Course : X0504-Dynamics of State Interaction and

Multinational Corporations in Globalization Era

Year : 2014

MNC Definition and Significance of MNC:

Session 3-4
 Outline
• Introduction
• Significance MNC in International Relations and
Business.
• Definition of MNC
• Discussion
• Q&A

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 Introduction
• MNC appears as one of the important actors since 1970s
• MNC as economy entity have impact on investment and
wealth of a country.
• What is MNC and what is significance of MNC would be
answered in this session

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 MNC in IR
• Along with the HI development as science, traditional state
actor in HI no longer be the only actor that critical with the
strengthening of the role of other actors such as MNCs 1970s.
• 1970s oil shocks strengthen the power of MNC, mainly
engaged in petroleum energy sector.
• IPE study of the MNC and its role as an actor in international
relations more concentrated on the relationship between the
state as a recipient country (the host country) and MNC.

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 MNC in IR (2)

• Conflict of interest of MNCs, on the one hand as a corporation

that works to maximize profits, met with the interests of the
country who view their relationship in glasses nationalists who
consider that the economic activity undertaken by MNC is
subordinate to the interests of the state.

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 MNC in IR (3)
Luo (2003) said at least four factors simultaneously and
collectively shaping the relationship between the MNC and the
country as a cooperative.
1. Complementary resources (resource complementarity), that
the resources (resources) that can not be separated between the
two parties is an essential condition for the creation of
synergies.
2. Political accommodation (political accommodation) which
leads to the ability to accommodate the interests of MNCs in
the political and social translated in various ways such as job
creation, education, and social support for local infrastructure
development.
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 MNC in IR (4)
3. The credibility of the organizational (organizational
credibility) which refers to the degree of trust
(trustworthiness) of the MNC is determined by the image of
social responsibility, subject to social norms, institutional
harmony, company reputation, loyalty service users, as well
as the solidity of the relationship between TNC and business
community, including competitors.
4. Personal relationships (personal relations), namely the
relationship between MNC executives and government /
government agencies (

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 MNC and other terminologies
• Multinational Company or Transnational Company or
Multinational Enterprise?
• United Nations (UN) and some academics such as Stephen
Gill and David Law prefers the term transnational because of
the ownership and control over company which expanding
overseas.
• In "The Multinational Enterprise as an Economic
Organization", Caves (Frieden, 1995) refers to the hierarchy of
decision makers (top-level coordination in the hierarchy of
Business Decisions).

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 MNC Definition
• Some academics like Dunning and David Fieldhouse stated
that the company to be categorized as an MNC must operate in
at least one country.
• Others such as academics or economists Caves and Gilpin
explicitly call the company at least should control and manage
production in at least two countries.
• Theodore H. Cohn: MNC are usually defined as firms that
control asset in at least two countries.
• MNC called international actors because MNC is a company
whose activities were out of the boundaries of a country
(Spero, 1990).
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 MNC Definition (2)
To measure the degree of internationality multi or a company, Dunning in
"Multinational Enterprises and the Global Economy" charted several criterias:
1. The number and size of the foreign subsidiary or affiliated company controlled by
the parent company.
2. Number of countries in which the MNC operates in value-added activities (value-
added activity) such as factories, tmbang, plantations, banks, hotels, and sales
outlets.
3. Global proportion of the assets, income, and number of employees by an affiliate
or subsidiary companies.
4. The level of internationalization of the management or ownership of shares.
5. Given the extent of internationalization of value-added activities such as R & D.
6. The pattern and level of influence of MNCs on a series of economic activities in
several countries.

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 References
• Tirta Mursitama and Dini Adiba, Diktat Pembelajaran Bisnis
Internasional: Globalisasi dan Signifikansi Peran Perusahaan
Multinasional, Bina Nusantara University, 2013
• John H. Dunning, Theories and Paradigms of International
Business Activity. Ch.13

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 THANK YOU

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