Multinational Corporation and the Role of the State

University of Ljubljana- Faculty of Economics

Course title: Globalization and multinational firms

Lecturer: dr. Črt Kostevc

Graduate programme: Tourism Masters Programme

SEMINAR PAPER

MULTINATIONAL CORPORATION AND THE ROLE OF THE STATE

Student: Ana Lokovšek

Ljubljana, June 2011

PAGE INDEX

1 MULTINATIONAL CORPORTION 2

1.1 Definition of MNC 2

2 FOREIGN DIRECT INVESTMENT 3

2.1 Definition of FDI 3

2.2 Motives for FDI 3

3 ARE MNCs TAKING CONTROLE ON THE STATE? 5

3.1 Examples of negative effects of MNCs in foreign countries 5

4 THE MNC – HOST GOVERNMENT RELATIONSHIP 7

5 COOPERATION 8

5.1 Four levels of cooperation 8

5.2 Building blocks 9

5.2.1 Hypothesis 10

5.2.2 Findings 12

6 CONCLUSION 14

REFERENCES 15

TABLE INDEX

Table 1: Host country determinants for FDI 4

Table 2: Determinants of MGR: Standardized regression analysis (N=131)* 13

Table 3: Consequences of MGR: Multiple regression analysis (N=131)* 13

INTRODUCTION

Recent advances in technology, information technology, coupled with deregulation and market liberalization worldwide, have unpredictably increased in the growth of multinational corporations (MNCs hereafter). Before MNCs were creations of wealthy countries like United States and United Kingdom. But today many of the newcomers are based in the developing countries and many developing-county firms have expended abroad. To have a company in a foreign county the relationship between MNCs and host-governments is needed.

The relationship between governments and multinationals is characterized by a complex distribution of benefits. MNCs increasingly demand the "freedom" they need to optimize their operations across borders, with the goal of lowering their total costs and continuously upgrading quality. Their key bargaining chip in dealing with host governments is that they have the option not to...