Multinational Corporations (MNCs) play a fundamental role in the economic improvement of the unindustrialized nations. MNCs complement the host nation’s resources and escalate value addition on diverse products. MNCs engagement in the emerging states has created both undesirable and helpful impacts.
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Developing nations place a considerable expectation on their interactions with MNCs. They believe this can move them closer to the industrialized states. MNCs continue to accelerate their investments in developing nations in order to unlock the markets. Remarkably, such increments have generated numerous implications. First, they have positively influenced expansion of the economy, increased labor, accelerated production, and improvement of infrastructure.
On the contrary, the undesirable impacts have taken the form of environmental degradation, widening developmental gaps, and adverse competition that hurt local businesses. Much as MNCs support the economic expansion of the unindustrialized states, their operations also create undesirable impacts, which hurt the host countries and their residents in a number of ways.
Positive Impacts of MNCs
MNCs contribute to the improvement of economies of the emerging states in different ways. MNCs normally generate job opportunities in the developing nations. This escalates income and spending within the economy, thus stimulating growth (Rugraff & Hansen, 2011). The technological growth stimulated by MNCs also benefits the countries.
Large MNCs also contribute to the host nation’s revenue base. The taxation revenue submitted by MNCs is normally higher than payments made by some local businesses (Kristensen and Morgan, 2007). Furthermore, MNCs improve the developing nation’s balance of payment. This takes place through direct investments and export of manufactured products.
MNCs also improve the level of productivity and expertise within the emerging economies. The introduction of new technology in the local markets enhances production efficiency. This helps MNCs obtain an edge over local manufacturers (Kristensen and Morgan, 2007). Local industries normally attempt to enhance their competitive advantage through hiring experts and introducing technology.
This further escalates production (Adeyeye, 2012). In addition, the developing nations realize benefits through the introduction of best practices and expertise. The locally generated resources may find ready market in the MNCs (Rugraff & Hansen, 2011).
MNCs also contribute to the improvement of social and development needs of the developing nations. Corporate Social Responsibility (CSR) programs implemented by MNCs contribute to the expansion of social services that benefit residents (Mujih, 2012). MNCs implement diverse programs such as supporting the creation of an infrastructure in hospitals and schools to improve accessibility to health care and education services. Furthermore, MNCs sometimes support the training of residents through providing scholarships (Adeyeye, 2012).
MNCs normally require an enabling environment for investment. Therefore, the host nations that seek to attract MNCs normally undertake diverse investment reforms. The reforms aim at expanding and creating suitable business environment (Kristensen and Morgan, 2007). MNCs contribute to the enhancement of economic reforms, which eventually places the country in the right track to pursuing development.
Negative Impacts of MNCs
MNCs in the developing economies often cause small business to suffer
Large MNCs operate at high levels and generates quality products (Bobo, 2005). Furthermore, most MNCs have brands that consumers in diverse parts of the world identify with easily. In most cases, small businesses performance declines may lead winding up. MNCs also provide opportunities such as discounts and free samples to clients, thus widening their customer base at the expense of local businesses (Bobo, 2005).
Notably, MNCs may take advantage of the modest status of the emerging economies to control them disproportionately. MNCs can infiltrate the government of the developing economies in order to enhance their operations. However, the challenge MNCs present to the countries may include providing poor work conditions and violation of business regulations (Rugraff & Hansen, 2011). Some MNCs also engage in corruption deals with people in leadership positions in order to buy protection when they engage in illegal activities.
MNCs promote problems of wage inequality in the emerging economies. Employees working for MNCs receive better payments than people employed by the local business establishments. MNCs normally attract highly trained workforce (Bobo, 2005).
These people receive huge salaries as opposed to unskilled workforce, thus creating high levels of wage inequality. MNCs operating in the developing states also generate inconsistencies regarding different matters. The emerging states and her residents can easily lose intellectual property rights for their inventions.
MNCs continue to promote economic inequality in countries where they operate. The gaps between the richest individuals and the most economically underprivileged continue to escalate because of MNCs. The large investors practice capitalism that has disadvantaged the poor (Bobo, 2005). Their engagement in the evolving nations is associated with overexploitation of resources, thus leading to more poverty.
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MNCs also cause adverse environmental impacts in the developing states. Their operations promote environmental pollution because most developing nations have less stringent regulations (Kristensen and Morgan, 2007). Furthermore, MNCs may fail to adhere to regulations against pollution because of the need to maximize their profits.
The contributions made by MNCs in the evolving economies are evident. However, MNCs also present adverse impacts on the developing nations. The positive contributions are associated with economic expansion and improvement of social development (Adeyeye, 2012). On the contrary, MNCs operations have affected the states through escalating inequalities, killing of small businesses, and environmental concerns.
Adeyeye, A. 2012, Corporate social responsibility of multinational corporations in developing countries: perspectives on anti-corruption, Cambridge University Press, Cambridge.
Bobo, B. F. 2005, Rich country, poor country: the multinational as change agent, Praeger, Westport.
Kristensen, P. H. and Morgan, G. 2007, “Multinationals and institutional competitiveness”, Regulation & Governance, Vol. 1, pp.197–212, doi: 10.1111/j.1748-5991.2007.00017.x.
Mujih, E. 2012, Regulating multinationals in developing countries: a conceptual and legal framework for corporate social responsibility, Gower Pub, Surrey.
Rugraff, E., & Hansen, M. W. 2011, Multinational corporations and local firms in emerging economies, Amsterdam University Press, Amsterdam.