Multinational corporation

A multinational corporation (MNC) or multinational enterprise (MNE)¹ is a corporation that is registered in more than one country or that has operations in more than one country. It is a large corporation which both produces and sells goods or services in various countries.² It can also be referred to as an international corporation.

They play an important role in globalization. Arguably, the first multinational business organization is conjectured to be the Knights Templar, founded in 1120.³⁴⁵ After that came the British East India Company in 1600 ⁶ and then the Dutch East India Company, founded March 20, 1602, which would become the largest company in the world for nearly 200 years.⁷

Strategies

A corporation may choose to locate in a special economic zone, which is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws.

Conflict of laws

Main article: Conflict of laws

Conflict of laws is a set of procedural rules that determines which legal system and which jurisdiction's applies to a given dispute.

The term conflict of laws itself originates from situations where the ultimate outcome of a legal dispute depended upon which law applied, and the common law courts manner of resolving the conflict between those laws. In civil law, lawyers and legal scholars refer to conflict of laws as private international law. Private international law has no real connection with public international law, and is instead a feature of local law which varies from country to country.

The three branches of conflict of laws are:

Jurisdiction – whether the forum court has the power to resolve the dispute at hand
Choice of law – the law which is being applied to resolve the dispute
Foreign judgments – the ability to recognize and enforce a judgment from an external forum within the jurisdiction of the adjudicating forum.

Globalization

Multinational corporations are important factors in the processes of globalization. National and local governments often compete against one another to attract MNC facilities, with the expectation of increased tax revenue, employment, and economic activity. To compete, political powers push towards greater autonomy for corporations, or both. MNCs play an important role in developing the economies of developing countries like investing in these countries provide market to the MNC but provide employment, choice of multi goods etc.

On the other hand, economist Jagdish Bhagwati has argued that in countries with comparatively low labor costs and weak environmental and social protection, multinationals actually 'race to the top' rather than race to the bottom. While multinationals will certainly see a low tax burden or low labor costs as an element of comparative advantage, Bhagwati disputes the existence of evidence suggesting that MNCs deliberately avail themselves of lax environmental regulation or poor labor standards. As Bhagwati has pointed out, MNC profits are tied to operational efficiency, which includes a high degree of standardisation. Thus, MNCs are likely to adapt production processes in many of their operations to conform to the standards of the most rigorous jurisdiction in which they operate (this tends to be either the USA, Japan, or the EU). As for labor costs, while MNCs clearly pay workers in developing countries far below levels in countries where labor productivity is high (and accordingly, will adopt more labor-intensive production processes), they also tend to pay a premium over local labor rates of 10 to 100 percent.⁸ Finally, depending on the nature of the MNC, investment in any country reflects a desire for a medium- to long-term return, as establishing plant, training workers, etc., can be costly. Once established in a jurisdiction, therefore, MNCs are potentially vulnerable to arbitrary government intervention such as expropriation, sudden contract renegotiation, the arbitrary withdrawal or compulsory purchase of licenses, etc. Thus, both the negotiating power of MNCs and the 'race to the bottom' critique may be overstated, while understating the benefits (besides tax revenue) of MNCs becoming established in a jurisdiction.^{according to whom?}

The number of MNCs have increased greatly from 7000 in 1970 to over 78,000 in 2006. What many people aren't aware of is that MNCs account for over half of the industrial output of the world. The names of some of the largest MNCs include Wal-mart, General Motors, Exxon-Mobil, Mitsubishi, and Siemens. However, according to data from 2005, only one of the 200 largest MNCs are based in a developing nation which happens to share a border with the United States, Mexico.^{citation needed} This statistic, among many others, helps to illustrate the unequal distribution of TNC's. The North holds a monopoly when it comes to large corporations including MNCs and this power difference continues to create a rift between the North and South.⁹

Transnational corporations

A transnational corporation (TNC) differs from a traditional MNC in that it does not identify itself with one national home. While traditional MNCs are national companies with foreign subsidiaries,¹⁰ TNCs spread out their operations in many countries sustaining high levels of local responsiveness.¹¹ An example of a TNC is Nestlé who employ senior executives from many countries and try to make decisions from a global perspective rather than from one centralized headquarters.¹²

Criticism of multinationals

Main articles: Anti-globalization and Anti-corporate activism

Anti-corporate advocates criticize multinational corporations for entering countries that have low human rights or environmental standards.¹³ They claim that multinationals give rise to huge merged conglomerations that reduce competition and free enterprise, raise capital in host countries but export the profits, exploit countries for their natural resources, limit workers' wages, erode traditional cultures, and challenge national sovereignty.^{according to whom?}

References

^ Pitelis, Christos; Roger Sugden (2000). The nature of the transnational firm. Routledge. p. 72. ISBN 0-415-16787-6.
^ Doob, Christopher M. (2013). Social Inequality and Social Stratification in US Society. Upper Saddle River, NJ: Pearson Education Inc.
^ The History Channel, Lost Worlds: Knights Templar, July 10, 2006, video documentary written and directed by Stuart Elliott.
^ Ralls, Karen (2007). Knights Templar Encyclopedia. Career Press. p. 28. ISBN 978-1-56414-926-8.
^ Benson, Michael (2005). Inside Secret Societies. Kensington Publishing Corp. p. 90.
^ http://yaleglobal.yale.edu/about/globalinc.jsp "Globalinc. An Atlas of The Multinational Corporation" Medard Gabel & Henry Bruner, New York: The New Press , 2003. ISBN 1-56584-727-X
^ http://www.kb.nl/dossiers/voc/voc.html VOC at the National Library of the Netherlands (in Dutch)
^ Jagdish Bhagwati, In Defense of Globalisation. Oxford: Oxford University Press, 2004, esp. 122–195.
^ ref name="Steger">Steger, Manfred B. (2009). Globalization: A Very Short Introduction. Oxford. p. 147.
^ Drucker, Peter F. (1997). The Global Economy and the Nation State. Council on Foreign Relations. p. 167.
^ Case study: The Relationship between the Structure/Strategy of Multinational Corporations and Patterns of Knowledge Sharing within them. Oxford University Press. 2009.
^ Schermerhorn, John R. (2009). Exploring Management. John Wiley and Sons. p. 387. ISBN 0-470-16964-8.
^ Marc 'Globalization, Power, and Survival: an Anthropological Perspective', pg 484–486. Anthropological Quarterly Vol.79, No. 3. Institute for Ethnographic Research, 2006

External links

[pitelis-1] Pitelis, Christos; Roger Sugden (2000). The nature of the transnational firm. Routledge. p. 72. ISBN 0-415-16787-6.

[2] Doob, Christopher M. (2013). Social Inequality and Social Stratification in US Society. Upper Saddle River, NJ: Pearson Education Inc.

[Worlds-3] The History Channel, Lost Worlds: Knights Templar, July 10, 2006, video documentary written and directed by Stuart Elliott.

[4] Ralls, Karen (2007). Knights Templar Encyclopedia. Career Press. p. 28. ISBN 978-1-56414-926-8.

[5] Benson, Michael (2005). Inside Secret Societies. Kensington Publishing Corp. p. 90.

[6] ttp://yaleglobal.yale.edu/about/globalinc.jsp "Globalinc. An Atlas of The Multinational Corporation" Medard Gabel & Henry Bruner, New York: The New Press , 2003. ISBN 1-56584-727-X

[7] ttp://www.kb.nl/dossiers/voc/voc.html VOC at the National Library of the Netherlands (in Dutch)

[8] Jagdish Bhagwati, In Defense of Globalisation. Oxford: Oxford University Press, 2004, esp. 122–195.

[9] ref name="Steger">Steger, Manfred B. (2009). Globalization: A Very Short Introduction. Oxford. p. 147.

[Drucker-10] Drucker, Peter F. (1997). The Global Economy and the Nation State. Council on Foreign Relations. p. 167.

[Case_study:_The_Relationship_between_the_Structure.2FStrategy_of_Multinational_Corporations_and_Patterns_of_Knowledge_Sharing_within_them-11] Case study: The Relationship between the Structure/Strategy of Multinational Corporations and Patterns of Knowledge Sharing within them. Oxford University Press. 2009.

[Schermerhorn-12] Schermerhorn, John R. (2009). Exploring Management. John Wiley and Sons. p. 387. ISBN 0-470-16964-8.

[13] Marc 'Globalization, Power, and Survival: an Anthropological Perspective', pg 484–486. Anthropological Quarterly Vol.79, No. 3. Institute for Ethnographic Research, 2006

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Transnational corporations Ultimate Study Guide