The Multinational Corporation in World Affairs

Jean-Marc F. Blanchard, Ph.D.

*Please turn off your STUFF

Todays Agenda/Themes

Administrative MNCs and the developing worldacademic views on effects MNCs and the developing worldacademic views on bargaining power

Attendance/Administrative

Revised class schedule Guest speaker on April 25attendance counts extra Guest speaker on May 2attendance counts extra
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Attendance/Administrative (cont.)

Exam #1 return and usage of CP 1-3 Distribution of new CP opportunities

Monday Madness
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MNCs and the Developing WorldBasics

MNCs as exploiters MNCs as contributors-better wages and technology transfer MNCs as contributors-environment

MNCs and the Developing WorldBasics (cont.)

Bargaining power (BP) is critical What are some of the factors that give countries BP? What are some other factors that might increase the likelihood that MNCs contribute more to their host countries?
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Greater MNC BP Bad MNC Behavior

Introduction

Different stakeholders seek different kinds of profits

Search for profits also means concern for the top line Profit motive can produce different kinds of behaviors Questions?
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Dependentistas Views of the Impact of MNCs on Developing Countries (Peter Evans)

Overview Distilling the dependentistas perspective Lots of economic pain and limited economic gain

With the growing predominance of the multinational corporation increasing numbers of a poor countrys economic actors become responsible to superiors and stockholders who are citizens of other countries. If a similar chain of command existed in public organizations, the poor country would be deemed a colony
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Dependentistas: The Causes of MNC Economic Harm

MNCs extract more capital from developing countries than they invest MNCs earn excessive rates of profit MNCs play transfer pricing games

Dependentistas: The Causes of MNC Economic Harm (cont.)

MNCs squeeze out local entrepreneurs MNCs aggravate unemployment MNCs increase low-skilled employment

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Dependentistas Views about Other MNCs Costs on Developing Countries

Limits the ability of DCs to choose their own economic development and IPR strategies MNCs usurp control over DC social, environmental, and labor standards Questions?

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Dependentistas Views about the Impact of Specific MNCs on the Developing Countries

Extractive MNCs, DCs, and skewed development Manufacturing MNCs, DCs, and consumptive emulation Understanding consumptive emulation

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Liberals on MNCs Impact on Developing Country Businesses

MNCs transfer technology MNCs create opportunities for local firms Questions?

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Liberals on MNCs Impact on Developing Country Jobs and Autonomy

MNCs neither foster capital intensive production or low-skilled employment Policy autonomy

The Unholy Alliance may not ever exist

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Obsolescing Bargain (OB) School and its Insights on MNC-Developing Country Relations

Introduction DCs will win over time as far as extractive industries are concerned because it will gain BP Logic of the OB school

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(Supposed) Limits of the OB School

Limited empirical support

Manufacturers do not have the same sunk costs as extractive firms

Manufacturers have special technological advantages Manufacturers can achieve insider status Questions?
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In Defense of the OB School

Manufacturers can have huge sunk costs

Footloose? NOT!
The technology gap may not be as big as assumed Insider status is not automatic

Questions?

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Bargaining Power Approach (BPA), MNCs, and the Developing World (Kobrin)

Introduction Components of the BPA

Questions?

Balance of resources, balance of needs, balance of constraints, and coercive power

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Kobrins BPA & the Balance of Resources

Resources-MNCs

Why does product differentiation create power?

Resources-hosts Why is it problematic to focus on the balance of resources? Questions?

Technology, managerial skills, capital, advertising intensity, product differentiation, access to markets, and employment

Economic size, growth rates, incentives, labor pool, and other factors of production

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Kobrins BPA and the Issue of Constraints

Introduction Degree of integration into global production chains Questions?

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Kobrins Findings re: the BP of Manufacturing MNCs and DCs

Traditional variables do not seem so important Technology intensity has one of the strongest effects on bargaining power Structural constraints need consideration

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Tech Transfer from MNCs to Local Suppliers in Developing Countries

Introduction Benefits of Technology Transfer Two models of technology transfer (terms: accumulation and assimilation theory) Accumulation theory Assimilation theory
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Tech Transfer from MNCs to Local Suppliers in DCs (cont.)

Giving away the crown jewelsunderstanding transfers and teaching Limits on MNC sharing Questions?

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Tech Transfer from MNCs to Local Suppliers in DCsCase Study of Volvo in Brazil, China, India, and Mexico

Introduction Rationales for local sourcing

Features of local suppliers

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Volvo in Brazil, China, India, and Mexico (cont.)

Forces driving tech. transfers Forces driving greater tech. transfers

A greater length of time, more MNC control over its investment in the host country, and the size/needs of the operation

Questions?
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Volvo in Brazil, China, India, and Mexico

Forces shaping the level of supplier upgrading

Benefits of supplier upgrading Questions?

The most upgrading seemed to occur where the demands on local suppliers were greatest, where the relationship had gone on longer, and where there was potential for upgrading. Also relevant were Volvos appeal and Volvos universally high global standards
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MNCs and DCs: The Case of MTV in India

Introduction Currying India Its the L of the O, I, and L

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The Case of MTV in India (cont.)

MTVs difficulties Consumptive emulation in reverse

I got your Naan right here!

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The Case of MTV in India (cont.)

Some cultural impact Limits to this impact

Questions?

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The Case of MTV in India-Its Entry

Introduction People power Questions?

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