Central Concepts

Abstract

The literature does not provide a generally accepted definition of MNCs. One of the first definitions was formulated by Lilienthal who describes MNCs as corporations “which have their home in one country but which operate and live under the laws and customs of other countries as well” (Lilienthal 1960, p. 119). This definition is rather open and the nature of foreign activities is not specified. For other authors, in contrast, more specific characteristics are necessary in order to speak of an MNC (see, for instance, Kutschker & Schmid 2008, pp. 242–244 for an overview). Frequently, the existence of a foreign unit is regarded as a prerequisite for an MNC (e.g., Vernon, Wells & Rangan 1996, p. 28). Some authors even require foreign production activities (e.g., Glaum 1996, p. 10; Mucchielli 1998, pp. 18–19). Firms, however, can choose various other forms of foreign activities (cp. Kutschker & Schmid 2008, pp. 846–939 and Root 1998 for overviews): They can export products and services, cooperate with license or franchise partners, create joint ventures, join strategic alliances and establish different kinds of foreign units. Since the present study's interest lies in the relationship between headquarters and foreign subsidiaries, the focus here will be on the last mentioned form of internationalization, i.e., MNCs that own foreign subsidiaries.