Final answer:
A firm becomes a multinational enterprise when it controls operations in multiple countries, significantly influencing global trade, policy, and economies. MNCs grow through international expansion, mergers, and foreign direct investment.
Step-by-step explanation:
When a firm participates in international expansion and begins to control production or service operations in multiple countries, it evolves into a multinational enterprise (MNC). A multinational corporation integrates into different economies, becoming a part of other countries' Gross Domestic Product (GDP), circular flow, and business cycles, subjecting itself to their laws, taxes, customs, and business cultures. The rise of multinational enterprises has been significantly influenced by factors like globalization, advancements in transportation, communication technologies, and the strategic use of mergers and acquisitions to expand their global footprint.
Notably, multinational corporations play a crucial role in the global economy by controlling assets, sales, production, and employment, often reallocating resources to optimize for costs, which can involve outsourcing jobs to countries with lower labor costs. This practice has considerable implications on job availability in developed countries as well as on international trade and policy matters, such as taxation, investment protection, and immigration. Additionally, foreign direct investments by MNCs across borders are pivotal in shaping economic growth, technology transfer, and international relations.