Multinational Corporations

Economists are not in agreement as to how multinational or transnational corporations should be defined. Multinational corporations have many dimensions and can be viewed from several perspectives (ownership, management, strategy and structural, etc.)
Ownership criterion: some argue that ownership is a key criterion. A firm becomes multinational only when the headquarter or parent company is effectively owned by the nationals of two or more countries.

Nationality mix of headquarter managers: An international company is multinational if the managers of the parent company are nationals of several countries.
Business Strategy: global profit maximization
According to Franklin Root (1994), an MNC is a parent company that:
1. engages in foreign production through its affiliates located in several countries
2. exercises direct control over the policies of its affiliates
3. MNCs exhibit no loyalty to the country in which they are incorporated.


Export stage
initial inquiries firms rely on export agents
expansion of export sales
further expansion, foreign sales branch or assembly operations (to save transport cost)
2. Foreign Production Stage
There is a limit to foreign sales (tariffs, NTBs)
DFI versus Licensing
Once the firm chooses foreign production as a method of delivering goods to foreign markets, it must decide whether to establish a foreign production subsidiary or license the technology to a foreign firm. …