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A multinational corporation (MNC) is an enterprise that engages in foreign direct investment (FDI) and that owns or controls value-added activities in more than one country (Spero & Hart, 1997, 96). Firms are considered to be more multinational if (1) they have many foreign affiliates or subsidiaries in foreign countries; (2) they operate in a wide variety of countries around the globe; (3) the proportion of assets, revenues, or profits is high; (4) their employees, stockholders, owners, and managers are from many different countries; (5) their overseas operations are much more ambitious than just sales offices, including a full range of manufacturing and research and development (R & D) activities (Ibid, 96).
Four theories and one hypothesis provide explanations of how structural goals are achieved by the MNC's. The internalization theory "...contends that firms expand abroad in order to "internalize" activities in the presence of market imperfections just as they expand domestically for similar reasons" (Ibid, 109). There are three prerequisites that must be met by the MNC to contend with the local firms even though the disadvantages of the former as a foreigner, "...(1) it must have market power that derives from o
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