transnational corporation

A firm which owns or controls production facilities in more than one country through direct foreign investment. Although multinationals grew most rapidly in the 1960s, the foundations were laid in the inter-war period, notable examples being Ford, Vauxhall, and Philips. In the mid-1980s transnationals accounted for 14% of UK employment and 30% of UK exports. The corresponding figures for France were 24% and 32%.

Transnationals are made possible by improved international communications which provide rapid containerized transhipment and foreign travel, easy communication of information, and international mobility of capital. When one market is saturated, the multinational can rapidly develop others, since foreign investment cuts transport costs, and makes possible a rapid response to local markets. It also eases tariff barriers—the UK has been an attractive location for many Japanese manufacturers, for example, because it is within the European Union, but has opted out of the EU's social charter.Transnationals can compare costs at different locations, and can switch activities to different areas as appropriate.

TNCs are probably the major force affecting world-wide shifts in economic activity, since the largest have a turnover greater than the GNP of many less developed nations. Although a developing nation may benefit from the construction of a plant for a TNC in terms of jobs and markets, it has been argued that the price is a loss of local control.

Yeung (Transactions of the Institute of British Geographers 23) has argued that most TNCs are, in fact, not so transnational: most board seats are held by home-nationals 50% of the assets and employment of IBM, Du Pont, and General Electric remain in the United States, and 66% of all sales of UK, Japanese, German, and Canadian TNCs are in the home country.

The term is generally synonymous with multinational corporation, although a transnational corporation may operate in only two national economies. See new international division of labour, spatiality of capital.