The Multinational Enterprise: Power versus Sovereignty

Author's Note: The major conclusions of this article will be expanded in "Sovereignty at Bay: The Multinational Spread of U.S. Enterprises," to be published in September 1971 by Basic Books, Inc., New York.

THE extraordinary spread of U.S. enterprises into foreign countries in the last two decades has produced its inevitable aftermath. Though the multinational enterprise as an economic institution seems capable of adding to the world's aggregate productivity and economic growth, it has generated tensions in foreign countries. As a rule, the tensions are a manifestation of powerful psychic and social needs on the part of élite groups in host countries, including the desire for control and status and the desire to avoid a sense of dependence on outsiders.

There are several unresolved conflicts. Sovereign states have legitimate goals toward which they try to direct the resources under their command. Any unit of a multinational enterprise, when operating in the territory of a sovereign state, responds not only to those goals but also to a flow of commands from outside, including the commands of the parent and the commands of other sovereigns. As long as the potential clash of interests remains unsolved, the constructive economic role of the enterprise will be accompanied by destructive political tensions.

II

What can be done about the potential clash? A useful first step in any prescriptive exercise is to attempt a projection based on the assumption that events will be allowed to run their course, without the conscious intervention of new policies. As far as the future of multinational enterprises is concerned, simple projections seem risky. As tension builds, more Chiles and more Cubas could easily develop. Despite such possibilities, however, there have been some exceedingly strong regularities in the patterns of growth and the patterns of relations between host countries and foreign-owned enterprises.

In modern societies, products have commonly moved through a predictable cycle from birth to senescence. As a consequence, the enterprises dependent on any given product have found their negotiating strength constantly in a state of change, rising for a time in the beginning of the cycle, then declining later on.