Investment and transnational corporations(tnc)
Another indicator of globalization is the rapid growth of investment between countries
over the past two decades. Since the late 1970s in particular, the global economy has witnessed rapid growth in movements of capital. While there are similarities in the growth of global finance and global investment, the two concepts can be distinguished by describing the shorter term, speculative shifts of money as finance and the longer term flows of money to buy or establish businesses as investments. One measure of the globalisation of investment is the expansion of foreign direct investment (FDI), which involves the movements of funds that are directly invested in economic activity or in the purchase of companies. Reforms in developed and developing countries led to a surge in FDI flows from the 1980s. Figure 1.5 demonstrates the dramatic increase in FDI flows over the past three decades. FDI flows are strongly influenced by the level of economic activity. The global economic recession in the late 2000s saw FDI flows fall significantly. Transnational corporations (TNCs) play a vital role in global investment flows. Often, they will have production facilities in countries around the world, sourcing inputs from some countries, doing most of the manufacturing in another country, and doing other packaging and marketing tasks in another country.As TNCs like Microsoft, Shell and Ford establish or expand production facilities in a country, they bring foreign investment, new technologies, skills and knowledge. Because of the capital and job opportunities they bring, governments often encourage TNCs to set up in their in other countries for lower production cost and labor cost. "Globlization - trade and transnational corporations" by KHAN ACADEMY ( http://youtu.be/GmomzubjO1 ) |
KEy termsForeign direct
investment (FDI) refers to the movement of funds between economies for the purpose of establishing a new company or buying a substantial proportion of shares in an existing company (10 per cent or more). FDI is generally considered to be a long term investment and the investor normally intends to play a role in the management of the business. Transnational corporations (TNCs) are global companies that dominate global product and factor markets. TNCs have production facilities in at least two countries and are owned by residents of at least two countries. |