The concept of a Multinational Corporation
The concept of the multinational corporation has served various dimensions. Multinational companies are those which control production facilities in more than one country such facilities having been acquired through the process of foreign direct investments.
Definition
An enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation.
Merits of MNCs
Due to globalization, Multinational corporations started to invest more & more capital in the Indian economy and industries.MNCs, help to increase the investment level and thereby the income and employment in a host country.
2) Technological Development
MNCS has become a vehicle for transfer technology, especially to the developing country
3) Export-Import
This enables the host countries to increase their exports and decrease their import requirement.
4) More spending on Research & Development (R&D)
The enormous resources of multinational enterprises enable them to have a very efficient research and development system thus they make a common contribution to innovation.
5) Competition
Multinational Corporation helps increase competition and break domestic monopolies.
Demerits of MNCs
1)The MNCs technology is designed for worldwide profit maximization but the development needs of poor countries in particular employment need & relative factors scarcities in these countries.
2) It records the growth of employment in the home country.
3) MNCs may destroy competition & acquire monopoly power.
4) The transfer of pricing enables MNCs to avoid tax by manipulating prices on an intracompany transaction
5) Through their power& flexibility, MNCs can evolve or undermine try national economic autonomy & control their activities may be inimical to the national interest of the particular country.
6) The tremendous power of global corporations possesses the risk that they may threaten the sovereignty of the nation in which they do business.