Statement of the issues

  • Mark Casson
Chapter

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

Keywords

Foreign Direct Investment Host Country Source Country Multinational Enterprise Gross National Product 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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1. Statement of the Issues

  1. 1.
    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.Google Scholar
  2. 2.
    On the history and development of US-based MNEs see M. Wilkins, The Emergence of the Multinational Enterprise, Harvard, 1970Google Scholar
  3. and The Maturing of the Multinational Enterprise, Harvard, 1974.CrossRefGoogle Scholar
  4. 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, andGoogle Scholar
  5. J. M. Stopford, ‘The origins of British-based multinational enterprises’, Business History Review 48 (1974), pp. 303–35.CrossRefGoogle Scholar
  6. 3.
    The post-war growth of US foreign direct investment was highlighted in J. J. Servan-Schreiber, The American Challenge, London, 1968, and analysed inGoogle Scholar
  7. C. P. Kindleberger, American Business Abroad, Yale, 1969.Google Scholar
  8. The counter-thrust by European firms in the US is described by R. Heller and N. Willatt, The European Revenge, London, 1975;Google Scholar
  9. see also L. Franko, The European Multinationals, London, 1976.Google Scholar
  10. 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;Google Scholar
  11. K. Kojima, Japan and a New World Economic Order, London, 1977;Google Scholar
  12. M. Ikema, ‘The Japanese investment abroad’ (mimeo: Hitotsubashi University), 1977, andGoogle Scholar
  13. M. Y. Yoshino, Japan’s Multinational Enterprises, Harvard, 1976.CrossRefGoogle Scholar
  14. 4.
    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.Google Scholar
  15. For an overview of the subject see R. J. Barnett and R. E. Muller, Global Reach, London, 1975,Google Scholar
  16. J. N. Behrman, US International Business and Governments, New York, 1971,Google Scholar
  17. 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.Google Scholar
  18. For a radical view of the impact of MNEs on LDCs see A. G. Frank, Capitalism and Underdevelopment in Latin America, New York, 1967, andGoogle Scholar
  19. O. Sunkel, ‘Transnational capitalism and national disintegration in Latin America’, Social and Economic Studies, Special Number 22 (1973), 135–70.Google Scholar
  20. 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.Google Scholar
  21. 5.
    See G. D. A. MacDougall, ‘The benefits and costs of private investment from abroad: A theoretical approach’, Economic Record, 36 (1960), pp. 13–35, andCrossRefGoogle Scholar
  22. M. C. Kemp, ‘The benefits and costs of private investment from abroad: Comment’, Economic Record, 38 (1962), 108–10, both reprinted inCrossRefGoogle Scholar
  23. J. H. Dunning (ed.), International Investment, Harmondsworth, 1972.Google Scholar
  24. 6.
    See S. H. Hymer, The International Operations of National Firms: A Study of Direct Investment, Farnborough, 1976; also C. P. Kindleberger, op. cit.Google Scholar
  25. 7.
    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.Google Scholar
  26. 8.
    The figures are for 1971; see United Nations, Multinational Corporations in World Development, New York, 1973, Table 27.Google Scholar
  27. 9.
    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.Google Scholar
  28. For more detailed information cf. J. W. Vaupel and J. P. Curhan, The World’s Multinational Enterprises, Geneva, 1974, andGoogle Scholar
  29. T. Houston and J. H. Dunning, UK Industry Abroad, London, 1976.Google Scholar
  30. 10.
    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.Google Scholar
  31. 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.Google Scholar
  32. 11.
    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.Google Scholar
  33. 12.
    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.Google Scholar
  34. 13.
    For a historical perspective on international capital flows see J. H. Dunning, ‘Capital movements in the twentieth century’, Lloyds Bank Review, April 1964, reprinted inGoogle Scholar
  35. J. H. Dunning, Studies in International Investment, London, 1970 and inGoogle Scholar
  36. J. H. Dunning (ed.), International Investment, Harmondsworth, 1972.Google Scholar
  37. 14.
    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.Google Scholar
  38. 16.
    See S. M. Robbins and R. B. Stobaugh, Money in the Multinational Enterprise, London, 1974.Google Scholar
  39. 17.
    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 inGoogle Scholar
  40. H. Bernstein (ed.), Underdevelopment and Development, Harmondsworth, 1976.Google Scholar
  41. 18.
    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.Google Scholar

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© Mark Casson 1979

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  • Mark Casson

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