What is the relation between economics and globalization?- NGUYEN KIM CHI

The relationship between economics and globalization is deeply interdependent, forming a dynamic process in which economic structures, corporate strategies, and global interconnections continuously shape one another. Peter Dicken’s analysis of transnational corporations (TNCs) provides an essential foundation for understanding how globalization is fundamentally an economic phenomenon-driven by firms’ strategic behaviour, enabled by uneven global geographies, and negotiated within multilevel regulatory environments. This essay examines how economic forces both motivate and are transformed by globalization, drawing on Dicken’s empirical and theoretical insights.

At the most basic level, globalization is propelled by economic motivations. Dicken identifies two primary categories of incentives that drive firms to extend their activities across national boundaries: market-oriented investment and asset-oriented investment. Firms seek to overcome domestic market saturation, access new consumer bases, reduce transportation or trade costs, and achieve greater competitiveness by embedding themselves in foreign markets. At the same time, the uneven spatial distribution of economic assets—ranging from natural resources to skilled labor—generates strong incentives for firms to operate transnationally. The quest for cheaper labor originally characterized early forms of global expansion, while contemporary globalization increasingly reflects firms’ pursuit of specialized knowledge, advanced technologies, and regionally concentrated skills. Thus, the global economic landscape provides both the motivation and the opportunity for firms to globalize.

However, globalization does not simply expand the reach of firms; it transforms the structure of economic activity itself. The rise of TNCs and the acceleration of foreign direct investment (FDI) have produced what Dicken describes as transnational production networks-webs of production, distribution, and innovation that span multiple countries. These networks reshape the geography of economic activity by dispersing manufacturing, concentrating high-value functions, and reorganizing industries at regional and global scales. Although globalization is often portrayed as creating “placeless” corporations, Dicken argues that firms remain deeply embedded in their countries of origin. National institutional structures, corporate cultures, and historically rooted business systems continue to shape how firms organize and manage their global operations. As a result, globalization does not erase national economic differences but reproduces them within new transnational configurations.

The interplay between economics and globalization is further mediated by complex power relations among TNCs, states, and other institutional actors. While corporations possess significant mobility and the capacity to exploit differences in labor costs, regulations, and market conditions, states retain considerable-though uneven-authority. Governments influence TNC behaviour through regulatory frameworks, market access policies, and investment incentives. Regional economic blocs such as the European Union further strengthen state bargaining power by establishing unified regulatory environments. Thus, globalization should not be viewed as a process in which corporations simply overpower states, but rather as a continuous negotiation shaped by the economic interests and institutional capacities of multiple actors. The resulting outcomes are contingent rather than predetermined, reflecting the asymmetrical and context-specific nature of global economic power.

The relationship between economics and globalization is therefore circular and mutually reinforcing. Economic motives push firms outward, prompting the globalization of markets, production systems, and organizational structures. In turn, globalization reshapes national economies by altering regulatory regimes, labor markets, and industrial strategies, which then generate new economic conditions that further influence corporate behavior. The global economy emerges as a mosaic of interconnected production networks embedded within diverse institutional and cultural contexts. Rather than producing a single uniform global system, globalization magnifies economic interdependence while preserving-and in some cases deepening-geographical differentiation.

In conclusion, the relationship between economics and globalization is best understood as a dynamic and dialectical process. Globalization is driven by the strategic imperatives of firms responding to economic opportunities and constraints, while at the same time transforming the economic environments in which those firms operate. Dicken’s analysis demonstrates that globalization is neither a borderless marketplace nor a corporate-dominated inevitability. Instead, it is a complex and evolving system shaped by the interactions among transnational corporations, states, institutions, and the uneven geographies of the world economy. Understanding this relationship is essential for analyzing contemporary global dynamics and for shaping policies capable of navigating the challenges and opportunities of an interconnected economic future.