Introduction Multinational corporations are what we can say a direct result of globalization and international integration of economies.

MNCs are entities, which operate in more than one country with their management headquarters in what we call the home country and branches in countries called host countries. They are large-scale operators, and the scale of operation is precisely why the revenue of some MNCs exceeds that of a few small countries. Multinationals were first seen in the 17th and 18th century- a stark example being the East India Company, an English corporation that later expanded into various parts of the world. REASONS FOR EXISTANCE MNCs like other companies are mostly profit driven. The difference though is, MNCs look beyond domestic borders for better profit avenues. This ensures that though the home market is saturated the company can continue to grow and gain profit. ___________________ MNC go international for several other reasons as well. Some of them include cheaper labor, better availability of resources, lower production costs etc. __________________. The impact of MNCs in Developing Countries. MNCs like any other firm in a competitive market are profit driven. It is because of this motive that there are several negatives of an MNC functioning in

developing countries. The MNCs operate on a large scale and thus require high levels of resources and endowments to function at profitable levels. This leads to abusive use and depletion of natural resources. The firms bring to the host country new production process and technology, however it is argued that MNCs usually bring in technology that is outdated in the home country. Because of its large scale of operation and comparative technological advancements an MNC gains comparative advantage in production compared to the indigenous industries. This results in the MNC reducing competition by eliminating the domestic firms and establishing an arguable monopoly in the market. The MNCs in a host country are basically a subsidiary of the parent company in the home country. Thus, large sums of money in the form of economic profit are drained from the host country-giving rise to capital flight. A typical MNC due to its nature and large scale of operation, influences the trade and foreign policies of a small developing country. MNCs use this influence to increase their economic profit at the cost of social benefits to the host country. They exploit the governments provision of economic and social concessions, tax rebates and reductions, cheap endowments like that of sites for factories, inputs etc. Because the MNCs are profit driven they usually cater to select few groups in society. This usually includes a few Modern sector Workers. By doing so they push the income gap between different stratas of society. Along with exploiting the government through influence, MNCs also tend to exploit the labor force. So often it is found that the

workers employed are underpaid and work in inadequate working conditions. For example Nike outsourced the production of its shoes to developing countries like China, Bangladesh and Vietnam. The workers employed, worked in sweatshops under hazardous conditions and were underpaid. MNCs have a lot of positive impacts too. Hardly receive credit. Extension of opportunities for earning higher incomes. Better quality of goods and services. Increase in Employment levels, and income levels. Industries get new technology from home countries of the MNC. The host country s business also gets management expertise ( Management GAP). Break protectionalism, curb local monopolies creates competition in local firms and enhances competitiveness. Host country industries benefit from the R & D outcomes of the MNC (Technology Gap). Host country can increase exports and reduce imports because of the contribution of the MNC. Improves balance of payments FDI .( Trade Gap).