chapter  14
46 Pages

Transnational Corporations and Economic Development

Transnational corporations (TNCs) are companies operating in two or more nations (with a significant equity investment of at least 10 percent in a foreign branch plant, subsidiary, or affiliate). Transnationals are far from being a new or recent element of the structure of economic relationships which define the less-developed world. In the early colonial period (Chapter 3), TNCs such as the Dutch East Indies Company and the British East India Company played major roles in the economic lives of Java, India, Holland, and England. Even prior to the Industrial

Revolution, these early trading corporations were determined to reap profits from their nearmonopolistic control of certain trade routes and commodities. However, most of these early TNCs were involved in trade, not in the direct production of goods. With the onset of the Second Industrial Revolution (1870-1910), giant vertically integrated corporations emerged in many branches of primary production, such as mining, and tropical commodities, such as bananas and rubber, and oil. Many of these vertically integrated companies established production and processing sites in the colonial areas, or in independent but poorer nations, such as Latin America. These resource-specific transnationals often established a strong political presence, both within their nation of origin and within the host nation or territory.1