Multinational corporations spread capital, technology and production across borders, which tied national economies together.
A multinational corporation (MNC) is a company that owns production in more than one country. American firms led the way in the 1950s and 1960s. Many set up factories in Europe to get inside the growing EEC market.
From the late 1960s, electronics firms began moving assembly work to East Asia, where labour was cheaper. Singapore, Hong Kong, Taiwan and later Malaysia attracted these factories. Japanese and European MNCs followed.
MNCs brought capital, skills, management methods and links to world markets. Host countries gained jobs and exports.
Foreign investment rose sharply in the 1980s and 1990s. By the 1990s, UN estimates suggested that about a third of world trade took place within multinational companies.
MNCs also had limits and critics. They sent profits home and could leave when costs rose. Some clashed with host governments. In the 1970s many oil-producing states took over the assets of Western oil companies.
- MNC
- A company with production in more than one country.
- Offshore assembly
- From the late 1960s, electronics in East Asia.
- Trade within firms
- About a third of world trade by the 1990s (UN estimate).
Worked example: Judging the role of MNCs
How far did MNCs drive global growth?
- Growth: capital, technology and exports for host countries.
- Integration: production networks across borders.
- Dependence: MNCs needed open trade rules and stable politics.
- Limit: profits sent home; investment could move on.
Watch out for this
MNCs caused global growth on their own.
MNCs depended on open trade rules, stable money and host-government policies. They were a channel of growth as much as a cause.
Check your understanding
Why did electronics firms move assembly to East Asia from the late 1960s?
- Lower labour costs and welcoming host governments
- East Asian governments forced them to move
- Trade between countries was banned