Multinationals and Global Capitalism: From the Nineteenth to the Twenty-First Century

This chapter explores the relationship between multinationals and their home economies. The organization of knowledge by firms is forged by the interplay of national institutions and entrepreneurship. As a result the firms of different countries developed distinct capabilities and organizational forms. This was reflected in the strategies and organization of firms from different countries. This chapter examines the long-term differences between the firms of different nationalities in their propensities to invest, and the geographical and sectoral distribution of their investments. It then turns to examine the impact of multinationals on their home economies. Finally the issue of whether nationality still matters is discussed.

The number of major home economies has always been small. As Chapter 2 showed, before World War I at least four-fifths of world FDI came from a handful of countries in Western Europe. Britain alone accounted for nearly one half of world FDI. The United States held another 14 percent. Thereafter ownership became more rather than less concentrated. Between World War I and 1980 the United States, the United Kingdom and the Netherlands accounted for between two-thirds and three-fourths of total world FDI. From the 1980s the number of major home economies rose again, but the six large home economies shown in Box 9.1 accounted for two-thirds of world FDI in 2002.

This ownership pattern reflects strong national differences in the timing of international business activities. In a historical perspective, three categories of home economy can be identified: persistent, erratic, and latecomer. The persistent investors began to invest in the nineteenth century, and continued on a substantial scale despite shifts in the political and economic environment. The United States belongs firmly to this category. Even more striking was the propensity of British companies to invest abroad which persisted in the face of relative economic decline and the end of the Empire. In 2002 its stock of world FDI was proportionately much larger compared to its domestic

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