In this paper, we analyzed the basic tenets of multinational enterprise (MNE) from a theoretical perspective, shedding light on the growing significance of MNEs in today’s global economy. The concept of MNE has been reviewed. We examined two theories of MNE – the trade theory and the transaction cost or internalization theory, in line with emerging global trends. We conclude that no single theory can explain MNE, rather, a combination of theories.

1. A Theoretical Analysis of the
Tenets of Multinational
Enterprise (MNE)
Claretta Taylor Pam
Dr. Gregory Uche
College of Management and Technology,
Walden University

2. Introduction
Multinational enterprises (MNEs), sometimes
referred to as multinational corporations
(MNCs), are arguably the most influential
business entities responsible for turning
Western capitalism into a global phenomenon
(Heidenreich, 2012). A comprehensive
definition of MNE should integrate structural,
investment, and ownership elements.

3. Concept of Multinational Enterprise
The basic tenets in the concept of multinational
enterprise (MNE) are that it is a large business
organization which emphasizes the structural
dimension; it has headquarters in a home
country and business operations in several
host countries pointing to the element of
globalization; and it operates in various
business environment (Buckley & Casson,
2009; Qi, 2008).

4. The fundamental questions to address are:
(i)What is the motivation for a business entity to
go abroad?
(ii)What resources enable it to accomplish this
goal?
(iii)Why do MNEs embark on different
investment interests?
(Hennart, 2012).

5. We reviewed the trade theory and the
transactional cost or internalization theories,
in an effort to make connections to emerging
trends in the world of MNEs.
Theories of Multinational Enterprises

6. The trade theory is based on the assumption that
the MNE is a component in the long-term capital
sector of the balance of payment with huge
implications for foreign direct investment (FDI).
The basic argument of the transaction costs theory
is that the cost of organizing a given transaction
varies with the method of organization chosen to
organize it (Hennart, 2009).
Theories of Multinational Enterprises

7. Emerging Trends in MNE
Foreign direct investment (FDI) has been on the
increase in emerging economies, which may
compel Western MNEs to streamline their
cost structures and access resources.
Driven by profit and cheap labor, most Western
countries have resorted to MNEs in order to
remain competitive.

8. We conclude that both theories (trade theory
and transaction cost theory) have merits and
can be used to explain some contemporary
issues in MNE. However, it is our position that
no single theory can adequately explain
current trends in the complex world of MNEs.
Conclusion

9. References
Buckley, P. J., & Casson, M. C. (2009). The internationalisation theory of
the multinational enterprise: A review of the progress of a research agenda
after 30 years. Journal of International Business Studies, 40, 1563-1580.
doi:10.1057/ jibs.2009.49.
Heidenreich, M. (Ed.). (2012). Innovation and Institutional Embeddedness of
Multinational Companies: New Horizons in International Business.
Edward Elgar Publishing.
Hennart, J-F. M. A. (2012). Emerging market multinationals and the theory of
multinational enterprise. Global Strategy Journal, 2, 168-187.
Doi:10.1111/j. 2042.5805.2012.01038.x.
Qi, Z. (2008). The model of expansion from local enterprises to multinational
enterprises. International Journal of Business and Management, 3(8),
141-148.

10. About the Authors
Dr. Greg Uche is a contributing faculty and an online
professor of research methodologies in the Doctor of
Business Administration (DBA) program of the
College of Management and Technology at Walden
University. He is currently a research specialist at
Grextar Consulting in Houston Texas. He teaches
quantitative research in addition to serving as chair
and mentor to several doctoral students. He is a
published author.

11. About the Authors
Claretta T. Pam is a doctoral candidate in the Walden
University School of Management. Claretta earned
an MBA at the University of Phoenix and two
undergraduate degrees at the UMass Boston. Her
doctoral topic is: An Exploration of Immigrant
Entrepreneurs Perceptions of Business Success. Ms.
Pam is the managing director of Global Nebula
LLC,CEO at the Boston School of Real Estate, Global
Realty & Investment Corp and is lead publisher at
Innovative Publishers Inc. in Boston, Massachusetts.