Technology is a new variable in the equation of economic relations. Traditional theories of international business assumes that all nations have equal access to technology and, therefore, that there is no need to transfer technology from one county to another. Recent research findings have invalidated this assumption. In addition, they point to technology differences as primary cause of international inequalities in economic achievements. To reduce the inequalities, technology capabilities of the backward nations must be strengthened. The quickest way to do so is to transfer technology from the developed to the developing nations. Technology is any device or process used for productive purposes. In its broadest sense, it is the sum of the ways in which a given group provides itself with good and services, the group being a nation, an industry, or a single firm. There is a fundamental characteristic of technology that demands clear recognition. Q unites unlike Continue reading
International Business Policies
Multinational Corporations and Home Country Relations
Public attitudes toward Multinational Corporations (MNCs) are biased by a nation’s position as a home or host country. Historically, home countries have perceived MNC activities as desirable extensions of their domestic business systems. Conversely host countries have viewed MNCs as agents of foreign influenced and exploitation. This historic dichotomy is now shot through with conflicting perceptions of the MNCs. Different segments of society, such as labor, investors, consumers, traders, and farmers, see their interests affected in different ways. As a result, a multi-sided controversy about the societal merits and demerits of MNCs has grown in both host and home countries. The most aggressive challenge to the traditionally supportive home country policies towards MNCs has come from organized labor. Labor Conflict Multi-nationalization has created for management new mobility and flexibility that have greatly enhanced its bargaining power vis-Ã -vis labor. Since the sourcing base of the multinational firm knows no national boundaries Continue reading
Conflicts Between Multinational Corporations and Host Countries
Although the Multinational Corporations (MNCs) has no power over the host government, if may have considerable power under that government. By being able to influence certain factors, the MNC has the opportunity to help or harm national economics; in this sense, it may be said to have power against host governments. Critics of the MNC perceive these powers as potential perils to host societies. The strategic aspects of a host country’s national policy that are subject to the influence of the MNC include: 1. Planning and Direction of Industrial Growth Host nations have viewed with concern the tendencies of many MNCs to centralize strategic decisions in their headquarters. For the host governments this signifies loss of control over industrial strategy to the foreign-based MNC. The MNCs allegiances are geocentric; their overall objectives are growth and profits globally rather than in the host economy. These objectives require efficiency in the functional Continue reading
Multinational Corporations Adaptability to Host Environments
All Multinational Corporations (MNCs) are not equally likely to cause friction and tension in their host economies. Some adapt with relative ease and become closely integrated with their host environment, both economically and socio-culturally; others remain isolated and insulated, often forming alien enclaves in the host society. There appears to be a causal relationship between the MNC’s organizational structure that is, its organizational design as well as its underlying objectives and strategies and its capacity for social adaptation to host country conditions. In terms of inducement to social conflict, MNCs fall into three categories: home dominated, host dominated, and internationally integrated. Home or Parent Dominated MNCs These enterprises are organized and managed in such a way that the foreign based subsidiaries and other affiliates, whatever their specific legal form, serve primarily in a complementary support role. Their function is to help the parent company achieve its business objectives in the Continue reading
Transnational Corporations (TNCs) and Foreign Direct Investment (FDI) Decisions
Knowledge-intensive production, technological change, shrinking economic space greater openness have also changed the context for Transnational Corporations (TNCs). There are new opportunities and pressures to utilize them. The opening of markets creates new geographical space for TNCs to expand in and access tangible and intangible resources. It also permits wider choice in the methods firms can use (FDI, trade, licensing, subcontracting, franchising, partnering and so on) to operate in different locations. At the same time, advances in information, communication and transportation technologies, as well as in managerial and organizational methods, facilitate the trans-nationalization of many firms, including SMEs. The combination of better access to resources and a better ability to organize production trans-nationally increases the pressure on firms to utilize new opportunities, lest their competitors do so first and gain a competitive advantage. Competition is everywhere – there are fewer and fewer profit reservations and market niches that remain protected Continue reading
Foreign Direct Investment and the Business Environment
Direct investment abroad is a complex venture. As distinct from trade, licensing or investment, Foreign Direct Investment (FDI) involves a long-term commitment to a business endeavor in a foreign country. It often involves the engagement of considerable assets and resources that need to be coordinated and managed across countries and to satisfy the principle of successful investment, such as sustainable profitability and acceptable risk/profitability ratios. Typically, there are many host country factors involved in deciding where an FDI project should be located and it is often difficult to pinpoint the most decisive factor. However, it is widely agreed that FDI takes place when three sets of determining factors exist simultaneously; the presence of ownership-specific competitive ages in a transnational corporation (TNC), the presence of locational advantages in a host country, and the presence of superior commercial benefits in an intra-firm as against an arm’s-length relationship between investor and recipient. The Continue reading