MNCs-19. MNCs and the Developing World Part I iLearn

7/31/2019 MNCs-19. MNCs and the Developing World Part I iLearn

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The Multinational Corporation in

World Affairs

Jean-Marc F. Blanchard, Ph.D.

*Please turn off your STUFF


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Todays Agenda/Themes

Administrative

MNCs and the developing world-academic views on effects

MNCs and the developing world-academic views on bargaining power

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Attendance/Administrative

Revised class schedule

Guest speaker on April 25-attendance counts extra

Guest speaker on May 2-attendance counts extra

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Attendance/Administrative (cont.)

Exam #1 return and usage of CP1-3

Distribution of new CPopportunities

Monday Madness

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MNCs and the Developing World-Basics

MNCs as exploiters

MNCs as contributors-better wagesand technology transfer

MNCs as contributors-environment

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MNCs and the Developing World-Basics (cont.)

Bargaining power (BP) is critical

What are some of the factors thatgive countries BP?

What are some other factors that

might increase the likelihood thatMNCs contribute more to their hostcountries?

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Greater MNC BP Bad MNC Behavior

Introduction

Different stakeholders seek different kinds ofprofits

Search for profits also means concern for thetop line

Profit motive can produce different kinds ofbehaviors

Questions?

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Dependentistas Views of the Impact of MNCs onDeveloping Countries (Peter Evans)

Overview

Distilling the

dependentistasperspective

Lots of economicpain and limitedeconomic gain

With the growingpredominance of themultinational corporationincreasing numbers of a poor

countrys economic actorsbecome responsible tosuperiors and stockholderswho are citizens of othercountries. If a similar chain

of command existed in publicorganizations, the poorcountry would be deemed acolony

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Dependentistas: The Causes of MNC EconomicHarm

MNCs extract more capital fromdeveloping countries than they invest

MNCs earn excessive rates of profit

MNCs play transfer pricing games

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Dependentistas: The Causes of MNC EconomicHarm (cont.)

MNCs squeeze out localentrepreneurs

MNCs aggravate unemployment

MNCs increase low-skilledemployment

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Dependentistas Views about Other MNCs Costson Developing Countries

Limits the ability of DCs to choose their owneconomic 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 SpecificMNCs on the Developing Countries

Extractive MNCs, DCs, and skeweddevelopment

Manufacturing MNCs, DCs, and consumptiveemulation

Understanding consumptive emulation

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Liberals on MNCs Impact on Developing CountryBusinesses

MNCs transfer technology

MNCs create opportunities for localfirms

Questions?

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Liberals on MNCs Impact on Developing CountryJobs and Autonomy

MNCs neither foster capital intensiveproduction or low-skilledemployment

Policy autonomy

The Unholy Alliance may not everexist

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

Introduction

DCs will win over time as far asextractive industries are concernedbecause 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 sunkcosts as extractive firms

Manufacturers have special technologicaladvantages

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 asassumed

Insider status is not automatic

Questions?

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

Introduction

Components ofthe BPA

Questions?

Balance ofresources,balance of needs,

balance ofconstraints, andcoercive power

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Kobrins BPA & the Balance of Resources

Resources-MNCs

Why does productdifferentiation create power?

Resources-hosts

Why is it problematic to focuson the balance of

resources?

Questions?

Technology, managerialskills, capital,advertising intensity,product differentiation,access to markets, and

employment

Economic size, growthrates, incentives,

labor pool, and otherfactors of production

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Kobrins BPA and the Issue of Constraints

Introduction

Degree of integration into globalproduction chains

Questions?

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Kobrins Findings re: the BP of Manufacturing MNCsand DCs

Traditional variables do not seem soimportant

Technology intensity has one of thestrongest effects on bargaining power

Structural constraints need consideration

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Tech Transfer from MNCs to Local Suppliers inDeveloping Countries

Introduction

Benefits of Technology Transfer

Two models of technology transfer (terms:accumulation and assimilation theory)

Accumulation theory

Assimilation theory22


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Tech Transfer from MNCs to Local Suppliers in DCs(cont.)

Giving away the crown jewels-understanding transfers and teaching

Limits on MNC sharing

Questions?

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Tech Transfer from MNCs to Local Suppliers in DCs-Case 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 drivingtech. transfers

Forces drivinggreater tech.transfers

Questions?

A greater length oftime, more MNCcontrol over its

investment in thehost country, andthe size/needs ofthe operation

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Volvo in Brazil, China, India, and Mexico

Forces shaping thelevel of supplierupgrading

Benefits of supplierupgrading

Questions?

The most upgradingseemed to occur wherethe demands on localsuppliers were greatest,

where the relationshiphad gone on longer, andwhere there waspotential for upgrading.Also relevant were

Volvos appeal andVolvos universally highglobal 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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MNCs-19. MNCs and the Developing World Part I iLearn

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