The expansion of multinational corporations (MNC) around the world is one of the most important features of the international economy. So far, major changes and developments have taken place in this field and the role of these companies has been established as part of the current reality of the contemporary world. Today, despite the great interest of these companies in investing in developed countries, developing countries are also pursuing policies to attract the attention of these companies to invest in their country.
Therefore, these companies are considered as a vital part of the global economy. According to Hunya (2012), the concept of a multinational corporation is a product of the post-World War II era. When the powerful countries of that time, such as Britain, France, the Netherlands, Spain and Portugal, using newly established trading companies, transferred the wealth of the colonial countries to their country in the form of gold and silver bars. In other words, they are the original mother of today's multinational corporations.
In a comprehensive definition, it can be said that multinational companies are large industrial-commercial enterprises whose main base is located in one country; but in addition, in several other foreign countries, through the networks of units, organizations and subsidiaries, they have production and sales activities. These companies, with the cooperation of large banks in the mother country, dominate the economies of underdeveloped countries. According to economic historians, the late 1960s and early 1970s marked a turning point in the history of multinational corporations; because the number of multinational companies in the industrialized countries of the West increased significantly and reached about 10,000 companies, in terms of number, led by American, British, German, Swiss, French and Dutch companies (Duduiala, 2017, p.103). Of course, with the advent of multinational corporations in third world countries, elites, students, industrial workers, peasants, and local businessmen became unemployed, then criticism and protests against the activities of these companies increased. Agreeing to most economists, the collapse of the Soviet Union was considered a historic victory for the market-based economy, and it paved the way for the expansion of multinational corporations in most “Eastern Bloc” countries (Hunya, 2012).
There are two general theoretical perspectives on the role of multinational corporations in the global economy. Critics of the phenomenon argue that giant multinational corporations that are just looking for more profit are excluding host countries from the world of competition. They exploit the masses of the people while seizing the economic bases of these countries. In this view, it seems that these companies will dominate the global economy by relying on their financial, technological and managerial capabilities, which worries some rulers (Kenya, 2020). According to this view, the relationship between multinational corporations and underdeveloped countries is unfair because multinational corporations mainly pursue their interests by dominating the natural resources and markets of these countries. Monopolies slow down the process of industrialization and development by absorbing the economic surplus of underdeveloped societies.
In addition, scholars of this way of thinking basically criticize the institutions and structures of the capitalist system and consider the current capitalist economic system to be unjust and to exploit underdeveloped societies. In their view, the experiences of developed countries cannot be used as a model for the “Third World”. Because within existing relationships, multinational corporations not only do not contribute to the development of the third world, but also make them more dependent on themselves. Proponents of this view define the relationship between multinational corporations and underdeveloped economies as follows: 1. Multinational corporations, in order to make more profit, impose their desired division of labor on the host country and make these countries dependent on the capitalist system. 2. The governments of advanced societies, while supporting the capitalist class and the owners of multinational corporations, provide the maximum profit for them. 3. Multinational corporations, through their respective governments and the capitalists of underdeveloped countries, put pressure on the governments of these countries for their own interests (Duduiala, 2017, p.105). Thus, they are totally opposed to the tendency of multinational corporations to take over the global economy.
On the other side are advocates for the expansion of multinational corporations. They see multinational corporations as the crystallization of modernity and prosperity, the engine of development and the savior of the deprived of the third world. They believe that in recent decades, multinational corporations have become increasingly imperative in the global economy. Developing countries are gradually realizing the many benefits associated with multinational corporations, especially in terms of the productivity of host country firms(Hunya, 2012). Some of the main reasons why multinational corporations are reflected beneficial to host countries include technology transfer, the creation of new job opportunities, and the inflow of capital from the parent company MNC to its subsidiaries in the host country.
They consider that foreign direct investment (FDI) is a major factor in productivity in host countries because it increases technology transfer, which in turn brings great benefits to the host country and the parent company. In other words, host countries gain access to superior technology through technology overflows, which growths the economic productivity of local companies (Kenya, 2020). Domestic companies are believed to be experiencing technological advances due to their affiliation with multinational corporations in host countries; otherwise, economic progress is inconceivable for them. Thus, proponents of this view believe that multinational corporations are a force for the distribution of wealth and resources around the world and provide a means of economic prosperity in the world.
In conclusion, the rapid expansion of multinational corporations around the world has led many economists to attribute the future economic development of the world to the activities of these corporations. The increasing investment of multinational companies in different parts of the world has had a tremendous impact on the economic, social and cultural life of countries. The performance of these companies is so intertwined with the various dimensions and ways of life of developing countries that it seems impossible to recognize and analyze the economic and social situation of these countries without considering the role of multinational corporations. Economists have always debated how multinational corporations interact and operate in developing countries, but there is never complete agreement between analysts and experts. Some speak of the positive effects of establishing this relationship and believe that multinational corporations provide a favorable development environment for underdeveloped countries. On the other hand, a group of thinkers believe that the losses of these companies outweigh their benefits, and in practice, such companies should be considered more as an obstacle to development. Thus, given the globalization of the economy, it is believed that multinational corporations will conquer the world in the not-too-distant future by making more profit and acquiring assets and playing a wider role in the international economy.
References
Duduiala, P, L. (2017). "The Expansion of Multinational Companies Globally". Annals
Economy Series, Constantin Brancusi University, Faculty of Economics. Vol. 2, pages
102-107. December 2017.
Hunya, G. (2012). “The Role of Multinational Companies in International Business
Integration”. The Vienna Institute for International Economic Studies. WiiW Research Reports. November 2012.
Kenya, G. (2020). “The Role of Multinational Corporations (MNCs) in Globalization”.
University Of Nairobi. June 2020. Retrieved from
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