Transnational Companies and Globalization. Benefits and Costs

TNCs have several advantages over local firms in using new technologies for export activity. They have large internal reserves of skill, technical support, experience and finance to design and implement the learning process. They have access to major export markets, established marketing channels and well-known brand names. They can transfer particular components or processes from a production chain to a developing country and integrate it into an international system. Such supply-side upgrading needs government support. Moreover, a policy to induce TNCs to enter more advanced activities by offering such incentives as specialized infrastructure and skills can accelerate the upgrading process. With a completely passive policy, TNC exports can remain at low, technologically too small, levels. Thus, a TNC dependent export strategy needs a proactive element for dynamic competitiveness. More important, an FDIdependent strategy is not a substitute for building domestic capabilities.