Geography Reference
In-Depth Information
Since 1970 there has emerged a type of company, the transnational
corporation, that is seen to have much less linkage to any one country. Instead, it
is footloose and has no particular attachment to any single country. In order to
meet the demands of different kinds of markets and infrastructure in Europe,
North America and the Far East, the three main world markets, the TNC may
have separate headquarters in each, and quite separate organization in each, with
only a loose financial control over the whole. Any country chosen for its
operations may be seen as a temporary platform, to be used while factor costs
(e.g. cheap labour) are favourable, and abandoned as soon as they become
unfavourable.
Up until recently, the TNC was regarded as definitely anti-local, and even
hostile to national development projects, because of its lack of permanence or
commitment to any country or region, its tendency to use a country for its
momentary cost advantages of one or a few factors, and for its lack of interest in
upgrading the local workforce skills. Holland (1976) coined the term
“mesoeconomy” to refer to this new intermediate organization, an institution that
lay somewhere between the ordinary firm and the state itself. Transnationals
could be contrasted with the older multinationals, but still more with the more
traditional, purely domestic firms of the nineteenth and early twentieth centuries,
which integrated well into local economies and had greater welfare concerns for
their workforce (Massey 1984). In traditional regional economies, the specialized
skills of different stages of production, all put together in one region, meant a
rounded set of types of work and ability. By contrast, modern concentration on
one stage of production, for a foreign giant firm, means limited skill base, even
deskilling from previous levels, and a fragility of employment structure, because
the single large firm might go elsewhere at short notice.
The embedded firm
Now, however, there is a new consensus that at least some of the TNCS have
become linked in to local economies in various ways, not from any sense of guilt
or concern for their local workforce, but as a logical means to achieving
corporate aims. Some economists have seen the new emergence as an answer to
the need for efficient decision-making, especially in relation to transactions, the
acquisition or the sale of materials, components, information, technology, market
territory, and so on. Williamson (1975, 1985) proposed that two alternative ways
of handling these transactions were, at one extreme, through the market (in cases
where the transaction was simple, and where the costs and benefits were well
known) and at the other extreme (where there were many transactions to
contemplate and each required a substantial transaction-specific investment), in a
hierarchy, in other words within the firm itself. This justified the large integrated
firm with its bureaucratic organization, and limited the amount of effort to be
made in each transaction. Following criticism of his oversimplified version of
1975, Williamson (1985) agreed that there were forms in between market and
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