Multinationals, corporations that have direct business activities in many countries. The terms “transnational” or “international” are used more or less interchangeably with multinational. Similarly the terms “companies“, “firms”, “enterprises” are often used instead of “corporations”. Their activities involve some form of direct production and/or distribution, and the establishment of branches or affiliates, in the host countries in which they operate. According to the United Nations Centre on Transnational Corporations: “A foreign branch is a part of an enterprise that operates abroad. An affiliate is an enterprise under effective control by a parent company and may be either a subsidiary (with majority or sometimes as little as 25 per cent control of the voting stock by the parent company) or an associate (in which case as little as 10 per cent control of voting stock may be judged adequate to satisfy the criterion).” The foreign activities may be measured in terms of assets, employment, sales, or profits of the branches or affiliates. The Foreign Direct Investment (FDI) by the Multinational Corporation (MNC) may take the form of acquisition of an existing company, or of “greenfield”investment which develops a new productive activity (factory or distribution chain) where none previously existed.
Though enterprises with production activities in several countries, such as the East India Companies, can be traced back over the past few centuries, the modern MNC is a product of the 20th century. Before World War II most foreign direct investment by MNCs was resource-based, and therefore its main objective was to secure sources of raw materials. As a result, the developing countries, including those still ruled as colonies, were host to the largest share of worldwide foreign direct investment. After World War II the foreign activities of large corporations took off on a large scale. It all began with the large wave of foreign direct investment in Europe by American corporations in the 1950s and 1960s, which soon spread on a growing scale with large investment by European and Japanese concerns. This earlier investment was mainly in manufacturing; however, the 1980s and 1990s have seen a considerable increase in the relative share of FDI in services. These post-war developments have led to a change in the relative geographical distribution of FDI: as a result the relative share of FDI going into developing countries fell from around 60 per cent before World War II to around 25 per cent in the 1970s and 1980s.
