This document discusses theories around the relationship between multinational corporations and nation-states. It outlines perspectives ranging from MNCs having complete independence and sovereignty over states, to states maintaining power over MNCs and their ability to influence them. The document also examines different stages of interaction between the two entities over time, from cooperation to confrontation and back to reconciliation.

1. M
Nattawut Thammanukornsri
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in the global affairs
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Dunod.
● Willetts, Peter. "Chapter 20: Transnational Actors and International Organizations in Global Politics." The
Globalization of World Politics: An Introduction to International Relations. By John Baylis, Steve Smith, and
Patricia Owens. 5th ed. New York: Oxford UP, 2011. N. pag. Print.
● Dunning, J.H. (1992): Multinational Enterprises and the Global Economy. Reading, Addison-Wesley.
● Ohmae, Kenichi. The Borderless World: Power and Strategy in the Global Marketplace. London:
HarperCollins, 1994. Print.
● Doremus, Paul N. The Myth of the Global Corporation. Princeton, NJ: Princeton UP, 1998. Print.
● Vernon, Raymond. Sovereignty at Bay: The Multinational Spread of U.S. Enterprises. New York: Basic, 1971.
Print.
● Hymer, Stephen. "The Efficiency (Contradictions) of Multinational Corporations." The American Economic
Review 60.2, Papers and Proceedings of the Eighty-second Annual Meeting of the American Economic
Association (1970): 441-48. JSTOR. Web. 10 Mar. 2014. <http://www.jstor.org/stable/10.2307/1815843?
ref=search-gateway:3155314d62325eca10c1402fec26d26d>.
● Poynter, T.A. (1985a): Strategic Responses to Government Intervention in Developing Countries. In: Brewer,
T.L. (1985): Political risks in international business: new directions for research, management, and public
policy. New York, Praeger.
● Steinbockova, Martina. "MULTINATIONAL CORPORATIONS AND NATION-STATES: PARTNERS,
ADVERSARIES OR AUTONOMOUS ACTORS?" Thesis. MASARYK UNIVERSITY IN BRNO, 2007. (n.d.): n. pag.
Web. 10 Mar. 2014. <http://is.muni.cz/th/64635/fss_m/DIPLOMA_THESIS.pdf>.
Book info

3. ● Transborder activity: operate somewhere else from
○ David E. Liliental: “corporations which have their home in one
country but operate and live under the laws and customs
of other countries as well.”
○ International Labour Organisation (ILO): "the essential of the
MNC lies in the fact that its managerial headquarters are
located in one country (home country), while the enterprise
carries out operations in a number of the other countries
(host countries)."
Basic featureof Multinational corporation

4. ● International corporation
○ mainly exporting its products/services to foreign countries
● Multinational corporation
○ organizing production across borders
● World/global corporation*
○ their functions integrated on a global level
Development Stagesby Meier and Schier (2001)
They clearly state the enterprises generally expand through several stages:
Christian Chavagneux (2001) describes the concept of a “world company” as a phantasm because according to him,
the company which is a total stateless entity deprived of all possible linkages to territories, has not occurred yet.
*

5. ● Horizontally integrated companies
○ which acquire additional business activities at the same level of the
value chain.
● Vertically integrated corporations
○ which are composed of a network of operations in upstream and
downstream activities in the production process.
● Conglomerate structure
○ when the corporate divisions operate as relatively autonomous
businesses under a larger corporate umbrella and as such, constitute
self-contained strategic business units while each of them produces
a single product.
Type of MNCsby Martina Steinbockova

6. ● Financial control
○ to change transfer prices means that they can evade taxation or
government controls on their international financial transactions.
● Triangulation of trade
○ to use triangulation means individual governments cannot control their
country's international trade.
● Regulatory arbitrage
○ to move production from one country to another means individual
governments are constrained in regulating and taxing companies.
Ability of TNCsby Peter Willetts
With ability of those TNCs, we can consider them as transnational actors:

7. ● Extraterritoriality and clash of sovereignty
○ The structure of authority over TNCs generates the potential for
intense conflict between governments, when the legal authority of one
government has extraterritorial impact on the sovereignty of another
government.
● Re-regulation at global level
○ In some areas of economic policy, governments have lost sovereignty
and regulation now has to be exercised at the global level rather than
by governments acting independently.
Conflicting Regulationby Peter Willetts
with TNCs feature of cross-border operation, new question rise over regulation:

8. 1. The Honeymoon phase (early 1950’s – mid 1960’s)
○ was characterized by a very positive approach towards
multinational enterprises.
○ The relationships between MNCs and states were
extremely mutually beneficial since the expanding
companies found new markets for their products as well
as sources of raw materials and energy.
Three Phasesby John H. Dunning (1992)
He identifies three fairly distinct phases in the development of nation-states –
MNCs interaction:

9. 2. The Confrontation phase (mid 1960’s – late 1970’s)
○ The MNCs became most heavily criticized for their
unacceptable behaviour resulting in uneven contribution to
economic development and unfair distribution of world
wealth.
○ This negative approach to the multinational entities was
reflected in political activities of the nation-states, such as
frequent expropriations, restrictions on new investment
flows or heavy regulation of MNCs’ performance.
Three Phasesby John H. Dunning (1992)

10. 3. The Reconciliation phase (late 1970’s till present)
○ By the end of 70’s, both implemented more constructive solutions and
effective instruments from both sides.
■ Governments realized the necessity to refine, modify and extend
the scope of their policies in order to make use of the inward
investments.
■ The MNCs, on the other hand, reviewed their attitudes and
activities in the acquired markets and focused on drawing up
codes of conduct as well as easing the communication on both
local and global activities, more and more often engaging in cross-
border strategic alliances and transnational ventures.
Three Phasesby John H. Dunning (1992)

11. ● The change of relations
○ With the patterns of relationships between the actors have changed
fundamentally.
○ The world has become more integrated, interconnected and
interdependent on all the levels. This process has had major impacts
on the relationships between nation-states and MNCs.
● Two Approaches to explain
○ There’re two approaches present the extreme ends of a view on the
nation-states and MNCs in the era of globalization which can be easily
simplified by two important books titles:
■ The Borderless World (by Kenichi Ohmae, 1990) and
■ The Myth of the Global Corporation (by Doremus et el., 1998).
Globalization & MNCs

12. ● Being stateless
○ Ohmae (1990) argues that global (stateless) firms are a natural
response to the fully integrated, borderless world economy.
○ MNCs have disengaged from any linkage to national origins, thus
becoming fully independent from any state control. Ownership
frameworks, decision-making processes, corporate strategies,
cross- national alliances.
● Untouchable
○ According to Ohmae, the governments have been deprived of
their traditional roles: both economic and political since the MNCs
have means how to circumvent governmental restriction.
Therefore, the multinational companies are becoming true
citizens of the world.
The Borderless Worldby Kenichi Ohmae (1990)

13. ● More integrated, more power for state
○ Doremus and his colleagues (1998) state that the position of the
nation-state has been reinforced because all the transnational forces,
technical advancements and economic integration have caused the
convergence of state policies. Thus, domestic factors such as national
structures and economic ideology do have powerful impact on the
strategies and operations of MNCs.
● National interest, national firm
○ Put in other words; the MNCs are seen as products of their home
economy, the national market is always considered the primary one
and the MNC’s activities are heavily influenced by policies of home
governments. The multinationals tend to reflect economic and political
interest of their home country while the governments promote the
interest of their own national firms.
The Myth of the Global Corporation
by Doremus et el. (1998)
Also be called as extremely state-centric approaches.

14. ● Nation-state as anachronism
○ The basic idea is that increasing economic interdependence,
technological advances in communication and transportation have made
the nation-state an anachronism.
● More effective at hand of private
○ The state is no longer in control over its economic affairs because
MNCs have proven that they are able to provide domestic economic
welfare and organize effective production of goods on a much more
efficient scale than the governments.
Sovereignty at Bay?by Raymond Vernon’s (1971)

15. ● Uneven development
○ Costs and benefits associated with the MNCs tend to be distributed
unevenly within and across the states. This concern became the core
of the “dependencia” theories elaborated mostly by developing
countries in 1970’s and 1980’s.
● More connect, more dependency
○ Basically, it challenges Vernon’s conclusions of MNCs and nation-states
being “partners in development”. According to Dependencia, accepting
foreign private investments from developed states increases
economical, technical and cultural dependency of less developed
states, and therefore, contributes to a hierarchical and exploitative
world order.
Dependencia

16. ● Transfer of economic function
○ The concept was further elaborated by the Marxist economist Stephen
Hymer (1970) into the concept of two rules through which will cause the
final transfer of economic functions of the state to MNCs.
● MNCs as the Trojan horse
○ Poynter (1985b: 25) even compares the acceptance of FDI and the
presence of MNCs in developing countries to a Trojan horse through
which the outside states can exert their influence on the host nation.
Dependencia

17. ● Mutually influence & co-existance
○ Both two actors (state and MNCs) still possess to control or at least
influence the other and also, that the key attributes of the nation-
state have not been fully destroyed by the global activities of MNCs.
● Mutual benefit & more cooperation
○ Also, the relationships between these two actors are not only
antagonistic as it might seem at the first moment from their mutually
different features, interests and strategies but, apart from the
interdependence and autonomy, a great deal of their relationships are
in a cooperative manner.
○ Not only does this bring hope that the world of nation-states and
global business might survive within one system but also that through
further cooperation, these two actors together with other entities will
continue working on a global set of rules and thus, will improve the
quality of the world system itself.
Conclusionby Martina Steinbockova (2007)

18. M
Nattawut Thammanukornsri
N
in the global affairs
Cs