Edited by Jan Toporowski and Jo Michell
Chapter 42: Transnational companies and finance
Transnational companies (TNCs) are companies that own assets and conduct direct business activities in at least two countries. There are several modalities of cross-countries business operations: from trade to joint ventures, franchising, licensing to foreign direct investment (FDI). It is the involvement in FDI that characterizes a company as transnational. Foreign direct investment can take place via greenfield investment – in which a plant, building, business is started from scratch – or via mergers and acquisitions (M & As), in which an existing foreign business is bought. Most FDI between World War I and World War II was directed towards developing countries and was mainly in the primary sector. The decades after World War II saw a surge in FDI, particularly in manufacturing, with a shift in geographical direction towards developed countries. In the last 35 or so years there has been considerable growth in FDI alongside a shift in the sectoral shares towards FDI in services worldwide.
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