Companies that operate in more than one country.
During the 1950s and 1960s, American firms of all kinds established offices abroad. According to the U.S. Department of Commerce Bureau of Economic Analysis, the topic value of American foreign direct investment rose from $12 billion in 1950 to almost $80 billion in 1970. American companies sought to overcome trade barriers such as tariffs erected by most countries around the world that existed in the 1950s. As trade restrictions eased, however, American companies became more aggressive and tried to link technical, marketing, managerial and financial advantages with cheap overseas labor. During this period, “going multinational” became the fashionable thing to do, and American companies felt a need to develop global product portfolios to remain competitive.
In 1968, Jean-Jacques Servan Schreiber published The American Challenge, predicting that American multinational corporations would soon dominate world business. But large companies in other countries were also part of the international expansion, having begun in 1965 to set up or acquire foreign manufacturing operations at the same annual rate as American multinationals. The 1965 value of foreign direct investment in the United States totaled approximately $7.5 billion; by 1972 it had reached almost $15 billion. Although foreign investment in the United States remained small compared with U.S. investment abroad, the increase represented an important change in the organization of multinational companies, because funds from foreign investment exerted influence on the structure and operation of these entities.
By the 1970s, some of the glamour of internationalization started wearing off, resulting in a period of American divestment during the early 1970s. From 1971 to 1975, American companies sold 1,359 of their foreign subsidiaries (almost 10 percent). During the same period, a substantial decline occurred in the number of new subsidiaries being formed (3.3 for each divestment in 1971 compared with 1.4 in 1975). These divestments were largely in low-tech, high-competition industries such as textiles, apparel, leather, and beverages. Investment in high-tech industries such as pharmaceuticals, machinery, and office equipment increased during the same period. Thus, both investment patterns and the makeup of the multinationals themselves changed. European multinationals had largely caught up with American companies; Japanese firms began to expand internationally; and the developing countries spawned their own multinationals. By 2000, 62 percent of exports and 39 percent of imports involved multinational corporations. Total trade among multinational corporations equaled $363 billion.
