The Role and Impact of Multinational Corporations in the

Topics: Economics, Developing country, Economic development Pages: 11 (3664 words) Published: May 22, 2011
The role and impact of multinational corporations in the world economy.

Introduction: Looking around.
Before we will start our topic under consideration, let me draw generalized picture form our everyday lives. Imagine that you are coming back home from your lovely work. You are driving your Volvo car of 2002 model year, during this you are talking with your darling, by your new Nokia N97, and she promise to be at home after one hour and cook for you dinner. After 20 minutes you are at home, you need something to eat before your darling cook for you. You are so hungry, and you open fridge and find there your favorite “Nutella”, you decide to make some sandwiches with it, after that you take “Dynamisan” vitamin, and then you go to the sofa to watch you Sony TV and wait for your darling… And now stop and become thoughtful, all four things, which I have mentioned here, are produced by the Multinational Corporations (MNCs): Ford Motors, Nokia, Nestle SA, Novartis and Sony Group. And from this point we can see to what extent MNCs are prominent in our daily life and whole world economy. Of course this fragment is generalized, but nevertheless things we are using every day in majority of cases are produced by MNCs, but these in turn are creating working places, building factories and making investments in research and development.

As we have already mentioned MNCs are playing significant role not only in our lives but also in a whole world economy and going with my discussion further I want more clearly consider this question, but first of all we need to have comprehensive definition about what is MNCs. As we have already understood MNCs are not just ordinary firms and their activities range from the extraction of raw materials to the producing to high – technology productions. What is more, they are firms that control production in two and more countries, with multinational employment and cross – border investment, investment in manufacturing as well as in research and development. Moreover, multinational firm send abroad a package of capital, technology, managerial talent, and marketing production to carry out production in foreign countries, and firm cannot be counted as multinational if it only engages in overseas trade. Also majority of MNCs have their production in more than two or three countries and their production is authentically worldwide. All control concerning production and decision - making usually are centralized and made by parent company, however there are cases when some portion of decision – making is transferred to the local level – to the subsidiaries. Not like ordinary firms, quite often corporate giants acting in the oligopolistic markets.

And through this definition we can see how important they are in the world economy. Moreover, data about their performance can be empirical evidence of that. For instance, in 2003 there was 62.000 MNCs with more than 820 000 of subsidiaries around the world, with world’s stock of FDI reached level of $8.2 trillion, at the same time MNCs are producing 10 percent of the total world’s GDP, conducting 40% of world’s trade and employing 90 million people around the world.

Now we can get the comprehensive picture about the role and scope of MNCs, and going further we will also discuss their impact in world economy and we will see how important they are.
Role and impact: FDI, Globalization, History, Regulation and Economic Bloc.
Starting our considerations about the role and impact of the MNCs, first of all, I want to draw our attention to the FDI and MNCs. So, as we can see above MNCs have quite significant role on the FDI promotion and of course this policy has an impact in the world economy. Making FDI, multinational corporations stimulate growth within country, which receive such investments. Moreover, as Oatley pointed out in his book, country can achieve faster growth with the FDI, because it will not be rely only on the domestic savings. And...
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