The transnationality index gives a measure of an MNE’s involvement abroad by looking
at three ratios – foreign asset/total asset, foreign sales/total sales, and foreign employment/
total employment. As such it captures the importance of foreign activities in its
overall activities. In Table 10.9 Vodafone has the highest index – this is because in all
three ratios it has a high proportion of foreign involvement. Since 1990, the average
index of transnationality for the top 100 MNEs has increased from 51 per cent to 55 per
cent, but the rate of increase slowed slightly in 1998, mainly reflecting a decline in the
ratio of foreign to total assets.
These multinationals are huge organisations and their market values often exceed the
GNP of many of the countries in which they operate. There are over 60,000 MNEs
around the world and they are estimated to account for a quarter of the world’s output.
The growth in MNEs is due to relaxation of exchange controls, making it easier to move
money between countries, and the improvements in communication which makes it
possible to run a worldwide business from one country. The importance of multinationals
varies from country to country as Table 10.10 shows.
As can be seen, foreign affiliates are very important for some countries and not so
important for others: in the case of Japan, there is hardly any foreign presence at all. For
all of the countries except Finland, foreign affiliates have a bigger impact upon production
than employment.