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Homework answers / question archive / Compose a 2000 words assignment on impact of multinational firms on the economic development

Compose a 2000 words assignment on impact of multinational firms on the economic development


Compose a 2000 words assignment on impact of multinational firms on the economic development. Needs to be plagiarism free! The spre?d of multin?tion?l firms w?s often viewed with suspicion ?nd mistrust in such countries, p?rticul?rly in those th?t pursued ? str?tegy of import substitution. In this p?per, I will t?ke ? look ?t both positive ?nd neg?tive effects of multin?tion?l firms on the economies of developing n?tions. I will ?rgue th?t such comp?nies through their ?ctivity provide FDI in the economies th?t ?re still under development ?nd spe?k ?bout pros ?nd cons of the glob?liz?tion in fr?mes of multin?tion?l firms. The concept of link?ges will be discussed in order to underst?nd the link between the multin?tion?l firm ?nd the effect intern?tion?liz?tion on the economies of developing n?tions.

Multiple m?rket forces ?re behind the observed growth of multin?tion?l firms: reduction in costs of communic?tion h?s e?sed the constr?ints on glob?l r?tion?liz?tion of production ?nd the inform?tion technology revolution h?s cre?ted m?rkets for m?ny new products ?nd services. Incre?sed world tr?de in services h?s further contributed to glob?liz?tion of multin?tion?l firms since services often require suppliers to h?ve ? physic?l presence in ? m?rket. However, ch?nges in the m?rket environment do not c?pture the whole story.

Policy initi?tives h?ve pl?yed ? centr?l role: m?ny countries h?ve gone further th?n simply removing b?rriers to inw?rd multin?tion?l firms ?nd h?ve t?ken ? more pro-?ctive ?ppro?ch tow?rd ?ttr?cting multin?tion?l firms to enter the m?rkets of developing countries through the use of fisc?l ?nd fin?nci?l incentives. This new, more f?vor?ble, policy environment in m?ny developing ?nd formerly communist countries contr?sts sh?rply with historic?l ?ttitudes tow?rd multin?tion?l firms in these countries.

The recent w?ve of liber?liz?tion of tr?de ?nd FDI policies suggests th?t the optimistic view of multin?tion?l firms seems to be g?ining the upper h?nd. One m?nifest?tion of this trend of liber?liz?tion is the prolifer?tion of bil?ter?l investment tre?ties ?cross countries: there now exist 1,513 bil?ter?l investment tre?ties ?mong countries, comp?red with fewer th?n 400 ?t the beginning of 1990 (UNCT?D 1998). Of course, the f?ilure of import substitution ?s ? str?tegy for development is ? cruci?l re?son behind this rem?rk?ble turn?round in policies in m?ny developing countries.

Within the more optimistic view of the effects of multin?tion?l firms to the economy of developing n?tions is th?t it pushes forw?rd the process of industri?l development by cre?ting link?ges with the rest of the economy.

In ? cl?ssic work, Hirschm?n (1958) developed the concepts of b?ckw?rd ?nd forw?rd link?ges ?nd ?n?lyzed their import?nce for economic growth. In his own words: The setting up of ?n industry brings with it the ?v?il?bility of ? new exp?nding m?rket for its inputs whether or not these inputs ?re supplied initi?lly from ?bro?d.

This enh?nced m?rket exerts ? b?ckw?rd pressure for est?blishing industries th?t supply the new entr?nts. He c?lls this process b?ckw?rd link?ge effects:

Every non-prim?ry ?ctivity will induce ?ttempts to supply through domestic production the inputs needed in th?t ?ctivity.

Simil?rly, forw?rd link?ge effects ?re cre?ted when one industry uses ?nother industry's outputs ?s its inputs:

Every ?ctivity th?t does not by its n?ture c?ter exclusively to fin?l dem?nds will induce ?ttempts to utilize its outputs ?s inputs in some industries.

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