The Technology Contribution Of Multinational Enterprises Economics Essay

The transnational endeavors are at the hub of internationalized competition and so planetary economic sciences [ 2 ] [ 7 ] [ 3 ] [ 4 ] ( Blomstrom and kokko 1997 ) , ( Buckley and casson 1994 ) . They are drivers of the planetary economic system and the fiscal criterions. Multinationals truly keep the key for the growing and technological alterations and research promotions in developing states. Technological promotion can be handled by either invention or research in peculiar Fieldss. Even though the transnational endeavors promote the host state with technological promotion, high competition, and good trade statistics, it is decided merely by nature of MNE and the host state features and its policy environments [ 2 ] [ 7 ] ( Blomstrom 1997 ) .

MNC and its types:

Multi-national endeavor is the endeavor which owns company operations and control activities in more than one state [ 5 ] [ 3 ] [ 4 ] [ 1 ] ( Buckley 1997 ) . Which normally fuelled by two footings, they are place and host. Home state refers to the state which it was originated and registered. Host refers to the state where it is situated. Multinational companies could take at the host for several grounds, chiefly of inexpensive labor, adept professionals, technological expertness, handiness of natural stuffs, enlargement of market, equal substructure demand, legal flexiblenesss, and manpower or might be of specific geographical facets. I would to wish exemplify the gas & A ; oil companies which do prefer gulf, mid-east states for resource handiness. On general they are classified on the footing of their demands in host states such as market searchers, resource searchers, accomplishments searchers, assets searchers [ 7 ] ( samantra 2006 ) [ 4 ] ( Kingsbury 2004 ) etc. On footing of merchandise distinction, the MNE can be categorized into three types,

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1. Horizontally diversified: ( Same merchandise in different location ) .

2. Vertically diversified: ( Intermediate merchandises of same merchandise sequence ) .

3. Conglomerately diversified: ( Products of different production sequence ) . [ 3 ] ( Buckley, 1994 )

Most of MNE are horizontally diversified, which produces same trade name merchandises with the same engineering what they had used normally, so these companies normally have less positions of technological impact in the host. They normally rely on the inexpensive labor and technological expertness workers. The vertically diversified are high technological participants, they normally have premier ground for host as skilled workers and low production costs. Third type of MNE largely chooses host for geocentric demands, which does n’t hold that much engagement in proficient betterment of host [ 3 ] ( buckley, 1994 ) .

Technology part:

Multinational Enterprises gives the host a glorious lead in state ‘s development, employability, high life criterions, foreign direct investing addition, and good trade statistics. Apart from those discussed earlier the major part of MNE to the host is the proficient border. By the word engineering one mean the research and developments of the nucleus field. By and large academic bookmans refer technological facet of MNC as majorly invention [ 6 ] ( Sjoholm 1997 ) . Invention might be seen transparently from the witnesss view, but the state ‘s development and betterments are more fundamentally depends on research and cognition development instead than the invention. Individual position is really much differentiated from state ‘s position ; invention in assorted Fieldss might hold shown adept work force. But the state could be recognized by the value of research quality and the patents they possess. One of the general statistics shown as clearly that more than 90 % of research patents are held by the MNE ‘s of the industrialized states [ 1 ] . Invention is one of the major factors for the growing ; this is the ground why the developed world power states are truly passing more on research and developments. Innovation usually increases the market and competition [ 2 ] [ 5 ] [ 6 ] ( Sjoholm 1997 ) ( Blank 1979 ) .

The host welcomes MNE as a necessary tool for cut downing the technological retardation of their states [ 3 ] [ 5 ] ( clean 1979 ) ( buckley 1994 ) . Geting the new engineering and accommodating it could bring them the decrease of the spread between them and other developed states. MNE ‘s behavior most of the research & A ; developments and cognition surveies in host state and they would seek to implement it and prove it on host state and so they transferred the engineering to the parent houses might leak out some forms of it in host, which is referred as technological spillovers [ 6 ] [ 5 ] ( Sjoholm 1997 ) . The spillovers might be positive or negative to the host states, depends on host state engineerings and its credences to alter. These positive alterations could do them to reasonable growing in economic system and state position [ 6 ] ( Sjoholm 1997 ) . I would wish to exemplify an illustration of package industries in India ; they had shown affluent positive spillovers which resulted in the elephantine spring in the package industries, besides the fact, it had improved in economic system position and go the 2nd biggest drawing card for FDI following to china. However the technological mismatch between developed and developing state ( host ) might supply an obstruction to the spillovers [ 6 ] ( Sjoholm 1997 ) . The engineering designed for the developed world power states could non be accepted or less suited for the development and less developed states. It could make the immense technological spread between the domestic and foreign houses.

The technological spread could supply the good expanse over the market and economic system to the foreign houses, which might hold force the local houses to work hard, improvise and renovate their operation schemes to the degree of foreign houses [ 5 ] ( Blank 1979 ) . Obviously due to these alterations the engineering in the host would by and large better. For the interest remain in the market there could be more proficient promotion required in local houses of host. Hence the preparation and proficient instruction would tool up to sky-rocketing in the host. This in bend can pull more investors from the developed states ( ex: this is what happened in INDIA and CHINA in mid 90 ‘s ) .

The MNE ‘s working environment could increase the multi-cultural facets in the host. Due to these elephantine companies, the pay rate [ 3 ] ( buckley 1994 ) would top out and those employees working in the local houses could acquire some higher packages of offers and pay hiking from the local houses, which wants them to lodge on the occupations to avoid migration to MNE ‘s who by and large required more figure of adept employees. It increases the competition among local and planetary participants. This evidently increases the criterion of life in host [ 2 ] ( blomstrom and kokko 1997 ) . Proportionately the buying power and market will be spread outing in host. These consequences in constitution of newer trade names, planetary trade names, epicurean life manner, great development in substructure field, new technological equipments, advanced scientific instruments, effectual and efficient services.

Transfer engineering and its issues:

Above I discussed about the positive technological effects of MNE ‘s presence in the host. But it chiefly depends on the host engineering scheme and local market. The credence for the alteration is biggest job of all-time in developing states. Most grounds on multinationals ‘ effects has to make with effects in industrial states and it is impossible to disregard the hazard that the multinationals` entry into developing states may replace local production and coerce local houses out of concern, instead than coerce them to go more efficient [ 1 ] [ 5 ] ( clean 1979 ) .A There are few factors which are considered to be decider, whether the transportation in engineering of host state will profit the host economic system. Harmonizing to my idea, the factors could be equilibrating local economic system and its market chances, credence to alter, equal preparation, rewards, employability, high profile pull offing scheme of MNE ‘s, degree of economic developments in host, equal substructure etc. Major factor which decides the host credence is the uncertainty or even fear about their market being [ ] . The being of multinationals could deform the national advancement by instabilities in host economic system. Consequently it forces the host excessively dependent on the external forces. By and large this is said to be denationalization [ 5 ] ( Lapalombara and clean 1979 ) , which means host functionaries and organisation have small or literally no control over their advancement [ ] . For illustration: this is the same happened during 18th and nineteenth century when British E companies dominated the advancement of assorted states and do them as settlements. Subsequently they got themselves out and got independency from Britain now they are known as commonwealth states. Recent illustrations show the similar effects on Latin America which feels the denationalized by US multinationals.

Another large job the host suffers is altering to the new engineering, is required more sophisticated preparation and more beforehand instruction in rather a spot of clip. Wage inequality besides became the obstruction to the technological spill over in host. Job security is another make up one’s minding factor, MNE ‘s normally look for the adept workers, which are renowned for its hire and fire policies. Once the MNE ‘s went off the host. It is really hard to pull off the unemployability [ 5 ] ( Blank 1979 ) because their accomplishments are non movable to low terminal. Understanding the political and societal environments of the host is another major factor. Cultural factor is considered to be most effectual, for the MNE ‘s because some kinds of plants are ne’er accepted. On those conditions MNE ‘s engineering ne’er traveling to win those cultural restraints in the host.

Other benefits:

Increase in local economic system, GDP of host.

Addition in FDI, Capitol employed.

High employability.

Technical promotion.

High grade of competition.

Superior Management.

High criterion of life.

Brand constitution.

Research & A ; development, invention in assorted Fieldss.


There is a high profile argument exist by and large now, whether the MNCs contributing to the sustainable development of a developing state? Or, do they merely exploit developing states making a state dependant on that MNC for their ain economic growing? [ 1 ] [ 7 ] ( samantra et al 2006 ) ( Kingsbury et al 2004 ) I for one stands with MNE ‘s are good to the host, if they are regulated and managed by the host. MNE ‘s are the beginning of technological promotion for the development states. The transportation of engineering wo n’t be a job if they are decently managed with adept schemes by MNE.



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