Global production networks, labour and small firms.

Author:Rainnie, Al
Position:Essay
 
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Introduction

In this article we are concerned with the dynamics of the economic organisation and the restructuring of the geography of contemporary global capitalism, especially the development of global production networks (GPNs), the position of small firms in such networks, and the implications for worker organisation and resistance of such positioning. In particular, we suggest that some analyses appear to consign workers in small firms in these networks to a necessarily tenuous, dependent and powerless position. By way of contrast, we argue that understanding the way in which small firms are geographically connected to other firms and how they are spatially embedded allows us to see that they and the workers who labour in them can in fact have significant agency. Such a spatial awareness, then, challenges those analyses of present-day globalisation that fail to theorise the importance of capitalism's geographical organisation to the way it operates as an economic system, and which see this organisation as simply the reflection on the Earth's surface of the actions of collective capital: that is to say, as a social artefact upon which workers have little influence. (For additional arguments on the importance of taking issues of spatiality more seriously in analyses of work and employment, see Herod et al. 2007; Rainnie et al. 2007; McGrath-Champ et al. 2010; Rainnie, McGrath-Champ and Herod 2010; and Rainnie et al. 2011.)

The paper is divided into five main sections. The first very briefly considers some ongoing changes in the way transnational corporations (TNCs) are organised and some geographical patterns of recent restructuring, thereby providing a context for what follows. The second section discusses GPNs' geographical embeddedness and introduces conceptual schema concerning workers' positioning vis-a-vis GPNs. The third section outlines some approaches to GPNs that have endeavoured to address the role of labour, although they have tended to focus on large firms and to ignore small firms and the agency of their workers. The fourth section develops the argument concerning small firms as being integral to the amalgam that constitutes GPNs, rather than simply as being subservient components thereof, by linking small firms' activities to broader arguments about uneven and combined development. The fifth section links these themes together, arguing that locationally situated analysis of the labour process that includes bona fide conceptualisation of the role of small business is crucial to a robust understanding of GPNs.

Globalisation, transnational corporations and economic restructuring

It is a truism to state that the global economy is becoming ever more interconnected and networked. What Harvey (1989) calls 'time-space compression' means that goods, capital, information and people can now move across the Earth's surface more quickly than ever before in human history. In the process, geographically distant places are becoming ever more linked together. Despite the self-evident nature of this statement, there are some important aspects of the ways in which this interconnectivity is coming about that are worth detailing. In particular, as Dicken (2011: 20) points out, one aspect of the global economy's mounting interconnectedness is that the growth of trade has been outpacing the growth of manufacturing output in recent years. In turn, the growth of foreign direct investment (FDI) has been outpacing the growth of trade, such that the primary mechanism of bringing about interconnectedness has now shifted from trade to FDI. The common element in these developments is the transnational corporation (TNC). Indeed, TNCs have come to play an increasingly dominant role as geographical integrators of the global economy relative to, say, the types of small firms that have been the focus of classical economic theorising since Adam Smith. For instance, TNCs presently account for two-thirds of world exports of goods and services, of which a significant share is intra-firm trade.

Changes in the way the global economy is organised economically have been associated with notable shifts in how it is organised geographically, although these shifts should not be overstated. For instance, a number of Global South economies have become major producers of manufactured goods that they are now exporting across the planet. Nevertheless, the planetary geographies of production, trade and FDI remain highly spatially uneven and strongly concentrated in particular parts of the global economy, especially in the industrial giants of the Global North (Dicken 2011: 25). Thus, whilst the established developed economies are being challenged by some newly industrialising countries like Brazil and India, 80 per cent of outward FDI stock nevertheless still emanates from just 15 countries, while almost half of all inward FDI is concentrated in five host countries (see Herod 2009 for more details). One key metamorphosis, however, is that 30 per cent of inward FDI is now concentrated in China and Hong Kong. Indeed, it is suggested that the biggest development in East Asia in recent decades has been the economic (re-) emergence of China (Dicken 2011: 31). This is important because, as we have pointed out previously (Rainnie et al. 2011), the rise of giant China-based supplier companies is fundamentally altering the dynamics of a number of important GPNs.

For Dawley (2011: 401), there are three principal competitive dynamics currently shaping the uneven geography of contemporary corporate investment and the restructuring processes that are impacting GPNs: time-based competition; intensified intracorporate competition; and TNC mergers, acquisitions and restructuring. Dicken (2011: 59) argues that these pressures have been reinforced and accelerated in recent years by the impact of increasingly dominant financialisation. These developments are influencing the organisational structure of many TNCs in some very important ways. For example, a significant response to such competitive pressures has been the growing disintegration of the model of business organisation that dominated for most of the 20th century--that is, the highly vertically integrated corporation--and the emergence of much more networked organisational forms. Indeed, Castells (1996) has suggested that the era of globalisation has been marked by the rise of what he calls a 'network society'. One consequence of this has been that activities that were previously conducted 'inside' the corporation--such as manufacturing the components that would be used in the assembly of automobiles--are increasingly being contracted out. A classic example of this in recent years was the 1999 spinning off by General Motors (GM), the world's largest automobile producer, of its components manufacturing subsidiary Delphi in the hope that this would make Delphi more competitive, enable it to diversify its customer base, and ultimately lead it to produce parts more cheaply for GM. Equally, other activities which may remain 'inside' the corporation--like janitorial activities--have increasingly been benchmarked against outside contractors. These developments have raised myriad issues for workers and their attempts to organise (see Herod 2007).

One of the most noteworthy developments in all of this, though, has been the growing imbrication of large firms and their suppliers. Thus, even as many large firms have subcontracted out activities that they themselves previously did, subsequently they have frequently developed highly integrated relationships with the firms that now do this work. For example, after GM spun off Delphi, both companies purchased stakes in each other and continued to do business with one another, and GM remained Delphi's largest customer. Furthermore, in the aftermath of the US government's bailout of GM and Delphi's problems with bankruptcy, GM provided Delphi with financial support, paid billions of dollars in reorganisation-related charges to Delphi, lowered its prices for Delphi-made parts, provided funding for labour and pension costs, and bought Delphi's steering division in 2009 (US Department of Commerce 2009). This is but one of many such examples. Such concentration and consolidation, though, are having important implications for supply chains and the nature of work and employment within them (Flecker 2009). In particular, there are increasing demands to meet the conditions of entry to them, as conscious coordination of the chains becomes ever greater with the growing integration of the kinds of subcontracting structures typified by Japanese keiretsu, Korean chaebol, and Wal-Martian business arrangements. Indeed, this coordination has grown to such an extent that Dicken (2011: 121) has suggested that it now makes more sense to think of TNCs not as embodied organisations but as networks of networks (perhaps the classic example being shoe manufacturer Nike, which does not own any of its own factories but merely subcontracts with myriad independently owned plants across Asia). Conceiving of TNCs in such manner raises critical questions about the place of small firms in such networks, and of their agency and that of their employees.

Global production networks as geographically embedded entities

Elsewhere (McGrath-Champ et al. 2010; Rainnie et al. 2011), we have argued for a GPN-theory approach to understanding work and employment within the contemporary global economy. Such an approach, we contend, gives greater emphasis and acknowledgement to the issue of value creation and appropriation than do either 'global commodity chain' (GCC) or 'global value chain' (GVC) analyses (see also Taylor 2010). Adopting Ernst and Kim's (2001: 1) definition of a GPN as something that 'combine[s] concentrated dispersion of the value chain across firm and national boundaries, with a parallel process of integration of hierarchical layers of network participants', we maintain that a GPN...

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