The United States, Japan, and the major economic forces of Western Europe are developed countries whose infrastructures and well-established financial markets are conducive to the operation and potential success of multinational corporations (MNCs). Many MNCs are based in the U.S. Many of these companies are among the Fortune Global 500.

China, which has one of the world's fastest-growing economies, is a country where many MNCs have established operations. Additionally, China itself is the headquarters of many growing multinational corporations. Examples of large Chinese MNC's include Hauwei Technologies, Lenovo, and Haier.

Key Takeaways

  • Developed countries such as the United States, Japan, and those located in Western Europe are the headquarters to many of the world's largest multinational corporations (MNCs).
  • Although still a developing country, China is also the headquarters of several growing MNCs.
  • MNCs require both soft and hard infrastructure to sustain their businesses and facilitate trade.
  • Soft infrastructure includes access to a well-trained labor force, advanced technology, and a stable government.
  • Hard infrastructure refers to the physical infrastructure of roads, bridges, ports, railways, and airports that enable MNCs to move goods from place to place.

Advantages Gained by MNCs in These Countries

Multinational corporations (MNCs), also known as multinational enterprises, rely upon infrastructure, both soft and hard, to establish and sustain healthy business environments in any given location. These infrastructures are closely related, and both are impacted by politics and economics. MNCs view the existence of infrastructure as critical to facilitating trade, as well as necessary for investing and doing business in the country.

Soft Infrastructure

The U.S., Western Europe, and Japan all possess highly developed soft infrastructures and financial markets that enable companies located there to raise large amounts of money at a low cost. The presence of advanced technology and sophisticated management techniques is also an enormous advantage to these companies.

Soft infrastructure encompasses human capital, specialized talent, training, and supporting institutions such as the colleges and universities that help produce educated employees. A sound, soft infrastructure also contains administrative, judicial, and law enforcement agencies that safeguard the kind of political and social stability necessary to do business efficiently, as well as grow and convey specialized services to people.

The absence of soft infrastructure means there are institutional voids, such as a lack of regulatory systems, specialized intermediaries, educational institutions, talent, and training. This makes it difficult for new corporations based in developing countries to access human capital or talent inexpensively, and it is equally challenging for MNCs wishing to do business in such countries.

Hard Infrastructure

Hard infrastructure is yet another reason most MNCs are based in the U.S., Western Europe, and Japan. This consists of roads, bridges, ports, buildings, and any structures falling under the heading of public works. Because hard infrastructure impacts transportation, its absence negatively affects the supply chain potential and the ability of MNCs to move materials and goods from place to place physically.

Though MNCs have long avoided entering developing countries, globalization and the new potential to initiate the creation of infrastructures finds them more frequently embracing the challenge. The promise of receiving enormous tax revenues compels governments in developing countries to entice MNCs to do business in their territories.

Benefits of MNCs

In addition to providing revenue, MNCs generate jobs, stimulate local economies, as well as create and share culture. They also introduce previously unavailable goods and services, advanced technologies, and management techniques. Local MNCs can then take advantage of these benefits, becoming more competitive and creating their own opportunities to do business across national borders.

$1.54 trillion

The value of foreign direct investments made by multinational enterprises in 2019, according to the United Nations' World Investment Report 2020.

MNC Statistics

Though historically the U.S. has boasted the largest number of MNCs compared to other countries, the percentage of the largest MNCs headquartered there has dwindled over the years. Sixty percent of the world's top 500 MNCs were headquartered in the U.S. in 1962. By 1999, that number had dropped to 36%. The United Nations Conference on Trade and Development (UNCTAD) reported there were almost 80,000 active MNCs in the world in 2006.

According to the Bureau of Economic Analysis, U.S. multinational enterprises employed 42.5 million workers worldwide in 2017. Employment was the largest in China, United Kingdom, Mexico, India, and Canada.