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A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, is a corporate
organization An organization or organisation (Commonwealth English; see spelling differences), is an entity—such as a company, an institution, or an association—comprising one or more people and having a particular purpose. The word is derived f ...
that owns and controls the production of goods or services in at least one country other than its home country. Control is considered an important aspect of an MNC, to distinguish it from international portfolio investment organizations, such as some international mutual funds that invest in corporations abroad simply to diversify financial risks.
Black's Law Dictionary ''Black's Law Dictionary'' is the most frequently used legal dictionary in the United States. Henry Campbell Black (1860–1927) was the author of the first two editions of the dictionary. History The first edition was published in 1891 by West ...
suggests that a company or group should be considered a multinational corporation "if it derives 25% or more of its revenue from out-of-home-country operations". Most of the largest and most influential companies of the modern age are
publicly traded A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange ( ...
multinational corporations, including ''
Forbes Global 2000 The ''Forbes'' Global 2000 is an annual ranking of the top 2000 public companies in the world, published by ''Forbes'' magazine. "The Global 2000" annual ranking is assembled by ''Forbes'' using a weighted assessment of four metrics: sales, profit ...
'' companies.


History


Colonialism

The history of multinational corporations began with the
history of colonialism The historical phenomenon of colonization is one that stretches around the globe and across time. Ancient and medieval colonialism was practiced by the Phoenicians, the Greeks, the Turks, and the Arabs. Colonialism in the modern sense began ...
. The first multinational corporations were founded to build set up colonial "factories" or port cities. In addition to carrying on trade between the mother country and the colonies, the British East India Company became a quasi-government in its own right, with local government officials and its own army in India . The two main examples were the
British East India Company The East India Company (EIC) was an English, and later British, joint-stock company founded in 1600 and dissolved in 1874. It was formed to trade in the Indian Ocean region, initially with the East Indies (the Indian subcontinent and South ...
, and the
Dutch East India Company The United East India Company ( nl, Verenigde Oostindische Compagnie, the VOC) was a chartered company established on the 20th March 1602 by the States General of the Netherlands amalgamating existing companies into the first joint-stock ...
(VOC). Others included the Swedish Africa Company, and the
Hudson's Bay Company The Hudson's Bay Company (HBC; french: Compagnie de la Baie d'Hudson) is a Canadian retail business group. A fur trading business for much of its existence, HBC now owns and operates retail stores in Canada. The company's namesake business di ...
. These early corporations engaged in
international trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significa ...
and exploration, and set up trading posts.Micklethwait, John, and Adrian Wooldridge, ''The company: A short history of a revolutionary idea'' (New York: Modern Library, 2003). The Dutch government took over the VOC in 1799 and during the 19th century, other governments increasingly took over the private companies, most notable in British India. During the process of
decolonization Decolonization or decolonisation is the undoing of colonialism, the latter being the process whereby imperial nations establish and dominate foreign territories, often overseas. Some scholars of decolonization focus especially on separatism, in ...
, the European colonial
charter companies A chartered company is an association with investors or shareholders that is incorporated and granted rights (often exclusive rights) by royal charter (or similar instrument of government) for the purpose of trade, exploration, and/or coloniz ...
were disbanded, with the final colonial corporation, the
Mozambique Company The Mozambique Company ( Portuguese: ''Companhia de Moçambique'') was a royal company operating in Portuguese Mozambique that had the concession of the lands in the Portuguese colony corresponding to the present provinces of Manica and Sofala in ...
, dissolving in 1972.


Mining

Mining of gold, silver, copper, and especially oil were major activities early on and remains so today. International mining companies became prominent in Britain in the 19th century, such as the
Rio Tinto company Rio Tinto Group is an Anglo-Australian multinational company that is the world's second-largest metals and mining corporation (behind BHP). The company was founded in 1873 when of a group of investors purchased a mine complex on the Rio Tinto, ...
founded in 1873, which started with the purchase of sulfur and copper mines from the Spanish government. Rio Tinto, now based in London and Melbourne Australia, has made many acquisitions and expanded globally to mine aluminum, iron ore, copper, uranium, and diamonds. European mines in South Africa began opening in the late 19th century, producing gold and other minerals for the world market, jobs for locals, and business and profits for companies.
Cecil Rhodes Cecil John Rhodes (5 July 1853 – 26 March 1902) was a British mining magnate and politician in southern Africa who served as Prime Minister of the Cape Colony from 1890 to 1896. An ardent believer in British imperialism, Rhodes and his Bri ...
(1853–1902) was one of the few businessmen in the era who became Prime Minister (of South Africa 1890-1896 ). His mining enterprises included the
British South Africa Company The British South Africa Company (BSAC or BSACo) was chartered in 1889 following the amalgamation of Cecil Rhodes' Central Search Association and the London-based Exploring Company Ltd, which had originally competed to capitalize on the expect ...
and
De Beers De Beers Group is an international corporation that specializes in diamond mining, diamond exploitation, diamond retail, diamond trading and industrial diamond manufacturing sectors. The company is active in open-pit, large-scale alluvial and ...
. The latter company practically controlled the global diamond market from his base in southern Africa.


Oil

The "Seven Sisters" was a common term for the seven multinational companies which dominated the global
petroleum industry The petroleum industry, also known as the oil industry or the oil patch, includes the global processes of exploration, extraction, refining, transportation (often by oil tankers and pipelines), and marketing of petroleum products. The larg ...
from the mid-1940s to the mid-1970s. *
Anglo-Iranian Oil Company The Anglo-Persian Oil Company (APOC) was a British company founded in 1909 following the discovery of a large oil field in Masjed Soleiman, Persia (Iran). The British government purchased 51% of the company in 1914, gaining a controlling number ...
(originally Anglo-Persian; now BP) *
Royal Dutch Shell Shell plc is a British multinational oil and gas company headquartered in London, England. Shell is a public limited company with a primary listing on the London Stock Exchange (LSE) and secondary listings on Euronext Amsterdam and the New ...
*
Standard Oil Company of California Chevron Corporation is an American multinational energy corporation. The second-largest direct descendant of Standard Oil, and originally known as the Standard Oil Company of California (shortened to Socal or CalSo), it is headquartered in Sa ...
(SoCal, later
Chevron Chevron (often relating to V-shaped patterns) may refer to: Science and technology * Chevron (aerospace), sawtooth patterns on some jet engines * Chevron (anatomy), a bone * '' Eulithis testata'', a moth * Chevron (geology), a fold in rock la ...
) *
Gulf Oil Gulf Oil was a major global oil company in operation from 1901 to 1985. The eighth-largest American manufacturing company in 1941 and the ninth-largest in 1979, Gulf Oil was one of the so-called Seven Sisters oil companies. Prior to its merger ...
(now merged into Chevron) *
Texaco Texaco, Inc. ("The Texas Company") is an American oil brand owned and operated by Chevron Corporation. Its flagship product is its fuel "Texaco with Techron". It also owned the Havoline motor oil brand. Texaco was an independent company unt ...
(now merged into Chevron) *
Standard Oil Company of New Jersey ExxonMobil, an American multinational oil and gas corporation presently based out of Texas, has had one of the longest histories of any company in its industry. A direct descendant of John D. Rockefeller's Standard Oil, the company traces its root ...
(
Esso Esso () is a trading name for ExxonMobil. Originally, the name was primarily used by its predecessor Standard Oil of New Jersey after the breakup of the original Standard Oil company in 1911. The company adopted the name "Esso" (the phonetic ...
, later
Exxon ExxonMobil Corporation (commonly shortened to Exxon) is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the largest direct descendant of John D. Rockefeller's Standard Oil, and was formed on November 3 ...
, now part of
ExxonMobil ExxonMobil Corporation (commonly shortened to Exxon) is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the largest direct descendant of John D. Rockefeller's Standard Oil, and was formed on November 3 ...
) *
Standard Oil Company of New York Standard may refer to: Symbols * Colours, standards and guidons, kinds of military signs * Standard (emblem), a type of a large symbol or emblem used for identification Norms, conventions or requirements * Standard (metrology), an object t ...
(Socony, later
Mobil Mobil is a petroleum brand owned and operated by American oil and gas corporation ExxonMobil. The brand was formerly owned and operated by an oil and gas corporation of the same name, which itself merged with Exxon to form ExxonMobil in 1999. ...
, now part of ExxonMobil) Preceding the
1973 oil crisis The 1973 oil crisis or first oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by Saudi Arabia, proclaimed an oil embargo. The embargo was targeted at nations that had su ...
, the Seven Sisters controlled around 85 percent of the world's petroleum reserves. In the 1970s most countries with large reserves nationalized their reserves that had been owned by major oil companies. Since then, industry dominance has shifted to the
OPEC The Organization of the Petroleum Exporting Countries (OPEC, ) is a cartel of countries. Founded on 14 September 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), it has, since 1965, been headqua ...
cartel and state-owned oil and gas companies, such as
Saudi Aramco Saudi Aramco ( ar, أرامكو السعودية '), officially the Saudi Arabian Oil Company (formerly Arabian-American Oil Company) or simply Aramco, is a Saudi Arabian public petroleum and natural gas company based in Dhahran. , it is one of ...
,
Gazprom PJSC Gazprom ( rus, Газпром, , ɡɐzˈprom) is a Russian majority state-owned multinational energy corporation headquartered in the Lakhta Center in Saint Petersburg. As of 2019, with sales over $120 billion, it was ranked as the large ...
(Russia),
China National Petroleum Corporation The China National Petroleum Corporation (CNPC) () is a major national oil and gas corporation of China and one of the largest integrated energy groups in the world. Its headquarters are in Dongcheng District, Beijing. CNPC was ranked fourth ...
,
National Iranian Oil Company The National Iranian Oil Company (NIOC; fa, شرکت ملّی نفت ایران, Sherkat-e Melli-ye Naft-e Īrān) is a government-owned national oil and natural gas producer and distributor under the direction of the Ministry of Petroleum of ...
,
PDVSA Petróleos de Venezuela, S.A. (PDVSA, ) (English: Petroleum of Venezuela) is the Venezuelan state-owned oil and natural gas company. It has activities in exploration, production, refining and exporting oil as well as exploration and productio ...
(Venezuela),
Petrobras Petróleo Brasileiro S.A., better known by the portmanteau Petrobras (), is a state-owned Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil. The company's name translates to Brazilian Petrole ...
(Brazil), and
Petronas Petroliam Nasional Berhad (National Petroleum Limited), commonly known as Petronas, is a Malaysian petroleum, oil and natural gas, gas company. Established in 1974 and wholly owned by the Government of Malaysia, the corporation is vested w ...
(Malaysia). By 2012 only 7% of the world's known oil reserves were in countries that allowed private international companies free rein. Fully 65% were in the hands of state-owned companies that operated in one country and sold oil to multinationals such as BP, Shell, ExxonMobil and Chevron.


Manufacturing

Down through the 1930s about 4/5 of the international investments by the multinational corporations was concentrated in the primary sector, especially mining (especially oil) and agriculture (rubber, tobacco, sugar, palm oil, coffee, cocoa, tropical fruits). Most went to the Third World colonies. That changed dramatically after 1945 as the investors turn to industrialized countries, and invested in manufacturing (especially high-tech electronics, chemicals, drugs and vehicles) as well as trade. Sweden's leading manufacturing concern was SKF, a leading maker of bearings for machinery. In order to expand its international business, it decided in 1966 it needed to use the English language. Senior officials, although mostly still Swedish, all learned English in all major internal documents were in English, the lingua franca of multinational corporations.


Unilever

A prominent multinational manufacturer is
Unilever Unilever plc is a British multinational consumer goods company with headquarters in London, England. Unilever products include food, condiments, bottled water, baby food, soft drink, ice cream, instant coffee, cleaning agents, energy dri ...
, a
consumer goods A final good or consumer good is a final product ready for sale that is used by the consumer to satisfy current wants or needs, unlike a intermediate good, which is used to produce other goods. A microwave oven or a bicycle is a final good, b ...
company headquartered in London. Its products include many foods, as well as vitamins, supplements, tea, coffee, cleaning agents, water and air purifiers, pet food, and cosmetics. Unilever is the largest producer of soap in the world. Unilever's products are sold in 190 countries. Unilever owns over 400 brands, with a turnover in 2020 of 51 billion
euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
s. The company is organized into three main divisions: Foods and Refreshments; Home Care; and Beauty & Personal Care. It has research and development facilities in China, India, the Netherlands, the United Kingdom, and the United States. Unilever was founded in 1929 by the merger of a Dutch margarine producer Margarine Unie and the British soap maker
Lever Brothers Lever Brothers was a British manufacturing company founded in 1885 by two brothers: William Hesketh Lever, 1st Viscount Leverhulme (1851–1925), and James Darcy Lever (1854–1916). They invested in and successfully promoted a new soap-making p ...
. After 1950, it increasingly diversified its products and expanded its operations worldwide. Its numerous acquisitions included
Lipton Lipton is a British brand of tea, owned by Ekaterra. Lipton was also a supermarket chain in the United Kingdom, later sold to Argyll Foods, after which the company sold only tea. The company is named after its founder, Sir Thomas Lipton, wh ...
(1971),
Brooke Bond Brooke Bond is a brand of tea owned by Ekaterra, formerly an independent tea-trading and manufacturing company in the United Kingdom, known for its PG Tips brand and its Brooke Bond tea cards. History Brooke Bond & Company was founded by A ...
(1984),
Chesebrough-Ponds Pond's is an American brand of beauty and health care products, currently owned by Unilever. History Pond's Cream was invented in the United States as a patent medicine by pharmacist Theron T. Pond (1800–1852) of Utica, New York, in 1846. M ...
(1987),
Best Foods Best or The Best may refer to: People * Best (surname), people with the surname Best * Best (footballer, born 1968), retired Portuguese footballer Companies and organizations * Best & Co., an 1879–1971 clothing chain * Best Lock Corporation ...
(2000),
Ben & Jerry's Ben & Jerry's Homemade Holdings Inc., trading and commonly known as Ben & Jerry's, is an American company that manufactures ice cream, frozen yogurt, and sorbet. Founded in 1978 in Burlington, Vermont, the company went from a single ice cream ...
(2000),
Alberto-Culver Alberto-Culver was an American corporation with international sales whose principal business was manufacturing hair and skin beauty care products under such brands as Alberto VO5, Andrew Collnge, St. Ives (skin care products), TRESemmé, FDS, ...
(2010),
Dollar Shave Club Dollar Shave Club is an American company based in Venice, California, that delivers razors and other personal grooming products to customers by mail. It delivers razor blades on a monthly basis and offers additional grooming products for home ...
(2016) and Pukka Herbs (2017).


Current status

A multinational corporation (MNC) is usually a large corporation incorporated in one country which produces or sells goods or services in various countries. Two common characteristics shared by MNCs are their large size and centrally controlled worldwide activities. *
Import An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade. In international trade, the importation and exportation of goods are limited ...
ing and
export An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is a ...
ing goods and services * Making significant investments in a foreign country * Buying and selling licenses in foreign markets * Engaging in
contract manufacturing A contract manufacturer (CM) is a manufacturer that contracts with a firm for components or products (in which case it is a turnkey supplier). It is a form of outsourcing. A contract manufacturer performing packaging operations is called copacker o ...
— permitting a local manufacturer in a foreign country to produce its products * Opening manufacturing facilities or assembly operations in foreign countries MNCs may gain from their global presence in a variety of ways. First of all, MNCs can benefit from the
economy of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables a ...
by spreading R&D expenditures and advertising costs over their global sales, pooling global purchasing power over suppliers, and utilizing their technological and managerial experience globally with minimal additional costs. Furthermore, MNCs can use their global presence to take advantage of underpriced labor services available in certain developing countries, and gain access to special R&D capabilities residing in advanced foreign countries. The problem of moral and legal constraints upon the behavior of multinational corporations, given that they are effectively "stateless" actors, is one of several urgent global
socioeconomic Socioeconomics (also known as social economics) is the social science that studies how economic activity affects and is shaped by social processes. In general it analyzes how modern societies progress, stagnate, or regress because of their l ...
problems that has emerged during the late twentieth century. Potentially, the best concept for analyzing society's governance limitations over modern corporations is the concept of "stateless corporations". Coined at least as early as 1991 in ''
Business Week ''Bloomberg Businessweek'', previously known as ''BusinessWeek'', is an American weekly business magazine published fifty times a year. Since 2009, the magazine is owned by New York City-based Bloomberg L.P. The magazine debuted in New York City ...
'', the conception was theoretically clarified in 1993: that an empirical strategy for defining a stateless corporation is with analytical tools at the intersection between
demographic Demography () is the statistical study of populations, especially human beings. Demographic analysis examines and measures the dimensions and dynamics of populations; it can cover whole societies or groups defined by criteria such as ed ...
analysis and
transportation Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipelin ...
research. This intersection is known as
logistics management Logistics is generally the detailed organization and implementation of a complex operation. In a general business sense, logistics manages the flow of goods between the point of origin and the point of consumption to meet the requirements of ...
, and it describes the importance of rapidly increasing global mobility of resources. In a long history of analysis of multinational corporations, we are some quarter-century into an era of stateless corporations - corporations that meet the realities of the needs of source materials on a worldwide basis and to produce and customize products for individual countries. One of the first multinational business organizations, the
East India Company The East India Company (EIC) was an English, and later British, joint-stock company founded in 1600 and dissolved in 1874. It was formed to trade in the Indian Ocean region, initially with the East Indies (the Indian subcontinent and Sou ...
, was established in 1601. After the East India Company, came the
Dutch East India Company The United East India Company ( nl, Verenigde Oostindische Compagnie, the VOC) was a chartered company established on the 20th March 1602 by the States General of the Netherlands amalgamating existing companies into the first joint-stock ...
, founded on March 20, 1603, which would become the largest company in the world for nearly 200 years. The main characteristics of multinational companies are: * In general, there is a national strength of large companies as the main body, in the way of foreign direct investment or acquiring local enterprises, established
subsidiaries A subsidiary, subsidiary company or daughter company is a company owned or controlled by another company, which is called the parent company or holding company. Two or more subsidiaries that either belong to the same parent company or having a sa ...
or branches in many countries; * It usually has a complete
decision-making In psychology, decision-making (also spelled decision making and decisionmaking) is regarded as the cognitive process resulting in the selection of a belief or a course of action among several possible alternative options. It could be either ra ...
system and the highest decision-making center, each subsidiary or branch has its own decision-making body, according to its different features and operations to make decisions, but its decision must be subordinated to the highest decision-making centre; * MNCs seek markets in worldwide and rational production layout, professional fixed-point production, and fixed-point sales products, in order to achieve maximum profit; * Due to strong economic and technical strength, with fast information transmission, as well as funding for rapid cross-border transfers, the multinational has stronger competitiveness in the world; * Many large multinational companies have varying degrees of monopoly in some area, due to economic and technical strength or production advantages.


Foreign direct investment

When a corporation invests in a country which it is not domiciled, it is called foreign direct investment (FDI). Countries may place restrictions on direct investment; for example, China has historically required partnerships with local firms or special approval for certain types of investments by foreigners, although some of these restrictions were eased in 2019. Similarly, the United States
Committee on Foreign Investment in the United States The Committee on Foreign Investment in the United States (CFIUS, commonly pronounced "Cifius" ) is an inter-agency committee of the United States government that reviews the national security implications of foreign investments in U.S. companie ...
scrutinizes foreign investments. In addition, corporations may be prohibited from various business transactions by
international sanctions International sanctions are political and economic decisions that are part of diplomatic efforts by countries, multilateral or regional organizations against states or organizations either to protect national security interests, or to protect i ...
or domestic laws. For example, Chinese domestic corporations or citizens have limitations on their ability to make foreign investments outside of China, in part to reduce capital outflow. Countries can impose extraterritorial sanctions on foreign corporations even for doing business with other foreign corporations, which occurred in 2019 with the United States
sanctions against Iran There have been a number of sanctions against Iran imposed by a number of countries, especially the United States, and international entities. Iran was the most sanctioned country in the world until it was surpassed by Russia following its inva ...
; European companies faced with the possibility of losing access to the U.S. market by trading with Iran. International investment agreements also facilitate direct investment between two countries, such as the
North American Free Trade Agreement The North American Free Trade Agreement (NAFTA ; es, Tratado de Libre Comercio de América del Norte, TLCAN; french: Accord de libre-échange nord-américain, ALÉNA) was an agreement signed by Canada, Mexico, and the United States that crea ...
and most favored nation status.


Legal domicile

Raymond Vernon reported in 1977 that of the largest multinationals focused on manufacturing, 250 were headquartered in the United States, 115 in Western Europe, 70 in Japan, and 20 in the rest of the world. The multinationals in banking numbered 20 headquartered in the United States, 13 in Europe, nine in Japan and three in Canada. Today multinationals can select from a variety of jurisdictions for various subsidiaries, but the ultimate parent company can select a single legal domicile; ''
The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Eco ...
'' suggests that the Netherlands has become a popular choice, as its company laws have fewer requirements for meetings, compensation, and audit committees, and Great Britain had advantages due to laws on withholding dividends and a double-taxation treaty with the United States. Corporations can legally engage in
tax avoidance Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to reduce the amount of tax that is payable by means that are within the law. A tax shelter is one type of tax avoidance, and tax havens are jurisdi ...
through their choice of jurisdiction, but must be careful to avoid illegal
tax evasion Tax evasion is an illegal attempt to defeat the imposition of taxes by individuals, corporations, trusts, and others. Tax evasion often entails the deliberate misrepresentation of the taxpayer's affairs to the tax authorities to reduce the tax ...
.


Stateless or transnational

Corporations that are broadly active across the world without a concentration in one area have been called stateless or "transnational" (although "transnational corporation" is also used synonymously with "multinational corporation"), but as of 1992, a corporation must be legally domiciled in a particular country and engage in other countries through foreign direct investment and the creation of foreign subsidiaries. Geographic diversification can be measured across various domains, including ownership and control, workforce, sales, and regulation and taxation.


Regulation and taxation

Multinational corporations may be subject to the laws and regulations of both their domicile and the additional jurisdictions where they are engaged in business. In some cases, the jurisdiction can help to avoid burdensome laws, but regulatory statutes often target the "enterprise" with statutory language around "control". , the United States and most OECD countries have the legal authority to tax a domiciled parent corporation on its worldwide revenue, including subsidiaries. , the U.S. applies its corporate taxation "extraterritorially", which has motivated
tax inversion A tax inversion or corporate tax inversion is a form of tax avoidance where a corporation restructures so that the current parent is replaced by a foreign parent, and the original parent company becomes a subsidiary of the foreign parent, thus mov ...
s to change the home state. By 2019, most OECD nations, with the notable exception of the U.S., had moved to territorial tax in which only revenue inside the border was taxed; however, these nations typically scrutinize foreign income with controlled foreign corporation (CFC) rules to avoid base erosion and profit shifting. In practice, even under an extraterritorial system, taxes may be deferred until remittance, with possible
repatriation tax holiday A repatriation tax holiday is a tax holiday specifically directed towards individuals and businesses in one country who repatriate to that country income earned in other countries. The theory supporting such an action is that multinational compani ...
s, and subject to foreign tax credits. Countries generally cannot tax the worldwide revenue of a foreign subsidiary, and taxation is complicated by
transfer pricing In taxation and accounting, transfer pricing refers to the rules and methods for pricing transactions within and between enterprises under common ownership or control. Because of the potential for cross-border controlled transactions to distort ...
arrangements with parent corporations.


Alternatives and arrangements

For small corporations, registering a foreign subsidiary can be expensive and complex, involving fees, signatures, and forms; a professional employer organization (PEO) is sometimes advertised as a cheaper and simpler alternative, but not all jurisdictions have laws accepting these types of arrangements.


Dispute resolution and arbitration

Disputes between corporations in different nations is often handled through international arbitration.


Theoretical background

The actions of multinational corporations are strongly supported by
economic liberalism Economic liberalism is a political and economic ideology that supports a market economy based on individualism and private property in the means of production. Adam Smith is considered one of the primary initial writers on economic libera ...
and
free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
system in a globalized international society. According to the economic realist view, individuals act in rational ways to maximize their self-interest and therefore, when individuals act rationally, markets are created and they function best in a free market system where there is little government interference. As a result, international wealth is maximized with free exchange of goods and services. To many economic liberals, multinational corporations are the vanguard of the liberal order. They are the embodiment par excellence of the liberal ideal of an interdependent world economy. They have taken the integration of national economies beyond trade and money to the internationalization of production. For the first time in history, production, marketing, and investment are being organized on a global scale rather than in terms of isolated national economies. International business is also a specialist field of academic research. Economic theories of the multinational corporation include
internalization theory Internalization theory is a branch of economics that is used to analyse international business behaviour. Outline Internalization theory focuses on imperfections in intermediate product markets. Two main kinds of intermediate product are distin ...
and the eclectic paradigm. The latter is also known as the OLI framework. The other theoretical dimension of the role of multinational corporations concerns the relationship between the globalization of economic engagement and the culture of national and local responses. This has a history of self-conscious cultural management going back at least to the 60s. For example:


Multinational enterprise

"Multinational enterprise" (MNE) is the term used by international economist and similarly defined with the multinational corporation (MNC) as an enterprise that controls and manages production establishments, known as plants located in at least two countries. The multinational enterprise (MNE) will engage in foreign direct investment (FDI) as the firm makes direct investments in host country plants for equity ownership and managerial control to avoid some
transaction cost In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a market. Oliver E. Williamson defines transaction costs as the costs of running an economic system of companies, and unlike pro ...
s.


Criticism

Sanjaya Lall in 1974 proposed a spectrum of scholarly analysis of multinational corporations, from the political right to the left. He put the business school how-to-do-it writers at the extreme right, followed by the liberal laissez-faire economists, and the neoliberals (they remain right of center but do allow for occasional mistakes of the marketplace such as externalities). Moving to the left side of the line are nationalists, who prioritize national interests over corporate profits, then the "dependencia" school in Latin America that focuses on the evils of imperialism, and on the far left the Marxists. The range is so broad that scholarly consensus is hard to discern. Anti-corporate advocates criticize multinational corporations for being without a basis in a national
ethos Ethos ( or ) is a Greek word meaning "character" that is used to describe the guiding beliefs or ideals that characterize a community, nation, or ideology; and the balance between caution, and passion. The Greeks also used this word to refer to ...
, being ultimate without a specific nationhood, and that this lack of an ethos appears in their ways of operating as they enter into contracts with countries that have low
human rights Human rights are moral principles or normsJames Nickel, with assistance from Thomas Pogge, M.B.E. Smith, and Leif Wenar, 13 December 2013, Stanford Encyclopedia of PhilosophyHuman Rights Retrieved 14 August 2014 for certain standards of hu ...
or environmental standards. In the world economy facilitated by multinational corporations, capital will increasingly be able to play workers, communities, and nations off against one another as they demand tax, regulation and wage concessions while threatening to move. In other words, increased mobility of multinational corporations benefits capital while workers and communities lose. Some negative outcomes generated by multinational corporations include increased inequality,
unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the refe ...
, and wage stagnation. For the debate from a neo-liberal perspective see Raymond Vernon, ''Storm over the Multinationals'' (1977).
The aggressive use of
tax avoidance Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to reduce the amount of tax that is payable by means that are within the law. A tax shelter is one type of tax avoidance, and tax havens are jurisdi ...
schemes, and
multinational tax haven Corporate haven, corporate tax haven, or multinational tax haven is used to describe a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly du ...
s, allows multinational corporations to gain competitive advantages over
small and medium-sized enterprises Small and medium-sized enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel and revenue numbers fall below certain limits. The abbreviation "SME" is used by international organizations such as the World Bank ...
. Organizations such as the Tax Justice Network criticize governments for allowing multinational organizations to escape tax, particularly by using base erosion and profit shifting (BEPS) tax tools, since less money can be spent for public services.


See also

*
Globalization Globalization, or globalisation (Commonwealth English; see spelling differences), is the process of interaction and integration among people, companies, and governments worldwide. The term ''globalization'' first appeared in the early 20t ...
* Global workforce *
List of multinational corporations A ''list'' is any set of items in a row. List or lists may also refer to: People * List (surname) Organizations * List College, an undergraduate division of the Jewish Theological Seminary of America * SC Germania List, German rugby union ...
*
Transnational Corporations Observatory Transnational Corporations Observatory is a Non-profit organization, created by Régis Castellani in October 1999 in Martigues, France. A Transnational Corporation (TNC) is a company or organisation that possesses and controls the free flow of its ...
*
World economy The world economy or global economy is the economy of all humans of the world, referring to the global economic system, which includes all economic activities which are conducted both within and between nations, including production, consumptio ...
*
Multinational tax haven Corporate haven, corporate tax haven, or multinational tax haven is used to describe a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly du ...


Notes


References


Further reading

* Cameron, Rondo, V. I. Bovykin, et al. eds. ''International banking, 1870–1914'' (1991) * Chandler, Alfred D. and Bruce Mazlish, eds. ''Leviathans: Multinational Corporations and the New Global History'' (2005)
online
* Chandler, Alfred D. et al. eds. ''Big Business and the Wealth of Nations'' (Cambridge University Press, 1999
excerpt
* Chernow, Ron. ''The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance'' (2010
excerpt
* Davenport-Hines, R. P. T., and Geoffrey Jones, eds. ''British Business in Asia since 1860'' (2003
excerpt
* Dunning. John H. and Sarianna M. Lundan. ''Multinational Enterprises and the Global Economy'' (2nd ed. 2008), major textboo
1993 edition online
* Habib-Mintz, Nazia. "Multinational corporations’ role in improving labour standards in developing countries." ''Journal of International Business and Economy'' 10.2 (2009): 1–20
online
* Hunt, Michael H. "Americans in the China Market: Economic Opportunities and Economic Nationalism, 1890s–1931." ''Business History Review'' 51.3 (1977): 277–307
online
* Jones, Geoffrey. ''Multinationals and Global Capitalism: From the Nineteenth to the Twenty-first Century'' (2005) * Jones, Geoffrey. ''Merchants to multinationals : British trading companies in the nineteenth and twentieth centuries'' (2000
online
* Jones, Geoffrey, and Jonathan Zeitlin, eds. ''The Oxford Handbook of Business History'' (2008) * Jones, Geoffrey, et al. ''The History of the British Bank of the Middle East: Vol. 2, Banking and Oil'' (1987) * Jones, Geoffrey. ''The Evolution of International Business'' (1995
online
* Lumby, Anthony. "Economic history and theories of the multinational corporation." ''South African journal of economic history'' 3.2 (1988): 104–124. * Martin, Lisa, ed. ''The Oxford Handbook of the Political Economy of International Trade'' (2015
excerpt
* Munjal, Surender, Pawan Budhwar, and Vijay Pereira. "A perspective on multinational enterprise’s national identity dilemma." ''Social Identities'' 24.5 (2018): 548–563
online
* Stopford, John M. "The origins of British-based multinational manufacturing enterprises." ''Business History Review'' 48.3 (1974): 303–335. * Tugendhat, Christopher. ''The multinationals'' (Penguin, 1973
online
* Vernon, Raymond. ''Storm over the Multinationals: The Real Issues'' (Harvard UP, 1977)
online
* Wells, Louis T. ''Third world multinationals: The rise of foreign investments from developing countries'' (MIT Press, 1983) on companies based in Third World * Wilkins, Mira. "The history of multinational enterprise." in ''The Oxford handbook of international business'' vol 2 (2009)
online
* Wilkins, Mira. ''The Emergence of Multinational Enterprise: American Business Abroad from the Colonial Era to 1914'' (1970) ** Wilkins, Mira. ''Maturing of Multinational Enterprise : American Business Abroad from 1914 to 1970'' (1974) * Wilkins, Mira. ''American business abroad: Ford on six continents'' (1964
online


Corporate histories

* Ciafone, Amanda. ''Counter-Cola: A Multinational History of the Global Corporation'' (U of California Press, 2019) on Coca-Cola. * Fritz, Martin and Karlsson, Birgit. ''SKF: A Global Story, 1907–2007'' (2006). ISBN 978-91-7736-576-1 * Scheiber, Harry N. "World War I as Entrepreneurial Opportunity: Willard Straight and the American International Corporation." ''Political Science Quarterly'' 84.3 (1969): 486–511
online


Historiography

* Hernes, Helga. ''The Multinational Corporation: A Guide to Information Sources'' (Gale, 1977)
online


External links




UNCTAD publications on multinational corporations
{{DEFAULTSORT:Multinational corporation International business Multinational companies Transnationalism Economic globalization