Published by China Social Sciences Press, Shi Dan, Yu Jing and others
Stan
Transnational corporations are the product of two waves of modern economic globalization. In the second wave of modern economic globalization, the group of multinational corporations is becoming more and more mature, leading and promoting the formation and development of the global value chain. Over the past 30 years, global value chains have experienced a sustained and rapid expansion before turning to a slight contraction. The current global value chain restructuring has become a crucial factor affecting the strategic choice of multinational corporations, and the strategic choice of multinational corporations will affect the future trend of global value chain reconstruction.
What are the deep-seated reasons for the change in the globalization situation?
The research theme of examining the restructuring of global value chains and the strategic differentiation of multinational corporations needs to be examined in the context of globalization. On the one hand, transnational corporations are important participants in globalization, and the global value chain is the product of the strategic choices made by transnational corporations in the process of globalization, and is constantly changing with the process of globalization. As TNCs contribute more and more to world output and trade, TNC strategies are bound to have a greater impact on the variables of globalization and global value chains. On the other hand, the process of globalization is also an important environmental factor affecting the strategic choices of transnational corporations. Once a global value chain is formed, the strategy of TNCs is also influenced by it. In the process of globalization and the dynamic changes of global value chains, the strategic choices of multinational corporations are highly differentiated, and each makes subjective decisions based on its understanding of the changes under the constraints of the objective conditions of the global value chain. This book will discuss the relationship between the restructuring of global value chains and the strategic choices of multinational corporations and the future trends, first to make a judgment on the situation of globalization, and then to discuss the phenomenon of strategic differentiation of multinational corporations in the reconstruction of global value chains in the context of China.
How to understand the situation facing the globalization process in the world today is an important issue of the times. Since the 90s of the 20th century, mankind has experienced the golden 30 years of globalization. At the turn of the century, researchers in many fields are trying to embrace globalization and turn to globalization. In just 20 years, the research trend has changed dramatically, and researchers have begun to study the problem of "globalization turn" again. The May 2020 issue of The Economist took the cover title "Goodbye, Globalization", pointing out that the raging coronavirus pandemic is another major blow to a already troubled globalization. In recent years, researchers have paid attention to the major changes in the nature of globalization from different perspectives. Martin Wolff, chief economic commentator for the Financial Times, pointed out that the momentum of global economic integration has stalled and there is a possibility of a reversal, a change he called "the tide of globalization is turning". If we say that de-globalization is only a superficial change in the globalization situation, then what are the deep-seated reasons for the change in the globalization situation?
The research in this book argues that the globalization shift is a deep-seated factor affecting the current global value chain restructuring and the strategic choices of multinational corporations. The existing research results mainly examine the human and social factors that have contributed to the globalization turn, and they have jumped out of the constraints of economic analysis to examine the globalization turn from a broader range of social system, political and cultural factors, which is positive but also insufficient. The book argues that the shift to globalization should also be considered in terms of production technology. The reason why the globalization turn is likely to succeed must rely on the drive of major production and technological innovation activities, otherwise, relying only on the adjustment of human and social factors, the globalization turn will most likely lead to a zero-sum game and failure. To accurately understand the trend of globalization, we need to jump out of the pessimism plagued by the current reversal and recession of globalization, and examine the historical process of economic globalization, the development of multinational corporations and the evolution of the international production system in a historical and objective manner, so as to discover the future prospects of globalization, and then identify the development opportunities that can be actively acted upon hidden in many uncertainties and risk factors.
In the study, we also found that best-in-class multinationals have three strategic commonalities: first, they spare no effort to ensure control of the global value chain of their industry, second, they maintain the necessary sensitivity to cutting-edge technological innovation activities and technological factors that have a decisive impact on the future of the industry, and third, they pay attention to the new changes brought about by digital transformation to the way enterprises organize and do business. The above-mentioned strategic consensus is worth learning from mainland enterprises.
There are signs and manifestations of globalization turning in two directions
The global value chain has undergone an evolution from rapid expansion since the end of the 20th century to a slight contraction in the past decade, and in the future, the globalization shift will lead to the restructuring of the global value chain. At present, we can observe at least the signs and manifestations of globalization turning in two directions.
The first is the shift from globalization to regionalization. Many people see regionalization as an alternative to globalization, but it is not so simple. Since the mid-to-late 90s of the 20th century, there has been a simultaneous development of regionalization and globalization in important economic regions such as North America, Europe and Asia. For example, European economic integration, while strengthening the regionalization characteristics of the European economic integration process, has also promoted the global expansion of European multinational corporations to regions outside Europe. Therefore, regionalization is not a purely alternative solution to globalization, but may well go hand in hand with globalization. Regionalization represents a polycentric power structure that de-economic hegemony, which is more in line with the practical needs of economic development in different regions of the world, and alleviates the strong impact of economic competition on the highly differentiated non-economic value significance of human groups in different regions. Under certain conditions, the characteristics of regionalization may be more explicit than those of globalization, and in other times, the characteristics of globalization may be more explicit than those of regionalization. Therefore, we prefer to use the term "globalization turn" to summarize the current trend of local regionalization in the international production system, which we believe is brewing new momentum for broader and deeper globalization. Technological change, environmental and institutional changes are driving global value chains away from a distribution structure scattered around the world to a relatively concentrated regional production network.
Second, it is a shift from the tangible to the intangible. In 2016, McKinsey released a research report "Digital Globalization" that since 2008, the slowdown in global merchandise trade growth and the sharp decline in cross-border capital flows do not mean that globalization is reversed, and globalization is entering a new stage defined by the surging flow of data and information. According to a study by the World Intellectual Property Organization, nearly one-third of the value of manufactured goods sold worldwide derives from intangible capital such as brands, designs and technologies. The liberalization of global capital allocation has accelerated the intangibility of the economy and the digital transformation of the international production system. UNCTAD's ranking of the top 100 multinational companies shows that in the past decade, the number of asset-light technology enterprises in the top 100 multinational companies has increased rapidly from 4 in 2010 to 15, and at the same time, the amount of manufacturing greenfield cross-border investment projects has decreased by 20%~25% in 10 years. Economic intangibility has played an indirect role and has a deeper impact on the transformation of globalization. In the early stage of economic intangibility, its relationship with globalization is mutually reinforcing, but after the development of economic intangibility reaches a certain level, the differentiation effect of the old and new economies brought about by it will separate the world, forming a typical "double-edged sword" situation. In other words, economic intangibility will first accelerate the expansion process of globalization, and then it will promote the contraction and transformation of the globalization process in a state of multiple contradictions and conflicts.
The next decade will be a decade of great transformation of the international production system
Looking at the current international production system from the perspective of globalization, we can draw the following conclusions. First, in the current state of the world's political economy, the growth potential of global trade and the international production system, which could be achieved by the old mode of international organization of production, has been largely exhausted. Since the flow of intangible capital is often not limited by geographical location, it is difficult for countries to readjust the distribution of wealth through taxation. Some of the cultural traits needed to succeed in the intangible economy may help explain the socio-economic contradictions that have led to the rise of populism in many developed countries.
Second, the nature of the current globalization dilemma determines that the partial optimization and adjustment of various governance mechanisms to solve the contradictions and problems in the previous round of globalization process are not enough to support the world to get out of the new dilemma of globalization. These countermeasures may have positive intentions, but they are likely to have unintended consequences of intensifying confrontation and separatism in the process of globalization. In short, the implementation of reform in the governance of globalization cannot mainly rely on goodwill for the common well-being of the people of the world, but requires all parties involved, including transnational corporations, to propose measures that are more suitable for the new situation and changes in the turn of globalization.
Finally, the door to globalization has been opened, but the actual state of change will still depend on changes in both technological and institutional factors. As noted in the World Investment Report 2020, according to its 30-year study of international production systems and transnational corporations, the international production system is at a crossroads – first after 20 years of rapid growth, after a stagnation and decline during the 2008 international financial crisis, and then after a decade of pre-storm calm since 2010. After entering 2020, the new crown epidemic has posed the greatest challenge to the international production system, and the 10 years from 2020 to 2030 will be a decade of great transformation of the international production system.
To sum up, the next 10~15 years will be an important period of great transformation of the international production system and the reconstruction of the global value chain. In the face of uncertainty and a global market that is no longer flat, multinational corporations have responded through differentiated strategies, which is an inevitable choice for multinational companies in various countries due to the globalization shift. Whether it is to turn to regionalization in terms of geographical layout or to intangible in industrial layout, and in the situation that the shift to globalization brings more uncertainty to the operation of the global market system and the reconstruction of the global value chain, the risk of global strategic failure of multinational companies will tend to rise. In the process of responding to changes in the global market environment, the strategic differentiation of multinational corporations also means that the performance gap between the leaders and laggards in adapting to the globalization shift will inevitably widen.
(The author is a researcher and director of the Institute of Industrial Economics, Chinese Academy of Social Sciences, and this article is excerpted from the book "Global Value Chain Reconstruction and Strategic Differentiation of Multinational Corporations")