Indice
The corporate group, as the legal organisational model of multinational firms, thus alters the structure of the firm that is accepted as the model of economic science, to the extent that it undermines its founding principles.
Since one is dealing with the same organisation as a single corporate group, the individual legal entities are entrusted with the carrying out of segments of the same production activity, the ultimate purpose of which is to create goods and services for end-consumers. The collective interest of the single firm prevails over that of the individual subsidiary, which is more akin, as repeatedly emphasised, to a mere company department that is managed by a third-party central management reporting to another (or to other) company(ies).
Investments in technology, know-how and other value-enhancing elements of the individual production segments are not concentrated in a ‘targeted’ manner in the individual companies carrying them out, but follow a rationale of ‘global’ operational specialisation, designed to enable the maximisation of profits of the single corporate group.
It follows that the structure of the production function of a firm that is legally represented by a single company differs from the one of a corporate group, as in this case the production function is the sum of distinct production functions, with a different distribution of the factors and their corresponding monetary value—each representing a distinct affiliated company, according to a relationship of functional interdependence.
Some group companies are therefore in charge of capital-intensive functions, thus capable of producing high added value, while others represent worker ‘vessels’, aimed at maintaining a low added value, which tends to be zero.
There is, of course, no interest in increasing the profitability of the companies managing the workforce, since investments in capital and technology are made in other group companies, which then supply the former with what is needed to supplement the other factors of production by means of supply contracts, and thus enable the actual realisation of the part of the business to which the workforce is assigned.
As a result, certain group companies can be loaded with costs and deprived of revenues in order to favour the accumulation process of other group companies, generating in their favour an increase in revenues and profits that exceeds the traditional notion of profit which is obtained by the difference between revenues and costs.