Digitalization and the transnational corporations. Rethinking economics
Emeritus Professor of Applied Economics London South Bank University and Research Professor Birkbeck University of London.
Please cite the paper as:
Grazia Ietto-Gillies, (2019), Digitalization and the transnational corporations. Rethinking economics, World Economics Association (WEA) Conferences, No. 1 2019, Going Digital, 15th November to 16th December, 2019
Digitalization has been with us for a couple of decades and is now all pervasive. It affects every sphere of economic activity: from production to consumption to the interaction between the State and its citizens. The latter interaction is in terms of: the delivery of public services; the collection of revenue; and the development and implementation of public policies.
The transnational companies (TNCs)2 have been with us for much longer. Steven Hymer (1976 ) – who developed the first theory of the international firm – dates the modern transnational to after the Second World War. Its very distant antecedents can be dated much further back even before the birth of nation-states. Transborder direct business operations were indeed part of the activities of the Medici bank with headquarters in fifteenth century Florence.
More recently-established companies, such as the East India Company, the Royal African Company, the Hudson Bay Company and others dating back to the seventeenth and eighteenth centuries, are sometimes considered to be the forerunners of the modern TNC. However, these companies were chartered by governments to carry trading business operations in colonies. The specificity of their operations and the fact that the charter was for business in the colonies – which were considered part of the country whose government had granted the charter – make these companies substantially different from the modern transnational corporation.
Hymer does not consider any of these companies to have been the forerunners of the modern TNC because they lacked a key element of modernity on business: the ability to control and manage at a distance3. This became possible only with the modern means of transport and communication available after WWII. Management and control of operations became possible owing to cheaper and faster transportation and communication technologies. Changes in the internal organization of companies developed alongside improvement in such technologies and they all contributed to the increase in the number and activities of transnational companies worldwide.
In this paper I shall concentrate on developments in the last decade, the years that have seen the emergence and growth of the digital transnational corporations though I shall deal with wider issues linked to technology transnational in general.
The next section deals with digitalization and the TNC. Section three and four tackle, respectively, issues of theory and policy with regards to the transnational companies and which arise from digitalization. Section five deals with macro issues and the last section summarizes and concludes.