Answer to Question #266056 in Microeconomics for DAVIES MBALAKAWE

Question

‘The growth of transnational corporations has had a major impact on the economic and social geography of a number of countries around the world.’ Discuss this statement with reference to the More Economically Developed Countries (MEDCs), the Less Economically Developed Countries (LEDCs) and the Newly Industrialized Countries (NICs). In your answer you should include the following: • a definition of a transnational corporation (TNC), illustrated by an example; • an explanation of the reasons for the growth in the number of such companies; • a discussion of their economic and social impact in named countries; • an examination of the attitudes of individuals and groups to their expansion. 

Answer 1

More economically developed countries:

Transnational corporations have been able to influence more economically developed countries through the employment of government officials involved in economic policy making and making financial contributions to political parties.

TNCs have also led to:

• creation of employment opportunities.
• Stable and reliable income as opposed to farming.
• Improvement in education and skills.
• Investment in infrastructure , for example new roads.
• Exploitation of natural resources.
• A better developed economic base for the country.

Less economically developed countries:

The positive effect of labour cost does not hold in this case, on impact of transnational corporations. No strong negative results emerge for any of the industrial groups under these economies. This implies that affiliate's R&D spending in LED countries is not influenced by labor cost saving nor do they expect benefit from the skilled labor force pool in developing countries.

Newly Industrialized countries:

The spillover and networking effects are positive and significant only for medium technology industries. ICT infrastructure also has a positive effect on the industries in the country.