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The Theory of the Transnational Corporation at 50+

Grazia Ietto-Gillies

Abstract

The paper briefly summarises the historical evolution of transnational corporations (TNCs) and their activities. It then introduces the major theories developed to explain the TNC. There is an attempt to place the theories historically, within the context of the socio-economic conditions and of the relevant economic ideas in which they were developed. The following theories are discussed: Hymer’s, market power and control; Vernon’s international product life cycle; the internalisation theory; Dunning’s eclectic framework based on Ownership, Location, and Internalisation (OLI) advantages; The Scandinavian School; the evolutionary approaches of Cantwell and of Kogut and Zander; the New Trade theory applied to the TNC; the role of nation-states in the strategic behaviour of TNCs. There are some critical comments at the end of each presentation. A brief analysis of key elements in the theories, their differences and commonalities follows. It is pointed out that the pattern of development shows tensions between the following interconnected elements: (1) contents and methods of interest to Business Schools and to Economics Departments; (2) static versus dynamic approaches; (3) emphasis on efficiency versus strategic elements; (4) strategies towards rivals as well as towards other players in the economic system such as labour, governments and suppliers; (5) single- versus multi-disciplinary approaches; and micro versus macro approaches.

Published on 30 Sep 2014 in Economic Thought Vol 3, No 2, 2014