Global interdependence and regional development: business linkages and corporate governance in a world of financial risk

The paper begins with a case study of CORPORATION X, a small global corporation which specializes in the production and sale of brand-name textile and apparel goods. CORPORATION X is a real company but emphasis is placed on the logical implications of its structure and organization for the theory of the firm and regional development in the western Pacific. The entrepreneurial and coordination functions of CORPORATION X are located at its centre but it purchases many of its design, production, transportation and wholesale/retail services from agents and subcontractors around the globe. CORPORATION X is made-up of an extended chain-of-links; it is, in effect, a spatially elongated production system. The paper suggests that the company's commitment to any subcontracting source (and hence the region in which that subcontractor is located) depends upon the relative costs and prices of a subcontractor (compared to other opportunities for the provision of comparable services), the relative contribution of a subcontractor to total value (compared to other parts in the chain-of-links) and the temporal dependence of the firm on the subcontractor given the nature of the service provided. Also considered are two limits to globalization. One limit is the problem of corporate governance. The second limit is financial risk assessment and management.