Just a few years ago, multinational enterprises were busily and profitably occupied in spreading their subsidiaries across the globe. Today, the world is awash with actions and proposals that would restrain the multinational enterprise and would alter its relations to nation-states.
There is no lack of explanations for the shift in mood and direction. Yet most explanations seem to ignore the real causes of the tension between multinational enterprises and nation-states, and most of the prescriptions seem impractical or irrelevant in dealing with those causes.
What are the roots of the tension between the enterprises and the states? Perhaps the most proximate cause has been the revolutionary shrinkage in international space over the past two or three decades, brought on by the introduction of new modes of international communication, including the radio telephone, jet air travel and the computer. The shrinkage of space has succeeded in narrowing the gap in consumer tastes between one country and the next, bringing aspirins and plastic pails and McDonald hamburgers into the remotest corners of the world. The same development has helped to reduce the differences among producers in different nations in their choices of machinery and industrial processes.
These developments have created the basis for a new state of interdependence among nations, manifested in higher levels of international trade, a greater flow of technical services across borders, and larger movements of international capital. At the same time, the shrinkage of space has provided enterprises everywhere with a new impetus for spreading outward from their home bases. Worldwide operations have offered increased opportunities for enterprises to profit from innovations or trademarks or patents, to develop new economies of scale, and to reduce their risks by spreading their operations over a number of different countries.
In the beginning, the largest enterprises in the industrialized countries, especially the leading firms of the United States, were in the vanguard of the movement. Soon, however, firms from Europe and Japan were crowding at the heels of the leading U.