TNCs as Global Investors
Whereas inbound FDI volumes can be explained by existing locational advantages (L-advantages) of recipient countries, FDI outflows reflect ownership advantages (O-advantages) of investing companies. O-advantages refer mainly to financial capacity and intangible assets (technological, management and marketing know-how; intellectual property; brand equity; trade and customer links; etc.) of TNCs in host countries. 1
TNCs have firmly established themselves as the key agents of international investment and transfer of know-how. Concentrating on technology-intensive activities, TNCs constitute the main medium for creating and disseminating technologies. TNCs belong to a wide range of sectors of activity, represent companies of different size categories (large-scale, medium-sized and, rarely, small) and operate through various forms of organization (e.g. sales subsidiary, joint venture, production affiliates).
The world's leading TNCs are true multinationals with diversified activities in manufacturing and, increasingly, services. In manufacturing, most industries have seen a trend towards 'transnationalization' over the past 30 years. Since the 1980s, service TNCs have also actively invested in foreign markets. Banking, insurance, telecommunications, media, retailing, transport, tourism and accounting–consulting have been recording the fastest expansion rates.
According to UNCTAD's 1999 annual investment survey of leading multinationals, some 60 000 parent TNCs were operating through 500 000 foreign affiliates (up from only 7000 in 1970 and 24 000 in 1990), in practically all countries of the world. The largest 100 industrial and services TNCs (excluding banks) – ranked according to foreign assets – were all headquartered in industrialized (OECD) countries: Unites States (30 companies),