The Impact of Multinational Corporations (MNCs) on Developing Countries Essays

The Impact of Multinational Corporations (MNCs) on Developing Countries Essays

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Multinational enterprises date back to the era of merchant-adventurers, when the Dutch East India Company and the Massachusetts Bay Company traversed the world to extract resources and agricultural products from colonies (Gilpin 278-79). While contemporary multinational corporations (MNCs) do not command the armies and territories their colonial counterparts did, they are nevertheless highly influential actors in today’s increasingly globalized world.
Gilpin discussed the MNC’s evolution through the lenses of a number of business economic theories. Using Raymond Vernon’s Product Cycle Theory, the overseas expansion of American companies until the 1960s was shown as a means of preempting foreign competition and preserving monopoly positions, which was possible then because of the wealth and technology gaps that existed between the US and the rest of the world (282-83). Following the closing of such gaps, Dunning and the Reading School’s Eclectic Theory explained the next stage of the MNC’s evolution as propelled by the great leaps made in technology and communication, which made internationalized management both possible and viable (283). Michael Porter’s Strategy Theory, meanwhile, asserted that the MNC is now in the era of strategic management, wherein activities and capabilities spanning borders allow it to “tap into the value chain” in the most advantageous positions (285-85). Gilpin made an interesting point, however, that MNCs are oftentimes the result of market imperfections and unique corporate situations. In many instances, the decision to expand a firm’s operations in another country was a means of circumventing protectionist measures and trade barriers, or simply to curry favor with governments, as practiced by IBM (280...


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...e citizenry of negotiating nations (locations 3523-27).
The negative externalities caused by MNCs are most visible in the damage that has been inflicted on the environment. The Exxon Valdez oil spill and the Oki Tedi toxic waste dumping are just two examples of MNCs causing serious harm to the environment, whether by accident or as a business strategy. Environmental damage can have devastating effects not just on the community an MNC has situated itself in but also potentially on the rest of the world as the effects of environmental degradation, much like globalization, spans borders and territories, as well.

Bibliography
Gilpin, Robert. Global Political Economy: Understanding the International Economic Order. Princeton: Princeton University Press, 2001. Print.
Stiglitz, Joseph E. Making Globalization Work. New York: Norton & Company, Inc., 2007. Kindle ebook file.

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