Differences Between International Organizations & Multinational Corporations
Multinational corporations and international organizations are distinct in their purposes and operations. A multinational corporation is an international profit-making organization that seeks to meet a specific demand for a product. An international organization is a group of like-minded people who work together for a cause, such as human rights or environmental safety. What they have in common is that they work across international borders.
The multinational corporation is not a new development, but the size of, number of and global dominance of these organizations is. The point of a multinational corporation is to make profits for stockholders. They do this by using the resources, labor and markets of foreign societies. Gold mining operations, for example, might invest in South Africa and Russia to take advantage of large mining opportunities there. This, in turn, expands the business, increases its global reach and increases equity and profits for shareholders in the firm.
Examples of international organizations include Amnesty International, Greenpeace, Doctors without Borders and even NATO. An international organization usually is funded through corporate largesse, the donations of members or funding from national states. On the other hand, the multinational corporation is self-financing. It may, occasionally, receive tax incentives to invest in a particular area. The multinational corporation functions because it can successfully make profits, while the international organization functions because it can attract the needed donations.
A multinational corporation goes where it can make the most money. An international organization goes where it is needed. The international organization deals with fundamental political and social change and reform. It can advocate legal and economic transparency that then makes it easier for a multinational corporation to enforce contracts and do business. An international organization dealing with human rights, for example, might emphasize the significance of an independent judiciary that is not controlled by elites and well-connected political groups. This, in turn, might be what a multinational corporation needs to invest in the local economy because an independent judiciary is supposed to deal fairly—rather than arbitrarily—with firms doing business locally. Private property, taxes, regulation and contracts can be set on firmer ground if the international organization has successfully promoted such rights-based institutions.
In his book on international organizations, political scientist Robert S. Jordan defines an international organization as a group cooperating over specific issue areas for neither profit or political power. International organizations solve problems and fill needs that neither the state nor a multinational corporation is willing or able to solve. Large numbers of refugees or a recent drought, for example, might create a crisis that overwhelms local authorities. An international organization assists in these cases by donating money, transporting supplies or providing medical care free of charge. Multinational corporations do not do this, nor, under most circumstances, are they expected to do so.