Issues in International Business

Industrial Firm Location: The Role of Multinational Corporations

Multinational corporations are the primary players today in the world's most dynamic industries and the driving force behind the global economy. Privatization is reaching deep into the farthest comers of Latin America. Russian firms seek international capital by listing themselves on the New York Stock Exchange. Africa, rich in resources but desperately poor in other respects, sees in foreign investment the only hope for an otherwise dismal future. Indeed, the business of the world today is business.

Prime ministers become famous by announcing their distaste for the global market, but their actions belie a different set of beliefs. While nation-states worry about guarding their sovereignty, their citizens pursue profit, higher living standards, and good old-fashioned durable goods, regardless of whether the products they buy come from next door or halfway around the world.

These are not the times for narrow balance-of-power considerations. As even an unchallenged superpower like the United States has seen, efforts to block the flow of trade and investment to nations such as Iran and Cuba are not just increasingly ineffective but costly. Multinational corporations - once made vulnerable to the expropriation of property or blockage of funds, and forbidden to trade with hostile countries and to buy and sell freely the latest high technology and scarce commodities - are now more likely to guide foreign policy than follow it. Individual donors such as George Soros and Ted Turner surpass the world's impoverished ministries of foreign affairs with their gifts to countries and world agencies.

Every year, the financial flows of international organizations such as the World Bank and the International Monetary Fund (IMF) diminish in importance relative to the hefty direct and portfolio investments that private investors pour into emerging markets. Many forces, from technology to political ideas, are keeping...