Multinational Corporations

A major development of the postindustrial era was the growth of the multinational corporation. Multinationals produced goods and services for a global market and conducted business worldwide, but unlike older kinds of international firms, they established major factories and managerial centers in countries other than their home base. For example, of the five hundred largest businesses in the United States in 1970, more than one hundred did over a quarter of their business abroad, with business machine manufacturer IBM operating in more than one hundred countries. Although U.S.-based corporations led the way, European and Japanese multinationals like Volkswagen, Shell, Nestlé, and Sony also had a broad global reach.

Some multinational corporations burst the bounds of the nation-state as they set up shop in whatever part of the world offered cheap labor. In the first years after World War II, multinationals preferred European employees, who constituted a highly educated labor pool and had well-developed consumer habits. Then, beginning in the 1960s, multinationals moved more of their operations to the emerging economies of formerly colonized states to reduce labor costs and avoid taxes. Although multinational corporations provided jobs in developing areas, profits usually went out of those areas to enrich foreign stockholders. Multinational corporations lacked the interest in the well-being of localities or nations that earlier industrialists had often shown. Thus, this system of business looked to some like imperialism in a new form.

Managers believed that their firms could stay competitive only by expanding, merging with other companies, or partnering with governments. They also increased their companies’ investment in research and used international cooperation to produce major new products. Beginning with its first commercial flight in 1976, the British-French Concorde supersonic aircraft flew from London to New York in less than four hours. Another venture was the Airbus, a more practical series of passenger jets inaugurated in 1972 by a consortium of European firms. Both projects grew from the strong relationships among government, business, and science as well as from the international cooperation in manufacturing among members of the Common Market. Such relationships allowed European businesses to compete successfully with U.S.-based and other multinational giants.