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19 January, 2016 - 15:18

Although extreme caution must be exercised in drawing any major inferences from the abundance of quantitative data compiled by the U.S. Department of Commerce, the International Chamber of Commerce, the OECD, the World Bank, the International Monetary Fund (IMF), and the United Nations, certain statements can be made about MNCs. For example, there is a widespread agreement among researchers that the typical MNC is a large, complex, powerful, diversified, and, above all, important social institution that is here to stay. In this section we will construct an overall picture of the growth of MNCs by focusing exclusively on the quantitative aspects of world and U.S. MNCs. Later the MNC-nation-state interaction will be placed in perspective through an examination of the MNC's relationship to human survival and well-being.

With very few exceptions, the multinationals are a country's largest corporations. A comparison of the Fortune 500, the Business Week 1000, or the Forbes 500 with a list of the largest MNCs would reveal a great deal of overlap. Only a few of the largest U.S. companies would not appear on the list of MNCs: Lockheed, McDonnell Douglas, Boeing, AT&T, and perhaps USX (formerly U.S. Steel). Similar results would be obtained by comparing lists of the largest European and Japanese corporations with a list of the largest MNCs.

Most of the large corporations not included among the largest MNCs are among the largest exporters. Business Week magazine's April 19, 1986 list of the twenty-five largest U.S. exporters included the three aircraft companies mentioned in the preceding paragraph. The reason these large corporations have not evolved to the multinational stage is that the production processes employed require a certain level, or scale, of production to be cost effective. The final process of producing an aircraft, for example, must be performed at one location, although various parts can, of course, be manufactured at different locations and brought for assembly to the main plant.

In addition to being large, most MNCs are diversified with respect to both product and area. A measure of product diversification is the number of industries and product lines in which a given company participates. As the Harvard Multinational Enterprise Project found, the large MNCs do not ordinarily "belong" to just one industry. 1 An MNC's degree of geographical diversification is measured by the number of subsidiaries that it maintains. The 2,245 U.S. MNCs surveyed by the Department of Commerce in its 1982 benchmark study maintained some 34,000 affiliates all over the world (an average of 15 affiliates for each MNC).

What are the best-known multinational corporations? What countries do they represent? To which industries do they belong? Figure 3.3 lists the world's fifty largest multinationals. An examination of the statistics on these fifty companies as a group or as individual economic units—their total sales, net income, and degree of internationalization (ratio of foreign sales to total sales)—reveals their tremendous importance. These fifty companies made over $1.5 trillion worth of sales in 1987. This figure is almost 10% of the world's total production and close to 30% of the U.S. gross national product.

The U.S. presence in the list of the world's top fifty corporations is obvious. Nineteen of the world's largest corporations are U.S. MNCs, and these nineteen account for 45% of total sales and 62% of total net income.

Figure 3.3 The World's Fifty Largest Multinationals