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Hansen and Mitchell (2000) indicate that there are six key factors that affect the level of a corporation’s participation in political activity. For each of the following five factors explain how they are expected (not the empirical results) to affect the level of engagement of a corporation in political activity.
A higher concentration of industries will reduce the overall operational cost of the company, also the chances of free riding through the economy will cause a reduction in the political activity since there will be many options to choose from. This will further be enhanced if these companies have a wider common goal to safeguard the interests of the company. Therefore, a high concentration of players within an industry drastically lowers the level of the political activity of these players.
It is expected that the level of political activity and/or interruption would increase as the institution becomes more visible taking into account the fact that both industry stakeholders, policymakers, and other parties interested will have their attention drawn to the institution. This raises general operational and regulatory costs, affecting the business negatively.
The foreignness of a given firm dictates the level at which it can interfere or engage in political activity in which it operates. For instance, they have to adapt to the political environment of their host country, through which they end up contributing more to the economic activities compared to the local corporations. These contributions are rarely direct lest they are accused of meddling in the politics of their host country. They are indirect and are presented in form of charities and lobbying activities. However, the degree of domestic firms contributing to such initiatives is higher compared to the foreign firms that have so much to guard in terms of interest.
Political activities incorporate affairs play out in two dimensions as far as government procurement is concerned. The first is that the institution may use this as a bridge to accessing, bidding, and winning over government tenders or contracts; it may also be a bid to win government opinion in price wars and the tariffs therein. The other dimension is that the institution may harbor political activities in order to reduce operational costs be they regulatory. Sometimes they are targeted to secure tax exemptions if such offers are given to these companies.
Counter mobilization even by the parties interested in the business has an impact on the institution. Lobbying, which is a form of mobilization creates a countenance from the opposing sides especially if they serve competing interests. In this regard, an increase in political activity will increase the costs of mobilization altogether.
Compared to domestic firms, foreign firms are less likely to contribute to campaigns and to give to a charity. But there is no significant difference between domestic and foreign firms regarding participation in lobbying. Explain why.
Corporate contributions from foreign companies have failed on many occasions, especially when the decisions that were to be made were defined by votes. One representative or several representatives who are backed up by an institution or even act independently have an uphill task because they wield less influence. This may influences business performance negatively if discovered, and if not, may result to double losses in terms of influencing policy and getting public support.
The benefits to participate in lobbying are numerous. In a nutshell, participation in lobbying is more broadly categorized, as such contributions to the main goal for charity would fall under the above, according to Navarro, this could be “an overall lobbying strategy” (90). The overall goal of these firms is to maximize profits, and therefore they employ such strategies that have euphemized the actions of the corporate citizenry in order to enhance their business environment.
On the other hand, charitable giving, and lobbying on the other hand by these firms will have profound effects on societal perspectives and will therefore increase their visibility together with their interests to policymakers. The employees of the given corporation gain an improved self-image and representation too. The gains made by the company are intangible in nature, but benefits include the ability to influence the opinion of both, the public and elite, hence the institution would be favored in the course of policy formulation and implementation.
In less developed countries, multinationals from emerging economies often perform better than multinationals from developed countries. Explain why.
Multinational companies from emerging economies normally have problems when expanding to new markets, but when they set-up, the home experiences come in handy. These experiences provide a stepping stone rather than a quagmire in that they are better off when handling very dissatisfied and demanding clients who offer less money for products and services. The challenges they face back home such as the distribution of their own products, failure of suppliers to meet their own demand provide them with solutions when handling these issues in the less developed countries. The other factor is that these companies do not operate large sums of money, they operate overhead costs.
Their technology is not of the highest standards as well, which is most of the time adequate to meet the demands in less developed countries with which one will have to get expatriates run the machines from their home countries. This is way expensive. Developing countries have a closer link to the less developed countries as compared to the developed countries. This is emphasized both, geographically and culturally. As a result, developing countries have an upper hand and are equipped with a better experience when faced with the assessment of risks associated with challenges in less developed countries such as political instability and even unstable economies.
As indicated in Gammeltoft (2008), explain the differences in the destinations, and the ownership advantages of multinationals from emerging economies during the second (the mid-1980s to 1990s) and the third (1990s to 2000s) waves of outward FDI.
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In outward investments, Latin America, Brazil was the leading investor with outflows hitting the $ 2.5 billion mark. However, just a year after this dropped reflecting a poor performance of general outflows from the economies of Latin America to the external economies. In 2004 however, the performance shot up once more, with Brazil leading the pack again. With Russia and its neighbors, Russia led the pack both in terms of outward and inward FDI (Gammeltoft 40). India has been investing too, but its growth was not so significant as compared to other developing countries. Before 1985, Chinese interactivity was less and therefore their OFDI was very little. The OFDI is still less for China as compared to its South Korean and Indian neighbors though it has adopted an upward trend. In Africa, South Africa is the single largest OFDI source, which has been boosted by resource investment locally and with other neighbors through privatization.
Why do firms engage in political activities? Explain briefly.
A firm’s engagement in political activity marks an important step toward securing a good shareholder value, acquiring and securing a good reputation and goodwill from the clients and investors alike. Corporate citizenship and political involvement go a long way in securing the future prospects of the given company, aside from their right to stamp their feet fronting for the ideals of a true democracy. In their endeavor to make a contribution to democracy, companies back individuals, welfare groups, and other associations based on which political triumph they will advance their agenda and business policies (Hansen and Neil 15).
What are the three top motives (in their order of importance) for multinational corporations from emerging and developing economies?
The three top motives for multinational corporations investing in developing economies are as outlined below;
The firms were getting market for their finished products abroad, this translates into more revenue for them which would, in turn, make them run their companies more efficiently back home.
The firms were looking to gather a larger asset base, therefore the firms found the need to accumulate these in developed and developing countries outside their home regions. This became paramount as the need to increase the asset base for the companies arose.
The people in developing and the less developed countries offer labor at cheaper rates and their regulations of work are not as stringent. This, therefore, encourages the multinationals from well-developed countries to invest in these countries as operational costs are drastically reduced.
Gammeltoft, Peter. “Emerging multinationals: outward FDI from the BRICS countries. Int.” J. Technology and Globalization 4. 1 (2008): 37-56. Print.
Hansen, Wendly and Neil Mitchell. “Disaggregating and Explaining Corporate Political Activity: Domestic and Foreign Corporations in National Politics”. American Political Science Review 94. 3 (2000): 2-19. Print.