MAIN THEORIES IN BUCKLEY FROM CHAPTER 1 TO 4

 Global Factory: https://www.youtube.com/watch?v=kI4RZLqnZSQ

o Type of system that multinationals can do. This production system is that there
are lots of outsourcing and not a lot of in-house. 
o When there are changes in the environment, companies have found ways to
adapt to this, so thats what makes the global factory strong. 
 FDI (foreign direct investment): this is different from portfolio investment because they
have 10% of a company, a portfolio has less. So, they have influence on foreign
companies. https://www.youtube.com/watch?v=4NBzBS0jZkc
 Hymer: he first noticed that FDI is when businesses invest abroad not only financially but
other resources as well like their technology and skills. It is different from portfolio
investment because they have 10% of a company, a portfolio has less so they have
influence on companies abroad. There are different types of FDI: 
o Merging with another company, combining resources. 
o Acquisition: taking over a foreign company.
o Greenfield investment: it is when a foreign company creates a subsidiary (a
company connected to the home country), so its a type of investment abroad. 
 Hymer Kindleberger: he expanded Hymer’s theory and added the advantages to do
FDI. 
o FDI is done to enter the market if there are high barriers to trade. It might be
costly to export. 
o MNEs use their advantages to compete with domestic firms. They transfer their
knowledge to local firms or open up a whole new business and compete. 
 Internationalization theory: this is that the company replaces the market. Everything is
internalized, they get everything from the company, not the market. The company has
intangible assets (knowledge) so they just share it across their different branches, they
don’t need any outside sources because they have the assets themselves. 
 Uppsala model: countries start in their nearby markets to develop their experience and
then slowly they go abroad to countries with different systems and cultures. It is the
psychic distance which means the distance between the cultures that affects the
decision making. 
 Dunning’s eclectic paradigm: companies do FDI because of the assets that a location
has. Three advantages (the reasons they internationalize and build a company in
another country): 
o Ownership: the advantages a company has, if they have advantages, they might
want to invest abroad because they know they will have an advantage over the
domestic market. 
o Location: the resources a location has. If there is no location, then there is no
point to move to that country. 
o Internationalization: this is when companies believe they can do things internally
instead of outsourcing, so they would do FDI so they can have control over the
operations abroad, they don’t want to just outsource and let an outsider do it. So
it would be better for the company to go to that country and build something
there. 
o This has been criticized though of being sort of a checklist, where they have to
go through ownership, location and internationalization, some argue not all 3 are
needed. 
 Globalization: 
 o Impact: there is wide support that it has helped poverty. It has allowed people in
developing countries to have jobs that were previously limited to developed
countries. 
o Critics of globalization: there is inequality and believe that MNEs are exploiting
other countries with low labor costs. Also, the critic that there is damage to the
environment. 
o Benefits of internationalization: 
 Lower costs
 New market of consumers 
o Challenges of globalization: 
 There is import competition for the home markets. 
 High levels of inward foreign investment (means more companies are
having control over the local companies and having a higher influence).
 Complex management issues: hard to manage international supply
chains sometimes. If there is a major event like a revolution, it can affect
a part of the supply chain and then the company has to adapt. 
 Employee anxiety: lots of work is outsourced so people get scared that
they will lose their job to someone abroad.
 Porter’s Diamond and Rugman’s Double Diamond: how countries are more competitive
and successful https://www.youtube.com/watch?v=T9ALTVXawNk
o Factor conditions: resources and labor in a country. 
o Demand conditions: if there is high demand in the home market, it will pressure
companies to innovate and improve. 
o Firm strategy, structure and rivalry: competition with the companies in the market
makes them constantly improve themselves.   
o Related and supporting industries: information sharing and sharing resources. 
o Government: they are a factor, not the center. For instance, they invest in
educational institutions, build infrastructure etc. 
 Resource based view: resources are the key to be successful, to have a competitive
advantage. 
Chapter 1

 The value of trade is that its cheaper to import than to produce at your own country for
some goods. It is better for the country to focus on what they are better at and cheaper
than to produce everything for themselves. 
 Free market: when there is no intervention from the government and no monopoly. The
consumers have an effect on the prices, so it would be hard to have a high price. 

Conflicting Perspectives on “Globalization”

 Hyper-globalists: they believe the world is really global. That everyone has the same
taste. They are not critical. However, the author says that this is a myth and will unlikely
exist. 
 Pro-globalizers or neoliberals: they believe that globalization is the solution to all the
problems. 
 Anti-globalization. They don’t like free markets and believe that the market should be
regulated because they think there will be some companies in the market that are more
powerful than others. 
  Free trade:its beneficial because they trade what they are specialized at which they
make at cheaper production. Sometimes countries might not like free trade because they
want to protect their local companies from foreign competition. 
o Free trade is also building in other foreign countries. Globalists say it helps the
economy because if businesses are free to do business, wealth can be created.
It has led to cheaper products, more jobs etc. 
o Protectionism: high tariffs and discourage relocation.

Grounding ‘Globalization’: Geography really does matter

 Shallow integration: reduction or removal of tariffs.

 Deep integration: this is when domestic laws are changed so that trade is easier
globally. 

Chapter 2

The Importance of taking a long view: the imprint of past geographies

 Core: they are the major powers in the economy. 

 Periphery: countries that are not as strong in the economy. 

Roller-coasters and interconnections

 The volatility of aggregate economic growth: 

o The economy is hard to predict, it has been going up and down. 
 Growing interconnectedness within the global economy: 
o Volatility means the range of the change. If there is a big change then it is a high
volatility. 
o Trade has grown faster than output: 
 Countries produce products less and depend more on trade, that they
import the products from other countries. 

The USA still dominates the global economy - though less than it did

 China has beat US in manufacturing. However, the US is still the biggest foreign direct
investor, largest exporter of commercial services and agricultural products. 
 Trade deficit: when a country’s imports (receiving) is higher than the exports. Its a
negative because they are not selling their own products to other countries, they are just
buying from others. The US has a large trade deficit. 

Emergence of the ‘transitional economies’ of Eastern Europe and the Russian

Federation 

 A command economy is when the government has full control over the economy. It is
not like a free market because the government decides the prices for the products, what
should be produced and the amount of production.
 After the Berlin wall fell, it was a transformation because former command economies
became capitalist market economies. 
The Centre of Gravity has shifted

 There has been high volatility (a rollercoaster).

Chapter 3

Global Production Networks 

 They deal with the production and delivery of a good. A product does not have to be
physical, it can be non-physical like financial services. 
 First there are inputs of materials and then they are transformed into semi finished or
finished goods or services, then they are distributed, then consumed. 
 Information is also shared between the buyers and sellers at all stages of the GPN. 
 Financialization: this is the central role. Every activity has to be financed at all stages of
the production and distribution. Therefore, its important to decide who will finance. 

Transnational corporations

 TNCs have the power to control operations in more than one country, even if they do not
own them. 
 Vertical integration: when the company owns the entire supply chain. Companies may
decide to internalize. 
 Companies might also decide to do externalized transactions, where they connect with
separate firms to do the activities. 
 Territorial embeddedness of production networks: states as regulators in GPNs:
o Capital: the physical factors of production. It is argued that it is no longer tied to a
place and can be anywhere. However, this is misleading because every firm
does have a specific location. 
 GPN is regulated by some politics such as WTO, EU etc. 

Even in a globalizing world, economic activities are geographically localized. 

 There are clusters like Silicon Valley. 

 Generalized clusters: people usually go to urban areas like a large city. Benefits are
called urbanization economies. (Urbanization) 
 Specialized clusters: when companies go to the same place and its called an ‘industrial
districts’. The benefits of this are called localization economies. (Marshalls clusters,
MAR). 
 Jacobs’ Clusters: this is that different industries can help each other with the knowledge
spillovers. It is not like Marshalls that they have to be from similar industries. (Asked
classmates and they said this is in general clusters). 

Geographical clusters lead to two types of interdependency: 

 Traded interdependencies: direct contact between firms in a cluster like supplying

material to each other. Therefore, it is a benefit to be close in order to reduce
transportation costs. Tangible things are traded. 
  Untraded interdependencies: they can have face to face contact and the universities can
lead to an increase in knowledge. Intangible things are traded. 

Chapter 4

Technology and Economic Transformation

 Technology is a tool used to make globalization easier. 

Processes of technological change: an evolutionary perspective

 Types of technological change: 

o Incremental innovations: it is when there are small improvements made to
products that already exist. 
o Radical innovations: larger changes to existing products. 
o Changes in technological systems: biotech and IT. 
o Changes in techno-economic paradigm/system: large changes that can change
the entire economic system, can change the “style” of production (steam power
in the Industrial revolution.) 
 Trajectories of technological change: 
o Big changes in technology take time. When a radical innovation is introduced,
acceptance has to be done and then there will be incremental innovations done
to improve that innovation and production is slow until the best design has been
decided then they start to work fast. Once it reaches maturity, it is accepted in
the market and stable and production starts to slow down. 
 Kondratiev long waves: there have been changes of how technology has been done. 
o https://www.youtube.com/watch?v=aJg8re-HwIg
o 1st wave: steam engine and the textile industry.  
o 2nd wave: railroad and steel. 
o 3rd wave: electrical and chemical industry and it ends with the great depression
in the 1930s. 
o 4th wave: car transportation and it ended with the increase of oil prices. 
o 5th wave: modern information technology. 
o 6h wave: which technology will trigger this.
o Each wave has four different stages: prosperity, recession (starts to decline) ,
depression and recovery. 
 Time-Space Shrinking Technologies
o Improvement of transportation systems have made distance short. 
o Communication systems have made information easy to share. 
o Steam engines were used for transportation and changed trade between
countries (major breakthrough), made transport costs lower. 
o Global shrinkage graph: The graph stops at the 1960s and since then there has
been more technological improvements such as airplanes and containerization. 
 Flights became more affordable in the 1960s and 70s. 
 Containerization: containers made it easier for shipments. Almost
everything is shipped in containers. Vietnam triggered containerization
because of the Vietnam war. The US wanted to sell materials and
weapons to Vietnam but it was costly and hard. Therefore, containers
 were suggested to make it easier in the 1960s. There was a standard
container made where it can fit all types of transportation. 
 There needs to be a port to be able to handle the containers.
There are big ports but there are still areas that lack the ports
(developing countries), they are behind. 
 ‘Everywhere is at the same place’
o The first satellite was launched in the 1960s and it was over the Western
countries. 
o Optical fibre technology: this led to cables and is more effective than satellites. It
is high speed and high signal strength. (Used for internet, telephone and TV). 
 Digital divides: 
o Not every place has internet, there are some poor areas that don’t have access. 
o Low willingness to adopt new technology among the eldery population.
Companies are becoming digital and its hard to escape that so its frustrating.
Also, the internet is not as strong everywhere, lower in Egypt. 

Technological Innovations in Products, Production Systems and Organizational Forms

 Product life cycle: product cycles have become shorter, pressuring companies to create
new products. To extend the life cycle they can: 
o Introduce a new product while the existing one doesn’t work anymore so it lasts
longer like from Nokia to Apple. 
o Extend the lifecycle by making small incremental innovations. 
o 5 Stages: 
 Initial development: few buyers 
 Growth: growth of buyers. 
 Maturity: stable
 Decline
 Obsolescence: deep fall. 
o In the beginning, they require highly skilled people to develop the product but
then as the cycle goes, its not necessary and they can get unskilled labor to
produce the product because the design is already established. (Apple is
produced in China). 
o Product life cycle hypothesis: 
 New product: in the beginning of the life cycle, its introduced to a market
with high income and then they say what they think and then feedback is
taken and adjustments are made. Also, in the beginning, there is product
development so its usually in advanced countries. 
 Maturing stage: it starts to enter markets that are below the high income. 
 During the last stage of the product cycle, it reaches markets that have a
low income and the production is there to save costs. There is no need
for high knowledge. 
 Changes in production systems: towards greater flexibility and leanness: 
o Five stages: 
 Manufacture: split into specific tasks and people manually working. 
 Machinofacture: using machines and factories. 
 Scientific management (Taylorism): workers got specialized training and
specific tasks, increasing productivity because there was more control.
 Mass production (Fordism): assembly lines = standardized products. 
  Lean production: cutting waste, reducing costs and maintaining quality.
There is just in time production. There is IT involved so it makes
communication good. 
 Changing organizational forms: towards the network organization 
o Modular production network: it has become like Legos, different models can be
made using the same pieces. 
o Cellular network: It is a switch from vertical integration (everything done at the
business) to outsourcing. It is that there is no hierarchy and it is just separate
firms that do a certain task. 

Types of knowledge

 Codified knowledge: knowledge that can be expressed in documents, easily transferred

like documents. 
 Tacit knowledge: personalized knowledge like experience, can’t be easily transferred. 

Chapter 5

The Myth of the ‘Global’ Corporation

 There are barely any differences between TNC, MNC and MNEs, it's just different
names. 
 There was an article that said that corporations have a better economy than other
countries and viewed them as a threat but it was a flawed comparison. They were
comparing the sales to the GDP but the sales were not calculated correctly, they were
really high numbers. 

Transnationality index (TNI) 

 They focused on three parts (foreign sales, employment and assets) compared to (total
sales, assets and employment). 
 High value: important activities abroad. They sell more abroad than in their home
country. 
 Low value: domestically oriented. 
 If the value is 80, it means 80% of their employment is abroad. 
 In 2012, the top 100 TNCs got a TNI of 67.8 which is pretty high so it shows they work
more abroad. 
 However, the lecturer says the index is limited. It depends on the country, when a home
country has a small population, they have to go abroad and sell to foreign countries. So
it is not that companies are cutting ties with their home country. Lecturer says that TNCs
are still rooted in their home country. 

Major motives for internationalization

 Market seeking: 
o Size of market: it's not only the population but the income levels. 
o Structure (of demand): also based on income levels, they might not have
demand for luxurious products. It is also important for TNCs to be cautious of
believing that the taste of consumers is becoming global. There is still some
diversity so they have to adapt to local tastes, to avoid issues.  
 o Accessibility: also based on tariffs, are there trade barriers to sell to that country. 
 Asset seeking: 
o Natural resources
o Knowledge: going to a country because of the knowledge that people have. 
o Labor: 
 The quality of labor: the educational level and skills.
 Low costs
 Labor productivity: skills and the type of machinery can they use. 
 Labor “controllability”: how organized are the labor unions. They might
want countries with less influence of the labor unions. 
 Labor: it is harder to move. For example, male workers are more likely to
move to another country than females. Since they are people, its harder
to move them to other countries. 
 Labor with TNCs also make it hard for labour unions to organize
effectively because they are usually nationally based. 

HOW FIRMS TRANSNATIONALIZE

 Conventional view: they are a large company in their home country and will decide to go
abroad so they can expand. In the product cycle, it is common to first introduce new
products to the domestic market and then go abroad with the idea. 
 Latecomer and newcomer TNCs: do not depend on their prior experience. Ex: 5 months
after Nestle was created, it was manufacturing abroad. 
 Mergers and acquisitions are very common to enter a foreign market. 

TNCs as networks within networks

 The home country has an influence on the way a TNC manages. They often hire people
from the home country to manage companies abroad. 
 Keiretsu: in Japan there are lots of companies that are connected with each other. They
all own some shares in each other’s companies. They are all connected by a core bank
for their finances. 

(He didnt go into detail about the types of TNC organizational architecture). 

Configuring the TNCs’ Internal Network 

 Multinational organization model: when they go abroad, they adapt their management
according to the country. They had a lot of independence and were local so they can
manage local needs. 
 International organization model: this is different because the corporate headquarters
have more control so the international branches have less control. 
 Global organization model: this has the least freedom and they tend to ignore the local
market conditions. The headquarter’s knowledge is the most important, not the local.
 To be most efficient, it would be best to take the strengths of all 3 types. A 4th model
was created called integrated network organization model. This is to make it globally
efficient with the central headquarters controlling some parts but still allowing the
affiliates to adapt to the local management and conditions, to meet local needs. This is
how it is today. 
Headquarters - subsidiary relationships 

 Subsidiary: when a company is owned by a bigger company. 

 3 types of subsidiary roles: 
o Local implementer: they adapt the TNC’s products to the local market. 
o Specialized contributor: contributes their specialized expertise. 
o World mandate: worldwide or region responsibility for a particular product. 

Control and coordinator

 Corporate headquarters: the headquarters has the overall control so that the
subsidiaries do not change the TNC’s strategy. They make the legal decisions too. They
also do the final financial decisions, to manage the budget. 
 Regional headquarters offices: offices that deal with several countries. They are the
connector between the headquarters and a region. They deal with local needs that
cannot be handled by the headquarters, more responsibility. New products can be
created just for that area. 

Research and Development

 Global: basic research centers. 

 Regional: development of local products for that region.
 Local: support laboratory and technical service center. 
 Lots of research is done at the home country. Valuable info so its guarded at the home
country. 
 Corporate R&D processes: major locational requirements 
o Research: need educational institutions. 
o Product development: needs highly qualified engineers. 
o Adaption to the local environment: need relevant marketing units. 

Marketing and Sales 

 Spread across the world because they need to be close to the local market. They have
to be aware of the local culture to avoid embarrassing mistakes. They are also
sometimes close to R&D to be close to the product development to meet local needs. 

Production 

 4 major types: 
o Globally concentrated production: all production is in one country and then the
products are exported to other countries. 
o Host-market production: common, products are produced in each country and
sold within that country. Some tariffs might be high so its cheaper to produce in
that country. 
o Product specialization for a global or regional market: one country in the region
market is chosen for production and then products are exported within that
region. 
  Ex: cheapest country in the EU is chosen for production and then there is
the possibility to export to other EU countries.
o Transnational vertical integration: 
 Parts are produced in different countries. One part is completed in one
country then exported to the next station that will produce another part. A
chain. 
 3 different places that are specialized in different parts and then all of the
parts are sent to an assembly center (last location).
 They have units in different places because in case there is an issue in one place, they
can produce it somewhere else so they are not delayed. 

TNCs within networks of externalized relationships 

 Outsourcing: there is a big trend to outsource. 

o Commercial outsourcing: another company manufactures the product. 
o Industrial outsourcing: 
 Speciality outsourcing: a specialist supplier is outsourced for their skills. 
 Cost saving outsourcing: supplier might have cheaper production costs. 
 Complementary: supplier is used if extra capacity is needed (more
demand). 
 Outsourcing may benefit companies because then they don’t need to invest in building a
new production plant. 
 Suppliers have a risk of being replaced. 
 The relationships between the supplier and the company can be short or long term. 

Just-in-case and Just-in-time 

 Just-in-case: large batches are in the warehouse in case it is needed. 

o Disadvantages: high costs to hold the large stocks. Suppliers can be far away. 
 Just-in-time: small batches, only for what is needed. This saves costs. 
o Disadvantages: there is no room for error, everything has to be perfect because
there are no extra products. Suppliers should be close. 

Outsourcing 

 Subcontractors (company hired by the head to do a task) can offer lots of benefits. 
o Local integrator: they can provide extra production capacity because they have
relationships with other firms in the same local area. 
o Export base: they add knowledge about how a product should be when exported
to another market because they have local knowledge. 
o Import base: specialist supplier providing access to international resources skills,
importing skills. 
o International spanner: Base supplier, connects suppliers and buyers. 
o Global integrator: manages international supply chain. 

Different ways of coordinating GPNs

  Captive production networks: suppliers can’t switch, they are ‘captive’ so they are stuck
to the company. The company does not want other companies to benefit from these
suppliers. 
 Relational production networks: there is less authority and its focused more on
relationships that are based on trust. There is no hierarchy like the cellular network
(ch.4). 
 Modular production networks: the companies do their own product development and
marketing and then they outsource suppliers that focus on producing the product. They
make parts that can fit different models, like legos, where different models can be made
using the same pieces.
o Base process: a process that can be used to manufacture products in different
markets.  
o Base component: a component that can be used in lots of different products. 
o Base service: a service that can be used by different users like an accounting
system. 

Transnational strategic alliances

 Strategic alliances: formal agreements between companies to achieve a specific goal.

They share the risks and benefits. It is not like mergers where they completely combine,
they still have their own companies and their own activities, it is just that they are
working on one activity together, so they can still be competitors in other activities. 
o They do this to enter new markets, gain access to technology, share resources,
etc.

Forces underlying reorganization and restructuring

 External conditions: They might change because there could be increased competition,
pressure of national governments to change their activities. 
 Internal pressures: sales may be too slow or production costs are too high so the
company from within feels they need to change. 

The geography of reorganization and restructuring 

 Global scanners: big global companies. They have the benefit of being able to use their
resources to analyze all potential production locations worldwide. They can close down
production units if they are not productive. However, sometimes, it might be hard to
close down production units because it could be costs lost. Also, politics might make it
hard to close it.

Chapter 6 

State - Nation

 State: organized by authority, internationally recognized.

 Nation: a group of people with common culture.
 Nation-state: state and nation overlap. 

3 key roles of nation-states

  Containers: the state is a container for the country’s culture. 
 Regulators
 Collaborators

STATE CONTAINERS: 

Hofstede’s 4 cultural dimensions 

 Individualism vs collectivism: own individual interests vs community. 

 Large or small power distance: high power and wealth or not. 
 Strong or weak uncertainty avoidance: focus on avoiding risk (build security) or not.
 Masculinity vs femininity: dominant men vs equality between genders. 

Variegated Capitalisms 

 Non-liberal market capitalism: US, UK. Government is not involved a lot. 

 Social market capitalism: Scandinavian. Government works together with businesses. 
 Developmental capitalism: the state guides in developing the economy. They help
private companies, does not mean they always do public ownership. Focus on business
networks, making businesses connected to help the economy like Japan. 
 Authoritarian capitalism: Highly centralized political system, lots of control. 

REGULATORS: 

 Natural assets: resources and the labor force. 

 Created assets: access to capital and technology.
 Location competition: sometimes countries compete with location. They say that their
place has the best business environment so that foreign companies can enter. 
 The competition state: states compete so they can build their economy. 
 Market liberalization: the state became less involved in business. 
o Deregulation: replaced by a new set of rules. 
o Privatization: state is less involved but doesn’t mean that the government does
not still spend on companies. 

Trade Terms

 Trade: 
o Mercantilism (16th century): holding as much gold as possible and spending little.
Designed to maximize exports and minimize imports. 
o Absolute advantage - economics
o Comparative advantage - economics
o “Expanded” trade theory: 
 Heckscher-Ohlin-(Samuelson): countries export what they are most
efficient at. 
o Countertrade: countries trade on certain conditions. 
o Intra-firm trade: it means within so like within the same country or same
company. 

New (modern) Trade Theory

  Role of TNCs in world trade: 
o Inter-industry trade: 
o Intra-industry trade: 
o Non-equity mode (NEM): it is contract manufacturing. They have influence on
manufacturers even though they do not own them. 

Regulating and stimulating the economy (what can individual countries do) 

 Macroeconomic policies
o Fiscal policies: taxes
o Monetary policies: interest rates. 
o Provision of public goods: 
 Physical infrastructure: government can build railways,
telecommunications. 
 Human infrastructure: good education system and labor laws. 
 Trade: 
o Imports = expenses and exports = income so its better to encourage exports. 
o Tariffs: taxes on imports and this can increase the prices to the customers. 
o Non-tariff barriers: certain conditions that make it hard for a product to enter the
market. 
 Anti-dumping: not allowing countries to dump their products at a low price
into their country because then it is hard for the domestic products to
succeed. 
 Import quotas (quantitative restrictions): 
 FDI:  
o Inward investment: when companies come in and invest in that country. There
are certain policies against it like restriction of foreign firms in certain industries. 
o Outward investment: domestic firms investing abroad. There can be a limit on the
export of capital and the government has to approve of the projects. 
 Industry and Technology: 
o Big innovations have happened because of the government’s investment. 
 Labour markets: 
o There should be more flexibility. Encouraging long term unemployed and young
people to take low-paid jobs, different forms of flexible working time, increase
transferable skills (can be used in any role). The low-paid jobs are important to
enter the labour market. 
o Flexible labour market is done to create new employment. 

From Import Substitution to Export Orientation 

 M-substituting industrialization (ISI): this is when they want to reduce the

dependence on imported products. 
1. X-oriented industrialization: However, they couldn’t just work within their
small domestic markets, they had to shift to x-oriented industrialization,
where they export their goods to other markets. TNCs started to have a
high interest in moving their labour abroad because of the low costs.
There was also a high level of government involvement. They would
subsidize products so that they can have a competitive price compared to
others. 
 1. Singapore used this to their advantage. They attracted foreign
companies to move their production to Singapore so that it can
reduce employment and help the economy. 

Export Processing Zone

 Zones that are located in developing countries and they attract foreign investment to do
their production there due to a good infrastructure that makes it easy to export and that
there are no taxes. It is also called a free-trade zone. 

China’s ‘Open Policy’

 In 1979, China started to open their borders to foreign direct investors. They created four
special zones next to the ocean to attract foreigners. 
 When China joined the WTO, it led to more stress on the domestic market because it led
to easier access for the foreign companies to enter, increasing competition. 
 However, China has also invested abroad, increasing their influence worldwide. 

States as collaborators 

 They collaborate to reach their goals. 

 Regional trade agreements: increased a lot from the 1990s onwards. 
 Countries that are in an agreement have access to the countries in the agreement,
usually lower tariffs. Countries that are not part of the agreement don’t have reduced
tariffs, its a block. 

Types of regional economic integration (graph in the lecture slide) 

Chapter 7 

 The goal of the TNC is to maximize profit while the government’s goal is to maximize the
welfare of the public. 
 TNCs and governments have a complicated relationship. The governments help TNCs
because they provide infrastructure (transportation) and resources and the TNCs
provide jobs for the economy, helping the government. However, there are
disadvantages as well with the relationship. The laws can limit TNCs and their
management. 
 Regulatory arbitrage: taking advantage of different prices in different countries. TNCs
might relocate to take advantage of lower costs in other countries. 

TNC Objectives vs State Objectives

 Performance: 
o TNC: maximize profits 
o State: maximize growth of GDP. Maximize employment. 
 Technology: 
o TNC: R&D at the best places. Gain access to all necessary technology.
o State: development of locally-rooted technology.
Bargaining Processes Between the TNcs and States

 It can be a problem for governments when TNCs relocate to avoid taxes. This can
negatively harm the government’s economy. 
 Transfer price: an MNE can open a subsidy in another country with a low tax rate on the
income. Then they will “pay” a large part of their income into that other country so then
their income is abroad. They can determine what price they can send to the other
country because usually there is no clear market price, so its sort of manipulation. So
then instead of paying a high tax rate on their profit, they will only pay a high tax rate on
a small portion of their profit and then a low tax rate on a large portion of their profit, so
that means they get to keep alot of the income. https://www.youtube.com/watch?
v=TLSYwkWCIzA&t=246s
 If there is a great demand for a certain source, then the one who has it has the greater
bargaining power (more control over negotiation). 

Chapter 8 

Capturing Value in GPNs

 Each part in a global value chain creates value. However, its complicated to know where
the product is made because each part is made in a different country. 

Upgrading (OR Downgrading) of local economies within GPNs

 Capital injection: it is investing resources like MNEs have invested in countries. FDI. 
 Local firm stimulation: if the TNC outsources from the local market, there might be a
demand of domestic firms and that encourages local entrepreneurs to do business.
However, if the multinationals do not engage local businesses, then the local businesses
are just used for low-skilled jobs, there is no real development in the local market. 
o The involvement of the local market depends on several factors. If the company
is vertically integrated, then they want to do everything themselves and do not
want to contact the local market. Also, it depends on the local economy, if its a
developing country, the people might not be skilled enough for the MNE. Also, it
takes time for the MNE to find suppliers and for the suppliers to develop the skills
needed for the MNE. 
 Knowledge diffusion: how much the MNE is sharing. They may like to keep their
research in their home country and then outsource the low skilled production.
 Employment creation: since MNEs prefer to put their R&D in developed economies,
demonstrates that in developing countries, the work might not be that advanced. In
developing countries, the majority is low-level production. 

Wages and Salaries

 Taking advantage of cheap labor in developing countries. 

 They are also unfair with their wages, they pay more where countries have a high
income. 

Economic upgrading: upgrading of local firms from low level to high level in the global
value chain. 
  Process upgrading: improved production. 
 Product upgrading: better quality products. 
 Functional upgrading: having more functions (more skills). 
 Inter-sectoral (chain) upgrading: entering a new industry so they can expand their
knowledge. 

Obstacles to local industrial upgrading 

 Hard to enter the profitable parts of the value chain.

Social Upgrading

 When industrial upgrading is done, it might exclude people that have a low income. They
might not be seen as valuable to the value chain. 

Chapter 9 

Three Aspects of Environmental Damage

 Overuse of non-renewable and renewable resources 

 Overburdening the natural environment: dumping waste, increase of greenhouse gases. 
 Destruction of ecosystems to create space for urban and industrial development. 

Pollution

 Rise in CO2 levels because of the economic activity. 

 Ozone layer is damaged. 
 Ships use the most polluting type of oil, known as ‘bunker fuel’. 
 Cities of developing countries face lots of pollution. Their increase in industrialization and
use of old cars for transportation increases pollution.

Double Exposure Problem

 In developing countries, there can be an increase in inequality with globalization in the

country because some benefit while others fall behind. 
 Developing countries also face the problem of climate change because of the
urbanization that is happening because of globalization.
 They have to face two problems at once, the inequality and trying to keep up with the
changes of the economy and the damage to the environment. 

Waste

 There is now e-waste which is the waste from electronics. The materials made to
produce the products are problematic. They are hard to recycle and the rest is wasted. 
 MSW (municipal solid waste): it's our trash, waste from the items that consumers use
like sofas, computers, refrigerators. 

Global geographies of waste disposal and recycling

  There is the relocation of waste. However, there are laws made forcing the local to
recycle more. 

Chapter 10

Location Matters 

 In the UK and US, there is high inequality between the incomes. 

 Transnational capitalist class (TCC): elites, mostly from developed countries.

Changing employment structures

 Jobs moved from manufacturing to service. Criticism because service jobs have low
wages compared to manufacturing. However, not completely true, there are service jobs
that are well paid. 
 Increased participation of women in the labor market. More opportunities for women with
the service jobs. There is more flexibility for them to do part-time work so they can also
be with their family. 

Employment and unemployment in developing countries

 In the lowest-income countries, more than 50% are employed in agriculture.

 In Asia, there is a growing trend from agriculture to urban-based manufacturing and
service. Service sector will be the main place for jobs. 
 However, the problem with developing countries is that there are lots of people available
for work but not enough jobs. EGYPT. 
 Formal and informal sector: formal is when there are contracts and the hours and
conditions are clearly established. However, in the developing countries, lots of people
get jobs from the informal sector. The informal is not monitored by the government,
legal/illegal activities with non-regulated working hours and work conditions

Demographics

 Population growth: In developed countries, the fertility rate is below 2.1 so it means the
population is declining.
 In least-developed countries, they have a high fertility rate of 4.4 and its not expected to
fall till 2100 so there will be a growth in population.
 Old and young populations:
o Developed countries are ageing. The elders might depend on the working class.  
o Developing countries are youthful. 
 Urban explosion: expected to increase, many living in cities. However, in developing
countries, there is not enough space and many live in slums. 

Chapter 11

TNCs and Corporate Social Responsibility 

 Most important for MNEs are to maximize shareholder value and shareholders are the
owners of the company. The company prioritizes them over the public and employees.
This mindset is mainly seen in the US and the UK. 
  Approaches to CSR: 
o Inactive CSR: companies only have the responsibility of creating profit. Doesn’t
matter what they are doing, if they are ethical or not.
o Reactive CSR: businesses monitor to make sure that they do not damage their
reputation.
o Active CSR: entrepreneurs are inspired by ethics. They make their goals towards
being socially responsible, regardless of pressure by stakeholders. 
o Proactive CSR: from the beginning, the entrepreneur involves external
stakeholders on how to be ethical. Active discussion with stakeholders. 

Code of Conduct (code of ethics) strategy

 Specificity: how many issues are covered in the code of ethics . 

 Compliance: the monitoring systems they have. 
 In the inactive CSR, they make code of ethics but they do not discuss with non-firm
stakeholders (people affected by the company like government, suppliers, customers).
While with proactive CSR, there is lots of discussion. 

Regulating the global financial system

 Offshore financial centers: they have low tax levels so lots of MNEs go there.
International Business Book

Chapter 1

Introduction

 Liability of foreignness: foreign companies have to adapt to the local environment and
get accepted by them so its additional problems than what local firms go through. 
 Co-determination: managers and workers cooperating when making decisions. The HQ
staff will have great influence because its only at this level that they have a great
overview of the operations. 

Chapter 2

 Division of labour: globalization led to that, work is spread across, developing countries
might do certain labor because it is cheaper. 
 Offshoring: doing business abroad because its cheaper. 
 Economic rent: the excess amount, ex: if it was supposed to be 10 but it is 13, 3 is the
rent. 

CHAPTERS 5 TO 8 EXTErRNAL ENVIRONMENT 

Chapter 5

 It's important for multinationals to be aware of how institutions differ because they can
affect the operations of the company. 
 Economic Institutional Theory: there are informal and formal constraints. 
 o Informal: traditions, values of the country. For example in Sweden, people want
to be a part of the decision making and there is less focus on authority. 
o Formal: laws
 Organizational institutional theory: 
o Regulative element: formal institutions put laws to help an economy. The EU
created the Common Market which allows free trade between the members. 
o Normative elements: norms, what is considered correct organizational behavior.
Some actions are accepted in some countries but not in others. However, when
MNEs work globally, they don’t have to always follow the norms. They should not
support corruption and they should pay decent wages. 
o Cultural-cognitive element: most informal, there are social networks that can
have an influence on an organization like the elites. 
 Domestic Laws and regulations: 
o Unilateral home-country facilitation: 
 Tangible support: they can get support from governments. 
 Intangible measures: knowledge is shared to companies in the home
country on how to expand. 
o Bilateral trade and investment facilitation: 
 When agreements are done with another country, it encourages foreign
companies to enter the country. There is this agreement that they will be
treated equally. 
 It is usually between a developed and a developing country. 
 There are certain ways to encourage countries to invest in their country
(inward FDI): 
 Exemption from export tax duties. 
 Reduction of corporate income tax rate. 
o Multilateral trade and investment facilitation: 3 or more countries. 
 Supranational institutions and their regulatory impact
o The goal was to create an international organization to create harmonization. 
o UN, WTO etc. 
o They came as a consequence of war. 
o Regional formations: 
 The EU 
 NAFTA (Canada, Mexico and the US). 
 Southern Common Market: South America 

Chapter 6

 Why some regulation?

o Correct market failure. The government attempts to help businesses and it also
helps with the competition and technological development. 
o Governments can help structure the market by having laws to make sure that
corruption is managed etc.  
 Different types of ideologies: 
o Communism: people get the same wages for the different types of work that they
do, inefficient. There is no motivation to develop businesses because regardless
of the effort, you get the same salary. No private property. 
o Socialism: hard work can be rewarded. Here there is some degree of private
ownership unlike in a communist environment. 
 o Liberalism: individual freedom and equality of opportunities. Market emphasis
(supply/demand). 
o Conservative: traditional systems and doesn’t want change. Problem is
adaptation to technological change. 
o Fascism: dictator, strict control of business activity and strong nationalist
attitudes. 
 Varieties of capitalism: 
o Liberal or free market economies
o Coordinated market economies: Germany, nordic, rely on the government to
regulate the market. 
 Political Risk: 
o Macro-political risks: a war, revolution.
o Micro-political risk: affect certain companies in a country, could be because of
their nationality. 
o Ownership risk: 
 Expropriation: a host country can take control of a foreign business
without any compensation.
 Nationalization: a host country may try to take control of a foreign
business by offering some compensation. 
o Operational risk: when there are laws that affect the profitability of a company. 
 Ex: transfer risk, which is when there are limits for the company and they
can’t move productive resources like people or technology in or out of a
country. 
o Also, increased taxation can be a problem.
o Corruption: government helping local businesses. 
 Forecasting Political Risk: 
o Quantitative approaches: statistics are used to calculate predictions about
political risk. 
o Qualitative approaches: experts analyze political risk. 
o Internal analysis: less costly and its seeking internal management views, since
the teams have experience in the host economy. However, its still hard to predict
the large events. 
 Managing political risk: 
o Defensive or reactive: 
 Direct: 
 Legal action: WTO for example can take legal action. 
 Splitting operations: if the activities are spread out across different
countries, it spreads the risk (Airbus did that). 
 ‘Host plus one’ strategy: the company has a reserve production
place, so if something happens to their production in one country,
they have a reserve so they aren’t affected. 
 Complexity defence: to try to not make a government take over a
subsidiary abroad, the MNE can make it seem less attractive so
there are no benefits of acquiring it. For example, they can make it
really dependent on other branches with the inputs so if the
government takes control of the subsidiary, they will no longer
have access to the other inputs in the supply chain and then it
would be hard to function on its own.
o Merging approaches: the goal is to integrate the company within the local
environment 
  Indirect: the goal is to demonstrate how much of a contribution the foreign
business is doing, to be on the good side of the government. With public
relations. 
 Direct: 
 Regional agreements: if companies are part of these trade
agreements, there is some stability because there are certain
standards that have to be met and governments can’t just do
whatever they want. 
 Local partners: MNE can make a joint venture by joining with a
local partner. If there is shared ownership, they make the
company appear less foreign. They can also have access to
political connections. 

Chapter 8 

 Economic systems: 
o Command economies: government decides for the production, what prices
should be set etc. they have alot of control. 
 This has been criticized because it is argued that the government doesn’t
know the different types of consumers and how to meet their needs, so it
leads to inefficiency. Also, the issue is that since there is no drive
competitively, there is no drive for innovation, so it pushes the country
behind. 
o Mixed economies: some industries are state controlled while most are in the
private sector. Sweden. 
o Free market economies: supply and demand, private companies make their own
decisions without the involvement of the government. 
 National economic size: 
o Gross national income: value of all domestic production and the income from
international production activities. 
o GDP: total market value of all final goods and services in a country. 
 Balance of Payments: country transactions with the rest of the world. It demonstrates
which countries they interact with financially with imports and exports. They should not
have large trade deficits. If there are, governments might tro to deal with them by raising
the tariffs but those are not allowed with the WTO. They might also try to deal with trade
deficits by encouraging exports so its more than the imports. 
 Inflation: if there is inflation, it will make prices higher so there will be less consumer
spending and higher production costs. Inflation is hard to predict so it leads to lots of
uncertainty. 
 Unemployment: high unemployment rate is often a sign that there is political risk.
 National debt: if a country has a high national debt then it can be hard for companies
that rely on the government for funding. 
 Exchange rate: 
o Transaction exposure: if the currencies change, it can affect the income from
individual transactions. 
o Translation exposure: how the currency changes will affect when the income
from overseas is translated back to another currency. 
o Economic exposure: the long term effect on the company to earn income
abroad. 
o Fixed exchange rate: the government intervenes and determines the exchange
rate. 
o Floating exchange: the government has no influence over the exchange rate, the
exchange rate is just made based on the supply and demand conditions of the
market.