Transnational Corporations: Definition & Examples (2024)

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Transnational corporations: definition

Transnational corporations (TNCs) are businesses that have a global reach. They are companies that operate in more than one country. Below you'll find some interesting facts about TNCs!

1. They operate (produce and sell) in more than one country.

2. They aim to maximise profits and lower costs.

3. They are responsible for 80 percent of global trade. ¹

4. 69 of the richest 100 entities in the world are TNCs, rather than countries! ²

Apple has a valuation of 2.1 trillion dollars as of 2021. This is larger than 96 per cent of economies (measured by GDP) in the world. Only seven countries have a larger economy than Apple! ³

Let's now look at some TNC examples below.

Transnational corporations (TNCs): examples

You may be wondering, what is an example of a TNC? It's a safe bet that any famous and big brand these days will be a TNC. Examples of transnational corporations (TNCs) include:

• Apple

• Microsoft

• Nestlé

• Shell

• Nike

• Amazon

• Walmart

• Sony

Fig. 1 - Nike is a known and loved company worldwide.

What's the difference between multinational corporations and transnational corporations?

That's a good question! And in truth, you've caught me out...in this explanation, the term transnational corporation incorporates multinational corporations (MNCs) as well. At A-level sociology, the difference for us is a small one. It has more implications from a business studies point of view then understanding their influence within global development. However, below I will briefly outline the difference between the two!

• TNCs = corporations that operate in many companies and who do not have a centralised management system. In other words, they don't have a central headquarters in one country which makes all the decisions globally.

• MNCs = corporations that operate in many companies and who do have a centralised management system.

Many companies involved in the exporting and importing of goods and services, like Shell, are more frequently MNCs than they are TNCs. But again, as sociologists looking at the impacts of these global companies on developing countries, the difference here is minute!

The question we should ask ourselves is: what makes TNCs so attractive for developing countries to attract in the first place?

...Keep on reading!

Transnational corporations and globalisation: what makes TNCs so attractive?

The large size of TNCs makes them extremely powerful in negotiations with nation-states. Their ability to hire many people and invest more widely in the country as a whole makes many governments regard the presence of TNCs in their country as instrumental.

As a result, developing countries attract TNCs through Export Processing Zones (EPZs) and Free Trade Zones (FTZs) that offer a range of incentives for TNCs to invest in.

As each country is competing against the other for the TNCs to set shop in their borders, there is increasingly a 'race to the bottom'. Incentives include tax breaks, low wages and the removal of workplace protections.

Depending on which theoretical approach of development we take, the role and perception of TNCs for local and global strategies for development changes.

Modernisation theory and neoliberalism favour TNCs, while dependency theory is critical of TNCs. Let's go through both approaches in turn.

Modernisation theory and neoliberal view of TNCs

Modernisation theorists and neoliberals believe that TNCs provide several benefits to the developing world. Neoliberals believe that TNCs should be actively encouraged by creating economic policies that create favourable conditions for TNCs to enter into. In many ways, TNCs are seen to play a central role in global development.

Benefits of TNCs for development

• More investment.

• Creation of more jobs...

  • For local businesses to help parts of the TNC operations.

  • Increased opportunities for women, which promotes gender equality.

• Encouragement of international trade - opening new markets should increase economic growth.

• Improvement of educational outcomes as TNCs requires skilled workers.

Disadvantages of transnational corporations: dependency theory and TNCs

Dependency theories argue that TNCs only exploit workers and exploit developing nations' natural resources. TNCs (and more widely, capitalism's) pursuit of profit dehumanises the world around them. Joel Bakan (2005) argues:

Transnational corporations exercise power without responsibility." ⁵

Let's consider why this is the case.

Criticisms of TNCs

1. The exploitation of workers - their conditions are often poor, unsafe, and they work for long hours with little pay.

2. Ecological damage - the wilful destruction of the environment

3. Removal of indigenous people - Shell in Nigeria, OceanaGold in the Philippines.

4. Human rights abuses - 100,000 people sought medical treatment after toxic waste was left around the city of Abidjan, Côte d'Ivoire in August 2006. ⁶

5. Little loyalty to countries - the 'race to the bottom' means TNCs will move when labour costs are cheaper elsewhere.

6. Misleading consumers - Think 'greenwashing'.

Fig. 2 - There are varying perspectives of TNCs.

Currently, the size of TNCs makes them almost unassailable. Fines are disproportionate to their revenue, blame is passed around, and the threat of leaving keeps governments amenable to the wants of the TNC.

Why are transnational corporations bad?

TNCs aren't inherently bad. However, Bakan (2004) would argue that "Transnational corporations exercise power without responsibility". He argues that it is TNCs (and more widely, capitalism's) pursuit of profit that dehumanises the world around them and makes them 'bad'.

What are transnational corporations (TNCs)? Give 10 examples.

Why do TNCs locate in developing countries?

TNCs locate in developing countries due to the incentives they are given. These incentives include tax breaks, low wages, and the removal of workplace and environmental protections.

What are the advantages of transnational corporations?

Do transnational corporations only bring advantages to the host country?

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