The Multinational Business Enterprise: What Kind of International Organization?

Abstract

The recent growth in the size and number of private business enterprises that operate in many countries has generated a great deal of speculation as to whether a form of international organization has been created which is able to frustrate the policies of the traditional nation-state. The enterprise with subsidiaries scattered around the globe clearly has the potential to evade the influence of many governmental policies. The firm can circumvent a tight monetary policy in one country by having an affiliate borrow in another country and transfer the funds across national borders. If direct transfers of capital from abroad are restricted, transfer prices, royalty payments, or open accounts between affiliates can be adjusted to bring in the needed financial resources. If taxes are high in one jurisdiction, profits that would be subject to tax can be shifted to another tax jurisdiction through manipulation of affiliate transactions. National labor unions and comparatively harsh labor legislation can be frustrated by moving production to facilities in another country when strikes or higher costs threaten a particular market. A governmental program aimed at increasing technical and managerial training to provide a larger domestic supply of skilled personnel may only generate technicians or managers for the multinational enterprise to shift out of the country, back to its head office or to other countries. Technology developed in one country—often through governmental support and often related to defense needs of governments—can be leaked quickly to other countries through the communication network of the multinational enterprise.