Multinational firms are among the most powerful actors in the global space. Their internationalization is both the consequence and one of the engines of globalization. Faced with their global strategies and transnational ways of working, states find it hard to introduce a system of governance that would offset the social and environmental consequences of their activities.

Because of their economic and financial clout and their ability to influence the fiscal and social policies of states, multinational corporations (MNCs, also known as transnational corporations) are major actors on the world scene. An MNC is a very large company possessing subsidiaries in several countries, and its organization, production and sales strategy, are conceived on a global scale. At the present time, there are some 60,000 MNCs worldwide, controlling more than 500,000 subsidiaries. They are responsible for half of international trade, especially due to the scale of intra-company trading (between subsidiaries of the same company).

The 2,000 largest multinational companies, 2008-2017

Sources: Forbes Global 2000, ; World Federation of Exchanges, 2017 Market Highlights,

Comment: On the map of the stock market capitalization of the 2,000 major multinational companies in 2017, the size of the circles is proportional to their weight in terms of stock market capitalization. The weight of United States firms can be seen (44%, compared with 22% for all European firms). The range of colors indicates progress made over the last decade: in addition to the growth of United States companies, an increase in those of emerging Asian countries is visible, at a time when some European, Japanese, and Latin-American firms are stagnating.

The origin of MNCs can be traced back to the late sixteenth century, with the creation of European trading companies, particularly English and Dutch ones. Among the most prominent of these was the Dutch East India Company, founded in 1602 and entrusted with exploiting resources from the colonies. These companies became one of the pillars of capitalist development and an essential vehicle for European imperialism in the world.

From internationalization to globalization

The first MNCs of the modern era were in the mining, oil, and agricultural sectors, where production was directly linked to the land. They were formed in the nineteenth century, with the advent of industrial capitalism. Many companies in the mining and agricultural sectors are more than a hundred years old, and still figure among the largest global enterprises. During the second half of the twentieth century, companies became much more international, particularly in the manufacturing sector. This was partly in order to get around customs and commercial barriers, which they did by setting up subsidiaries directly within consumer markets – a strategy used by European and Japanese car-manufacturers when they established assembly lines in the United States so as to have access to the local market. But internationalization particularly took advantage of the opening-up of trade between states as part of the GATT (General Agreement on Tariffs and Trade) agreements and then the WTO (World Trade Organization), as well as from financial liberalization, which gave rise to greater mobility of capital, a downward trend in transport costs, and the development of information technology and telecommunications.

The 25 largest multinational companies, 2017

Source: Forbes, The World’s Biggest Public Companies 2017 Ranking,

Comment: According to the annual ranking of companies by the US economic magazine Forbes, this diagram shows the sector of activity, stock market capitalization, turnover (according to which the ranking is decided), and profits of the 25 major multinational companies in 2017. Multinationals in the energy/raw materials and automobile sectors remain the most numerous, but, in terms of profits, finance and electronics occupy the top ranks. Seven Asian multinationals appear in this category, representing a quarter of the total both in number and in stock market capitalization.

From the 1980s, MNCs were able to delocalize their production to take advantage of cheap labor costs and the very low social, environmental, and safety standards offered by developing countries, especially those in Southeast Asia. Thereafter, the production chain was split up into multiple units scattered across countries where labor was cheapest, while communication and marketing strategies were carried out on a world scale (with the emergence of global brands and products) and profits were tucked away in tax havens in order to maximize returns. The cash flows from FDI (Foreign Direct Investment), which was a pillar of MNC globalization, was multiplied by more than 139 in half a century (going from 13 billion dollars in 1970 to 1,750 billion dollars in 2016).

Inward flows of foreign direct investment (FDI), 2007-2016

Source: UNCTAD,

Comment: UNCTAD helps governments to promote and facilitate investment; it compiles, validates, and disseminates data on FDI. This map shows both the stocks (proportional circles) and changes over the course of the last decade (color shading). Data on the growth of FDI inflows show marked contrasts which are not correlated with the data on volume; some economies no longer attract foreign investment (in blue), while others, on the contrary, capture it owing to their growth, tax concessions, or because they are tax havens.

Change in foreign direct investment (FDI), 1974-2016

Source: UNCTAD,


To take best advantage of the international division of labor without having to endure the legal (and moral) constraints associated with possessing subsidiaries in countries where social protection and environmental rules are flouted, MNCs tend to organize their production via a network of companies that no longer have capitalistic links between them. Many products (electronic, textile, etc.) are now assembled or made in factories belonging to subcontractors who are legally independent of those placing the order. This is the case with Apple, whose products are manufactured in China by a Taiwanese subcontractor, Foxconn. MNCs thus try to absolve themselves from any responsibility for the health, environmental, and social conditions in which their products are manufactured, as did the big clothing brands employing workers in the garment manufacturing workshops of the Rana Plaza building in Dhaka (Bangladesh), whose collapse in 2013 caused more than a thousand deaths.

Web of BP oil subsidiaries, 2013

Sources: OpenCorporates,; OpenOil,

Comment: British Petroleum is made up of hundreds of subsidiaries which themselves own subsidiaries. The graph of the network shows that most subsidiaries come under US or British and Dutch law for BP Europe. The map reveals that these subsidiaries, scattered throughout the regions of the globe, do not necessarily correspond to the places where hydrocarbons are extracted. On the contrary, BP domiciles many of its subsidiaries in tax havens (the Caribbean, the Netherlands, Switzerland, the Gulf, Singapore, Hong Kong, etc., and, of course, the United Kingdom).

Impossible to regulate?

The internationalization of MNCs has certainly enabled some countries of the South to catch up economically – countries such as China, whose development is based on receiving FDI and on becoming part of the globalization process. But it also contributes to deepening internal inequalities : by causing the employees of rich countries to compete with those in developing countries, it helps to increase unemployment in developed countries, which are becoming de-industrialized, while at the same time encouraging the appearance of affluent classes in countries of the South. Since MNCs are often in positions of power with regard to states, they are responsible for making the latter compete for the attractiveness of their territories (amenities, subsidies, and even the relaxation of fiscal, social, and environmental standards).

Nevertheless, the globalization of MNCs means they are subject to increased monitoring by civil society organizations, which urge them to adopt responsible business practices, particularly with regard to the social and environmental standards they apply. MNCs respond by voluntarily developing codes of conduct (sometimes at the sectional level) and corporate social responsibility (CSR) policies relating to environmental protection, the defense of human and social rights, and the combat against corruption. Often limited to greenwashing, these actions seek as much to respond to the criticisms of advocacy NGOs about their practices and the negative consequences of their activities as to dissuade public authorities from adopting restrictive legislation on these issues. In so doing, corporations are also vehicles for spreading standards (accounting, managerial, social, and environmental) throughout the world.

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