According to Dunning (1992: 3) “A multinational or transnational enterprise is an enterprise that engages in foreign direct investment and owns and controls value adding activities in more than one country”. A more general view from the late 90s assumes that we have now, those who are now global players, “born international organisations” such as Facebook or Apple.
The existence of MNCs is reasoned by structural market imperfections for final products (Hymer, Kindleberger and Caves). Market imperfections had been considered as structural and caused by the difference from perfect competition in the final product markets. Further reasons are newly formed from the control of own technology and distribution systems, scale economies, privileged access to inputs and product differentiation.
Multinational corporations are important factors in processes of globalization. National and local governments often compete against one another; however it is companies that trade not governments, to attract MNC facilities with the expectation of increased tax revenue, employment and economic activity. To compete, political entities may offer MNCs incentives such as tax breaks, pledges of governmental assistance or subsidized infrastructure, or lax environmental and labor regulations. These ways of attracting foreign investment may be criticized as a “race to the bottom” (which means a race to the bottom is a socio-economic concept that is argued to happen between countries as an outcome of regulatory competition).
On the other hand, in countries with comparatively low labor costs and weak environmental and social protection, multinationals actually bring about a “race to the top”. As mentioned before low labour costs give the MNCs a comparatively advantage; for example Shoe-MNCs clearly pay workers in developing countries far below levels in countries where labor productivity is high, wherefore Nike and Adidas move their plants to China or Vietnam.