Economic Institution

6）International institution

Multinational Corporations (MNCs) is companies, which own or control production or service facilities in more than one country. In order to obtain plant and other production facilities in foreign countries, an MNC must invest. Thus an MNC has to be a foreign investor.

As MNCs influence many countries, it can be defined as the host country and the home country. Host country is the country that receives the investment. Home country is the base of the company.

For the host country, MNCs help the exploitation of resources. For many developing countries, they own a lot of natural resources. However, they are unable to exploit the resources since they have insufficient capability. Local government may usually corporate with MNCs and make mutual agreement on how the MNCs help exploit and this is mutual benefit. Also, developing countries usually have abundant of human resources like India and China. MNCs can help solve the problem of resources wastage.

Also, as that the MNCs investment in other countries involve many people. It is impossible and unrealistic for moving from the home countries to satisfy the need. MNCs have to hire local people to work. Therefore, they create many job opportunities. This will in general raise the wage level (w1-w2) in the labour market. Since the demand is higher while the supply keep constant in a range.

Further, as the people are richer, they are more willing to make consumption thus increase the economic growth, the living standard are improved.

Strong MNCs usually have their own technological and management advancement. When MNCs invest to the regions, they bring the up to date technology to the host country to improve productivity. Local firms can imitate or get inspired from the update knowledge.

Local workers are trained by MNCs is a great benefit. No one will work for one organization in his whole life. After they leave the MNCs and enter the local firms. That the productivity...