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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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