Multinational corporation (MNC)

A multinational corporation (Multi-National Corporation MNC) is a company that is not only active in its home country, but in several countries or even worldwide, and which accomplishes a substantial part of its value-added activity abroad.

A company is not already regarded as an MNC when it exports its products or purchases factors from abroad. However, if, for example, research and development or part of production takes place in other countries, or if the headquarters and corporate management are in a different country than the divisions, then an MNC is in place.
In the context of value management, the question arises as to whether MNCs typically have a higher value than comparable companies that are heavily focused on one country. According to MORCK and YEUNG, several theories have been developed on this:

1. Die Theorie der Internalisierung: Eine Unternehmung kann durch multinationale Aktivitäten neue Märkte für ihre immateriellen Vermögenswerte (Patente, Human capital, Marketingfähigkeiten) erschließen.

2. Die Theorie der unvollkommenen Märkte: Da in der Realität die Märkte nicht vollkommen sind, kann eine MNC Wertsteigerungen erzielen, indem sie Arbitragegeschäfte realisiert. Eine MNC kann ihren Wert steigern, indem sie ein Low tax country für ihr Hauptquartier wählt oder Gewinne durch ein Transferpreissystem steueroptimal verteilt. Zudem können Inputkosten wie Produktionskosten durch Auslandspräsenzen minimiert werden.

3. The management theory: It says that multinationality has a negative impact on the value of a company, as there are more conflicting interests. It is emphasized here that the local management often tends to increase its own reputation through publicity projects, even if this is not very profitable for the group.

Which of these theories best describes reality has not been conclusively clarified. Although studies have come to different conclusions, it appears that the former theory of internalization is probably the most accurate. So: An MNC achieves an increase in value if the company portfolio promotes the company's composition of units and areas that use intangible production factors.

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