Abstract
A multinational enterprise (MNE) is an enterprise which owns and controls assets in more than one country.1 There is nothing very new about MNEs. They have played a significant role in the world economy since the early seventeenth century, when English and Dutch chartered companies held monopolies of colonial trade, and operated plantations for the export of food and raw materials.2 As the trading companies declined in the nineteenth century there was a compensating growth of European overseas investment in mining and textiles (and later in oil). The modern style of MNE is a comparatively recent phenomenon, the main impetus for its growth being the opportunities for adapting the advanced technologies of the Second World War to produce consumer goods for world markets. US firms took the lead in the 1950s but European and Japanese firms are now almost on level terms.3
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1. Statement of the Issues
Some writers exclude assets which are used solely in selling and distributing imported goods. For a classification of different types of MNE see R. D. Robinson, International Business Management, New York, 1973.
On the history and development of US-based MNEs see M. Wilkins, The Emergence of the Multinational Enterprise, Harvard, 1970
and The Maturing of the Multinational Enterprise, Harvard, 1974.
For the British experience see R. D. Pearce, ‘British investment in less developed countries — A general survey’, University of Reading Discussions Papers in International Investment and Business Studies, No. 31, 1977, and
J. M. Stopford, ‘The origins of British-based multinational enterprises’, Business History Review 48 (1974), pp. 303–35.
The post-war growth of US foreign direct investment was highlighted in J. J. Servan-Schreiber, The American Challenge, London, 1968, and analysed in
C. P. Kindleberger, American Business Abroad, Yale, 1969.
The counter-thrust by European firms in the US is described by R. Heller and N. Willatt, The European Revenge, London, 1975;
see also L. Franko, The European Multinationals, London, 1976.
The most recent phenomenon is the growth of Japanese investment overseas; see L. B. Krause and S. Sekiguchi, ‘Japan and the world economy’, in H. Patrick and H. Rosovsky (eds.), Asia’s New Giants, Washington, 1976;
K. Kojima, Japan and a New World Economic Order, London, 1977;
M. Ikema, ‘The Japanese investment abroad’ (mimeo: Hitotsubashi University), 1977, and
M. Y. Yoshino, Japan’s Multinational Enterprises, Harvard, 1976.
The subject of MNE-host country relations has an enormous literature. Nearly 800 references are listed in M. Z. Brooke, M. Black and P. Neville, A Bibliography of International Business, London, 1977.
For an overview of the subject see R. J. Barnett and R. E. Muller, Global Reach, London, 1975,
J. N. Behrman, US International Business and Governments, New York, 1971,
R. Vernon, Sovereignty at Bay, London, 1971, and the same author’s The Economic and Political Consequences of Multinational Enterprise: An Anthology, Harvard, 1972, and (with H. F. Johnson) Storm over the Multinationals, London, 1977.
For a radical view of the impact of MNEs on LDCs see A. G. Frank, Capitalism and Underdevelopment in Latin America, New York, 1967, and
O. Sunkel, ‘Transnational capitalism and national disintegration in Latin America’, Social and Economic Studies, Special Number 22 (1973), 135–70.
For a critique of these views see R. Vernon, ‘Multinational enterprises in developing countries: Issues in dependency and interdependence’, in D. E. Apter and L. W. Goodman (eds.), The Multinational Corporation and Social Change, New York, 1976.
See G. D. A. MacDougall, ‘The benefits and costs of private investment from abroad: A theoretical approach’, Economic Record, 36 (1960), pp. 13–35, and
M. C. Kemp, ‘The benefits and costs of private investment from abroad: Comment’, Economic Record, 38 (1962), 108–10, both reprinted in
J. H. Dunning (ed.), International Investment, Harmondsworth, 1972.
See S. H. Hymer, The International Operations of National Firms: A Study of Direct Investment, Farnborough, 1976; also C. P. Kindleberger, op. cit.
The most influential definitions of LDCs are due to the World Bank, and are reviewed in M. McQueen, Britain, the EEC and the Developing World, London, 1977, Chapter 1.
The figures are for 1971; see United Nations, Multinational Corporations in World Development, New York, 1973, Table 27.
See OECD, Stock of Private Direct Investment by DAC Countries in Developing Countries, End 1967, Paris, 1972, Table 5, summarised in UN, Multinational Corporations in World Development, New York, 1973, Table 12.
For more detailed information cf. J. W. Vaupel and J. P. Curhan, The World’s Multinational Enterprises, Geneva, 1974, and
T. Houston and J. H. Dunning, UK Industry Abroad, London, 1976.
Cf. W. B. Reddaway, S. J. Potter and C. T. Taylor, The Effects of UK Direct Investment Overseas: Final Report, Cambridge, 1968. Nevertheless the experience of individual LDCs differs greatly.
In some cases, such as the Bahamas and Bermuda, the book value of FDI is in excess of GNP; see G. L. Reuber et al., Private Foreign Investment in Development, Oxford, 1973.
See the graphs presented by O. G. Whichard and J. N. Freidlin, ‘US direct investment abroad in 1975’. Survey of Current Business, 56, No. 8, August 1976.
For numerous examples of the domination of host country industries by direct investments sourced from particular countries see United Nations, op. cit., Table 35. It is not only LDCs which experience this phenomenon; similar effects are observed with US investments in Canada, cf. A. E. Safarian, Foreign Ownership of Canadian Industry, Toronto, 1966.
For a historical perspective on international capital flows see J. H. Dunning, ‘Capital movements in the twentieth century’, Lloyds Bank Review, April 1964, reprinted in
J. H. Dunning, Studies in International Investment, London, 1970 and in
J. H. Dunning (ed.), International Investment, Harmondsworth, 1972.
Cf. United Nations, op. cit., Table 42. This ‘inflow-outflow’ approach is extensively developed by S. Lall and P. Streeten, Foreign Investment, Transnationals and Developing Countries, London, 1977.
See S. M. Robbins and R. B. Stobaugh, Money in the Multinational Enterprise, London, 1974.
For classic statements of this view see C. Vaitsos, Intercountry Income Distribution and Transnational Enterprises, Oxford, 1974, and the same author’s ‘Bargaining and the distribution of returns in the purchase of technology by developing countries’, Bulletin of the Institute of Development Studies, 3 (1970), pp. 16–23, reprinted in
H. Bernstein (ed.), Underdevelopment and Development, Harmondsworth, 1976.
It is argued in T. H. Moran, Multinational Corporations and the Politics of Dependence, Princeton, 1974, that bargaining power fluctuates over time. When the firm is about to expand, the host has very little bargaining power as it is interested in acquiring the technology. But, once the firm has invested, it is committed to the host and the balance begins to swing the other way. Overlaid on this pattern is a secular increase in host bargaining power as the host begins to develop skills which would enable it to run the subsidiary on its own without the parent firm.
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© 1979 Mark Casson
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Casson, M. (1979). Statement of the issues. In: Alternatives to the Multinational Enterprise. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-04645-4_1
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