Skip to main content
  1. Preface:

Multinational corporations are the driving force of the global economic and political system due to their enormous material and human capabilities that extend to various countries of the world. In order to distribute risks and diversify sources of profit, there are also a lot of its activities and products that take advantage of the achievements of scientific and technical progress. Recently, interest in multinational companies has increased due to the impact on the economies of developing countries. Multinational corporations, despite their importance and role in the global economy, can become a deadly weapon that threatens host countries, especially developing countries.

What are multinational companies, what are their characteristics and what are the effects of multinational companies on their activities in developing countries?

  • Description of multinational corporations:
The emergence of the term multinational corporations dates back to economist David Lilienthal in 1960. He has conducted research under the name of Kanringi Institute of Technology (Multinational Sharing Company). In this study, a new term has emerged that defines giant entities that have emerged in the international economy and defines them as companies that are resident in one country, but live and are subject to the laws of other countries.

Another name for multinational companies is called international companies, national companies or transnational companies. Companies that have their main headquarters in the main country and have assets in at least one other country, whether their assets in other countries are in the form of offices, branches, factories and production lines. The Headquarters coordinates all international operations, gives some authority to the branches and plans them by controlling them.

Multinational companies “are institutions or companies that own or manage branches (units) in many countries. These units are financially and legally dependent on the parent company,”it is defined. In other words: “It is a group of

According to the latest estimates, it shows that the number of multinational companies has reached about 65 thousand companies, there are about 850 thousand foreign companies connected to it all over the world. Industrially developed countries are home to about 50,000 companies, which is equivalent to 77% of the total number of multinational companies in the world. As for other countries in the world, it is home to more than 15,000 companies, representing 13% of the total number of multinational companies. The share of developing countries is 9,296 companies, of which about 65% are concentrated in South and East Asia, 28% in Latin America and the Caribbean, 5% in West Asia, and 2% in Africa. About 90% of the 100 largest non-financial multinational companies in the world in terms of foreign assets are located in the tripartite (USA, Japan and the European Union) countries that dominate the global economy. More than half of these companies operate in the sectors of electrical equipment, electronics, automotive and oil exploration and distribution.

companies whose branches are scattered throughout different national legal systems. It is an organization represented by a main center and its subsidiaries, which are its subsidiary elements,”it is called.

Multinational Brands

3- Characteristics of multinational companies (corporations):

– Large volume: The amount of money that represent only a small portion of the total funding provided to the company by the amount of capital employed or the number of, not by the number of sales (number of operations) that have to be measured by marketing networks, scientific research and development expenditure in the amount of organization is measured by the efficiency of the management structures and to conduct business worldwide.

– Geographical spread: it is an expansion of the geographical area of the scope of multinational companies. These companies are distinguished by the large market area they cover and their geographical extensions outside the main country, have enormous potential in Marketing and have branches and subsidiaries in various parts of the world.

– Decision center unit: Multinational corporations exercise centralized control over their subsidiaries worldwide. Where all its branches work under a strict disciplinary system and are subordinated to a decision-making center within the framework of a unified global strategy.

– Technological superiority: multinational companies represent financial-technological units. These companies invest large sums of money in research and development to invent new products or production methods, which makes it the owner of industrial secrets in the world.

These companies try to maintain integration and coordination relations between them in order to realize their common economic interests, develop competitiveness and marketing power, and each of them dec advantage of technological advantages that the other has, technical knowledge, marketing methods and management skills.

4- The reasons for the establishment of multinational companies:

  • the fact that natural resources and energy resources vary in different countries of the world. Multinational companies dominate many markets to ensure the supply of raw materials and the use of energy resources.
  • Inequality in production costs to take advantage of differences in transportation costs and labor costs: Therefore, it is directed to countries where labor exploitation is high and wages are lower.
  • The structure of global markets: They distribute production to different regions of the world for companies to develop and generate income. Therefore, these companies occupy all foreign markets to protect export markets, and when their products become typical, their activities become busy work and low-cost economies. Then, due to the low cost of production, it opens new branches specializing in the export process to international markets, which gives it the character of (universal demand) for its products.

The impact of multinational corporations on the global economic system:

Multinational corporations implement roles and influences on the new global economic system. It makes these applications through working mechanisms that lead to the following effects, these effects are as follows:

– Confirmation of universality: it is the globalization of the economy, and it is the pressure on the unification of the goods, services, capital markets and technology markets at the world level.

– The impact on the international monetary system: liquid assets owned by these companies, which are about twice their international reserves (gold, etc.) Its impact on the international monetary system.

– The impact on global trade: These companies account for 40% of the volume of international trade and 80% of world sales. This, in turn, reflects the extent of the influence that these companies exert on international trade.

– Impact on international investment targets: impact on international investment targets by acting as a moving carrier for capital invested in different parts of the world.

– Due to the globalization of markets, as parts of a single methane are produced in different parts of the world creating new specialization patterns and an international division of labor.

– Influencing technology transfer: Influencing technology transfer: Due to the great capabilities, material resources and human expertise that these companies have, they devote themselves to scientific research and industrial development in order to achieve new inventions and distribute them around the world.

The impact of multinational companies on developing countries

Steps that developing countries will take to reduce the negative impact of multinational companies: – To negotiate with multinational companies before starting operations, in order to obtain the best contract terms. -Constantly monitoring and monitoring the activities of multinational companies, monitoring the international movement in various ways (national planning, investment control, protection and development of sectors of national interest, insurance). -It is necessary not to rely entirely on multinational companies to achieve development, seeing them only as a means of assistance, it is necessary to rely on local national companies to achieve comprehensive development.

– Multinational corporations play an active role in ensuring comprehensive economic development in developing countries. In this role, creating jobs, raising the level of income, increasing productivity by breaking the monopoly of local and some national companies, by enhancing local competition, thereby increasing the volume to compete with international companies is by domestic or foreign. But this contribution to development is not connected with the actual development of the economy. Multinational corporations endanger national industries that have arisen in developing countries.

– Multinational companies always try to increase their profits through the consumption of natural resources and cheap labor. These companies do not care how important the projects they implement are for the national economies of the host countries.

– It negatively affects the culture of host countries and the traditional consumption patterns of their citizens. Where there is more material interest, the spread of unconventional consumption habits and the production of goods that do not affect the process of national development are becoming widespread.

– Multinational corporations interfere in the internal affairs of developing countries and host countries. Their goal is to achieve their goals and protect the interests of large countries that coincide with their interests and goals.

– Multinational companies retain control of technology production and distribution, and have become the main factor of new technologies in the world. But it is known that these companies are transferring technology to developing countries, which some developed countries have decided to abandon. These companies charge a high price in exchange for the technical knowledge they provide, and do not attach importance to the suitability of the technology they sell for the country’s economy, society and cultural values. This situation has negative consequences for developing countries around the world, and has resulted in dependence and subordination to developed countries.

Epilogue :

Nowadays, multinational corporations have had major projects in many countries of the world, and have become one of the most important elements of the global economy due to the role they play in the field of investment.  The rapid increase in the role of these companies in the global economy represents one of the most important features that characterized capitalist growth and development in the second half of the 20th century.

Some of these companies, as the main purpose, are to open markets abroad in order to meet the needs of the workers of industrial countries, the industrial sector and their economies, to find new raw material sources in this concept and to sell their goods. These companies seek to increase their competitiveness through their dominance in the market. These companies limit the role of the state, interfere in the internal affairs of states, have become a financial and economic force and authority in the global economy.


– Paul Hurst and Graham Thompson, Globalization, the global economy and the possibilities of control, Translation: Faleh Abdul-Jabbar, the information world series, Al-Politikah Publishing house, Kuwait, 2001.

– Khaled Ragheb Al-Khatib: Supervision of investment in multinational companies – in the light of international standards – Dar Al Badia, first edition, 2019

– Gul Farhat, 21. Journal of global strategic alliances, Economics, Management and Trade Sciences as a tool for competition in the XXI century, No. 23, University of Algiers 03, 2011