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and their flocks between lowland pastures in
the winter and highland pastures in the sum-
mer months, to take advantage of snow melt.
Such movements are historically tied to pas-
toralism in mountainous areas and dryland
regions with seasonal rainfall. mtSuggested reading
Stenning (1960).transnational corporations (TNCs) capital
moves around the globe in three forms:
embodied in materials, goods and services, it
enters intotradeflows. Invested in stocks,
bonds, foreign currency holdings and the
like, it moves as financial capital (seefinance;
hot money). Transnational corporations
(TNCs) invest their own capital resources in
other countries in order to engage in their
ordinary business of extracting, producing
and/or selling materials, goods and services.
This is also known asforeign direct investment
(FDI). FDI may involve the creation of an
operation from the ground up – a ‘greenfield
investment’. More commonly, it involves buy-
ing an already existing foreign company. In
either case, effective control over the offshore
operation remains with the parent company,
even if it does not own 100 per cent of the
foreign asset. Return oninvestmentmay be in
the form of royalties, interest or profits and
these may be reinvested in the offshore site,
repatriated to the parent corporation or
invested elsewhere altogether.
FDI grows out of the combined exigencies
of international competition and the push of
capital accumulation as a company amasses
more capital than it can conveniently or prof-
itably reinvest in its original market. This im-
plies a longer term commitment of resources
to a particular foreign site than either of the
other forms of international capital mobility,
and corporations undertake it for a number of
reasons. Control overnatural resourcesis a
classic motivation and the one most likely to
draw a company into remote parts of the world.
Tapping into low-cost and non-unionized
labour marketsis another. FDI may be a
way of internalizingtransaction costsacross
borders and taking advantage ofeconomies
of scope, greater capital resources or tech-
nologies in order to gain acompetitive ad-
vantagein foreign markets. A TNC may buy
out a foreign company in order to gain access
to proprietary technology or to reduce the in-
tensity of competition in its business. Or it
may be intent on gaining access to or improv-
ing its position in important foreign marketsand sees operating in the market as a better
means to this end than exporting from home.
This may be: because it can provide better
service or respond more quickly to shifts in
the market; because it will benefit politically
from being perceived as a local company; be-
cause it avoids tariff barriers andtransport
costs, or because it can keep a closer eye on
the competition (Schoenberger, 1997; Dun-
ning, 2002a; Dicken, 2003; Ietto-Gillies, 2005).
The geography of TNC investment may be
counter-intuitive. Conventional economic
theory supposes that capital will flow from
places where it is abundant and the price cor-
respondingly low to places where it is scarce
and therefore expensive. This implies a flow
from advanced industrial countries to less
developed countries across the board. Other
theories anticipate that capital will flow from
high-cost areas to low-cost areas, again imply-
ing an outflow from advanced countries, with
high labour and regulatory costs, to the Third
World (seenew international division of
labour) (Dunning, 2002b; Dicken, 2003).
Most non-resource FDI, however, flows
among advanced industrial countries. US
TNCs in manufacturing and services, for ex-
ample, invest mostly in western Europe and
Canada. European TNCs invest heavily else-
where in Europe and in North America. A
smaller share flows to just a handful of newly
industrializing countries (NICs). Even TNCs
from some NICs are investing now in North
America and Europe: in 2005, a Chinese cor-
poration, Lenovo, bought the personal com-
puter business of IBM. Market access seems
to matter more than costs. Further, since FDI
is so often made via acquisition rather than as
greenfield investment, it is likely to go where
the largest number of potential acquisitions
is located – advanced industrial countries
(Schoenberger, 1997; Dicken, 2003).
Despite this skewed distribution in favour
of advanced industrial countries, TNCs oper-
ating in developing regions still have a tremen-
dous impact – in part because they may be
quite large relative to the local economy.
This is especially true of resource extraction
operations, although even these are con-
centrated geographically in a relatively small
number of host countries (Bridge, 2004).
Why FDI does not flow more generally
across the surface of the Earth is an interesting
problem. Its orientation to rich (North
America and the EU) and/or fast-growing
(e.g. Asia) markets is an important factor.
economies of scalein many of the most
important FDI industries (e.g. mining orGregory / The Dictionary of Human Geography 9781405132879_4_T Final Proof page 771 31.3.2009 9:40pm Compositor Name: ARajuTRANSNATIONAL CORPORATIONS (TNCS)TRANSNATIONAL CORPORATIONS (TNCS)