“Transnational corporations (TNCs) are incorporated or

unincorporated enterprises comprising parent

enterprises and their foreign affiliates. A parent
enterprise is defined as an enterprise that controls
assets of other entities in countries other than its home
country, usually by owning a certain equity capital stake.
An equity capital stake of 10 per cent or more of the
ordinary shares or voting power for an incorporated
enterprise, or its equivalent for an unincorporated
enterprise, is normally considered as a threshold for the
control of assets (in some countries, an equity stake
other than that of 10 per cent is still used. In the United
Kingdom, for example, a stake of 20 per cent or more
was a threshold until 1997.). A foreign affiliate is an
incorporated or unincorporated enterprise in which an
investor, who is resident in another economy, owns a
stake that permits a lasting interest in the management
of that enterprise (an equity stake of 10 per cent for an
incorporated enterprise or its equivalent for an
unincorporated enterprise)”. (https://unctad.org)
The parent enterprise is linked with its foreign affiliates
to build one economic union with one collaborative
conduct and administration. (cf. Leser 2010, p.451)
What are the characteristics of measuring the
transnationality of enterprises?
There are several sources with different ways to
measure that, but the following refers to Dunning who
put up seven aspects to point out an enterprise’s
transnationality: First, the number and the size of foreign
affiliates are an important aspect for the TNC. As a
second point, Dunning thinks it’s important how many
countries are part of a TNC’s network. As a third aspect,
the amount of profit and revenues as well as the amount
of employees in foreign countries matter. Fourth, the
conduct from different nations meaning the amount of
the management seated outside the parent enterprise.
As fifth criteria, the quality of foreign affiliates is
important to prove that the outsourcing isn’t just for
cheap mass production. As a sixth point, the TNCs get
their advantages from networking in different countries.
The last criterion is the expansion of the TNC to have
more locations worldwide with its own managements so
that not the whole responsibility is in the hands of the
parent enterprise. (cf. Dunning et al. 2008, p. 3f.)

Why do TNCs produce abroad?

One reason for outsourcing is get a new orientation
away from the mature domestic market. Due to
advantage of globalization (‘time-space-compression’)
transport costs don’t matter anymore (cost degression in
sea transport); also the innovation of information
systems allow an enterprise to produce globally without
time delay. (cf. Steinbach 2009, p.35f.) Enterprises also
need to keep attention to get innovations quickly so that
they don’t be endangered referring to the dependency of
the stock market as well as the dependency of the
market and its price fluctuations. (cf. Steinbach 2009,
p.36; cf. Dunning 2008, p.79f.)
To get a clue of such enterprises, here are two
examples:
Example number one: VW (Volkswagen) group.
The automobile industry is one of the most successful
industries worldwide with four million employees and
nine to ten million employees in ancillary industries. (cf.
Dicken 2007, p.279)
The VW group was founded in 1937 to develop a
“Volkswagen” (a car for everyone) headquartered in
Wolfsburg, Germany. In 1960 the concern was
transformed in a corporation. In 2010, VW held 11.6% of
the world market (third biggest automobile producer in
the world) and the VW is the biggest automobile
producer in Europe (21% on West-European market,
13.7% in Central and East Europe). (cf.
https://www.volkswagenag.com; cf. Dicken 2007, p.290)
In 2011 there was a sales increase from 126.9 billion
euros to 159 billion euros. (cf.
https://www.volkswagenag.com) “The Group operates
99 production plants in 18 European countries and a
further nine countries in the Americas, Asia and Africa.
Each working day, 501,956 [December 31, 2011]
employees worldwide produce some 34,500 [December
31, 2011] vehicles, are involved in vehicle-related
services or work in the other fields of business. The
Volkswagen Group sells its vehicles in 153 [December
31, 2011] countries”. (https://www.volkswagenag.com)
VW is, according to Dicken 2007, the most
transnationalized European enterprise. (cf. Dicken 2007,
p. 301) Twelve brands from seven European countries
are counted among the VW group: “Volkswagen, Audi,
SEAT, SKODA, Bentley, Bugatti, Lamborghini, Porsche,
Ducati, Volkswagen Commercial Vehicles, Scania and
MAN”. (https://www.volkswagenag.com)
As a second example: Nike Inc.

Nike Inc. was “founded” in 1972 to provide better shoes

for athletes; it was not really a new enterprise but a
further development of “Blue Ribbon Sports” which was
founded in 1964 in Beaverton, Oregon (USA) by Bill
Bowerman and Phil Knight. Nike’s headquarter is still in
Beaverton, Oregon. 44,000 employees worldwide have
been working for Nike in 2011. Nike has 350 production
plants in 28 countries. In 2009 there was a sales
increase from US$ 8,000 (1964) to US$ 19.2 billion
(2009). (cf. www.nikebiz.com)
Nike Inc. is a TNC because production and distribution
had been outsourced. Nike does marketing, designing
and distribution by itself. (cf. Gereffi et al. 1994, p.251)
In the late 1980s, almost no shoes had been produced
in the US; in the early 1980s 70% came from South
Korea, 16% from Taiwan, 7% from Thailand and 7%
from the US. (cf. Scherer 2003, p. 26)
Marketing was the reason why Nike became so popular
and successful: Within the 1970s, first athletes signed
contracts with Nike. These athletes did very well in the
Olympic Games (1980) which improved Nike’s status as
well; so that other athletes (basketball, baseball) signed
contracts for advertising. (cf. Gereffi et al. 1994, p.255f.)
Nike made a huge profit by signing Michael Jordan
(basketball legend) for creation of “Nike Air”. (cf. Gereffi
et al. 1994, p. 257) In the 1990s, more athletes signed
with Nike like Tiger Woods, Lance Armstrong and the
Brazilian national soccer team. Nike’s success is also
reflected by launching shops (Niketowns). (cf.
www.nikebiz.com)
How does this production network work?
A design is created in Beaverton. This design is sent to
a production plant to produce a prototype which will be
proved in Beaverton, and if it is good enough, it is sent
back to give it into mass production. (cf. Scherer 2003,
p. 23f.)