A CRITICAL ANALYSIS OF THE ROLE OF MULTINATIONAL COMPANIES IN DEVELOPING COUNTRIES
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A CRITICAL ANALYSIS OF THE ROLE OF MULTINATIONAL COMPANIES IN DEVELOPING COUNTRIES
INTRODUCTION
A multinational corporation is a company with subsidiaries in multiple countries. Their decentralised structure, as well as their degree size, frequently allow them to circumvent legislative restrictions that smaller regional or national enterprises must follow.
Developing countries attract multinational subsidiary operations for a variety of reasons, including low labour costs, low taxation, and a lack of vigilance on worker rights and environmental protection.
They are required to contribute to the social security net (i.e., welfare, unemployment insurance, and so on); yet, other variables like as poor pay for female workers, child labour, and the lack of labour unions all add to the third world’s vulnerability to exploitation.
The presence of multiple nationalities in various countries raises overall living standards. The benefits of the partnership are typically one-sided, but the economic issues that these countries face make it impossible for them to be discriminating about their investors.
Firms become multinational corporations when they see the benefits of developing production and other activities in foreign countries. Companies expand their operations into new markets. Firms globalise their activities in order to provide their home country market at a lower cost while also serving other markets more directly.
Keeping overseas activities within the corporate structure allows enterprises to avoid the costs associated with arms-length transactions with separate entities while leveraging their own firm-specific knowledge, such as innovative production techniques.
By internalising what would otherwise be a cross-border transaction, companies can overcome the information barriers that frequently impede commerce.
For example, they may be able to closely control product quality or worker conditions at factories they own rather than those of contractors, or modify the composition of output more swiftly to changes in market conditions.
Advances in information technology have lessened the barriers to exercising corporate control across borders. These advancements have coincided in recent years with an increased political receptivity to foreign multinationalism, as the economic benefits of a foreign presence in the host country have become more widely recognised.
These advantages include higher investment and the associated jobs and money that the multinational corporation brings, as well as technological transfer and increased productivity.
The role of multinational corporations in spreading sector best practices is anticipated to be particularly crucial for services, many of which are difficult to trade across national borders.
The increased rate of Foreign Direct Investment (FDI) in recent years in 1991 is evidence of multinational corporations’ increased role. FDI flows into and out of other European countries (OECD) reached a critical level, accounting for more than 2.5 percent (%) of their combined GDP and 3.0 percent for outflows.
The majority of foreign direct investment is between developed countries; since 1982, 75% (percent) of FDI outflows from OECD countries have been to other OECD members.
SOURCE: United Nations Multinational Corporation for World Development. New York (2000).
1.1 Objective of the Study
The primary goal of this research is to critically examine the operations of multinational corporations in their host countries, most of which are developing countries, to determine if their presence has a beneficial or detrimental impact on the host country’s development.
SIGNIFICANCE OF THE STUDY
The significance of this study were as follows:
It will be a source of knowledge expansion for me.
This research project will be my contribution to knowledge.
It will act as a data source for others who may do future research on the same or similar topics.
It will also act as a point of reference for policymakers dealing with multinationals.
This research will help decision-makers make informed decisions about foreign investment in the country. Typically, when the country is experiencing a surge in foreign investment.
SCOPE OF THE STUDY:
The essay will address the following areas of study in terms of multinational corporations’ activities, their roles as development agents, their contribution to development, and the pros and cons, i.e. the benefits and drawbacks of their operations. It will also look into their negativity in terms of profit sent to their home country.
LIMITATION
Due to the following constraints, such as insufficient books or the topic posing a major constraint on the write up, some of the dates required for this write-up are not available at the time this write-up services are carried out.
It is important to realise that nobody has all to himself. Everything has restrictions, and this article is no exception.
Financial issue; This is a major issue, especially in today’s economy, which is plagued by inflation and skyrocketing material prices, and where people are trying to make ends meet with their limited resources.
This is especially true for students who rely heavily on others; one example is transportation to and from the area of research, which in some circumstances requires a long trip.
Time is another barrier that the writer faced. Examples include combining class activities such as tests, assignments, lectures, and exams with project work, as well as drudging through reading and writing from one item to another in order to complete the task.
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