The Multinational Enterprise in the World Economy

  • Peter J. Buckley
  • Mark Casson


One of the most remarkable economic phenomena of the postwar period has been the rise of the multinational enterprise (M NE). An MNE may be defined as an enterprise which owns and controls activities in different countries. No economic organisation in post-industrial society has evolved so quickly and to such a high degree of sophistication as the MNE. The closest parallels are to the trusts and cartels which rose to prominence about the turn of the century. But these were only national in scale, their international operations being governed by a loose federation of business leaders rather than by direct control from a corporate world headquarters. The growth of the cartels was responsible for an increase in government participation in economic life through the enactment of antitrust laws; it also inspired the development of the economic theory of imperfect competition, which revolutionised economic thinking on the basic issue of resource allocation. Something of a similar revolution is required today. The growth of the MNE has caught both governments and economists unawares. Governments organised on a national scale find it difficult to exert controls or sanctions against international firms, since competition between host nations for the benefits of foreign direct investment ensures that a restrictive policy toward MNEs will only succeed in driving out foreign investors to a more favourable climate.


Foreign Direct Investment World Economy Foreign Firm Multinational Enterprise Gross National Product 
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    See M. Holthus and G. Koopman, The Extent and Importance of the Operations of the Multinational Firms in the EEC, mimeo (Hamburg: Institute for International Economics, 1974).Google Scholar
  2. See also G. Ragazzi, ‘Theories of the Determinants of Direct Foreign Investment’, IMF Staff Papers, 20 (1973), 471–98.CrossRefGoogle Scholar
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    See G. C. Hufbauer, Synthetic Materials and the Theory of International Trade (London, 1965).Google Scholar
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    See S. Hirsch, Location of Industry and International Competitiveness (Oxford, 1967).Google Scholar
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    See L. T. Wells, ‘Tests of a Product Cycle Model of International Trade’, Quarterly Journal of Economics, 83 (1969), 152–62.CrossRefGoogle Scholar
  6. 8.
    For a recent comparison of US and Japanese patterns of foreign direct investment see K. Kojima, ‘A Macroeconomic Approach to Foreign Direct Investment’, Hitotsubashi Journal of Economics, 14 (1973), 1–21Google Scholar

Copyright information

© Peter J. Buckley and Mark Christopher Casson 1991

Authors and Affiliations

  • Peter J. Buckley
    • 1
  • Mark Casson
    • 2
  1. 1.University of Bradford Management CentreUK
  2. 2.University of ReadingUK

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