Multinational Corporations

A multinational corporation (MNC) is an organizational vehicle to transfer knowledge from one country to another while preserving cash flow and control rights. The MNC has its origins in the uncertainty of international trade and investment, and its modern form coevolved with the emergence of institutional and political structures that permitted owners to realize and retain profits from the utilization of its organizational knowledge in foreign countries and territories. Since operating overseas incurs costs, the MNC is only viable if its transfer of organizational capabilities permits it to compete effectively against domestic and other foreign competition. With the diffusion of knowledge, local competitors often compete with the MNC in the long run. However, an MNC has the advantage of profiting from arbitraging across markets and leveraging its scale and scope globally. The impact of the revolution in information technologies has consequently an ambiguous effect, both enabling the MNC to operate globally more effectively and enabling markets to contract to more efficiently compete against organizational solutions.