Companies that operate in more than one country.
During the 1950s and 1960s, American firms of all kinds
established offices abroad. According to the U.S. Department
of Commerce Bureau of Economic Analysis, the book value
of American foreign direct investment rose from $12 billion
in 1950 to almost $80 billion in 1970. American companies
sought to overcome trade barriers such as tariffs erected by
most countries around the world that existed in the 1950s. As
trade restrictions eased, however, American companies became more aggressive and tried to link technical, marketing,
managerial and financial advantages with cheap overseas
labor. During this period, “going multinational” became the
fashionable thing to do, and American companies felt a need
to develop global product portfolios to remain competitive.
In 1968, Jean-Jacques Servan Schreiber published The
American Challenge, predicting that American multinational
corporations would soon dominate world business. But large
companies in other countries were also part of the international expansion, having begun in 1965 to set up or acquire
foreign manufacturing operations at the same annual rate as
American multinationals. The 1965 value of foreign direct
investment in the United States totaled approximately $7.5
billion; by 1972 it had reached almost $15 billion. Although
foreign investment in the United States remained small compared with U.S. investment abroad, the increase represented
an important change in the organization of multinational
companies, because funds from foreign investment exerted
influence on the structure and operation of these entities.
By the 1970s, some of the glamour of internationalization
started wearing off, resulting in a period of American divestment during the early 1970s. From 1971 to 1975, American
companies sold 1,359 of their foreign subsidiaries (almost 10
percent). During the same period, a substantial decline occurred in the number of new subsidiaries being formed (3.3
for each divestment in 1971 compared with 1.4 in 1975).
These divestments were largely in low-tech, highcompetition industries such as textiles, apparel, leather, and
beverages. Investment in high-tech industries such as pharmaceuticals, machinery, and office equipment increased during the same period. Thus, both investment patterns and the
makeup of the multinationals themselves changed. European
multinationals had largely caught up with American companies; Japanese firms began to expand internationally; and the
developing countries spawned their own multinationals. By
2000, 62 percent of exports and 39 percent of imports involved multinational corporations. Total trade among multinational corporations equaled $363 billion.
—Albert Atkins
References
Ronen, Simcha. Comparative and Multinational
Management. Washington, DC: Library of Congress,
1986.