The role of Multinational Corporations in Developing Economies Essay

The role of Multinational Corporations in Developing Economies - Essay Example On the other hand, Maheshwari (2006, p.53) generally postulates six characteristics of a multinational corporation: (1) operates and carries direct investment to several nation-states; (2) formulates and maintains an industrial organization; (3) widely functions on the basis of globally owned assets; (4) largely transfers capital, goods, and services from home to host countries; (5) transfers resources but does not trade such resources; and (6) manages not its local subsidiaries but the nationals or people from the host country. Maheshwari (2006, p.52) notably provides several examples of MNCs such as Goodyear, Pepsi, and Nestle Corporations. These multinational corporations function and operate in numerous nation-states -- particularly those so-called Third World nations such as Indonesia -- as their host countries. Many of the MNC’s home countries are highly industrialized nations of which the United States is highly prominent. Multinational corporation fundamentally originates from a humble beginning, so to speak: firms. When firms firmly decide to become multinational corporations, there are necessary factors that they systematically fill-up or comply to. Maheshwari (2006, p.53) strongly argues that the underlying reason why certain firms become multinational corporations is because of their desire for vertical expansion. It implies that these firms wanted to substantially expand their business enterprise from production towards distribution. In setting up subsidiaries in other nation-states, these firms -- which ultimately become multinational corporations -- greatly endeavor either to accumulate raw materials from the resources of their host countries or to acquire global markets for the distribution or sale of their capital, goods, and/or services (Maheshwari, 2006). First, firms pursue an expansion business in order to acquire raw materials from the countries whose natural resources are exceedingly abundant. Normally, these firms are