With the disintegration of Soviet Union and the subsequent rise of market
economy as the dominant way of organizing economic activities in former centrally
planned economies, researchers have discussed what is to come. Some have advocated
that as the market economy has in one or the other form, been adopted by almost
all countries, history has come to an end. What remains to be done is to fine-tune
the structures and mechanisms of the market economy (Fukuyama, 1992). Others
see a new world order emerging (Stephens, 2005) with Asia as the dominant
economic arena which `takes all', and the Transnational Companies (TNCs) focus all
their attention and resources on Asia. A few try to introduce more dynamic
thinking, finding that the present global liberalization and integration processes at all
levels will create a new playing field for business and especially transnational
companies from both developed and emerging market economies. It will weave new
global alliances, create global value chains, intertwine with the various public
institutions and having resources enough to formulate elaborate corporate social
responsibility policies and play the donor role around the world either alone or in conjunction
with various institutions.
The aim of this paper is, in a modest way, to contribute to these reflections
on the globalized future. More specifically, the aim is to discuss the rise of China in
a business perspective and the implication of this growth of the Chinese economy
and of Asia at large on the European Union (EU). While the rise of China will
be conceptualized from basically an industrial economics and company
strategic perspective, the implications for the EU (and China) will be discussed within
the framework of three scenarios, a linear transfer of technology scenario; a
dynamic market scenario, and a market-com-institutional development scenario. In all
the three scenarios, the business strategy perspective of TNCs will play an essential
role as it is assumed (and believed) that the strategic interests and actual market
behavior of the TNCs will drive the global economy. This is even more so if the liberal
trade and investment regime, as assumed, continues to be the accepted mode of
organizing economic activity. Different versions of the market economy may appear, but the
core values and mechanisms of the market economy are intact and there will, it is
assumed, be a global economic playing field. Finally the paper discusses the possible
regional/Asian economic integration, using a strategic business perspective.
Over the last 25 years, country by country has opted for a liberal trade and
investment regime and thus created a large open playing field for the development of
TNCs. When the world consisted of many more or less closed and protected markets
and a central plan to direct development, TNCs, in the main, used two strategies to
mount the barriers: They pursued a multi-domestic Foreign Direct Investment (FDI)
strategy (Porter, 1980), i.e., they developed a strategy for each country to comply with
the specificities of that country (Whitley, 1994) and entered into an agreement with
the government in question. The other strategy was basically an exporting strategy
as the TNCs exported products, but more important, they exported complete
production entities to comply with the dominant import substitution policies of most
developing countries and centrally-planned economies. The terms `system's export' and
`turnkey project' were coined for this way of overcoming the barriers of and entering a
country. This way the centralized economies hoped to buy modern technology. When
realizing that acquiring the technology was not enough, they, at times, entered
into management contracts with TNCs to run the new factories. |
