Multinational Corporation

Multinational Corporation

A multinational corporation consists of incorporated and unincorporated enterprises comprising parent enterprises and their foreign affiliates. The parent and each of the affiliates are established under the laws and practices of the countries where they are located. The corporations are multinational in their geographic scope, but not in the sense that there is some multinational authority which permits them to operate. Increasingly multinationals are reorganizing by forming crossborder networks and alliances which make it difficult to determine firm boundaries and nationalities. At the same time these firms are using information technology to conduct transborder transactions which are difficult for governments to monitor.

Of the top 100 non-financial multinationals in the world, ranked by assets in 1994, 32 have US and 19 have Japanese parent companies, 15 are in the ELECTRONICS INDUSTRY, 12 in the AUTOMOBILE INDUSTRY and 11 in the PETROLEUM INDUSTRY. Canada has 3 firms among the top 100: The Thomson Corporation, SEAGRAM and ALCAN. In total, 1565 parent firms reside in Canada (out of a world total of 38 747), and there are 4708 affiliates of foreign firms in Canada (out of a world total of 265 551). Among the largest firms operating in Canada are the affiliates of foreign multinationals such as GENERAL MOTORS OF CANADA LIMITED, which is a subsidiary of General Motors, the world's largest industrial corporation. While foreign multinationals have set up subsidiaries in Canada, Canadian multinationals have also established subsidiaries abroad, and this has been a growing trend since the mid-1980s, especially with investment in the US.

Multinationals have come under scrutiny in Canada and elsewhere for their economic, political, social and cultural impact on host countries. Less developed countries argue that they have traded political independence for economic and cultural dependence. Politically, there remains concern over the extent to which multinational corporations are used as instruments of foreign policy by the governments of countries where parent companies are located. Culturally, the concern is over the loss of national identity.

In Canada and elsewhere, hostility to multinationals has been replaced by measures to promote the inflow of foreign direct investment. The FOREIGN INVESTMENT REVIEW AGENCY, created by the Liberal Trudeau government in 1973, was empowered to screen acquisitions and new foreign investment. The Conservative Mulroney government replaced it by the Investment Canada Act in 1984 with the mandate to attract foreign investment. In 1996, discussions were underway in the Organization for Economic Co-operation and Development on a Multilateral Agreement for Investment which would establish an international framework of rules for multinationals.

See also FOREIGN INVESTMENT; ECONOMIC NATIONALISM; TASK FORCE ON FOREIGN OWNERSHIP AND THE STRUCTURE OF CANADIAN INVESTMENT.