A multinational corporation (MNC) or worldwide enterpriseis a corporate organization which owns or controls production of goods or services in at least one country other than its home country. Black's Law Dictionary suggests that a company or group should be considered a multinational corporation if it derives 25% or more of its revenue from out-of-home-country operations. A multinational corporation can also be referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation, or a stateless corporation. There are subtle but real differences between these three labels, as well as multinational corporation and worldwide enterprise.
A corporation is an organization, usually a group of people or a company, authorized to act as a single entity and recognized as such in law. Early incorporated entities were established by charter. Most jurisdictions now allow the creation of new corporations through registration.
An organization or organisation is an entity comprising multiple people, such as an institution or an association, that has a particular purpose.
Black's Law is the most widely used law dictionary in the United States. It was founded by Henry Campbell Black (1860–1927). It is the reference of choice for terms in legal briefs and court opinions and has been cited as a secondary legal authority in many U.S. Supreme Court cases.
Most of the largest and most influential companies of the modern age are publicly traded multinational corporations, including Forbes Global 2000 companies. Multinational corporations are subject to criticisms for lacking ethical standards, and that this shows up in how they evade ethical laws and leverage their own business agenda with capital, and even the military backing of their own wealthy host nation-states.[ citation needed ] They have also become associated with multinational tax havens and base erosion and profit shifting tax avoidance activities .
A public company, publicly-traded company, publicly-held company, publicly-listed company, or public limited company is a corporation whose ownership is dispersed among the general public in many shares of stock which are freely traded on a stock exchange or in over-the-counter markets. In some jurisdictions, public companies over a certain size must be listed on an exchange. A public company can be listed or unlisted.
The Forbes Global 2000 is an annual ranking of the top 2,000 public companies in the world by Forbes magazine. The ranking is based on a mix of four metrics: sales, profit, assets and market value. The list has been published since 2003.
Ethics or moral philosophy is a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct. The field of ethics, along with aesthetics, concerns matters of value, and thus comprises the branch of philosophy called axiology.
A multinational corporation (MNC) is usually a large corporation incorporated in one country which produces or sells goods or services in various countries.The two main characteristics of MNCs are their large size and the fact that their worldwide activities are centrally controlled by the parent companies.
An import is a good brought into a jurisdiction, especially across a national border, from an external source. The party bringing in the good is called an importer. An import in the receiving country is an export from the sending country. Importation and exportation are the defining financial transactions of international trade.
An export in international trade is a good or service produced in one country that is bought by someone in another country. The seller of such goods and services is an exporter; the foreign buyer is an importer.
MNCs may gain from their global presence in a variety of ways. First of all, MNCs can benefit from the economy of scale by spreading R&D expenditures and advertising costs over their global sales, pooling global purchasing power over suppliers, and utilizing their technological and managerial know-how globally with minimal additional costs. Furthermore, MNCs can use their global presence to take advantage of underpriced labor services available in certain developing countries, and gain access to special R&D capabilities residing in advanced foreign countries.
The problem of moral and legal constraints upon the behavior of multinational corporations, given that they are effectively "stateless" actors, is one of several urgent global socioeconomic problems that emerged during the late twentieth century.
Potentially, the best concept for analyzing society's governance limitations over modern corporations is the concept of "stateless corporations". Coined at least as early as 1991 in Business Week , the conception was theoretically clarified in 1993: that an empirical strategy for defining a stateless corporation is with analytical tools at the intersection between demographic analysis and transportation research. This intersection is known as logistics management, and it describes the importance of rapidly increasing global mobility of resources. In a long history of analysis of multinational corporations we are some quarter century into an era of stateless corporations - corporations which meet the realities of the needs of source materials on a worldwide basis and to produce and customize products for individual countries.
One of the first multinational business organizations, the East India Company, was established in 1601.After the East India Company, came the Dutch East India Company, founded March 20, 1603, which would become the largest company in the world for nearly 200 years.
The main characteristics of multinational companies are:
Multinational corporations can select from a variety of jurisdictions for various subsidiaries, but the ultimate parent company can select a single legal domicile; The Economist suggests that the Netherlands has become a popular choice, as its company laws have fewer requirements for meetings, compensation, and audit committees,and Great Britain had advantages due to laws on withholding dividends and a double-taxation treaty with the United States.
Corporations can legally engage in tax avoidance through their choice of jurisdiction, but must be careful to avoid illegal tax evasion.
Multinational corporations may be subject to the laws and regulations of both their domicile and the additional jurisdictions where they are engaged in business.In some cases, the jurisdiction can help to avoid burdensome laws, but regulatory statutes often target the "enterprise" with statutory language around "control".
For small corporations, registering a foreign subsidiary can be expensive and complex, involving fees, signatures, and forms;a professional employer organization (PEO) is sometimes advertised as a cheaper and simpler alternative, but not all jurisdictions have laws accepting these types of arrangements.
Disputes between corporations in different nations is often handled through international arbitration.
The actions of multinational corporations are strongly supported by economic liberalism and free market system in a globalized international society. According to the economic realist view, individuals act in rational ways to maximize their self-interest and therefore, when individuals act rationally, markets are created and they function best in free market system where there is little government interference. As a result, international wealth is maximized with free exchange of goods and services.
To many economic liberals, multinational corporations are the vanguard of the liberal order.They are the embodiment par excellence of the liberal ideal of an interdependent world economy. They have taken the integration of national economies beyond trade and money to the internationalization of production. For the first time in history, production, marketing, and investment are being organized on a global scale rather than in terms of isolated national economies.
International business is also a specialist field of academic research. Economic theories of the multinational corporation include internalization theory and the eclectic paradigm. The latter is also known as the OLI framework.
The other theoretical dimension of the role of multinational corporations concerns the relationship between the globalization of economic engagement and the culture of national and local responses. This has a history of self-conscious cultural management going back at least to the 60s. For example:
Ernest Dichter, architect, of Exxon's international campaign, writing in the Harvard Business Review in 1963, was fully aware that the means to overcoming cultural resistance depended on an "understanding" of the countries in which a corporation operated. He observed that companies with "foresight to capitalize on international opportunities" must recognize that "cultural anthropology will be an important tool for competitive marketing". However, the projected outcome of this was not the assimilation of international firms into national cultures, but the creation of a "world customer". The idea of a global corporate village entailed the management and reconstitution of parochial attachments to one's nation. It involved not a denial of the naturalness of national attachments, but an internationalization of the way a nation defines itself.
A transnational corporation differs from a traditional multinational corporation in that it does not identify itself with one national home. While traditional multinational corporations are national companies with foreign subsidiaries,transnational corporations spread out their operations in many countries to sustain high levels of local responsiveness.
An example of a transnational corporation is Nestlé, who employ senior executives from many countries and tries to make decisions from a global perspective rather than from one centralized headquarters.
Another example is Royal Dutch Shell, whose headquarters are in The Hague, Netherlands, but whose registered office and main executive body are headquartered in London, United Kingdom.
"Multinational enterprise" (MNE) is the term used by international economist and similarly defined with the multinational corporation (MNC) as an enterprise that controls and manages production establishments, known as plants located in at least two countries.The multinational enterprise (MNE) will engage in foreign direct investment (FDI) as the firm makes direct investments in host country plants for equity ownership and managerial control to avoid some transaction costs.
The history of multinational corporations is closely intertwined with the history of colonialism, the first multinational corporations being founded to undertake colonial expeditions at the behest of their European monarchical patrons.Prior to the era of New Imperialism, a majority European colonies not held by the Spanish and Portuguese crowns were administered by chartered multinational corporations. Examples of such corporations include the British East India Company, the Swedish Africa Company, and the Hudson's Bay Company. These early corporations facilitated colonialism by engaging in international trade and exploration, and creating colonial trading posts. Many of these corporations, such as the South Australia Company and the Virginia Company, played a direct role in formal colonization by creating and maintaining settler colonies. Without exception these early corporations created differential economic outcomes between their home country and their colonies via a process of exploiting colonial resources and labour, and investing the resultant profits and net gain in the home country. The end result of this process was the enrichment of the colonizer and the impoverishment of the colonized. Some multinational corporations, such as the Royal African Company, were also responsible for the logistical component of the Atlantic slave trade, maintaining the ships and ports required for this vast enterprise. During the 19th century, formal corporate rule over colonial holdings largely gave way to state-controlled colonies, however corporate control over colonial economic affairs persisted in a majority of colonies.
During the process of decolonization, the European colonial charter companies were disbanded,with the final colonial corporation, the Mozambique Company, dissolving in 1972. However the economic impact of corporate colonial exploitation has proved to be lasting and far reaching, with some commentators asserting that this impact is among the chief causes of contemporary global income inequality.
Contemporary critics of multinational corporations have charged that some present day multinational corporations follow the pattern of exploitation and differential wealth distribution established by the now defunct colonial charter corporations, particularly with regards to corporations based in the developed world that operate resource extraction enterprises in the developing world,such as Royal Dutch Shell, and Barrick Gold. Some of these critics argue that the operations of multinational corporations in the developing world take place within the broader context of neocolonialism.
However, multinational corporations from emerging markets are playing an ever-greater role, increasingly impacting the global economy.
Anti-corporate advocates criticize multinational corporations for being without a basis in a national ethos, being ultimately without a specific nationhood, and that this lack of an ethos appears in their ways of operating as they enter into contracts with countries that have low human rights or environmental standards.In the world economy facilitated by multinational corporations, capital will increasingly be able to play workers, communities, and nations off against one another as they demand tax, regulation and wage concessions while threatening to move. In other words, increased mobility of multinational corporations benefit capital while workers and communities lose. Some negative outcomes generated by multinational corporations include increased inequality, unemployment, and wage stagnation.
The aggressive use of tax avoidance schemes, and multinational tax havens, allows multinational corporations to gain competitive advantages over small and medium-sized enterprises.Organizations such as the Tax Justice Network criticize governments for allowing multinational organizations to escape tax, particularly by using base erosion and profit shifting (BEPS) tax tools, since less money can be spent for public services.
A corporate haven, corporate tax haven, or multinational tax haven, is a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly due to favourable tax regimes, and/or favourable secrecy laws, and/or favourable regulatory regimes.
The Dutch East India Company was an early megacorporation founded by a government-directed amalgamation of several rival Dutch trading companies (voorcompagnieën) in the early 17th century. It was established on March 20, 1602 as a chartered company to trade with India and Indianised Southeast Asian countries when the Dutch government granted it a 21-year monopoly on the Dutch spice trade. It has been often labelled a trading company or sometimes a shipping company. However, VOC was in fact a proto-conglomerate company, diversifying into multiple commercial and industrial activities such as international trade, shipbuilding, and both production and trade of East Indian spices, Formosan sugarcane, and South African wine.. The Company was a transcontinental employer and an early pioneer of outward foreign direct investment. The Company's investment projects helped raise the commercial and industrial potential of many underdeveloped or undeveloped regions of the world in the early modern period. In the early 1600s, by widely issuing bonds and shares of stock to the general public, VOC became the world's first formally-listed public company. In other words, it was the first corporation to be listed on an official stock exchange. It was influential in the rise of corporate-led globalisation in the early modern period.
The economy of Singapore is a highly developed free-market economy. Singapore's economy has been ranked as the most open in the world, 3rd least corrupt, most pro-business, with low tax rates and has the third highest per-capita GDP in the world in terms of Purchasing Power Parity (PPP). APEC is headquartered in Singapore.
A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country. SEZs are located within a country's national borders, and their aims include increased trade balance, employment, increased investment, job creation and effective administration. To encourage businesses to set up in the zone, financial policies are introduced. These policies typically encompass investing, taxation, trading, quotas, customs and labour regulations. Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.
A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct control.
IDA Ireland is the agency responsible for the attraction and retention of inward foreign direct investment (FDI) into Ireland. The agency was founded in 1949 as the Industrial Development Authority and placed on a statutory footing a year later. In 1969 it became a non-commercial autonomous state-sponsored body. Today it is a semi-state body that plays an important role in Ireland's relationship with foreign investors, with multinationals accounting for 10.2% of employment and 66% of Irish exports. The agency partners with investors to help them to enter or expand their operations in the Irish market. It provides funding support to research and development projects, and has a number of direct support mechanisms, including employment and training grants.
Double taxation is the levying of tax by two or more jurisdictions on the same declared income, asset, or financial transaction. Double liability is mitigated in a number of ways, for example:
Ireland's Corporate Tax System is a central component of Ireland's economy. In 2016–17, foreign firms paid 80% of Irish corporate tax, employed 25% of the Irish labour force, and created 57% of Irish OECD non-farm value-add. U.S.–controlled firms represent almost all foreign firms in Ireland and in 2017 were 25 of the top 50 Irish firms, and 70% of the revenue of the top 50 Irish firms. By 2018, Ireland had received the most U.S. § Corporate tax inversions in history, and Apple was over one–fifth of Irish GDP. Academics rank Ireland as the largest tax haven; larger than the Caribbean tax haven system.
International business refers to the trade of goods, services, technology, capital and/or knowledge across national borders and at a global or transnational level.
A financial centre is defined by the IMF as encompassing: International Financial Centres (IFCs), such as New York City, London, and Tokyo; Regional Financial Centres (RFCs), such as Frankfurt, Chicago and Sydney; and Offshore Financial Centres (OFCs), such as Cayman Islands, Dublin, and Singapore.
When Corporations Rule the World is an anti-globalization book by David Korten. Korten examines the evolution of corporations in the United States and argues that "corporate libertarians" have 'twisted' the ideas of Adam Smith's view of the role of private companies.
Transnationality is the principle of carrying out an action across national borders, in order to have effects at a more general level. It is commonly associated with the actions of the European Union (EU), in distinction to 'international' or 'supranational'.
The Centre for Research on Multinational Corporations, is an independent, non-profit research and network organisation working on social, ecological and economic issues related to sustainable development. Since 1973, the organisation investigates multinational corporations and the consequences of their activities for people and the environment around the world.
Raj Aggarwal is an author and contributor to the fields of finance and international business studies. Aggarwal was the dean of the University of Akron College of Business Administration from 2006 until 2009. He was elected as a fellow of the Academy of International Business. He has worked as an engineer, financial analyst, strategic planner, department chair, university budget planner and corporate board member. He has authored or co-authored over a dozen books or monographs and over a hundred scholarly articles that have cited over 5,000 times according to his profile in Google Scholar.
Sanjaya Lall, was a development economist, Professor of Economics and Fellow of Green Templeton College, Oxford University. Lall's research interests included the impact of foreign direct investment in developing countries, the economics of multi-national corporations, and the development of technological capability and industrial competitiveness in developing countries. One of the world's pre-eminent development economists, Lall was also one of the founding editors of the journal Oxford Development Studies and a senior economist at the World Bank.
Economic globalization is one of the three main dimensions of globalization commonly found in academic literature, with the two others being political globalization and cultural globalization, as well as the general term of globalization. Economic globalization refers to the widespread international movement of goods, capital, services, technology and information. It is the increasing economic integration and interdependence of national, regional, and local economies across the world through an intensification of cross-border movement of goods, services, technologies and capital. Economic globalization primarily comprises the globalization of production, finance, markets, technology, organizational regimes, institutions, corporations, and labour.
Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to "shift" profits from higher–tax jurisdictions to lower–tax jurisdictions, thus "eroding" the "tax–base" of the higher–tax jurisdictions.
Ireland has been labelled a tax haven or corporate tax haven in multiple reports, an allegation which the state rejects. Ireland's base erosion and profit shifting (BEPS) tools give some foreign corporates § Effective tax rates of 0% to 2.5% on global profits re-routed to Ireland via their tax treaty network. Ireland's aggregate § Effective tax rates for foreign corporates is 2.2–4.5%. Ireland's BEPS tools are the world's largest BEPS flows, exceed the entire Caribbean system, and artificially inflate the US–EU trade deficit. Ireland's tax-free QIAIF & L–QIAIF regimes, and Section 110 SPVs, enable foreign investors to avoid Irish taxes on Irish assets, and can be combined with Irish BEPS tools to create confidential routes out of the Irish corporate tax system. As these structures are OECD–whitelisted, Ireland's laws and regulations allow the use of data protection and data privacy provisions, and opt-outs from filing of public accounts, to obscure their effects. There is arguable evidence that Ireland acts as a § Captured state, fostering tax strategies.
Murray Sayle: "The Netherlands United East Indies Company (Verenigde Oostindische Compagnie, or VOC), founded in 1602, was the world's first multinational, joint-stock, limited liability corporation – as well as its first government-backed trading cartel. Our own East India Company, founded in 1600, remained a coffee-house clique until 1657, when it, too, began selling shares, not in individual voyages, but in the Company itself, by which time its Dutch rival was by far the biggest commercial enterprise the world had known."
John Hagel & John Seely Brown (2013): "[...] In 1602, the Dutch East India Company was formed. It was a new type of institution: the first multinational company, and the first to issue public stock. These innovations allowed a single company to mobilize financial resources from a large number of investors and create ventures at a scale that had previously only been possible for monarchs."
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