As powerful forces of globalization continued driving the growth and expansion of multinational enterprises (MNEs), questions were increasingly raised about what responsibilities came with the power that these large companies had accumulated. Indeed, some of these questions and concerns have been behind a slowdown and even reversal of some of the earlier globalizing dynamics. In this final chapter, we address this issue by examining the evolving role of the MNE in the dynamic political economy of the twenty-first century.

The recent decades of growth in the global economy have also advanced the development of most large nation-states in which MNEs operated, as their economic and social infrastructure benefited from the value created through booming crossborder trade and investment. However, another group of countries has remained largely in the backwash of the potent developmental forces of globalization. While the richest nations argued that the rising tide of globalization would lift all boats, to those in the poorest countries, it appeared to be lifting mainly the luxury yachts. And despite half a century of effort, government-sponsored aid programs designed to narrow the growing gap between rich and poor nations have exhibited surprisingly little positive impact. With 71% of the world's population subsisting on less than $10 a day (and 11% on less than $1.90 a day), many have begun to feel that the MNEs that benefited so greatly from global economic expansion now have a responsibility to help deal with the unequal distribution of those benefits.

After discussing this evolving situation, this chapter will describe four different postures that MNEs have adopted in recent decades, ranging from the exploitative and the transactional to the responsive and the transformational. Although these are presented as descriptive generalizations rather than definitive normative categories, in today's global environment, there is a strong push to have companies move away from the exploitative end of the spectrum toward the responsive and even transformative end. These expectations are set out in documents ranging from the UN Global Compact to the voluntary industry norms and standards that have been established to provide guidance to the way the MNEs might think about their responsibilities abroad as they expand their operations into the twenty-first century.

In the information-based, knowledge-intensive economy of the twenty-first century, MNEs are not competing only on the basis of their traditional ability to access new markets and arbitrage factor costs. Today the challenge is to build transnational organizations that can sense an emerging consumer trend in one country, link it to a new technology or capability it has in another, develop a creative new product or service in a third, and then diffuse that innovation rapidly around the world. This transnational innovation process is much more sophisticated than the more traditional “center-for-global” and “local-to-local” approaches that have been the dominant form of cross-border innovation in the past. In this chapter, we describe the traditional and the emerging models of cross-border innovation as well as the nature of the organizational capabilities that must be developed to make them effective. The chapter concludes with a closer examination of the characteristics of the transnational organization that allows the MNE to develop and manage crossborder flows of human and intellectual capital supplement with the same facility it has traditionally managed its international flows of financial capital.

This chapter looks at a number of important questions that companies must resolve before taking the leap to operate outside their home environment. What market opportunities, sourcing advantages, or strategic imperatives provide the motivation for their international expansion? By what means will they expand their overseas presence – through modes such as exports, licensing, joint ventures, wholly owned subsidiaries, or some other means? And how will the management mentalities – their embedded attitudes, assumptions, and beliefs – that they bring to their international ventures affect their chances of success? Before exploring these important questions, however, we first need to develop a definition of this entity – the multinational enterprise (MNE) – that we plan to study and develop some sense of its size and importance in the global economy.