How MNCs influence economic development, trade, and technological progress across borders
Multinational corporations play a crucial role in global economic development and are responsible for large portions of world production, investment, international trade, employment, research, and innovation in the 21st century. Multinationals permeate nearly every aspect of our lives. The first multinationals were colonial enterprises. A MNC is a company that has business operations in at least two countries and generates revenue beyond its borders. Multinational corporations have their central head office in the home country and secondary offices, facilities, factories, industries, and other such assets in other countries. These corporations operate worldwide and are hence also known as global enterprises.
Multinational companies engage in exporting their products and services to various countries while also importing goods and services from different nations. MNCs are known as messengers of progress. They bring with them huge investments and capital and help the technological growth of the countries. They are significant participants in the process of globalization. MNCs improve international development by promoting investments and global trade in goods. They are interconnecting the economies of various nations by the distribution of technology, goods, services, and resources. This dynamic interaction sustains international trade and fosters greater economic integration among countries. MNCs operating around the world are also widening economic disparities, relying on foreign countries for their products, weakened environmental integrity, and increasing the likelihood of a trade war between major economic players. Conglomerates often have a fear of competitors revealing unjust business activities and valuable trade secrets.
Global economic progress and research are hindered by the lack of collaboration among countries, multinationals, and consumers alike. Multinational enterprises should keep control of and improve their efficiency, effectiveness, and predictability among competitors, as well as market share. These conglomerates’ development and growth encompass all regions of the world. The world is rapidly becoming a ‘global village’. The world has become increasingly interdependent, and businesses, governments, consumers, and scholars alike search for further information and knowledge about impacts of globalization around the world. MNCs play an important role in the world economy through the process of increasing economic interdependence of national economies across the world. Using the capital of developed countries, MNCs establish factories and plants in developing countries, where they can access cheap raw materials and labor, and ship back the finished products to wealthy countries where there is the consumer market.
Multinationals are influenced by globalization in many ways, positive and negative, mostly determined by the difference in nature of the company’s operation. Operations in different countries necessitate substantial investments (foreign direct investments, FDI). Developed and emerging enterprises both face issues associated with the liability of foreigners and other factors such as increased operational risks and costs due to operations being spread across large distances, changing political environments in host countries, currency exchange rate fluctuation, and economic risks. However, emerging economic enterprises from developing countries with foreign conglomerates cooperate via international joint ventures, providing significant knowledge and technology transfer advantages for local companies. But multinational corporations can have a powerful influence in local economies and the world economy.
MNCs often hold power over local and national governments, affect local and international policies through a monopoly on technological and intellectual property, and have a significant impact on government policy through the threat of market withdrawal. Economic globalization cites evidence of per capita GDP growth, narrowing the gap between rich and poor nations, and a decrease in poverty. Economic globalization impacts negatively exploiting the local labor force, funneling of important resources away from the country into foreign exports, and overall dependency of developing countries upon wealthy countries. And once MNCs are established, they exert power over political entities and promise economic growth for local and national government. For example, they hold patents on production equipment and infrastructure, and these patents allow multinational corporations to exercise monopolies in the local economy, preventing local enterprises from developing and keeping labor costs low, exploitatively.
Those who view economic globalization positively argue that the economic benefits are widely shared between different parts of society and also cite evidence of overall improvement of living standards and poverty reduction in globalizing countries. But there is evidence that the gap has narrowed between rich and poor countries and the rise of inequality within nations that have joined the global market. In addition to the uneven distribution of benefits that often occurs, critics point to the ways that resources are diverted from the local population into foreign exports. Finally, economic globalization may result in unequal relations of dependency between developing and developed countries.
Dependent relations that were formed in the colonial period continue on today in the form of economic imperialism or neocolonialism. Governments of developing countries may act more in the interests of MCN and other nations on whom they rely for aid instead of acting independently on behalf of the own people in the country. The role of MCN in the global community is increasing dramatically. But, without better management of international engineering and science relationships for improving productivity and removing numerous constraints due to national economic and security reasons, we cannot cope with the key problems that have put world peace and the survival of the human race at risk.
MNC need to be good citizens in their host countries
Since the societies in industrially advanced countries are rapidly becoming highly information-ooriented societies, the people demand highly sophisticated information products. Strategic alliances in business and technological development have to be globalized. International industrial collaboration is a strong weapon for comprehensive national security and is very desirable for increasing international collaboration and for improving world peace. Looking into the 21st century, the cost of developing new technologies is increasing very rapidly. Investing in numerous new technologies is required and applying them effectively to solve the many difficult problems we face if we are to achieve sustainable development.
We have to develop new industries, provide substantial employment opportunities for people around the world, improve the world economy and the global environment for sustainable development, and help underdeveloped countries build their own industries to raise their living standards above critical levels. The national security of one nation is heavily influenced by other nations’ security. The world is becoming a borderless society, weather we like it or not. Modern corporations took shape with the emergence of large-scale industries such as oil, gas, the automotive industry, and consumer goods in the late 19th and early 20th centuries. Among the forerunners in expanding their operations globally were companies like Standard Oil, Ford, and Coca-Cola.
These companies, often formally defined as business entities, take different forms, from giant conglomerates with diverse portfolios to specialized firms focusing on specific industries or regions. The most subsidiaries worldwide have Vinci SA, the French multinational construction firm, and the second is Healthcare, the U.S. pharmaceutical and healthcare giant. Multinational entities (MNE) include corporations, partnerships, state-run enterprises, and other types of business structures. MNCs can reduce prices and increase the purchasing power of consumers worldwide. They may also take advantage of lower tax rates in countries and develop monopolies where they operate. A centralized global corporation has a headquarters in the home country and has autonomous offices and executive officers and management overseas operations, as well as domestic operations.
A transnational corporation is a parent-subsidiary structure in which the parent company oversees the operations of subsidiaries in foreign countries and the home country. These global entities have the power to shape economies, industries, and societies across borders within the modern world. MNC influence in developing countries Multinationals bring benefits to economic growth but are also criticized for their potential to exert influence over host countries. The profits are repatriated by MNCs to their home country, limiting the benefits of foreign direct investments for hosting countries. Also, it’s become clear that many MNCs aren’t returning to where they are headquartered, but the highest FDI inflows are in newly opened markets, in tax havens (like Cayman Islands), which have no corporate income, capital gains, or payroll taxes. These are attractive destinations for MNCs to park funds and wealth.
MNCs have been accused of prioritizing profits over environmental protection, of labor exploitation, tax avoidance, making it difficult for local firms to compete, stifling local entrepreneurs, and for political blackmail. And some argue that the IMF and World Bank’s policy prescriptions to attract foreign investments, such as deregulation and austerity, undermine governments’ ability to invest in public services and protect national interests. Many countries have opened up their economies to foreign investments, creating favorable investment climates.
The increasing integration of financial markets and flows of capital made it easier for investors to invest in foreign projects and created new prospects for the growth of emerging markets. Technological advances in communication and transportation have made it easier for companies to operate and to manage global supply chains. The trade wars (between China and the U.S.), rising nationalism, and regional wars have upended earlier investment patterns. It seems we have entered a new chapter in the history of the multinational corporation.
The business’s primary goal is to increase profits and growth. If MNCs can grow a global customer base and increase their market share abroad, they may believe opening offices in foreign countries is worth the expense and effort. MNCs advocate for trade agreements and regulations that favor their business operations and to shape policies to reduce tariffs, improve market access, and protect intellectual property rights. MNCs are exposed to risks related to regulatory, crime, and violence, fluctuations in currency exchange rates, and cultural sensitivities. MNCs can bring valuable foreign direct investment, technology, and expertise. They also raise concerns about exploitation, loss of sovereignty, and distribution of benefits.
The revenues of the world’s biggest multinational corporations like Amazon, Berkshire Hathaway, United Health Group, Apple, Google, Microsoft, Meta, Exxon Mobile, General Electric, Walmart, Saudi Aramco, and Tesla range from several hundreds of thousands of billions of USD to tens of trillions of USD. China National Petroleum and Chemical (also known as Sinopec) is among the largest oil refining, gas, and petrochemical companies in the world, and its revenue is 2064 trillion CNY.
Saudi Aramco is a state-owned petroleum and natural gas company, and its revenue is 535 billion USD and is the backbone of Saudi Arabia’s economy. Amazon: revenue: 514 billion USD, Tesla: 923 billion USD. One of the world’s leading providers of investment, advisory, risk management solutions, and multinational investment companies is American Black Rock. It is the world’s largest asset manager, with U.S.$10 trillion in assets. And one of the largest investment companies, largest provider of mutual funds and exchange-traded funds, stockbroker, and risk manager is Vanguard, with about $ 9.3 trillion in assets.
Countries with the most MNCs are based in the U.S. 1700, in China 1272, Japan 615, UK 313, Australia 189, Canada 170, India 169, and Taiwan 136. The largest companies in the world fluctuate day to day, even minute by minute, and these giants compete vigorously. Most of the world’s corporate titans are tech giants. Expectations are that the future of world business will be driven by data, AI (which will be a major source of revenue and growth in the global market), personal computers, and other technology. Today the top 5 are all tech companies with market caps over 1.5 trillion USD, and the U.S.-based firms dominate the top 20.
The multinationals should be more socially responsible and respect ISO 2010 certificate standards, including human rights, the environment, fairness in operating practices, organizational governance, labor practices, community participation, development, and consumer protection. These standards positively impact emerging economies by improving labor wages and by lowering pollution levels. Issues of national stereotyping, political decision processes, national pride, and constructing managerial identities are entangled in relation to emerging global strategies and the spread of global capitalism in the emerging economies in Asia, Africa, South America, the Middle East, and some parts of Eastern Europe. Countries should adopt policies and measures to ensure that domestic enterprises are not displaced by foreign direct investments.
https://www.meer.com/en/82735-the-role-of-multinational-corporations-in-global-economy
