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Transnational Corporations and States Costs and benefits to: host economies home economies the bargaining relationship between TNCs and states TNC impacts on host economies Alternative perspectives empirical findings Why? ---sensitivity to precise statistical techniques used

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transnational corporations and states
Transnational Corporations and States
  • Costs and benefits to:
    • host economies
    • home economies
  • the bargaining relationship between TNCs and states
tnc impacts on host economies
TNC impacts on host economies
  • Alternative perspectives
  • empirical findings
  • Why? ---sensitivity to precise statistical techniques used
dicken s perspective outcomes are contingent on
Dicken’s perspectiveoutcomes are CONTINGENT on:
  • Nature of TNC investment
  • Nature of host economy
  • dimensions of impact of concern
conceptual framework
Conceptual framework

Dicken:

Figure 8.2

Nature of host economy:level of dev., size of economy, resource base, techn. Base, social, political, cultural chars. etc.

capital and finance
Capital and Finance
  • Distinction between gross and net capital flows
  • significant capital is raised locally
    • credit may be cheap
  • host economies lose capital
    • remissions of earnings and profits
  • various incentives offered to entice investment must be subtracted
  • how recoverable? --- given transfer pricing problem etc.???
technology issues
Technology--Issues
  • Reluctance of TNC to transfer best current production technology
  • constraints on transfer of technology to other parts of host economy
  • appropriateness of technology that is transferred
    • issue of capital intensity
    • environmental and health hazards risks
  • appropriateness of products transferred
trade and linkages
Trade and Linkages
  • The linkage issue
  • factors include:
    • overall TNC strategy
    • chars. of host economy
    • time
      • Japanese auto transplant example
mexican maquiladoras example
Mexican maquiladoras example
  • 1965---NAFTA (mid 1990s)
  • local content consistently < 2% of total purchases of material inputs
  • compare South Korea (33%) and Taiwan (27%)
  • factors
    • high prices
    • inadequate quality
    • unpredictable delivery
deeper factors
Deeper factors
  • Mexican inputs purchased by maquilas were subject to a 15% value added tax
  • Mexican suppliers had to import more raw materials and faced higher import duties
  • cost of Mexican inputs counted as part of value added in Mexico--import tariffs on entry to USA
  • purchasing decision-making was usually handled by corporate purchasing offices.
implication of linkages for balance of payments
Implication of linkages for balance of payments

Balance of payments equals

Capital goods imports +

materials imports +

royalties paid abroad +

dividends and interest sent abroad

Exports

+

Imports of capital

---

Issue of domestic sales ???

industrial structure and entrepreneurship
Industrial Structure and Entrepreneurship
  • impact is most pronounced in dualistic economies
  • industrial concentration is likely to increase
  • why? TNCs may increase barriers to entry
    • introduce brand goods
    • may use predatory pricing thanks to resources of parent company
    • stimulates defensive mergers by local firms
employment and labor impacts and issues
Employment and labor Impacts and Issues
  • Does a plant create new jobs?
  • What kinds of jobs?
  • Do TNCs pay higher wages?
  • Do TNCs operate acceptable systems of labor relations?
  • Are TNCs likely to offer STABLE employment opportunities?
application to mexican maquiladoras 1989
Application to Mexican maquiladoras--1989
  • Direct employment was 450,000
  • indirect employment --515,000
    • wage and salary expends (84%)
    • purchase of local services (15%)
    • purchases of local inputs (1%)
moral of the tale

Moral of the tale???

Danger of making sweeping generalizations about TNC impacts on host economies