Why do firms become transnational? Discuss various theories explaining emergence of transnational corporations in the world economy?
Answers
When business increases at one location, it is natural for companies to start branches and operations at other places, which afford more opportunities. They also diversify into other fields, as appropriate and therefore grow.
Before selecting other locations, companies consider factors such as governmental support in the new locations, tax benefits and scope for further growth.
Trans-nationalism is an economic process involving expansion or reorganisation of companies to other countries, to make use of government incentives and therefore minimise cost. It is also known as Globalisation.
Nowadays, the most important aspect to explain the economic link between the two nations is with the help of their transnational corporation.
It has become an essential part of 2/3rd of the trading sector on a global level that has affected approximately 90 per cent of the patents.
However, GNP is the main factor to determine it.