What this lesson teaches
I can evaluate the economic, social and environmental effects of TNC networks on home and host economies.
Syllabus 9173, Topic 1.2, 2. Geography of the Global Economy and Transnational Corporations (TNCs). How do TNCs' global production networks impact their home and host economies?
Make a guess
A TNC opens a factory abroad. Must its home country lose exactly what the host country gains?
- No. Both can gain, though gains are uneven.
- Yes, because the factory moved from home.
- Yes. The gains and losses balance exactly.
- No, because the host gains little.
Show the answer
No. Both can gain, though gains are uneven.
The home may keep design, finance and profits while the host gains jobs and skills. But some home regions can lose factory jobs.
TNC production abroad moves jobs, income and know-how between places, and the gains depend on what each place keeps.
A TNC's home economy is where its main ownership and control sit. A host economy receives its overseas activities. A country can be home to some TNCs and host to others. So judge each firm and function, rather than labelling a whole country as one or the other.
Host economies may gain jobs, orders for local suppliers, exports, taxes and new skills. Gains are weaker if inputs and skilled staff are imported, profits leave, tax breaks are large or there are few local links. Local firms may also learn new standards and techniques by supplying the TNC.
Home economies may keep headquarters, design, finance and research jobs. Overseas profits can support income and new investment. But moving factories abroad can cost jobs and supplier orders in some home regions, even if owners and consumers gain.
So gains are uneven in both places. A national income gain can sit beside job losses in an old factory town, or poor jobs near a new factory. Compare job quality, value kept, skills gained and resilience, not just the number of factories.
- Home economy
- Where the TNC's ownership and control are based.
- Host economy
- Where the TNC's overseas activities are.
- Value retained
- The wages, orders and taxes that stay local.
Step by step
Set the roles
Which firm, which activity, which place?
Trace retained value
Wages, suppliers, taxes and profits in each place.
Look at distribution
Workers, owners and regions, not just totals.
Real examples to use
Intel in Penang, Malaysia
Intel opened a plant in Penang in 1972. It helped make Penang an electronics hub, creating jobs and local supplier firms.
Worked example: Two host factories
Two made-up plants export the same value. Plant A imports almost every input. Plant B buys from local suppliers and trains local technicians. B probably brings wider local benefits, but pay and working conditions matter too.
Watch out for this
If the host gains, the home must lose the same amount.
Networks can create new output and markets. Gains and losses are spread unevenly, not swapped equally.
Check your understanding
Which evidence best shows a host region gains more than factory jobs?
- Export value, with no data on local inputs.
- Local supplier orders, skills gained and taxes kept.
- The size of the factory and its car park.
Show the answer
Local supplier orders, skills gained and taxes kept.
Yes. These show wider benefits.