It seems most developing countries have realized the immense benefits associated with Multinational Corporations (MNC’s), especially with regard to the productivity of the firms in the host country. In the past decades, there has been an unprecedented debate over whether multinational corporations yield economic benefits to the host countries but, that argument appear to have varnished after a comprehensive evaluation of different elements of multinational corporations. Currently, most countries are attracting multinational corporations to reap the accrued benefits, especially through Foreign Direct Investment, which has proven to boost the host country’s economy through enhancing productivity.
Some of the principal reasons as to why multinational corporations are considered beneficial to the host countries include technology transfer, creation of new job opportunities and the inflow of capital from the MNC’s parent company to its subsidiaries in the host country. Foreign Direct Investment (FDI) is known to be one of the principal drivers of productivity in the host countries because it enhances technological transfer, which in turn yields enormous benefits to the host country and the parent company. In most cases, host countries access superior technology through technological spillovers and, this enhances the productivity of the local firms. Campos states, “In addition, host country firms may obtain other potential productivity spillovers that the presence of MNC could generate on suppliers and customer.” Concisely, there are different ways in which multinational corporations enhance productivity of the firms. Therefore, this research will give an overview on the impact of multinational corporations on productivity.
Table of Contents
- Introduction
- Multinational Corporations and Technology Transfer
- Overview of Spillover Channels
- Productivity Improvement through Joint Ventures
- Productivity Improvement through Licensing
- FDI and Productivity
- Welfare Implications of Technology Transfer
- Conclusion
Objectives and Key Themes
This research aims to provide an overview of the impact of multinational corporations (MNCs) on productivity, specifically focusing on technology transfer and its effects on domestic firms. The study examines the mechanisms through which MNCs influence productivity in host countries.
- The role of MNCs in technology transfer to host countries.
- The impact of foreign direct investment (FDI) on productivity.
- Spillover channels, including vertical linkages and worker mobility.
- The welfare implications of technology transfer.
- Productivity improvement through joint ventures and licensing.
Chapter Summaries
Introduction: This introductory chapter sets the stage by discussing the widely recognized benefits that developing countries derive from multinational corporations (MNCs), particularly in boosting firm productivity. It highlights the historical debate surrounding the economic advantages of MNCs and notes the current consensus that they offer significant benefits, primarily through foreign direct investment (FDI), which enhances productivity. The chapter emphasizes key advantages of MNCs, including technology transfer, job creation, and capital inflow, ultimately introducing the research's focus on the impact of MNCs on productivity.
Multinational Corporations and Technology Transfer: This chapter delves into the significant role of MNCs in transferring technology to domestic firms in host countries, primarily through spillover effects. It discusses the public good characteristics of technological spillovers and how they improve productivity in domestic firms. The chapter highlights the two main spillover channels: market access and productivity spillovers, acknowledging variations in productivity improvement patterns depending on the channel involved. It explores the mechanisms through which vertical linkages improve the performance of local suppliers and how worker mobility contributes to human capital development within domestic firms.
Overview of Spillover Channels: This chapter explores the different spillover channels through which domestic firms benefit from MNCs. It focuses on vertical linkages and worker mobility as two principal avenues for technological advancements. Vertical linkages are discussed in detail, including forward linkages (domestic firms purchasing services from MNC subsidiaries) and backward linkages (MNC subsidiaries purchasing goods from domestic firms). The impact of backward linkages is illustrated through the example of the rapid growth of the East Asian electronics industry, showcasing the evolution from OEM to ODM to OBM and the resulting improvements in manufacturing skills, product development, and R&D capabilities. The chapter emphasizes the importance of knowledge sharing and technical knowledge diffusion between domestic firms and MNC subsidiaries in improving productivity.
Keywords
Multinational corporations, technology transfer, foreign direct investment (FDI), productivity, spillover effects, vertical linkages, worker mobility, technological spillovers, economic development, host countries, domestic firms.
Frequently Asked Questions: Impact of Multinational Corporations on Productivity
What is the main focus of this research?
This research examines the impact of multinational corporations (MNCs) on productivity in host countries, specifically focusing on technology transfer and its effects on domestic firms. It investigates how MNCs influence productivity through various mechanisms.
What are the key themes explored in this research?
Key themes include the role of MNCs in technology transfer, the impact of foreign direct investment (FDI) on productivity, spillover channels (vertical linkages and worker mobility), the welfare implications of technology transfer, and productivity improvement through joint ventures and licensing.
What are the main spillover channels discussed?
The research focuses on two primary spillover channels: vertical linkages (both forward and backward) and worker mobility. Vertical linkages involve interactions between MNC subsidiaries and domestic firms, while worker mobility facilitates knowledge transfer through personnel movement.
How does technology transfer occur through MNCs?
Technology transfer happens largely through spillover effects, which are public goods that improve productivity in domestic firms. These spillovers manifest through market access and productivity improvements, varying in their impact depending on the specific channel.
What is the role of vertical linkages in technology transfer?
Vertical linkages are crucial. Backward linkages (MNCs sourcing from domestic firms) and forward linkages (domestic firms supplying MNCs) foster knowledge sharing and technical expertise transfer, boosting the capabilities of domestic firms. The East Asian electronics industry's growth is presented as a case study illustrating this impact.
What is the significance of worker mobility in technology transfer?
Worker mobility plays a significant role in human capital development. The movement of employees between MNCs and domestic firms facilitates the diffusion of knowledge and skills, enhancing the productivity of domestic firms.
What are the welfare implications of technology transfer discussed in the research?
The research explores the broader societal consequences of technology transfer driven by MNC activity, considering its effects beyond direct productivity gains.
What are the chapter summaries provided in this preview?
The preview offers summaries for the Introduction (setting the stage and highlighting the benefits of MNCs), Multinational Corporations and Technology Transfer (focusing on spillovers), and Overview of Spillover Channels (detailing vertical linkages and worker mobility). Summaries for other chapters are not included in this preview.
What are the key words associated with this research?
Key words include multinational corporations, technology transfer, foreign direct investment (FDI), productivity, spillover effects, vertical linkages, worker mobility, technological spillovers, economic development, host countries, and domestic firms.
What is the overall objective of this research?
The research aims to provide a comprehensive overview of how MNCs influence productivity in host countries, particularly through technology transfer and its various channels.
- Quote paper
- Caroline Mutuku (Author), 2018, The Role of Multinational Corporations in Shaping Economies, Munich, GRIN Verlag, https://www.grin.com/document/429559
