At present, basic changes in the global economy have become a reality and without any doubt, the international economy and its components have developed extensively under the influence of communications and information. As a result of these changes, economic development has become progressively possible in various countries during past several decades and, in other words, it has been globalized.

Internationalization of the economic activities is not a new phenomenon and dealings in certain goods have enjoyed a global nature during many centuries. The trend of the international trade during the industrialization of Europe in the 18th century has taken on a new momentum. However, until recently, production process was restricted to national economies. The final products were only traded at local markets and global trade meant nothing but exchange of raw materials and foodstuff.

Since 1950s, the nature of the world economy has changed and national borders no longer seem adequate to contain production processes, so that, now after about half a century, there are few industries that are operating at local or even regional levels. Today, the bulk of new economic activities can only be realized in relation to global communications and due to increased intricacy of production methods among various countries, recognizing the true origin of a specified product has become increasingly difficult. A specified commodity can be the product of many components produced in many countries and usually, the trademark belongs to the country where all components have been assembled. Under these circumstances, what is the meaning of a British car, an American computer, a German camera or a Dutch television?

Globalization is a qualitative concept not limited to geographical expansion, but a more general concept including solidarity of performance in international production.

During past decades, the process of international trade has become more complicated. Previous framework of transactions, which was based on workforce distribution among satellite and central countries, has turned into an extensive structure, whose continuation has led to disintegration of many production methods and their reestablishment in new geographical regions. Large-scale figures presented in industrial statistics as shown in Table 1 indicate that the global economy is expanding around three major poles of North America, Europe and Asia, especially the East Asia. Although these regions accounted for 87% of total word production and 80% of commodity exports, new industrial centers simultaneously evolved in newly industrialized economies (NIEs) and formed a global puzzle alongside other ancient centers of the world and within framework of new arrangements.

Consolidation of international economy was nothing but a shallow integration before 1913, which was carried out as simple trade of goods and services among independent corporations and through transfer of capital on a global scale. However, deep economic integration, which has been organized by transnational corporations, is currently the focus of attention and the above concept has been generalized to various levels of goods and service production. Until recently, the process of internationalization was only a simple generalization of economic activities within national borders and this quantitative concept only referred to a big regional production models. But globalization is a qualitative concept not limited to geographical expansion, but encompassing a more general concept including solidarity of performance in the international production cascade.

Table 1: Top Industrial Countries of the World

In other words, without having production assets in different parts of the world, a transnational corporation can control the methods through which production assets are being used in various countries. Therefore, it is possible that in a global production cascade, production is being carried out by independent corporations, while international connections in the cascade including externalized transactions are carried out through a market attended by transnational corporations. On the other hand, sometimes the whole production cascade can take shape inside a transnational corporation in the form of vertical integration. In this case, connections inside the production cascade will consist of internalized transactions that are carried out according to a hierarchy in that corporation. In fact, decisions made by corporations about this dichotomy, that is, market-oriented externalized transactions and hierarchical internalized transactions as well as decisions about what kind of system must be organized inside and what kind of operations should be taken outside the corporation has given rise to two different spectra of global economic networks:

It should be noted that global production cascades are influenced by laws enacted by national governments and the impact of governments on the industry has still remained quite powerful. In other words, all components of a production cycle are currently influenced by these laws within the framework of industrial policies based on the viewpoints of the governments. Also, transnational institutions such as the International Monetary Fund and the World Trade Organization or such economic groupings as the European Union, OPEC and NAFTA influence such laws. The important point is that governments play the role of a locomotive for compiling economic policies aimed at promoting national welfare and these policies are, naturally, quite distinct. Therefore, all commercial and industrial institutions as well as transnational corporations are trying to take advantage of differences in laws of host countries. Meanwhile, the governments, on the other hand endeavor to minimize discrepancies and regional differences.

Today, this interaction has led to a complex situation of power games between transnational corporations and governments.