What Is the Relation Between Economics and Globalization? - TRAN THUY NGA (짠 튀 응아)

​1. Summary of the Reading

Reading 4, Economic Globalization: Corporations by Peter Dicken, provides a detailed and nuanced examination of the deep interconnections between economics and globalization, emphasizing that transnational corporations (TNCs) are the primary drivers of contemporary global economic processes. Rather than relying on the simplified narrative that global corporations dominate the world without constraints, the reading argues that the reality is far more complex, embedded, and uneven. It highlights several core themes: the scale and distribution of TNCs, their motivations for expansion, their modes of transnationalization, their geographical embeddedness, and the intricate networks and power dynamics that shape the global economy.

The chapter begins by challenging the stereotype of TNCs as “placeless giants.” Although corporations such as General Motors, Toyota, or IBM operate globally, most still retain a significant share of their activities in their home countries. Dicken stresses that the global economy is not a homogenous space in which corporations float freely; instead, it is a collection of differentiated geographical, cultural, and political environments that actively shape corporate behavior. Most strikingly, only a tiny fraction of TNCs—the top 100—account for a disproportionately large share of international production and exports, illustrating the extreme concentration of economic power in a handful of actors.  

The reading then explains how the growth of foreign direct investment (FDI) has outpaced global trade and become a key indicator of economic globalization. FDI flows remain heavily concentrated among developed economies, both as sources and destinations, though emerging economies (especially in East Asia) are becoming more important players. Nevertheless, the popular belief that developing countries receive the majority of corporate investment is incorrect.  

Dicken identifies two major motivations for why firms “go global”: market-oriented and asset-oriented investment. Market-oriented motives include saturation of domestic markets, transportation costs, and regulatory barriers, while asset-oriented motives refer to the geographically uneven distribution of natural resources, labor, human capital, and technological expertise. This means that globalizing is not simply an optional strategy; it is a necessity for many firms seeking profitability, growth, or competitive advantage. For example, firms may pursue foreign operations to access cheap labor, specialized skills, or resource bases unavailable at home.  

The chapter also details the modes of transnational expansion, emphasizing that firms can globalize in multiple ways: greenfield investment, mergers and acquisitions (M&A), or strategic alliances. Contrary to common assumptions, M&A not building new facilities is the dominant form of global expansion today, largely due to the risks and costs of establishing operations in foreign environments. Meanwhile, strategic alliances have created intricate constellations of cooperation between firms that simultaneously compete, particularly in industries like automobiles, semiconductors, and electronics.  

A major contribution of the reading is its emphasis on the embeddedness of corporations. Despite the assumption that globalization erodes the significance of place, Dicken argues that national origin remains a deeply influential factor in shaping corporate strategies, cultures, and organizational structures. Japanese, German, U.S., Korean, and Taiwanese firms each demonstrate distinctive patterns of corporate behavior rooted in their home-country institutions and histories. Even as globalization encourages convergence in certain areas, complete homogenization is unlikely: capitalism exists in multiple varieties, and these differences persist over time.  

Dicken also presents the idea of transnational production networks, or “webs of enterprise,” highlighting how TNCs organize globally dispersed activities across production, distribution, and consumption. Through these networks, corporations integrate geographically separated operations from R&D headquarters to manufacturing plants to marketing centers into a coordinated system. However, these networks are rarely truly “global”; instead, many are structured around regional blocs such as Europe, North America, or East Asia, reinforcing the idea that globalization often operates on a regional rather than planetary scale.  

Finally, the reading explores the complex power dynamics between TNCs and states. While corporations have considerable mobility and may take advantage of regulatory differences between countries, states retain significant power through their ability to grant market access, set policies, and regulate corporate behavior. TNC–state relationships are thus marked by negotiation, dependency, and mutual influence rather than unilateral dominance. Examples from the automobile industry illustrate how bargaining outcomes depend on context: sometimes firms hold more power (as with Ford in Spain), and sometimes states do (as with China’s restrictions on foreign auto companies).  

Overall, the reading portrays globalization not as a simple or inevitable force but as a dynamic, uneven, and relational process shaped by economic motives, geographical contexts, and institutional constraints.

2. New, Interesting, or Unusual Insights from the Reading

One of the most striking insights from the reading is the idea that globalization is not synonymous with homogeneity. Although the world economy is becoming more interconnected, this does not mean that corporations are becoming “placeless.” Instead, firms carry with them the “aroma” of their origins, much like Chagall’s metaphor of painters whose work always reflects their birthplace. This challenges the widespread assumption that globalization erases cultural or institutional differences. Instead, these differences shape the strategies and behaviors of TNCs even as they expand abroad.  

Another interesting insight is the strong emphasis on regionalization. While globalization suggests a borderless world, the reality is that many corporate networks cluster within specific regions—for example, Japanese-led networks in East Asia or pan-European networks within the EU. This suggests that globalization is not only about worldwide expansion but also about the deepening of regional integration, reflecting how proximity, cultural similarities, and political alliances continue to matter.  

The discussion on strategic alliances was also particularly eye-opening. The fact that rival firms such as Toyota and General Motors collaborate on technology development or share production facilities challenges traditional notions of competition. This phenomenon of “co-opetition” demonstrates how the complexity of modern global industries pushes firms to cooperate even with their competitors in order to innovate, share risks, and accelerate technological development. The example of semiconductor alliances between Motorola, Toshiba, Siemens, and others shows how globalization fosters hybrid relationships that are neither purely competitive nor purely collaborative.  

Another unusual insight was the description of “regulatory arbitrage,” where TNCs attempt to utilize differences in labor laws, tax systems, and government policies across countries. Yet what is surprising is that this does not necessarily mean TNCs always win. The reading demonstrates that states especially large or strategically important ones can and do push back. The example of China limiting foreign automakers through joint-venture requirements shows that states can effectively channel globalization to serve national goals.  

I also found it significant that TNC power is described as asymmetrical but not absolute. The conventional narrative of TNCs as omnipotent actors dominating powerless states is oversimplified. Instead, power is relational and contingent. Some countries are able to negotiate favorable terms, while others compete fiercely for investment by offering incentives, creating situations where the bargaining power shifts from one actor to another depending on context.  

Finally, the reading’s discussion of born-global firms companies that internationalize from the moment they are founded adds a contemporary dimension to globalization. These firms break from the traditional model of expanding domestically first before venturing abroad. Their existence underscores how technological advancements and digital connectivity are creating new pathways for globalization beyond the large industrial corporations that dominated earlier eras.  

3. Questions, Concerns, and Discussion Angles

While the reading offers a comprehensive examination of the relationship between economics and globalization, several questions and discussion angles arise that could be explored more deeply.

a. How does digital globalization challenge the traditional TNC model?

The reading emphasizes manufacturing, physical production networks, and geographical embeddedness. However, the modern global economy increasingly features digital platforms, intangible assets, and data-driven business models (e.g., Google, Amazon, Netflix, TikTok). These firms operate differently from traditional TNCs: they rely less on physical production infrastructure, and their “embeddedness” may revolve around data regulations rather than cultural or institutional origins. How should theories of TNC behavior adapt to this shift? Could digital-native firms be the first truly “placeless” corporations?

b. Is the nation-state still the most relevant regulatory actor?

The chapter argues convincingly that states retain power, and national-level regulations still matter enormously for FDI, production, and market access. But given the rise of supranational bodies (WTO, EU, CPTPP) and global technical standards, is the nation-state still the main locus of regulatory authority? For example, ISO 9000 and ISO 14000 shape production practices across borders. To what extent do these global standards limit or redistribute national sovereignty?

c. How do environmental concerns alter TNC strategies?

The reading focuses heavily on market and asset motivations but gives limited attention to sustainability, climate change policies, or environmental externalities. Yet environmental constraints increasingly shape where and how corporations operate—for example, carbon taxes in Europe, ESG requirements for investors, or supply chain audits. Would environmental regulation create new forms of “embeddedness” or reshape bargaining power between states and corporations?

d. To what extent do workers and civil society influence economic globalization?

Dicken acknowledges that labor is often geographically constrained, while TNCs are mobile. However, the rise of international civil society organizations, consumer activism, and digital organizing may increase labor’s influence. For example, global campaigns against sweatshops in the garment industry or digital labor unions present new dynamics. Could transnational networks of workers or consumers become a meaningful counterbalance to TNC power?

e. Are “born-global” firms an exception or the beginning of a new norm?

If more firms begin internationalizing immediately, the traditional stages of TNC development may become outdated. This raises questions about whether economic globalization will accelerate even further or whether such firms face vulnerabilities that traditional TNCs do not (e.g., lack of deep embeddedness, reliance on digital networks, exposure to global risks).

Conclusion

Reading 4 illuminates the deep and multifaceted relationship between economics and globalization, demonstrating that globalization is fundamentally an economic process driven by the expansion, strategies, and networks of transnational corporations. At the same time, globalization is not a uniform or inevitable force: it is shaped by geography, national institutions, regulatory structures, and evolving patterns of cooperation and competition. As the global economy continues to transform especially through digitalization, environmental concerns, and technological innovation many of the questions raised in the reading remain open for further exploration.