Transnational Corporation

Definition and Measurement

There are many definitions of TNCs, ranging from the simple notion of firms that [Page 2867]have operations in more than one country to more sophisticated conceptualizations that acknowledge the complexity of firm internationalization. The most widely used definition in geography is by Dicken (2007), who defines a TNC as “a firm that has the power to coordinate and control operations in more than one country, even if it does not own them” (p. 106). This definition offers an important qualification that transnational corporations are not simply “present” in more than one country. Their transnationality results from the nature of their presence in different markets and their organizational structure. TNCs are engaged in a wide range of different industrial sectors ranging from resource extraction to services such as banking. They share three basic characteristics:

• 1.
  Operations within and between different countries, coordinated and controlled through transnational production networks
• 2.
  The ability to use such networks to exploit global geographical differences in the distribution of resources
• 3.
  Flexibility to shift their geographical locations

Transnational firms can be measured in a variety of ways, for example, overseas revenues, number of employees, transnationality, geographical spread, overseas profitability, and many more. In 2005, the biggest company in the world (as measured by total revenues) was ExxonMobil, the world's largest employer was Walmart, the firm with the greatest foreign assets was General Electric, and the United Nations Conference on Trade and Development ranked Canadian media firm Thomson Corporation as the most transnational and Deutsche Post as having the greatest geographical spread. The total number of TNCs is growing yearly. Between 1970 and 1998, the number of TNCs worldwide grew from 7,000 to an estimated 53,600, with some 449,000 foreign subsidiaries.

Evolution of TNCs

The geographical expansion of firms outside their home territories is not a new phenomenon. Historically, companies such as the East India Company and Hudson's Bay Company developed extensive geographical networks to trade over large distances. However, the modern transnational firm emerged in the second half of the 19th century as part of a dramatic increase in international economic activity. Processes of globalization accelerated after 1945, and increased internationalization and integration were enabled by two interrelated processes: first, the rapid development of technologies of time-space compression—travel was quicker, cheaper, and possible over greater distances, and developments in telecommunications facilitated transnational communication—and second, the introduction and development of flexible systems of production and organization in firms. By the 1970s, firms were increasingly investing in overseas markets and integrating production and distribution across a range of different territories.

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