Positive Impact of Globalization Toward Economy

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Positive impact of MNC & FDI
Positive impact of MNC & FDI

International Political Economy
Second exam
J.C. Odencrantz

4/24/2012
TN
Gilpin writes that “opinions corporate on differs greatly over the significant for international and domestic economic affairs of the Globalization of corporate activities” explore how MNCs and FDI impact domestic and international economies using one of the perspectives discussed by Gilpin (perspectives can be from business economics or political economy)
International Political Economy
Second exam
J.C. Odencrantz

4/24/2012
TN
Gilpin writes that “opinions corporate on differs greatly over the significant for international and domestic economic affairs of the Globalization of corporate activities” explore how MNCs and FDI impact domestic and international economies using one of the perspectives discussed by Gilpin (perspectives can be from business economics or political economy)
Positive impact of MNCs and FDI toward economy
Introduction.
Multinational Corporation is the key element of globalization. MNCs internalize the production across the borders. MNC is a company establishes branches in more than one country. According to Baafi MNC are the ownership or control of productive assets in other countries which makes MNC separated from others, that is why they do overseas business by simply exporting and importing good and services.(Bossman Baafi 2009, 1). Dunning cited in the paper which is unknown that Multinational corporation is “an enterprise that engages in foreign direct investment (FDI) and owns or controls value adding activities in more than one country” (Dunning 1993, 3). There are great number of MNCs around the world such as Toyota, Coca-Cola, IBM, Mercedes, and ETC. according to United Nation Conference on Trade and development, as of 2006, there were 63,000 multinational corporation with over 700,000 branches scattered across the world. (shoo 2011, 1) Multinational Corporation has different subsidiaries which one of the important is foreign direct investment (FDI). The purpose of FDI is to achieve partial or complete control over marketing, production, or other facilities in another economy; such as investments maybe in services, manufacturing or commodities. (Gilpin, 278) MNCs have existed for a long time; however, there are differences between old MNCs and Modern. Earlier MNCs t had their own armies; their foreign policies were set up by themselves, and controlled their territories. But the modern are very modest. The early firms mostly focused on the agriculture on their region and the workers were native people, while in modern firms are focused on manufacturing, retailing and services because they want to have worldwide view. (Gilpin, 278-279) There are different ideologies over the significant of MNCs toward domestic and international economic affairs. Some economists believe that MNC is a powerful independent force which controls the international economic affairs. On the other hand some others consider that MNC has some positive impact on the world economy and is a creature for its home economy. These arguments bring up the question why such big companies or organizations invest in the others countries? Does it have any impact on the global economy? This paper is mostly explores on the positive impact of MNC and FDI on domestic and international economies, also it will discuss the business economist’s perspective toward this subject. In the 1980 economist John Dunning built up a theory that clarify why companies would invest abroad and become multinational corporation (MNC). This theory was named Eclectic theory and is known as the OLI model nowadays. (Heino Dossing, 2010) The Reading School’s Eclectic Theory of the MNC is theory based on the ideologies gathered from many sources and research on the MNC, it does not mainstream economists concede. The Eclectic theory is sensible for understanding the development and...
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