benefits within global value chains without the direct
on national security issues (the ability of such investment of comparable amounts of capital, albeit at the
corporations to privilege their host country for national cost of relinquishing elements of control and at reduced
security reasons) and issues of transparency and profit levels. NEMS constitute a significant portion of
corruption (UNCTAD-WIR, 2011: xiii). In a recent effort global corporate activity within emerging economies.
to develop guidelines for governance within state Total sales through such arrangements in 2010 is
owned enterprises OECD has framed the issue as 'finding estimated to have reached US$2 trillion; contract
a balance between the state's responsibility actually for manufacturing and services outsourcing approximated
actively exercising its ownership functions such as US$ 1.1—1.3 frillion, franchising US$330-350 billion,
nomination and election of the board, while at the same licensing 360 billion, with management and
time refraining from imposing undue political contacts around US$IOO billion. Collectively NEMS
interference in the management of the company'. This employ between 14—16 million workers. In some
report also emphasizes the need to ensure a level playing countries they account for up to 15 per cent of GDP and
field on which private companies can compete in some industries, they account for 70—80 per cent of
successfully with state-owned enterprises while not exports (UNCTAD-Y/R, 2011: 123).
The relative importance of NEMS to both the
global economy and the structure and governance of
 THE RISE OF THE GLOBAL CORPORATION 9

global corporations in the future is suggested by how market with significant market penetration on all
NEMS growth has outpaced that of base industry growth continents. NEMS represent a third type in which
in electronics, pharmaceuticals, footwear, retail, toys and working through contract and other relationships with
garments: in electronics the ratio is 6:1 and that of developed market firms has been the basis for their rapid
garments 1 : 1. Referencing contract manufacturing as an increase in size and influence, which in turn has
estimated share of the cost of goods sold, toys and empowered the firms to establish other complex linkages
sporting goods led at 90 per cent followed by consumer beyond core contract markets to build competitive
electronics 80 per cent, automotive 60—70 per cent, advantage in both global and domestic markets, usually
generic pharmaceuticals 40 per cent and branded by gaining access to and exploitation of superior
pharmaceuticals 20 per cent. (UNCTAD-WIR, 2011: innovative technology. The relationship between China's
134). In short, such arrangements are growing at rates Foxconn and Apple is a well-known case in point as the
substantially in excess of the industries within which they combination of Apple's own innovative technological
exist. Overall this implies that in emerging economies capacities and Foxconn's abilities to adapt production
many firms specializing in these relationships will changes relatively quickly and with acknowledged high
themselves become very large firms employing many quality elevated Apple into the world's highest valued
thousands of workers with hundreds of billions of dollars firm in 2012. (Albeit with considerable costs, as the
of annual revenue (such as Foxconn Hon Hai (China) repeated criticisms of Foxconn's labour practices have
with US$59.3 billion in sales and 611,000 employees; become an issue of global import for both companies.)
Flextronics (Singapore: US$30.9 billion, 160,000
employees; LG Chem (Republic of Korea: US$ 13.1
billion and 8,000 employees), or Hyundai Mobil
(Republic of Korea: US$ 11.2 billion, 6,000 employees) THE RELEVANCE OF THE CHANGING
— 2009 data (UNCTAD-WIR, 2011). Many others, REGULATORY ENVIRONMENT TO THE
especially those within less intensive value chains, will STRUCTURE AND OPERATION OF
remain relatively small even as their industry sectors
GLOBAL CORPORATIONS
grow. These data suggest that global corporations are
choosing to do substantial amounts of their business What a global corporation 'does' how it operates
through non-equity relationships, trading off elements of within its host environment and throughout the multitude
risk, control, profit and in some cases innovation in of regions and countries in which it has operations — is
exchange for engagement in inter-corporate arrangements to a significant degree a result of the various regulatory
that preserve their own capital and equity positions. environments that frame its operations and impinge on it.
In summary, global corporations within the Because so much of this activity is ultimately defined and
emerging economies appear to be of three general types: enumerated as 'trade', a significant amount of this
those that have arisen as a result of growing national regulation emerges from the global structures that have
power of the host country, responding (as in China and arisen to regulate global trade at all levels. Within the past
India) to the need to aggregate and deploy national capital decade regulation has either followed the path created by
to provide the bases for economic development. Whether macro trade structures such as the General Agreement on
initially capitalized with FDI or state funds, such firms, Trade in Services (GATS), in which the major change to
such as many Chinese energy and industrial material the previously prevailing General Agreement on Tariffs
firms, have increasingly turned to supplying their own and Trade (GATT), was to include services (including
rapidly growing internal markets while investing heavily financial services) as a trade category. Or, alternatively,
in off-shore material resources (often in Australia and during the same period, portions of the world — most
Africa). A second type of global firm has focused on specifically Asia — have experienced a significant
replicating major consumer pathways in both developed growth in bilateral trade agreements as the rise of China
and developing markets. The Korean automotive firm, as a major producer of both finished products and pre-
Hyundai is a case in point. In 2011 it achieved a Fortune finished components has brought nations together to
Global 500 rank of 55, up from 78 in the previous year. negotiate their relative place within emergent value
With 80,000 core employees, it produces to a global chains (Naya and Plummer, 2005).
 10 THE SAGE HANDBOOK OF GLOBALIZATION

Viewed across the past four decades, the for the claim that CSR results in outcomes that benefit
'regulat01Y dynamic', as it affects global corporations, corporate stakeholders, albeit primarily shareholders.
has manifested itself into two conflicting thrusts. One has Even while some proponents of CSR argue that the
been the progressive and steady regulat01Y movement at adoption by and adherence to the kinds of codes proposed
both international and national levels of liberalization, by CSR create a climate of win-win for both the
resulting in part in the transformation of investment corporations and their critics (and therefore should
codes, trade rules and operating rules to reduce barriers to rationally impel them toward the embrace of such codes),
global investment and trade (Steger and Roy, 2010). this view is often contested by those on the corporate side
Embodied within neo-liberal beliefs and policies, this more sensitive perhaps to their political character. Utting
thrust toward liberalization has accounted for regulatory (2002) cites a telling case of a former executive of a large
environments distinctly favorable to global corporate oil company remarking at a UN sponsored CSR
investment and value chain developments across the workshop 'that if the win-win argument were so
spectrum of goods and services. A second thrust has compelling "then we wouldn't be sitting around this
resulted from national regulatory changes targeted usually table'". The executive went on to remind those present
at specific industries or investment patterns. In 2010, that it had been 'NGO and consumer' pressures that were
UNCTAD-WEIR (2011) catalogued such regulations for changing corporate behaviour (Utting, 2002: 62, cited in
both developed and developing countries with respect to Levy and Kaplan, 2007).
their effect on FDJ, finding that 74 favorable changes In recent work, Lemon et al. have proposed a set
facilitating entry and establishment, and the operation of of stakeholder metrics that will permit measurement of
capital (49 of which were in developing countries) and 49 CSR over time and its utility for multiple stakeholders,
less favorable to FDI (with 34 of these from developing including but not limited to shareholders (Lemon et al.,
countries). If one looks at national regulatory changes by 2011). Whatever its current value across the whole range
industry with respect to their relative liberalization or of global corporate decision making behavior, it is clear
restrictive nature, with the exceptions of Agribusiness and that as a movement CSR has sufficient support both to
Extractive Industries the significant majority of changes bring corporate decision makers 'to the table' to discuss
has been in the direction of lessened regulation important aspects of corporate behavior and in specific
(UNCTAD-WIR, 2011: 5). instances to create a relevant regulatory framework.
A third source of regulatory effort has been the In the aftermath of the fiscal crisis of 2007 the
significant rise over the past decade-and-a-half of need for greater regulation of global financial markets has
corporate social responsibility (CSR) as a self-regulatory become the clarion call of many. The American
pattern that has been brought to global corporations in an economist Joseph Stiglitz has been persistent in his
eff01t to render them more accountable across the range arguments that without some form of global financial
of their many and varied stakeholders. Resulting in large regulation with sufficient reach and enforcement to deal
part from the cumulative effect of more than three with the kinds of global trading risks present in that crisis,
decades of intense critique of global corporate behavior that the global economy stands without the necessary
and its varied negative consequences, CSR represents a regulatory tools to deal with the intense aggregation and
wide-ranging set of proposed governance structures, profit seeking within global financial capital that continue
including rules, norms, codes of conduct and standards to characterize the system (Stiglitz, 2010).
developed largely by the global NGO community (Levy
and Kaplan, 2007). Various empirical studies over this
THE NORMATIVE CASE RE: GLOBAL
period have sought to evaluate efforts taken by global
corporations to develop greater degrees of responsibility CORPORATIONS
over global supply chains, particularly where deficiencies,
At least since the early 1970s the normative case
often with respect to occupational health and safety, have
for global corporations has been inseparable from the
been
broader discourses and structures surrounding
highlighted in mass media and as thus pose threats to end
globalization itself. In the two decades following World
products or corporate brands (Kolk and van Tulder,
War Il and in the context of global rebuilding of
2005). Such studies also indicate some positive support
manufacturing and trade capabilities, they were viewed
 THE RISE OF THE GLOBAL CORPORATION 11

primarily as agents of desired economic development, and is deeply characterized by income disparities. Both of
FDI was eagerly sought after throughout the world. their results also suggest that some progress is taking
However, toward the end of the 1960s global corporations place for the very poorest; however, the sluggish pace of
were viewed as gaining their economic prominence change is clearly unacceptable:
through a variety of socially destructive means. Much of
Using the fate of change under the global accounting model
the postcolonial critique that came to be framed in the
With market exchange rates, it took 17 years for the bottom
discourse of north—south globalization, anti- billion to improve their share of world income by O, 18
globalization movements and independence, focused on percentage points, from 0.77 per cent in 1990 to 095 per
the role of multinational corporations as agents of a cent in 2007 . . At this speed, it would take more than eight
centuries (855 years to be exact) for the bottom billion to
system that on balance was resulting in greater global have ten per cent of global Income, (201 1 : 19)
wealth inequality, income inequality, lack of effective
worker protection, environmental degradation, producing
Whatever other ' global entities ' are involved in this
national cultures of corruption through corporate
pattern of wealth creation and distribution, global
collusion, and in some instances threatened national
corporations stand in the center of the structure that
sovereignty. Beyond these, within the context of the post-
establishes and distributes global wealth. The role of the
2007 financial crisis is the threat that such corporate
state over the past four or five decades as a vehicle for
structures, operating in important ways outside the reach
redistribution has been increasingly challenged by
of effective governmental control — national, regional or
political ideologies oriented around the protection of
global constitute an economic concentration of wealth
society's primary wealth holders, a pattern evident in
and power sufficient to generate a global crisis of
many of the current crises of the Eurozone in which
proportions that exceed the capacity of existing
powerful political forces seek to exempt both corporate
mechanisms of governance to remedy (Stiglitz, 2010).
and individual wealth holders from patterns of taxation
From many points of view the extent to which
suitable to support the 'burdens' of the state through
wealth and income inequality appear to be increasing
effective taxation. Nollert provides a persuasive normative
throughout the world suggests that in some macro-
projection of a transnational world of societal integration
equation the normative balance of development within
in which one might 'expect that a coordinated world
which global corporations have been the primary driving
economy, where corporate networks and a redistributive
agents has a powerful long-term negative trending effect.
state cooperate, could enhance social integration while in
Overall, the data on global inequality measured by
a liberal world economy, transnational corporate networks
income suggests (as it has for the better part of two
could primarily integrate production processes and
decades) that from top to bottom such inequality
national elites' (Nollert, 2005: 310). This outcome is a
continues to be widely distributed both between and
major goal of the CSR movement.
within countries: as the richer countries grow farther apart
The normative case for transnational corporations is
from the poorer, so within nations, among all three
situated within the ever-dynamic context of three
developmental categories — older developed countries, complex interactive global patterns that continue to frame
developing countries including the BRICS and more contemporary globalization and its possible futures:
newly developing countries is continued economic global inequality, the systematic stability and viability of
growth accompanied by growing inequality. the global financial system, and climate issues — each of
Ortiz and Cummins (2010, 2011) make the case clearly these in turn is related to broader patterns of human
and powerfully. Although using two different security. The likelihood that continued global
methodologies to examine Income distribution, each interdependence will produce outcomes favorable for the
offers strikingly similar results. Overall, measured in world as a whole will depend in large part on the
market exchange rates, the top quintile (20 per cent) willingness of global corporations to embrace the
controls more than 80 per cent of global income importance of these global goods and their
contrasted by one percentage point for those in the bottom responsibilities for them.
quintile. While this disparity improves when measured in
PPP exchange rates (67 per cent for the top quintile to 2.6
per cent for the bottom), both models reveal a world that DISCUSSION QUESTIONS:
 12 THE SAGE HANDBOOK OF GLOBALIZATION

1. How have digital technologies transformed the structures and

operations of global corporations?
2. Has the rapid growth of global corporate capitalism
led to a diffusion of influence in the global economy?
3. To what extent have global corporations become less
regulated?