A BRIEF ANALYSIS ON DEVELOPMENT AND COMPETITIVENESS – CONSIDERING THE WORLD'S TOP TRANSNATIONAL CORPORATIONS

Abstract

Development represents a strategic goal for every country of the world. But it also is a "complicated issue", given the multitude of (micro and macro economic) approaches that academics and strategists have proposed for development. By this paper we consider competitiveness as measure and indicator of development – based on World Economic Forum researches and findings. This kind of approach allows us to make some (time -and space -based) comparisons – at country level and to identify some key figures – at industry level – of the world's top transnational corporations (ranked by UNCTAD) that can be valorised by countries (and TNCs as well) on their journey through economic development and competitiveness. Index (WEF), Top 100 non-financial TNCs (UNCTAD)

Full text

Studies in Business and Economics
- 82 - Studies in Business and Economics
A BRIEF ANALYSIS ON DEVELOPMENT AND
COMPETITIVENESS – CONSIDERING THE WORLD’S TOP
TRANSNATIONAL CORPORATIONS
OGREAN Claudia
Lucian Blaga University of Sibiu, Romania
HERCIU Mihaela
Lucian Blaga University of Sibiu, Romania
Abstract:
Development represents a strategic goal for every country of the world. But it also is a
“complicated issue”, given the multitude of (micro and macro economic) approaches that
academics and strategists have proposed for development. By this paper we consider
competitiveness as measure and indicator of development – based on World Economic Forum
researches and findings. This kind of approach allows us to make some (time - and space -
based) comparisons – at country level and to identify some key figures – at industry level – of
the world’s top transnational corporations (ranked by UNCTAD) that can be valorised by
countries (and TNCs as well) on their journey through economic development and
competitiveness.
Key words: development, stages of development, competitiveness, Global Competitiveness
Index (WEF), Top 100 non-financial TNCs (UNCTAD)
1. Introduction
Development represents a strategic goal for every country of the world – no
matter its level (or stage) of development or the moment in time. Most of the
approaches on development are based on its economic foundation (usually express as
economic growth), but development is a much more and complex concept and status
than that. There are a variety of (micro and macro economic) perspectives regarding
the theories of (economic) development. This variety is consistent with – and reflects –
the reality itself, characterized by many development gaps and discrepancies – that
are determined, and determine at their turn, by different levels of integration (of firms –
nations – regions), as well as quite different impacts and consequences for the

Studies in Business and Economics
Studies in Business and Economics - 83 -
decisions made by the global players – no matter their quality or level of aggregation
(firms – nations – institutions…).
So, we agree with Todaro & Smith (2009) which emphasize that development
„must be conceived of as a multidimensional process involving major changes in social
structures, popular attitudes, and national institutions, as well as the acceleration of
economic growth, the reduction of inequality, and the eradication of poverty.
Development, in its essence, must represent the whole gamut of change by witch an
entire social system, tuned to the diverse basic needs and desires of individuals and
social groups within that system, moves away from a condition of life widely perceived
as unsatisfactory toward a situation or condition of life regarded as materially and
spiritually better.” (Todaro & Smith, 2009)
The World Economic Forum (WEF) represents a significant milestone on the
map of concerns about development. It annually develops and releases a Global
Competitiveness Report – that ranks countries based on a composite index of
development: the Global Competitiveness Index (GCI). During more than three
decades of experience, the WEF has study and made benchmarks about the factors
that determine national competitiveness, by highlighting, in the same time, the powerful
connection between competitiveness and development (Figure 1).
Figure 1. The Global Competitiveness Index framework
(Source: WEF, 2012)
GLOBAL COMPETITIVENESS INDEX
Basic requirements
subindex
Pillar 1. Institutions
Pillar 2. Infrastructure
Pillar 3. Macroeconomic
environment
Pillar 4. Health and
primary education
Efficiency enhancers subindex
Pillar 5. Higher education and
training
Pillar 6. Goods market efficiency
Pillar 7. Labor market efficiency
Pillar 8. Financial market
Development
Pillar 9. Technological readiness
Pillar 10. Market size
Innovation and
sophistication factors
subindex
Pillar 11. Business
sophistication
Pillar 12. Innovation
Key for
Efficiency-driven
economies
Key for
Factor-driven
economies
Key for
Innovation-driven
economies

Studies in Business and Economics
- 84 - Studies in Business and Economics
The most recent WEF report (released on the 5th of September 2012) defines
competitiveness as „the set of institutions, policies, and factors that determine the
level of productivity of a country. The level of productivity, in turn, sets the level of
prosperity that can be earned by an economy. The productivity level also determines
the rates of return obtained by investments in an economy, which in turn are the
fundamental drivers of its growth rates. In other words, a more competitive economy is
one that is likely to sustain growth. The concept of competitiveness thus involves static
and dynamic components. Although the productivity of a country determines its ability
to sustain a high level of income, it is also one of the central determinants of its returns
to investment, which is one of the key factors explaining an economy’s growth
potential.” (WEF, 2012)
2. Global Competitiveness Index (GCI) as indicator and measure of
(country-level) development
According to the WEF, GCI is a composite indicator based on 12 pillars (Figure
1). It conventionally assignees higher relative weights to those pillars of
competitiveness that are more relevant for an economy within a certain stage of
development. That means that, although all the 12 pillars of competitiveness count to a
certain level – for every country and every stage of development – the relative weight
of each one depends on the stage of development that defines a country on a certain
moment. In order to put this concept into practice, WEF has grouped the 12 pillars of
competitiveness into 3 sub-indexes; each of them is critical for a certain stage of
development.
The interrelations between competitiveness and development (Table 1) are
explained by WEF as follows (WEF, 2012):
 „In line with the economic theory of stages of development, the GCI assumes
that economies in the first stage are mainly factor-driven and compete based
on their factor endowments – primarily low-skilled labor and natural resources.
Companies compete on the basis of price and sell basic products or
commodities, with their low productivity reflected in low wages. Maintaining
competitiveness at this stage of development hinges primarily on well-
functioning public and private institutions (pillar 1), a well-developed
infrastructure (pillar 2), a stable macroeconomic environment (pillar 3), and a
healthy workforce that has received at least a basic education (pillar 4).
 As a country becomes more competitive, productivity will increase and wages
will rise with advancing development. Countries will then move into the
efficiency-driven stage of development, when they must begin to develop
more efficient production processes and increase product quality because
wages have risen and they cannot increase prices. At this point,
competitiveness is increasingly driven by higher education and training (pillar
5), efficient goods markets (pillar 6), well-functioning labor markets (pillar 7),

Studies in Business and Economics
Studies in Business and Economics - 85 -
developed financial markets (pillar 8), the ability to harness the benefits of
existing technologies (pillar 9), and a large domestic or foreign market (pillar
10).
 Finally, as countries move into the innovation-driven stage, wages will have
risen by so much that they are able to sustain those higher wages and the
associated standard of living only if their businesses are able to compete with
new and/or unique products, services, models, and processes. At this stage,
companies must compete by producing new and different goods through new
technologies (pillar 12) and/or the most sophisticated production processes or
business models (pillar 11).” (WEF, 2012)
Table 1. Subindex weights and income thresholds for stages of development
Stages of development
Stage 1:
Factor-driven
Transition
from stage 1
to stage 2
Stage 2:
Efficiency-
driven
Transition
from stage 2
to stage 3
Stage 3:
Innovation-
driven
GDP per capita (US$)
thresholds
< 2.000
2.000-2.999
3.000-8.999
9.000-17.000
> 17.000
Weight for basic requirements
subindex
60%
40-60%
40%
20-40%
20%
Weight for efficiency
enhancers subindex
35%
35-50%
50%
50%
50%
Weight for innovation and
sophistication factors
5%
5-10%
10%
10-30%
30%
(Source: WEF, 2012)
The classification of the countries upon their stage of development for the year
2012 – in accordance with the WEF methodological model – synthetically reunites all
the determinants and consequences of competitiveness and development (Table 2).
The resulted image is complex and comprehensive in terms of reflecting the country
specific strengths and weaknesses – estimated through the scores that each pillar of
competitiveness has acquired and also through the GCI at the end.
Table 2. Countries/economies at each stage of development
Stage 1:
Factor driven
(38 economies)
Transition from
stage 1 to stage
2 (17 economies)
Stage 2:
Efficiency-driven
(33 economies)
Transition from stage
2 to stage 3 (21
economies)
Stage 3:
Innovation-driven
(35 economies)
Bangladesh
Algeria
Albania
Argentina
Australia
Benin
Azerbaijan
Armenia
Bahrain
Austria
Burkina Faso
Bolivia
Bosnia and
Herzegovina
Barbados
Belgium
Burundi
Botswana
Bulgaria
Brazil
Canada
Cambodia
Brunei
Cape Verde
Chile
Cyprus
Cameroon
Egypt
China
Croatia
Czech Rep.

Studies in Business and Economics
- 86 - Studies in Business and Economics
Chad
Gabon
Colombia
Estonia
Denmark
Cote d’Ivoire
Honduras
Costa Rica
Hungary
Finland
Ethiopia
Iran
Dominican Republic
Kazakhstan
France
Gambia
Kuwait
Ecuador
Latvia
Germany
Ghana
Libya
El Salvador
Lebanon
Greece
Guinea
Mongolia
Georgia
Lithuania
Hong Kong
Haiti
Philippines
Guatemala
Malaysia
Iceland
India
Qatar
Guyana
Mexico
Ireland
Kenya
Saudi Arabia
Indonesia
Oman
Israel
Kyrgyz Rep.
Sri Lanka
Jamaica
Poland
Italy
Lesotho
Venezuela
Jordan
Russian Federation
Japan
Liberia
Macedonia
Seychelles
Korea Rep.
Madagascar
Mauritius
Trinidad Tobago
Luxembourg
Malawi
Montenegro
Turkey
Malta
Mali
Morocco
Uruguay
Netherlands
Mauritania
Namibia
New Zealand
Moldova
Panama
Norway
Mozambique
Paraguay
Portugal
Nepal
Peru
Puerto Rico
Nicaragua
Romania
Singapore
Nigeria
Serbia
Slovak Rep.
Pakistan
South Africa
Slovenia
Rwanda
Suriname
Spain
Senegal
Swaziland
Sweden
Sierra Leone
Thailand
Switzerland
Tajikistan
Timor-Leste
Taiwan, China
Tanzania
Ukraine
United Arab Emirates
Uganda
United Kingdom
Vietnam
United States
Yemen
Zambia
Zimbabwe
(Source: WEF, 2012)

Studies in Business and Economics
Studies in Business and Economics - 87 -
But this image can be optimized if we consider a comparative and dynamic
analysis; by this way, the evolution of each country can be simultaneously compared in
time (with its historical performances) and in space (with all the countries that share the
same level of development or with those placed on superior stage). By doing so will be
possible to configure alternative scenarios – strategies and politics for continuous
improving and development. The comparative analysis of the GCI during the period it
has been served as benchmark for WEF – 2005-2011 (Figure 2) reveals a tendency of
convergence of values between the developed countries on one hand, and the
emerging and transition ones, on the other hand. Total weighted average score of GCI
for all the 80 countries that constitute the sample of the research has improved from
4.1 in 2005 to 4.4 in 2011 on a scale from 1 to 7. In the same time, the weighted
average of the 33 advanced economies has decreased from 5.4 to 5.2. As a result of
these evolutions, the gap between the two categories of countries has diminished from
1.3 to 0.8. (WEF, 2011)
Figure 2. Trends in GCI scores, 2005-2011
(Source: WEF, 2011)
3. Analysis and findings on development and competitiveness at
country and industry level – considering Top 100 non-financial TNCs
(UNCTAD)
Because multinational enterprises / transnational corporations (TNCs) have
a growing relevance in the world economies in both the developed and the developing
countries (Ietto-Gillies), and because they are the leading forces of the globalization
process – as we perceive and live it today – we have to analyze the interdependencies
between development and competitiveness at their level also. Within this general
framework, “a multinational or transnational enterprise is an enterprise that engages in

Studies in Business and Economics
- 88 - Studies in Business and Economics
foreign direct investment (FDI) and owns or, in some way, controls value-added
activities in more than one country. This is the threshold definition of a multinational
enterprise (MNE), and one that is widely accepted in academic and business circles,
by data-collecting agencies such as the Organisation for Economic Co-operation and
Development (OECD), UNCTAD’s Division on Investment, Technology and Enterprise
Development (DITE), and by most national governments and supranational entities”
(Dunning & Lundan, 2008).
So, in order to translate the above results into useful insights for the analysis at
industry level, we appeal to the most recent UNCTAD annual report on world
investments (UNCTAD, 2012). The UNCTAD’s World Investment Report 2012 contains
two annexes that illustrate the rankings of the largest 100 Transnational Corporations
(TNCs) according to their foreign assets. One of the annexes considers as unique
criterion the ratio of foreign assets to total assets, no matter the country of origin of the
TNC; the other one stops exclusively on the TNCs that have their origin in developing
and transition economies. (Ogrean & Herciu, 2012)
According to UNCTAD’s Top 100 non-financial NTCs, and the analysis made
on its basis by The Economist online, “the giant American conglomerate General
Electric (GE) holds more assets abroad than any other non-financial firm in the world.
... Of the 100 companies with the most foreign assets, 17 hold over 90% of their assets
abroad, including ArcelorMittal, Nestlé, Anheuser-Busch InBev and Vodafone. Their
share of foreign sales is also substantially larger than GE's. More than half of GE’s
300,000-strong workforce is based outside America ... Transnational firms benefited
from the more favourable economic climates in emerging markets, and some
developed markets, like America. ... Production by foreign affiliates increased in 2011:
sales rose by 9% to $28 trillion; employment rose by 8% to 69m; and total assets rose
from around $75 trillion in the previous two years to $82 trillion.” (The Economist
online, 2012). All the above are strong arguments in favor of the importance of TNCs at
global scale nowadays on one hand, and of the contribution of TNCs to development
on the other hand – because the ranking is made primarily based on foreing assstes,
but it also count for each TNC on the share of foreign employees in total employees
and the share of foreign sales in total sales.
If we consider, on one hand, the WEF’s stage of development criterion for
the countries – that places them according to their GCI index and its sub-indexes
within one of the five categories (Table 2) and the Top 100 non-financial TNCs –
developed by UNCTAD (UNCTAD, 2012; Ogrean & Herciu, 2012) on the other hand,
we have to emphasize that, from all the 24 countries that are present into the
UNCTAD’s Top 100 non-financial TNCs:
 twenty countries are placed into the 3rd stage of development – having
innovation-driven economies: United States, Australia/United Kingdom,
Austria, Belgium, Canada, Denmark, Switzerland, Finland, France, Germany,
Hong Kong, Israel, Italy, Japan, Luxemburg, United Kingdom, Netherlands,
Norway, Spain, Sweden;

Studies in Business and Economics
Studies in Business and Economics - 89 -
 three countries are in transition from stage 2 to stage 3: Brazil, Malaysia,
Mexico;
 one country is placed into the 2nd stage of development – having an
efficiency-driven economy: China.
This kind of distribution (the presence of the countries that are in transition
from stage 2 to stage 3 and mostly the presence of one country into the 2nd stage of
development) does not seem so surprising if we take into consideration the composite
structure of the reference and its structure.
Obviously, the distribution of countries at each stage of development differs
a lot when we analyze the countries that are present into the UNCTAD’s Top 100 non-
financial TNCs from developing and emerging economies (UNCTAD, 2012;
Ogrean & Herciu, 2012). So, from all the 18 entities:
 five of them are placed into the 3rd stage of development: Hong Kong, Taiwan,
Singapore, United Arab Emirates, Korea;
 six countries are in transition from stage 2 to stage 3: Russia, Mexico,
Malaysia, Brazil, Turkey, Argentina;
 two countries are placed into the 2nd stage of development: China, South
Africa;
 four countries are in transition from stage 1 to stage 2: Kuwait, Qatar, Egypt,
Venezuela;
 one country is placed into the 1st stage of development – having a factor-
driven economy: India.
There is a great diversity regarding the main characteristics of these countries’
development – equally seen as process and status; this diversity is also reflected in
terms of the industry within the To 100 non-financial TNCs (ranked by UNCTAD) and
Top 100 non-financial TNCs from developing and transition economies (ranked also by
UNCTAD) operate (Figure 3 and Annex 1).
The analysis on the distribution of TNCs in Top 100 non-financial TNCs
(UNCTAD) and of TNCs in Top 100 non-financial TNCs from developing and transition
economies (UNCTAD) – by industry reveals the following findings and conclusions:
 The two data series count for a total of 29 industries. 16 of them are present in
both of the analyzed categories – food, beverage and tobacco; other consumer
goods; motor vehicles; chemicals; wholesale trade; construction; diversified;
electrical & electronic equipment; petroleum exploitation/refining/distribution;
mining & quarrying; metal and metal products; non-metallic mineral products;
business services; telecommunications; transport and storage; utilities
(electricity, gas and water).
These industries are on different stages of lifecycle and their presence in both
of the categories of countries/economies suggests that they may be
determinants of competitiveness by capitalizing on their factors, but also
through efficiency and innovation (possible in different dosages for different
countries);

Studies in Business and Economics
- 90 - Studies in Business and Economics
Figure 3. Distribution of TNCs in Top 100 non-financial TNCs and TNCs in Top 100 non-
financial TNCs from developing and transition economies – by industry
0
10
20
30
40
50
60
70
80
90
100
1 2
Utilities (Electricity, gas and water)
Transport and storage
Telecommunications
Business services
Engineering services
Non-metallic mineral products
Wood and paper products
Petroleum and natural gas
Metal and metal products
Pharmaceuticals
Gold mining
Mining & quarring
Petroleum expl./ref./distr.
Electricity, gas and water
Electrical & electronic equipment
Diversified
Construction and real estate
Construction
Wholesale trade
Retail and trade
Chemicals
Aircraft
Motor vehicles
Automobile
Other consumer services
Other services
Other equipment goods
Other consumer goods
Food, beverage and tobacco
1 - Number of TNCs in Top 100 non-financial TNCs UNCTAD – 2011 – by industry
2 - Number of TNCs in Top 100 non-financial TNCs from developing and transition countries
UNCTAD – 2010 – by industry
(Source: authors’ processing of data from UNCTAD, 2012)
 The industries exclusively present into Top 100 non-financial TNCs (regardless
of the country where they have their headquarters) are: aircraft; retail and
trade; electricity, gas and water; gold mining; pharmaceuticals; engineering
services.
We can find the origin of this exclusivity into the highly innovative and
competitive nature that characterizes the industry, or into the specific

Studies in Business and Economics
Studies in Business and Economics - 91 -
strategies developed by the TNCs – in order to valorize: the company’s scale
and tradition, the economies of scale or those of network;
 The industries exclusively present into Top 100 non-financial TNCs from
developing and transition economies are: construction and real estate;
petroleum and natural gas; wood and paper products; other consumer goods;
other equipment goods; other services.
 None of these industries does belong to a leading/top category industry, none
of them requires special abilities in terms of business sophistication or
innovation; all of these industries are (at least) into the maturity phase of their
lifecycle. Therefore, the source of competitiveness could be efficiency – in
general – and the challenge to overcome the status of origin countries followed
by the entering into a new development stage – in particular.
 “Top 3” of the industries with the largest number of companies within the
general classification is represented by the following: motor vehicles;
petroleum exploitation/refining/distribution; pharmaceuticals (each of these
industries having 11 TNCs in Top 100 non-financial TNCs - UNCTAD); on the
other hand, “top 3” of the industries with the largest number of companies
within the Top 100 non-financial TNCs from developing and transition
economies (UNCTAD) is represented by the following: electrical & electronic
equipment; metal and metal products; telecommunications.
Each one of these industries is highly competitive; it suggests and emphasizes
on the need for an appropriate analysis (regarding the strengths and the
weaknesses of a country, on one hand, and the opportunities and threats of
the global business environment, on the other hand). This analysis has to be
made in accordance with some scientifically based projections and forecasts of
the essential economic trends, and it has to be followed by politics and
strategies able to valorise the (internal and external) potential and to minimize
(internal and external) risks. We think that this kind of approach has the
vocation to allow and confer global competitiveness to a specific country.
So, we can talk about interdependencies between development and
competitiveness at country, as well as at corporation and industry level – and the
analyses made at each one of those levels are very significant and relevant in terms of
conclusions and possible solutions.
4. Acknowledgement
”This work was supported by the project "Post-Doctoral Studies in Economics:
training program for elite researchers - SPODE" co-funded from the European Social
Fund through the Development of Human Resources Operaţional Programme 2007-
2013, contract no. POSDRU/89/1.5/S/61755.)”.

Studies in Business and Economics
- 92 - Studies in Business and Economics
5. References
Dunning, J.H., Lundan, S.M., (2008), Multinational Enterprises and the Global Economy, Second
Edition, Edward Elgar Publishing
Ietto-Gillies, (2011), Transnational Corporations and International Production: Concepts,
Theories and Effects, Second Edition, Edward Elgar Publishing
Ogrean, C., Herciu, M., (2012), Multinational Enterprises – Dynamics and Trends, Studies in
Business and Economics, Vol. 7, No. 2, pp. 141-157
Todaro, M.P., Smith, S.C., (2009), Economic Development, Tenth Edition, Pearson Education
Limited
The Economist online, (2012), Biggest transnational companies, Jul 10th,
http://www.economist.com/blogs/graphicdetail/2012/07/focus-1
UNCTAD, (2012), World Investment Report 2012. Towards a New Generation of Investment
Policies, New York and Geneva, http://www.unctad-docs.org/files/UNCTAD-WIR2012-
Full-en.pdf
UNCTAD, (2012), The world’s Top 100 non-financial TNCs, ranked by foreign assets, 2011, and
The world’s Top 100 non-financial TNCs from developing and transition economies,
ranked by foreign assets, 2010, www.unctad-docs.org/UNCTAD-WIR2012-Annexes
World Economic Forum, (2011), The Global Competitiveness Report 2011-2012, Geneva.
http://www3.weforum.org/docs/WEF_GCR_Report_2011-12.pdf
World Economic Forum, (2012), The Global Competitiveness Report 2012-2013, Geneva,
http://reports.weforum.org/global-competitiveness-report-2012-2013/

Studies in Business and Economics
Studies in Business and Economics - 93 -
Annex 1. Distribution of TNCs in Top 100 non-financial TNCs and TNCs in Top 100 non-
financial TNCs from developing and transition economies – by industry
Industry
Number of TNCs in Top
100 non-financial TNCs
UNCTAD - 2011
Number of TNCs in Top
100 non-financial TNCs
from developing and
transition economies
UNCTAD - 2010
1. Food, beverage and tobacco
8
4
2. Other consumer goods
-
6
3. Other equipment goods
-
2
4. Other services
-
2
5. Other consumer services
1
7
6. Automobile
-
1
7. Motor vehicles
11
1
8. Aircraft
2
-
9. Chemicals
4
4
10. Retail and trade
3
-
11. Wholesale trade
1
3
12. Construction
1
1
13. Construction and real estate
-
3
14. Diversified
4
9
15. Electrical & electronic equipment
7
12
16. Electricity, gas and water
4
-
17. Petroleum expl./ref./distr.
11
8
18. Mining & quarrying
5
1
19. Gold mining
1
-
20. Pharmaceuticals
11
-
21. Metal and metal products
3
12
22. Petroleum and natural gas
-
1
23. Wood and paper products
-
2
24. Non-metallic mineral products
3
1
25. Engineering services
2
-
26. Business services
1
1
27. Telecommunications
7
12
28. Transport and storage
2
4
29. Utilities (Electricity, gas and water)
8
3
Total corporations
100
100
(Source: authors’ processing of data from UNCTAD, 2012)