Multinational corporation

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A multinational corporation (MNC) or multinational enterprise (MNE) or transnational corporation (TNC) or multinational organization (MNO) is a corporation or enterprise that manages production establishments or delivers services in at least two countries.

Multinational corporations (MNC) are often divided into three broad groups:

  • Horizontally integrated multinational corporations manage production establishments located in different countries to produce the same or similar products.
  • Vertically integrated multinational corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries.
  • Diversified multinational corporations manage production establishments located in different countries that are neither horizontally or vertically integrated.

Very large multinationals have budgets that exceed those of many countries. Of the 100 largest economies in the world, 51 are multinational corporations.[1] They can have a powerful influence in international relations, given their large economic influence in politicians' representative districts, as well as their extensive financial resources available for public relations and political lobbying.

Multinationals have played an important role in globalization. Given their international reach and mobility, prospective countries, and sometimes regions within countries, must compete with each other to have MNCs locate their facilities (and subsequent tax revenue, employment, and economic activity) within. To compete, countries and regional political districts offer incentives to MNCs such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labor standards. This process of becoming more attractive to foreign investment can be characterized as a race to the bottom.

There is a dispute as to which was the first MNC. Some have argued that the Knights Templar, founded in 1118, became a multinational when it stumbled into banking in 1135. However, others claim that the British East India Company or the Dutch East India Company (Dutch:Vereenigde Oostindische Compagnie) were in fact the first proper multinationals.