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Handbook on the Economics and Theory of the Firm

Handbook on the Economics and Theory of the Firm

Elgar original reference

Edited by Michael Dietrich and Jackie Krafft

This unique Handbook explores both the economics of the firm and the theory of the firm, two areas which are traditionally treated separately in the literature. On the one hand, the former refers to the structure, organization and boundaries of the firm, while the latter is devoted to the analysis of behaviours and strategies in particular market contexts. The novel concept underpinning this authoritative volume is that these two areas closely interact, and that a framework must be articulated in order to illustrate how linkages can be created.

Chapter 14: The Multinational Firm: Characteristics, Activities and Explanations in Historical Context

Grazia Ietto-Gillies

Subjects: business and management, strategic management, economics and finance, industrial economics, industrial organisation, institutional economics


Grazia Ietto-Gillies 14.1 INTRODUCTION The multinationals are firms that operate direct business activities and own assets in at least two countries. The words enterprise, company or corporation are often used instead of firm. The multi- or cross-countries nature of their activities is indicated by the adjective ‘multinational’ or ‘international’ or ‘transnational’. I usually prefer to use the latter adjective because it highlights the fact that these companies strategically plan, organize and control business operations across several countries rather than just operate independently in each of them.1 Transnational corporations (TNCs) is the term used by the United Nations Conference on Trade and Development (UNCTAD), the official international institution dealing with data, research and a range of publications on these firms.2 Transborder direct business activities date back a long time. The Medici bank in Renaissance Florence can be seen as conducting direct financial activities across frontiers well before the birth of the nation-states. Similarly, the British and Dutch chartered trading companies of the seventeenth and eighteenth centuries were conducting direct business activities abroad. However, the real forerunners of the TNC can be traced to the nineteenth-century joint stock companies, particularly those dealing with the development of railways that involved the organization of resources and control of operations at a distance. The issue of control has been seen as essential for operations spread across territories as first noted in the seminal work by Stephen Hymer ([1960] 1976), which will be discussed in section 14.5. The chapter proceeds as follows. The next section deals...

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