The multinational enterprise (MNE) is defined here as an enterprise that controls and manages production establishments – plants – located in at least two countries. It is simply one subspecies of a multiplant firm. We use the term “enterprise” rather than “company” to direct attention to the top level of coordination in the hierarchy of business decisions; a company, itself multinational, might be the controlled subsidiary of another firm. The minimum “plant” abroad needed to make an enterprise multinational is judgmental. The transition from a foreign sales subsidiary or a technology licensee to a producing subsidiary is not always a discrete jump, for good economic reasons. What constitutes “control” over a foreign establishment is another judgmental issue. An MNE sometimes chooses to hold only a minor fraction of the equity of a foreign affiliate. Countries differ in the minimum percentage of equity ownership that they count as a “direct investment” abroad, as distinguished from a “portfolio investment,” in their international-payments statistics.

Exact definitions are unimportant for this study because economic analysis emphasizes that at definitional margins decision-makers face close trade-offs rather than bimodal choices. However, the definition does identify the MNE as essentially a multiplant firm. We are back to Coase's (1937) classic question of why the boundary between the administered allocation of resources within the firm and the market allocation of resources between firms falls where it does.