to the end of WW II in which the modern nation
The Rise of the Global Corporation state system emerged in ways that allowed
Deane Neubauer
Part One: The historic rise of the global
corporation—three periods.
As indicated throughout this text, global
corporations are inseparable from the more
general phenomenon of globalization itself. It
follows that how one identifies globalization
serves to “locate” global corporations, both in the
complex interactive pattern defined by
globalization and within given historical periods.
This chapter situates the global corporation in
three broad historical periods, of which the last
two have become the most relevant.
The approach to the study of globalization
sometimes termed “historical globalization”
locates the phenomenon itself in early patterns of
trade and exchange (Bentley, J. 2003; Gills, 2006;
Moore and Lewis 2000.) In early historical periods
as both cities and countries extended their reach
beyond their own borders, this view holds, 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). As Moore and Lewis contend, the
entities operating within this environment were
functionally and organizationally not so very
different from contemporary organizations, being
possessed of “head offices, foreign branch plants,
corporate hierarchies, extraterritorial business
law, and even a bit of foreign direct investment
and value-added activity (Moore and Lewis, 2000;
31-32).
The vast heterogeneity of this long period,
however, leads a majority of scholars to situate the
direct antecedents of the contemporary global
corporation within the dynamics of a two plus-
centuries long duration spanning the period prior
invention and social organization to combine that
vastly increased world capital and the wealth of
nation states. 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). Many of the characteristics of the global
corporation that we examine directly in this
chapter date from this period (e.g. patterns of
equity ownership, corporate ownership and
management of subsidiaries, the relationship of
“central” organizational functions to supply and
distribution chains, etc.) as attributes of corporate
structures in the most prosperous and globally-
engaged nations (largely through colonial and
imperialist relationships).
As the world emerged from the vast destructions
of 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). This period from the
end of WWII to the present can be viewed,
therefore, as a third and distinct period in the
transformation of the global corporation. As the
next parts of this chapter detail, the
transformations of the global corporation
occurring within this third period have been far
reaching and distinctive, reflecting changes taking
place within the broader structural dimensions of
globalization itself and at the same time
significantly contributing to those continuing
changes.
1
Part Two: How do global corporations
function? What constitutes a 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. While much of the
remainder of this chapter will serve to clarify some
of these distinctions, those offered by Iwan (2012)
are practically useful.
 International companies are 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. They are more focused on
adapting their products and services to
each individual local market.
 Global companies have invested in and are
present in many countries. They typically
market their products and services to
each individual local market.
 Transnational companies are 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.
More formally the transnational corporation has
been defined by the United Nations Centre on
Transnational Corporations (UNCTC) as an
“enterprise that engages in activities which add
value (manufacturing, extraction, services,
marketing, etc) in more than one country (UCTC,
1991).” This chapter will employ the term “global
corporation” to refer to all of these types, seeking
within specific contexts to be clear about which
usage most applies. As many of the citations
employed below indicate, however, these
distinctions are often not employed within the
literature.
An understanding of how global corporations
operate within contemporary globalization
requires a brief recounting of some of the major
changes that have taken place over the almost
seventy years since the end of WWII. As indicated
above, US corporations operating internationally
had enormous advantages in the immediate post-
war period as they—virtually alone in the world—
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 re-entry into global
markets of their national corporations. By 1974
Barnet and Muller 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 was coming to dominate
various aspects of global production and exchange
(Barnet and Muller, 1974). A 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 1980’s—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
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. (The post-war period can
be delineated in a number of ways. Geriffe for
example emphasizes three structural periods:
Investment-based globalization (1950-1970);
Trade-based globalization (1970-1995); Digital
globalization (1995 onwards.) Within this analysis
2
the nature of the global corporation changes
accordingly, being driven in each case by its
evolving purposes and by its extended reach and
abilities (Geriffe 2001: 1616-18). Another method
of projecting this growth is to examine the sources
and levels of Foreign Direct Investment (FDI) most
of which was of corporate origin. As Hedley
indicates, in 1900 only European corporations
were major investors, to be joined by some
American firms in the 1930s. Citing UN data he
dates 1960 as the major turning point for FDI as
the major driver of extended global corporate
development. In each subsequent decade until the
turn of the century, FDI would triple (Hedley
1999).
Throughout these periods economists, other
scholars and government actors at both the
national and transnational level tended to “frame”
the progressive growth of the global corporate
structure (again, referred to almost
indiscriminately as either MNC’s or TNC’s) through
efforts to define, measure and assess the extent
and consequences of foreign direct investment,
defined initially and primarily as the entry of
private capital from a source external to a country
into a receiving country. 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, and during various policy
periods as “essential” for the development of what
was then viewed as the “third” world, even if in
reality the vast majority of FDI into the 1990s was
between countries of the “developed” world—
primarily North America, Europe and Japan. Since
1964 the United Nations Conference on Trade and
Development (UNCTAD) has focused on the
various roles that FDI plays in the development
process and has maintained an extensive policy
library of global FDI statistics as well as the dense
structure of regulation that frame global corporate
cross-border engagements (Fredriksson 2003).
Periods of intense FDI changed the global
corporate landscape. During the period 1985-1990
FDI grew at an average rate of 30% a year. One
result, unsurprisingly, was the landscape of
corporate units and their relationship to each
other. DeAnne Julius indicates that the expansion
of FDI, inter-corporate alliances, and intra-firm
trade during this period reached a level at which “a
qualitatively different set of linkages” was created
among advanced economies (Julius 1990). It was
estimated that some 20,000 new corporate
alliances were formed just in the period 1996-
1998 (Gilpin, 2000: 170).
The investment-based period was dominated by
producer-driven commodity or value chains,
which in turn tended to be dominated by firms
characterized by large amounts of concentrated
capital focused on large-scale or capital-intensive
manufacturing or extractive industries. The
organization of the dominant global firms during
this period was powerfully influenced by the
transformation within national economies of the
older manufacturing companies wrought by what
was viewed as the progressive “de-
industrialization” of these economies through
wide-scale off-shoring of labor applications and its
related costs. (See for example Bluestone and
Harrison, 1984.) This progressive shift in the
siting of manufacture transformed the dominant
manufacturing firms of these older developed
companies into more fully extended and integrated
organizational forms that moved many such firms
from a self-conscious understanding of themselves
as “national firms operating internationally” into
more authentically global firms that required
extensive corporate integration of their activities
throughout the world.
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. U.S. firms in
particular had sought to transport these models
abroad to their international manufacturing
holdings. The emergence of Japan as a major
3
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. These activities were
experienced by U.S. firms as unwelcome challenges
to their previously virtually unchallenged
positions on product design, production efficiency,
and quality—and ultimately on the ability of these
corporate structures to maintain their accustomed
returns on investment. The result was a
progressive “re-inventing” of the American
business model, especially the industrial model—a
challenge that would dominate the curricula of U.S.
business schools for over two decades (Risi 2005)
and which is also continuously associated with the
global value shift from manufacturing capital to
finance and human capital in progressively
networking societies (Castells, 2009).
Gereffi has argued persuasively that “how global
corporations” work is largely determined by
whether they are situated in producer-driven or
buyer-driven commodity chains. The following
figure drawn from his work on U.S. firms suggests
indirectly that the more buyer-driven they are, the
more nodes exist within their networks and the
greater either their inter-dependence on other
actors or their imperative to establish extensions
(by whatever ownership or contract means) of
supply, finance, etc.
FIGURE ONE ABOUT HERE
The degree to which these generalizations were
apt has intensified with each extension of digital
reach throughout the world. Commodity chains
now need to be conceptualized as existing within
extraordinarily complex information structures in
which communications are virtually
instantaneous and appear to grow exponentially.
Global corporate structures and operations can
be viewed within the constantly changing digital
environment as framed by the constant need to
develop and adapt. Equally, one can envision
corporate activity has being propelled into
extensive communication environments in which
the dynamics of competition frame much of their
behavior and make activities such as the ability to
establish, maintain and extend corporate brands
an intrinsic element of global capital—literally
the point at which material capital (that required
to produce, deliver and make a product or service
known) becomes inseparable from symbolic
capital (Reich, 1990, 2010). For a wide variety of
so-called service activities that had previously
been deemed “in-place” e.g. many aspects of
medical care, soft-war design, etc. and thereby
bound by time and space, current digital
technology has worked to “dis-place” into a
digital global world that makes possible the
maximization of various corporate goals, such as
24/7 activity on common tasks through linked
global sites, the targeting of optimal cost labor
markets, etc. (Gautam and Batra, 2011).
The status of symbolic capital within the
global marketplace is evident in the increasing
value and importance being placed on the
branding created and owned by global
corporations. In a world of continuous and
instantaneous communications, corporate
brands come to symbolize the entire range of
corporate activity to the extent that
individuals who know virtually nothing else
about a corporation but its brand come to
interpret its status in the world and the value
of its products and services through the brand.
Known as “Brand Finance,” a new discipline
now ranks corporations in global league tables
on the value of their brand, in a manner
parallel to their ranking by various entities in
terms of their aggregate revenue, earnings, etc.
(Brand-Finance, Global 500 2012). In this
regard, for instance, technology brands had
become the most valuable global corporate
brands in 2012 with Apple lauded for having
4
“leapfrogged” Google for the honor of
placement at # 1 with a brand finance
valuation of US$70.6 billion, whereas another
success story, Amazon, saw its brand finance
value rise by 61% over the previous year.
Digitalization has affected the entire structure
of how global corporations operate. Producer
driven steams have progressively integrated
their corporate structures to reduce the effects
of time and distance, especially for services
performed within corporate structures such as
design, finance and accounting, advertising
and brand development, legal services,
inventory control etc. These extensive
capabilities of control and management at a
distance blend many of the differentiated
aspects of product and service based firms.
Digitalization is transforming the classic value
chain of manufacturing focused on innovation
in which:
 Product design and innovation is
replaced with driving innovation
through digital product design
 Labor intense manufacturing is
replaced by digitizing the factory
shop-floor
 Supply chain management is
replaced by globalizing through
digital supply chain management
 Marketing sales and service is
replaced by digital customization.
(Capgemini, 2012).
Buyer-driven value streams have increasingly
become digital with companies specialization
in Internet retailing of goods and services
continuing to gain market share over fixed in-
place marketing and selling. The past three
decades have borne witness to a fundamental
transformation of the apparel industry in
which not only has apparel manufacture
moved out of the older industrial economies
(which are still its biggest markets), but have
also become fundamentally driven by digital
operations from design, to ordering, to factory
processing, to inventory control, delivery and
perhaps most importantly branding,
marketing and advertising. Commonly known
as the Quick Response (QR) management
system the dominant system operates within
and between global corporate structures
consisting of three steps wherein retailers
adopt integrated electronic point of sale
technologies, which allow for instantaneous
communications between sales, reordering
and production units, and delivery control. In
a second process firms have redesigned
internal management practices that allow for
faster turnaround of merchandise and allow
for more effective inventory control. In the
third stage, retailers and manufacturers
establish an integrated supply chain “with
joint product development planning and
inventory control (Cammett, 2006: 32).
Another, somewhat different approach to the
question of what global corporations do and
how they function is to view them as a
complex collective activity, constituting either
a “global system” of corporations or a network
of global corporations that as a structure
interacts in complex ways, doing much to
constitute the global economic system as a
result. In this regard, for example, Kentor
examined the critical period from 1968 to
1998 in which global corporations were
developing much of the structure replicated in
current operations. His goal was to empirically
examine the “economic and spatial expansion
of transnational corporate networks overtime,
in terms of both individual countries and the
global network as a whole” by charting the
shifting linkages of the globe’s 100 largest
transnational manufacturing corporations
(Kentor 2005). In terms of both growth and
concentration the results were startling.
Whereby these largest industrial corporations
5
owned 1288 subsidiaries in 1962, by 1998 the
top 100 industrial corporations owned nearly
10,000 subsidiaries (Kentor 2005: 266).
Varieties of subsequent research replicate the
essential findings using other methodologies
and indicators. The Global 100 firms, a listing
that includes all sectors of the global economy,
grew from a .09 share of global GDP in 1983 to
.13 in 1998. Expanding the sample somewhat,
the revenues of the Global 500 grew from.15
to .28 of GDP between 1983-1998 (Kentor,
2005).
Another indicator of concentration estimates
that in 2009 that of the world’s largest
economic entities 44 are corporations; if one
examines the top 150 units the percentage
that are corporations rises to 59%. The 44
corporations in the top 100 in 2009 generated
revenues of US$6.4 Trillion equivalent to 11%
of GDP (Global Trends 2013).
Such questions about the relative size of global
corporations and their impacts on the world
economy figure strongly in making an
assessment about their relative “net value” or
“worth” to the world. It is useful to note that
like so many issues having to deal with the
vast complexities of global corporate
structure, how one chooses to look at the data
does much to determine what one actually
sees. The data citied above, for example, which
compare corporate sales with GDP has become
one of the most common ways of seeking to
assay the relative size of global corporations,
and from that to infer their relative influence.
Perhaps the most common citation is to the
work of Anderson and Cavanagh who in 2000
determined that of the world’s largest 100
economic units 51 were corporations.
(Anderson and Cavanagh 2000). De Grauwe
and Camerman (2003), however, argue that
corporate sales and GDPs are not in fact
directly or usefully comparable. GDP is
calculated as the sum of all values added by
each producer, not the sum total of all the
sales of all producers. Calculating in this
manner, they contend, results in significant
amounts of double counting and would create
much higher GDP figures. While agreeing that
global corporations are vast in size, no reason
exists to conclude that they are “bigger than
nations,” nor that their size relative to nations
has increased. A related issue that often
figures within policy debates carries the
presumption that the arena of all global
corporations is effectively represented by
their most well-known, larger exemplars, no
mattered how size is measured relative to
nation states. To clarify the extent of global
corporation activities Stopford points out that
by 1998 cross-border economic activity had
become so commonplace that fully 45,000
firms could be categorized as such, most of
which operated with fewer than 250
employees, and with many service companies
operating in as many as 15 countries with 100
or less employees (Stopford, 1998: 2).
Another approach to estimating the
concentration of global corporations has been
to examine the inter-locks that exist between
their boards of directors, often referred to as
“the network of corporate control.” Utilizing a
vast data set and complex network models and
analyses, Vitali, Glattfelder and Battiston
(2011) sought to move beyond well-known
correlates of the concentrations of existing
wealth and income, and explore the actual
degree to which interlocking membership
results in control of global corporations.
Employing a very large data set of 43060
TNC’s their analysis indicated a network of all
ownership “originating from and pointing to
TNCs” with the resulting network pointing to
600,508 nodes and 1,006,987 ownership ties.
(2011: 2) Their findings revealed a very highly
concentrated structure of ownership and
interlocks and a network structure dominated
by a very dense core in which 3/4s of the
6
ownership of firms in the core remained in the
hands of firms within the core itself. As they
conclude: “This is a tightly-knit group of
corporations that cumulatively hold the
majority shares of each other.” Framed
another way, approximately 40% of the
control over the economic value of TNC’s in
the world is “held via ownership relations by a
group of 147 TNCs in the core which has
almost full control over itself.” (Vitali,
Glattfelder and Brattison 2011: 4)
When one attempts to assess the overall role
of global corporations, it is clear that they
constitute such an essential part of the
economy that their various and multiple
activities in fundamental ways determine what
that economy is going to be. This property was
amply demonstrated in the financial crisis of
2006-07 that was triggered by events that
would merely two decades earlier have been
regarded largely as phenomena internal to the
US economy and one from which the “rest” of
the world might arguably have distanced itself.
That, however, is all too obviously not what
happened—in large part because global
financial firms, among them leading US firms,
had created a variety of financial instruments
organized around US real-estate values to be
traded within a global market as hedgeable
securities. As the International Monetary Fund
has concluded in a recent report on the
financial crisis of 2007 and beyond, the
prosperity of the preceding two decades owed
much within the US economy to total credit
market borrowing that grew from
approximately 160% of GDP in 1980 to 350%
in 2008. This increasing debt structure
focused on the one hand at the household level
where borrowing roughly doubled from 45%
of GDP in 1984 to 97% in 2008 and on the
other on financial sector debt which grew
from 19% of GDP in 1964 to approximately
115% in 2008 (IMF 2012).
However, numerous commentators agree than
had this debt not been securitized through
novel and widely traded instruments in the
period prior to 2008, the extent of the global
crisis may have been substantially mitigated.
(Harvey, 2009. Steglitz 2010), However one
interprets the actual playing out of the
financial crisis and estimates of its potential
severity, it is clear that global financial firms
and the 24/7 trading markets they have
created constitute a new form of global
corporation whose activities are capable of
impacting the global economy in powerful and
novel ways.
Part Three: What is different about this
phase of global corporate development?
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. While
still less than FDI flows between developed
countries, as Table 1-1 demonstrates the
rapidity of capital flows to developing
countries.
Table 1-1 About here
The relative size, growth and range of activity
of global corporations from the emerging
economies suggest that they are on a
trajectory that will soon situate them firmly
within those of the historically more
developed economies. The number of global
corporations from the emerging market
economies listed in the Fortune Global 500,
which ranks corporations by revenue, rose
from 47 firms in 2005 to 95 in 2010. These
companies have also become active in the
broad pattern of global mergers and
acquisitions (M&A), a primary vehicle by
which corporate concentration takes place. To
7
cite Ahern: “In 2010 these companies
accounted for 2,447 acquisitions, or 22% of
global M&A transactions, which is up from 661
acquisitions, or 9% of total M&A acquisitions,
in 2001. Of the 11,113 M&A deals announced
in 2010, 5,623 (50%) involved merging
market companies, either as buyers or as take-
over targets of MNCs in advanced countries”
(Ahern 2011: 23). 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.
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) with
most of the South-North capital flows coming
from China and India. Examples include
China’s Lenovo corporation’s purchase of
IBM’s PC business and India’s investment in
various historically British firms including
Jaguar Land Rover (Economist, 2011).
Increased North-South investments during
this period allowed global North corporations
to rebound quickly from their profit losses and
restore income growth. The relative robust
nature of the emerging economies has
continued to attract FDI and to create
conditions leading to the rapid expansion of
their nationally based global corporations
(UNCTAD, 2011: 26). China is the largest
developing country outward investor with
estimated holdings in 2009 of approximately
US$1 Trillion (OECD 2010). The differential
impact of such emergent global dynamics has
moved some observers to suggest that our
previous distinctions between global North
and South are no longer adequate to suggest
the overall dynamics of growth and inactions
within the global system. Wolfsensohn, for
example, has suggested a characterization that
he terms “ a four-speed world” that
differentiates countries as Affluent,
Converging, Struggling and Poor, with the
BRICS dominating the growth of the
convergent group (Wolfsensohn 2007).
The importance of global corporations in
Brazil, India and China to the current and
projected global economy is singlular. With
40% of the world’s population the BRICS
represent a primary force in both global
production and consumption. Hawksworth
and Cookson 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 (2008). The relative
import of their global corporate cultures can
be gauged in part by the fact that in 2012
global corporations in China made up 73 of the
largest in the Fortune 500 list (CNN Money
2012), and whereas Brazil and India with 8
apiece currently account for a small share of
such corporations, emergent market countries
are projected to account for a near doubling of
their share of world trade over the next 40
years, reaching nearly 70% by 2050 (Ahern,
2011). In 1998 only one of the top 100 global
corporations was located outside the US,
Europe or Japan (Oatley 2008).
Rising global corporations in the BRICS are
joined by emergent large companies in other
developing economies throughout the world
such as Malaysia, Mexico, Russia, Turkey, and
Vietnam. The following list suggests some
exemplary cases employing 2009 data:
Emerging Market Global Corporations:
 Basic Element (Russia) is a world
leader in alumnia production
 Bharat Forge (India) is one of the
world’s largest forging companies
8
  BYD Company (China) is the world’s
largest manufacturer of nickel-
cadmium batteries
 CEMEX (Mexico) has developed into
one of the world’s largest cement
producers
 China International Marine
Containers Group (China) is the
world’s largest manufacturer of
shipping containers
 Cosco Group (China) is one of the
largest shipping companies in the
world
 Embraer (Brazil) has surpassed
Canada’s Bombardier as the market
leader in regional jets
 Galanz Group (China) has a 45% share
of the European and a 25% share of
the US microwave market
 Hisense (China) is the number one
supplier of flat-panel TVs to France
 Johnson Electric (China) is the world’s
leading manufacturer of small electric
motors
 Nemak (Mexico) is one of the world’s
leading suppliers of cylinder head and
block casings for the automotive
industry
 Sistema (Russia) is a conglomerate
with a focus on telecommunications
 Tata Chemicals (India) is an
inorganic-chemicals producer with a
significant global market share of
soda ash
 Techtronic Industries Company is the
number one supplier of power tools
to Home Depot
 Wipro (India) is the world’s largest
third-party engineering services
company. (The Boston Consulting
Group 2009)
While BRICS are host countries to the largest
number of global corporations among developing
countries, these corporations are also distributed
across other market areas with Mexico, Russia, the
United Arab Emirates, Turkey, and Thailand next
in order of frequency (Adhern 2011). In 2009
China became the leading trade partner of Brazil,
India and South Africa, and Tata of India became
the most active investor in sub-Saharan Africa.
OECD data indicate that over 40% of researchers
are now in Asia. The OECD has examined the
growth of developing economies in terms of their
share of the global economy in purchasing power
party terms. Based on this analysis in 2000 the
non-OECD member countries share of Global GDP
was 40%; in 2010 it was 51%; and in 2030 it will
be 57% (OECD 2010). However, even with the
relatively enormous growth of the emerging
economies, the enormous population size of their
largest dilutes the per capita effect of growth.
Dadush and Shaw project that in 2050 China will
have the largest economy overall, but its per capita
income will be only 37% that of the US; India as
the third largest economy with have per capital
income of just 11%. (Dadush and Shaw, 2011: 30)
State-owned corporations, which may be defined
as “enterprises comprising parent enterprises and
their foreign affiliates in which the government
has a controlling interest (full, majority, or
significant minority), whether or not listed on a
stock exchange” are playing a significant role in
these emergent economies. (UNCTAD, 2011: 28).
“State-owned” may include both national and sub-
national governments such as regions, provinces
and cities. UNCTAD in 2010 identified at least 650
State-owned global corporations with more than
8,500 affiliates operating around the world of
which 345 (52.8%) are in developing countries
and 235 (36%) in Asia. State-owned corporations
differ remarkably in structure and function by
country. Overall China has the largest number of
such corporations that are completely sole-
funded—some 154,000 in 2008. Of these only a
small percentage attains the status of global
corporations (UNCTAD, 2011: 30-31). In many
other countries it is more common to have a
9
majority of state funded global corporations
having less than sole state ownership.
The entry of such corporations into the global
corporate world has created a variety of concerns,
many of them focused on China. Concerns take
different forms. Some view such firms as
unwelcome market competitors willing to employ
their potential and actual enormous capital
resources to create dominant stakes in various
national industries, especially those involving the
extraction and organization of natural resources.
In such cases the “full weight” of state ownership is
seen to give such corporations unfair competitive
advantages. Another characterization of China’s
state-owned global corporations views them as
legacy institutions (‘relics”) of China’s state
socialist system that perpetuates in its revised
neo-capitalist form institutions that lack the
essential features of economic efficiency and
competitive discipline that the global corporate
structure promotes—they are in effect
subsidized by the whole of the Chinese
state in all their inefficiencies, and this
property gives them un unwarranted
market advantage within global
competition, being “shielded” as it were
from true market discipline. (Woetzel,
2008. Greenacre, 2012).
Another view characterizes these firms as a “new
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 corporate reach, especially
when viewed in the context of their likelihood to
invest in South-South ventures and their
propensity to invest in so-called Greenfield
ventures (that form of FDI in which the parent firm
starts a new venture in a foreign country by
creating new operational facilities from the ground
up.) Yet other concerns focus on national security
issues (the ability of such corporations to privilege
their host country for national security reasons)
and issues of transparency and corruption.
(UNCTAD, 2011: xiii) In a recent effort to develop
guidelines for governance within state owned
enterprises OECD has framed the issue as “finding
a balance between the state’s responsibility
actually for actively exercising its ownership
functions such as nomination and election of the
board, while at the same time refraining from
imposing undue political interference in the
management of the company.” This report also
emphasizes the need to ensure a level playing field
on which private companies can complete
successfully with state-owned enterprises while
not distorting competition by the use of state
regulatory or supervisory powers (OECD 2005).
Non-equity modes of production (NEMS) have
become an increasingly important form of global
corporations within the emerging economies. The
traditional mode of organization for global firms in
these economies was through FDI, which
manifested itself though equity holdings and
created structures by which parent firms owned
and directly managed their subsidiaries— an
organization form known as internalization
because control and risk reside with the parent, as
do the vast majority of revenues and profits.
However, throughout the latter 20th century period
of vertical integration of global value chains by
advanced economy global corporations, the
“seeds” of non-equity relations had been well
established. “…how and whether firms can capture
value depends in part on the generation and
retention of competencies (that is, resources) that
are difficult for competitors to replicate. In
practice, even the most vertically integrated firms
rarely internalize all the technological and
management capabilities that are required to bring
a product to market…If an input, even an
important one, is required frequently, then it will
likely be acquired externally” (Gereffi, Humphrey
and Sturgeon, 2005).
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NEMS represent an increasingly vast network of
relationships in which global production chains
are assembled through contract manufacturing,
services outsourcing, contract farming, franchising,
licensing and management contracts. NEMS are
viewed as externalization for the corporation,
which gains access to benefits within global value
chains without the direct investment of
comparable amounts of capital, albeit at the cost of
relinquishing elements of control and at reduced
profit levels. NEMS constitute a significant portion
of global corporate activity within emerging
economies. Total sales through such arrangements
in 2010 is estimated to have reached $2 trillion;
contract manufacturing and services outsourcing
approximated $1.1-1.3 trillion, franchising $330-
350 billion, licensing $340-360 billion, with
management and contracts around $100 billion.
Collectively NEMS employ between 14-16 million
workers. In some countries they account for up to
15% of GDP and in some industries, they account
for 70-80% of exports (UNCTAD, 2011: 123).
The relative importance of NEMS to both the
global economy and the structure and governance
of global corporations in the future is suggested by
how NEM growth has outpaced that of base
industry growth in electronics, pharmaceuticals,
footwear, retail, toys and garments: in electronics
the ratio is 6:1 and that of garments 1:1.
Referencing contract manufacturing as an
estimated share of the cost of goods sold, toys and
sporting goods led at 90% followed by consumer
electronics 80%, automotive 60-70%, generic
pharmaceuticals 40% and branded
pharmaceuticals 20%. (UNCTAD, 2011: 134). In
short such arrangements are growing at rates
substantially in excess of the industries within
which they exist. Overall this implies that in
emerging economies many firms specializing in
these relationships will themselves become very
large firms employing many thousands of workers
with hundreds of billions dollars of annual revenue
[such as Foxconn/Hon Hai (China) with $59.3
billion in sales and 611,000 employees, Flexronics
(Singapore: $30.9 billion, 160,000 employees), LG
Chem (Rep. of Korea: $13.1 billion and 8 thousand
employees), or Hyndai Mobis (Rep. of Korea: $11.2
billion, 6,000 employees)—2009 data. UNCTAD].
Many others, especially those within less intensive
value chains, will remain relatively small even as
their industry sectors grow. These data suggest
that global corporations are choosing to do
substantial amounts of their business through non-
equity relationships, trading off elements of risk,
control, profit and in some cases innovation in
exchange for engagement in inter-corporate
arrangements that preserve their own capital and
equity positions.
In summary, global corporations within the
emerging economies appear to be of three general
types: those that have arisen as a result of growing
national power of the host country, responding (as
in China and India) to the need to aggregate and
deploy national capital to provide the bases for
economic development. Whether initially
capitalized with FDI or state funds, such firms,
such as many China energy and industrial material
firms, have increasingly turned to supplying their
own rapidly growing internal markets while
investing heavily in off-shore material resources
(often in Australia and Africa). A second type of
global firm has focused on replicating major
consumer pathways in both developed and
developing markets. The Korean automotive firm,
Hyundai is a case in point. In 2011 it achieved a
Fortune Global 500 rank of 55, up from 78 in the
previous year. With 80,000 core employees, it
produces to a global market with significant
market penetration on all continents. NEMs
represent a third type in which working through
contract and other relationships with developed
market firms has been the basis for their rapid
increase in size and influence, which in turn has
empowered the firms to establish other complex
linkages beyond core contract markets to build
competitive advantage in both global and domestic
11
markets, usually by gaining access to and
exploitation of superior innovative technology.
The relationship between China’s Foxconn and
Apple is a well-known case in point as the
combination of Apple’s own innovative
technological capacities and Foxconn’s abilities to
adapt production changes relatively quickly and
with acknowledged high quality elevated Apple
into the world’s highest valued firm in 2012.
(Albeit with considerable costs, as the repeated
criticisms of Foxconn’s labor practices have
become an issue of global import for both
companies).
Part Four: The Relevance of the Changing
Regulatory Environment to the Structure and
Operation of Global Corporations
What a global corporation “does”—how it operates
within its host environment and throughout the
multitude of regions and countries in which it has
operations—is to a significant degree a result of
the various regulatory environments that frame its
operations and impinge on it. Because so much
this activity is ultimately defined and enumerated
as “trade,” a significant amount of this regulation
emerges from the global structures that have
arisen to regulate global trade at all levels. Within
the past decade regulation has either followed the
path created by macro trade structures such as the
General Agreement in Trade and Services, in which
the major change to the previously prevailing
General Agreement on Trade and Tariffs, was to
include services (including financial services) as a
trade category. During the same period, portions of
the world—most specifically Asia—have
experienced a significant growth in bi-lateral trade
agreements as the rise of China as a major
producer of both finished products and pre-
finished components has brought nations together
to negotiate their relative place within emergent
value chains (Naya and Plummer 2005).
Viewed across the past four decades, the
“regulatory dynamic” as it affects global
corporations has manifested itself into two
conflicting thrusts. One has been the progressive
and steady regulatory movement at both
international and national levels of liberalization,
resulting in part in the transformation of
investment codes, trade rules and operating rules
to reduce barriers to global investment and trade.
(Steger and Roy 2010). Embodied within
neoliberal beliefs and policies, this thrust toward
liberalization has accounted for regulatory
environments distinctly favorable to global
corporate investment and value chain
developments across the spectrum of goods and
services. The other thrust has resulted from
national regulatory changes targeted usually at
specific industries or investment patterns. In 2010
UNCTAD catalogued such regulations for both
developed and developing countries with respect
to their effect on FDI, finding that 74 favorable
changes facilitating entry and establishment, and
the operation of capital (49 of which were in
developing countries) and 49 less favorable to FDI
(with 34 of these from developing countries). If
one looks at national regulatory changes by
industry with respect to their relative
liberalization or restrictive nature, with the
exceptions of Agribusiness and Extractive
Industries the significant majority of changes has
been in the direction of lessened regulation.
(UNCTAD-WIR 2011: 5).
A third source of regulatory effort has been the
significant rise over the past decade and a half of
corporate social responsibility (CSR) as a self-
regulatory pattern that has been brought to global
corporations in an effort to render them more
accountable across the range of their many and
varied stakeholders. Resulting in large part from
the cumulative effect of more than three decades
of intense critique of global corporate behavior
and its varied negative consequences, CSR
represents a wide ranging set of proposed
governance structures, including rules, norms,
codes of conduct and standards developed largely
12
by the global NGO community. (Levy and Kaplan,
2007). Various empirical studies over this period
have sought to evaluate efforts taken by global
corporations to develop greater degrees of
responsibility over global supply chains,
particularly where deficiencies, often with respect
to occupational health and safety, have been
highlighted in mass media and as thus pose threats
to end products or corporate brands (Kolk and van
Tulder 2005). Such studies also indicate some
positive support for the claim that CSR results in
outcomes that benefit corporate stakeholders,
albeit primarily shareholders. Even while some
proponents of CSR argue that the adoption by and
adherence to the kinds of codes proposed by CSR
create a climate of win-win for both the
corporations and their critics (and therefore
should rationally impel them toward the embrace
of such codes), this view is often contested by
those on the corporate side more sensitive
perhaps to their political character. Utting cites a
telling case of a former executive of a large oil
company remarking at a U.N. sponsored CSR
workshop “that if the win-win argument were so
compelling ‘then we wouldn’t be sitting around
this table.’” The executive went on to remind those
present that it had been “NGO and consumer”
pressures that were changing corporate behavior
(Utting 2002: 62, cited in Levy and Kaplan, 2007).
In recent work Lemon et. al. have proposed a set of
stakeholder metrics that will permit measurement
of CSR over time and its utility for multiple
stakeholders, including but not limited to
shareholders (Lemon, Roberts, Raghubir and
Winer 2011). Whatever its current value across
the whole range of global corporate decision
making behavior, it is clear that as a movement
CSR has sufficient support both to bring corporate
decision makers “to the table” to discuss important
aspects of corporate behavior and in specific
instances to create a relevant regulatory
framework.
In the aftermath of the fiscal crisis of 2007 the
need for greater regulation of global financial
markets has become the clarion call of many. The
American economist Joseph Stiglitz has been
persistent in his arguments that without some
form of global financial regulation with sufficient
reach and enforcement to deal with the kinds of
global trading risks present in that crisis, that the
global economy stands without the necessary
regulatory tools to deal with the intense
aggregation and profit seeking within global
financial capital that continue to characterize the
system (Stiglitz, 2010).
Part Five: The Normative Case Re: Global
Corporations
At least since the early 1970’s the normative case
for global corporations has been inseparable from
the broader discourses and structures surrounding
globalization itself. In the two decades following
WWII and in the context of global rebuilding of
manufacturing and trade capabilities, they were
viewed primarily as agents of desired economic
development, and FDI was eagerly sought after
throughout the world. However, toward the end of
the 1960’s global corporations also came viewed
as gaining their economic prominence through a
variety of socially destructive means. Much of the
post-colonial critique that came to be framed in
the discourse of North-South globalization, anti-
globalization movements and dependencia, focused
on the role of multinational corporations as agents
of a system that on balance was resulting in
greater global wealth inequality, income
inequality, lack of effective worker protection,
environmental degradation, producing national
cultures of corruption through corporate collusion,
and in some instances threatened national
sovereignty. Beyond these, within the context of
the post-2007 financial crisis is the threat that
such corporate structures, operating in important
ways outside the reach of effective governmental
control—national, regional or global—constitute
an economic concentration of wealth and power
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sufficient to generate a global crisis of proportions
that exceed the capacity of existing mechanisms of
governance to remedy (Stiglitz 2010).
From many points of view the extent to which
wealth and income inequality appear to be
increasing throughout the world suggests that in
some macro-equation the normative balance of
development within which global corporations
have been the primary driving agents has a
powerful long-term negative trending effect.
Overall, the data on global inequality measured by
income suggests (as it has for the better part of
two decades) that from top to bottom such
inequality continues to be widely distributed both
between and within countries: as the richer
countries grow farther apart from the poorer, so
within nations, among all three developmental
categories—older developed countries, developing
countries –including the BRICS—and more newly
developing countries is continued economic
growth accompanied by growing inequality.
Ortiz and Cummins make the case clearly and
powerfully. Although using two different
methodologies to examine income distribution,
each offers strikingly similar results. Overall,
meansured in market exchange rates, the top
quintile (20%) controls more than 80 % of global
income contrasted by one percentage point for
those in the bottom quintile. While this disparity
improves when measured in PPP exchange rates
(67 % for the top quintile to 2.6 % for the bottom),
both models reveal a world that is deeply
characterized by income disparities. Both of their
results also suggest that some progress is taking
place for the very poorest; however, the sluggish
pace of change is clearly unacceptable. “Using the
rate of change under the global accounting model
with market exchange rates, it took 17 years for
the bottom billion to improve their share of world
income by 0.18 percentage points, from 0.77
percent in 1990 to 0.95 percent in 2007…At this
speed, it would take more than eight centuries
(855 years to be exact) for the bottom billion to
have ten percent of global income.” P. 19.
Whatever other “global entities” are involved in
this pattern of wealth creation and distribution,
global corporations stand in the center of the
structure that establishes and distributes global
wealth. The role of the state over the past four or
five decades as a vehicle for redistribution has
been increasingly challenged by political
ideologies oriented around the protection of
society’s primary wealth holders, a pattern evident
in many of the current crises of the Euro Zone in
which powerful political forces seek to exempt
both corporate and individual wealth holders from
patterns of taxation suitable to support the
“burdens” of the state through effective taxation.
Nollert provides a persuasive normative projection
of a transnational world of societal integration in
which one might “expect that a coordinated world
economy, where corporate networks and a
redistributive state cooperate, could enhance
social integration while in a liberal world economy
transnational corporate networks could primarily
integrate production processes and national elites”
(Nollert, 2005: 310). This outcome is a major goal
of the CSR movement.
The normative case for transnational corporations
is situated within the ever-dynamic context of
three complex interactive global patterns that
continue to frame contemporary globalization and
its possible futures: global inequality, the
systematic stability and viability of the global
financial system, and climate issues—each of these
in turn is related to broader patterns of human
security. The likelihood that continued global
interdependence will produce outcomes favorable
for the world as a whole will depend in large part
on the willingness of global corporations to
embrace the importance of these global goods and
their responsibilities for them.
14