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Role of Multinational Corporation in Global Politics Economy

(GROUP ASSIGNMENT SEMESTER SPRING -2023)

Submission Date (August 1st, 2023)

BY

Masooma (019), Shazima (044), Ali Hamza (016), Maseera (037), Usman (051), Aoun (050)

PSIR-410 (Global Political Economy)

BS (IR 8th)

Submitted to

Prof. Ramzan Shahid

Department of International relations (87)

UNIVERSITY OF GUJRAT

Table of Contents
Keywords:................................................................................................................3

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Multinational corporation:.....................................................................................3
Role of multinational corporation in globalization: 5
Multinational corporation role in the economic influence:.................................6
Multinational corporation role in the economic influence examples:................8
Multinational corporation role in the politics influence:.....................................9
Multinational corporation role in the politics influence examples:..................11
Multinational corporation role in the technology influence:.............................13
Multinational corporation role in the technology influence example: 14
Multinational corporation role in the environment impact:.............................15
Multinational corporation role in the environment impact example:..............17
Multinational corporations in GPE advantages:................................................19
Multinational corporations in GPE disadvantages:...........................................20
Conclusion:.............................................................................................................22
References:.............................................................................................................22

Keywords:
multinational corporations (MNCs), firms, foreign policy, lobbying

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Multinational corporation:
It usually has its operations in more than 2 states.

Today, the geo political structure is impacted by multinational companies. Their budget, in

many cases, is higher than developing countries. Fortune 500 are the 500 biggest companies due
to the volume of their budget. It includes most of the American and Chinese companies. Other
than them, Germany, UK, and Japan’s companies have their participations.

Chinese companies are not rival companies. Rather they are state owned companies. Them
operations are like the private companies but they are controlled by the state.

In 1960s, same kind of model was adopted in Pakistan. Pakistan institute of corporation, it’s

kind of a bank, that gave loans for establishment of factories. At that time, Pakistanis had higher

growth than Indians.

FDI:

It involves a firm that wishes to expand its functions to another country, they buy or create

another firm in that state, the money they transfer for it is termed FDI.

China prospered on its basis. It had human resource that could perform all types of labor

services. Both capital intensive, and labor intensive, entered China. Even Apple and Samsung

has their manufacturing work done in China? But China established their own companies by

using the skills learnt from Apple and Samsung.

FDI doesn’t include investments in stock market of a country.

FDI is done through multinational corporations. Toyota comes from Japan, but their cars are

assembled in Karachi too. They do foreign direct investment.

Where does FDI go:

Advanced industrial countries, they have the most chunk of it. China in Asia had the biggest

chunk of it. In Latin America, Brazil and Mexico.

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Why to use FDI?

2 types of advantages.

Locational advantage.

Market imperfections.

Locational advantages:

It is possible that the place has large reserves of natural resources. France and Germany fought

thrice. Coal and steel were the reason of contention.

Coal and steel community, established in 1951, had the motive to guard those reserves. Prior

to it, Germany had thrice attacked France to get hold of it. In 1992, it was amended and

European Union came into existence.

Access a large local market:

China and India consume most phones. Hence they are the biggest markets. Companies focus

ongoing in states where their products can be sold.

Market oriented:

Apple comes in India because it is demanded highly in India. In Pakistan, they do not come.

Reason being less demand.

Less controls and curbs:

Companies do not go in states where there exist huge taxes on production.

Enhance efficiency:

Labor, and capital are the factors of production. Include in them the raw material. If a product

includes electronic chips, and it is cheaply available in a particular state, the factory will be

established in that state.

The biggest motive is to go where profits are higher.

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Role of multinational corporation in globalization:

Multinational corporations (MNCs) have been essential to the globalization process. MNCs have
significantly influenced numerous facets of the global economy and society as major contributors
to and beneficiaries of globalization. The following are some of the major roles that MNCs have
played in globalization:

Access to Diverse Markets:

MNCs have increased their activities across international boundaries, giving them a worldwide
presence. They create subsidiaries, make investments abroad, and engage in cross-border trade,
which enables them to cater to a global clientele.

FDI:

MNCs are significant sources of foreign direct investment (FDI), which is a global market for
capital. In order to promote economic growth and development, they make investments in
infrastructure, technology, and production facilities in the host countries.

Technology Transfer:

Technology Transfer and Innovation: MNCs frequently introduce cutting-edge management

techniques and technology to host countries, promoting innovation and the spread of knowledge.
This aids in closing the technological gap between advanced and underdeveloped nations.

Global Value Chains (GVCs):

Global Value Chains (GVCs): Multinational corporations (MNCs) take part in and help to shape
global value chains by coordinating manufacturing activities in many nations to increase
productivity and cut costs. Greater specialization and interdependence among nations have
resulted from this.

Skill transfer:

Employment of a global workforce by MNCs promotes labor mobility as well as the cross-border
transfer of skills and knowledge. This makes it easier for talent and experience to be transferred
to places where they are needed.

Homogenization:

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MNCs encourage the standardization of goods, services, and business procedures, which
contributes to the homogenization of consumer culture and international markets.

Multinational corporation role in the economic influence:

Multinational corporations (MNCs) place a strong emphasis on economic influence, which has a
major impact on how they operate, formulate their strategy, and affect the world economy. The
following are some significant economic influencers in MNCs:

Global Market Presence:

Due to their economic clout, MNCs are able to build a sizable foothold in numerous nations
across numerous continents. They can establish subsidiaries or joint ventures, engage in cross-
border trade, invest in international markets, and invest in foreign markets to gain access to new
markets and increase their clientele.

Foreign Direct Investment (FDI):

Major FDI by MNCs into their host countries frequently contributes to their economic impact.
They make investments in technology, facilities, and infrastructure, which helps these areas
flourish economically.

Foreign Direct Investment (FDI):

Major FDI by MNCs into their host countries frequently contributes to their economic impact.
They make investments in technology, facilities, and infrastructure, which helps these areas
flourish economically.

Job creation and employment:

MNCs have the potential to significantly increase employment in their host countries. Their
economic influence results in the establishment of employment possibilities, which helps to
lower unemployment and raise local residents' living standards.

Technology transfer:

Economic sway enables multinational corporations (MNCs) to transfer cutting-edge knowledge

and technology from industrialized to underdeveloped nations. This technology transfer can

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encourage innovation while raising the productivity and competitiveness of indigenous

industries.

Tax Revenue and Fiscal Impact:

The economic activities of MNCs bring in money for taxes in both their home and host nations.
However, concerns about fair taxation have been raised in recent years due to the controversy
around corporate tax avoidance and the use of tax havens.

Economic diplomacy:

Large MNCs frequently have significant economic impact, which enables them to engage in
economic diplomacy. To create trade policies, investment laws, and economic accords that serve
their interests, they can bargain with governments and international organizations.

Global Value Chains:

Due to their economic clout, MNCs can influence and participate in global value chains. To
increase productivity, cut costs, and gain a competitive advantage, they might coordinate
industrial activities across international borders.

Innovation and Research:

To maintain their competitiveness and provide new goods and services to the market, MNCs
frequently invest extensively in research and development (R&D). They can partner with local
firms, universities, and research organizations all over the world thanks to their economic clout.

Economic Stability and Risks:

MNCs can have an impact on economic stability due to their worldwide reach. Their choices
regarding investments, market entry, and market exit may have an impact on currency exchange
rates, financial markets, and the economy of both the host and home nations.

Market Influence:

MNCs with significant economic clout might take the lead in specific sectors. Pricing, supply
chain dynamics, and even the competitive environment of sectors can be impacted by their
market power.

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Multinational corporation role in the economic influence examples:

Apple Inc.:

Apple is a well-known MNC recognized for its global production and supply chain operations.
The business has an impact on the economy of many nations, notably China, where it outsources
the production of many of its products to companies like Foxconn. The enormous sales and
money generated by Apple greatly boost the economies of the nations that are a part of its supply
chain and distribution system.

Walmart:

As one of the biggest merchants in the world, Walmart has a significant impact on the economy.
Its operations are spread throughout several nations, and it is a significant employer in numerous
areas. The supply chains of several sectors throughout the world are significantly impacted by
Walmart's purchasing power and product demand.

Toyota:

As a top automaker, Toyota has a significant economic impact in many of the nations where it
conducts business. The establishment of production facilities and supply chains by the
corporation in various regions has aided in the growth of the local economy and the creation of
jobs.

Amazon:

The rise of Amazon as a major international player in e-commerce has revolutionized global
logistics and retail. The nations that host its data centers and fulfilment centers would suffer
economically as a result of its extensive distribution network and reliance on cloud services.

Samsung:

A South Korean corporation called Samsung works in a number of industries, such as

electronics, shipbuilding, and construction. Given its strong presence in the technology and
consumer electronics sectors, its economic influence not only has an impact on the South Korean
domestic economy but also on international markets.

Coca-Cola:

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Due to the beverage company's vast global reach, Coca-Cola has become one of the most well-
known names in the world. The beverage business and the economy of the nations where it has
bottling and distribution activities provide witness to its economic influence.

Nestlé:

Nestlé is a food and beverage corporation with its headquarters in Switzerland. It has a
significant global presence and owns many well-known consumer brands. Its economic impact
extends across global retail markets, packaging industries, and agricultural sectors.

ExxonMobil:

As a significant oil and gas corporation, ExxonMobil has a strong economic sway over the world
energy market. Energy prices and economies in both producing and consuming nations are
impacted by its exploration, production, and distribution activities.

HSBC:

With a sizable global presence, HSBC is a multinational banking and financial services
corporation. The international financial system, capital flows, and trade are all influenced by its
operations across numerous nations.

Microsoft:

Microsoft's software and technology products are utilized all over the world, and the company
has an economic impact on the IT sector, software developers, and companies that depend on its
products for operations and productivity.

Multinational corporation role in the politics influence:

Political influence plays a crucial role in multinational corporations (MNCs) and can have a
considerable impact on their business operations, strategy, and overall contribution to the global
economy. The following are some significant facets of the interaction between politics and
MNCs:

Regulatory Environment:

MNCs must abide by the rules and laws of the nations in which they conduct business. Political
sway has a significant impact on how the regulatory framework in which MNCs operate is

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shaped. Governments may pass laws to entice foreign investment, establish advantageous tax
structures, or impose sector-specific rules that may have a direct impact on the operations of
MNCs.

Trade and investment policies:

Governments establish trade agreements and investment treaties with other nations, which may
have an impact on MNCs' cross-border operations. Political sway can come from both the home
and host countries.

Advocacy:

MNCs frequently engage in political lobbying and advocacy to sway decision-makers and
reshape legislation to their advantage. They might try to advance their interests, get special
treatment, or support laws that help their particular industries.

Geopolitics and diplomacy:

Geopolitical factors may have an impact on the economic activities of MNCs. Market access,
trade limitations, and chances for MNCs to make foreign investments can all be impacted by
political ties between nations.

Government Contracts and Tenders:

MNCs may depend on government contracts for commercial possibilities in particular industries.
These contracts may be won or lost depending on political sway.

Corporate social response:

MNCs frequently participate in CSR projects to enhance their public image and show their
commitment to social and environmental issues. Governments may encourage or control CSR
activities, affecting MNCs'.

Intellectual property right:

Political sway can have an impact on the protection and enforcement of intellectual property
rights (IPR), which are essential for sectors that rely on research and technology. Strong IPR
protections can entice MNCs to spend money on R&D in particular nations.

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Sanctions and Trade Restrictions:

Political choices, like as trade restrictions or sanctions placed by one government on another, can
have a big impact on MNC operations in the impacted areas.

Resource Extraction and Access:

MNCs frequently depend on having access to natural resources in sectors like mining and
energy. Ownership of resources, rights to their extraction, and environmental restrictions can all
be influenced politically.

Sanctions and trade restrictions:

Political sway can occasionally have an impact on the corporate governance of multinational
corporations (MNCs), particularly state-owned enterprises (SOEs). Governments could utilize
their ownership shares to sway policy decisions.

Multinational corporation role in the politics influence examples:

The automotive industry with the USMCA and NAFTA:

NAFTA:

The United States, Canada, and Mexico signed NAFTA in 1994 as a trade pact with the intention
of removing trade restrictions and tariffs between the three nations. The automotive industry was
among those greatly impacted by NAFTA.

Political Influence:

The automobile sector is a crucial one in each of the three NAFTA nations and is of major
political and economic significance. The governments of the United States, Canada, and Mexico
came under pressure from domestic automakers, labor unions, and other interest groups during
the NAFTA negotiations to ensure that the deal wouldn't result in a large loss of employment or
manufacturing capacity.

Investment and Rules of Origin:

As part of the political compromise, NAFTA's rules of origin for the automotive industry were
established. These regulations specified the proportion of components and materials that had to

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be produced in the NAFTA territory in order to be eligible for tariff-free treatment. This was
done to stop businesses from just moving their production to the nation with the cheapest labor
costs.

Effect on MNCs:

The supply chain strategies of multinational automakers were influenced by NAFTA's rules of
origin and other provisions. To adhere to the rules of origin while maximizing costs and market
access, several automakers set up production sites and supply chains throughout the NAFTA
zone. The pact gave MNCs access to more extensive markets, integrated production processes.

USMCA:

The USMCA, which incorporated updates and adjustments to the original agreement, took the
place of NAFTA in 2020. Political considerations played a significant role in the USMCA's
renegotiation, as each nation sought to advance its own interests.

USMCA modifications:

The agreement contained tighter rules of origin for the automobile industry. The revised
agreement stipulated that in order to be eligible for duty-free treatment, a greater proportion of
vehicle components (such as labor, steel, and aluminum) have to be sourced from the USMCA
zone. To avoid outsourcing to low-wage nations, a sizable component of the vehicle must be
made by higher-paid individuals.

Impact on USMCA:

The new requirements under the USMCA have an impact on MNCs' sourcing choices and supply
chain strategy. To comply with the revised rules of origin, businesses have to modify their
manufacturing procedures and their interactions with their suppliers. The cost structures and
competitive positioning of international automakers doing business in the USMCA region were
impacted by this.

This illustration shows how politics and trade agreements may have a big impact on how
multinational firms operate and formulate their goals. Political choices made during trade
negotiations can influence how cross-border economic activities are governed, which has an
impact on supply chains, industry competitiveness, and investment choices. MNCs must

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negotiate the constantly shifting political landscape if they want to remain compliant and
competitive in the global economy.

Multinational corporation role in the technology influence:

Multinational corporations' (MNCs) reliance on technology has a significant impact on how they
conduct business, compete, and engage with one another in the global economy. Technology has
a significant impact on the strategy, operations, and overall success of MNCs. Some significant
areas of technology influence in MNCs are listed below:

Global Connectivity:

Technology has made it easier to communicate and connect with people throughout the world.
Regardless of where they are physically located, MNCs can now coordinate their operations,
communicate information, and make decisions instantly.

Supply Chain Optimization:

MNCs can improve their supply chains with the use of cutting-edge technology like supply chain
management software, Riot devices, and data analytics. This increases responsiveness to market
demands, lowers costs, and improves efficiency.

Global Collaboration:

MNCs can work with employees and partners all over the world thanks to technological
solutions like video conferencing and cloud-based collaboration platforms. This encourages
innovation and knowledge exchange among international staff.

Market research and analysis:

MNCs use technology to gather information about local markets, analyses customer behavior,
and perform market research. Their marketing and localization strategies are informed by this
data.

E-commerce

E-commerce and digital marketing have transformed how MNCs interact with their clients. They
are able to increase their market reach and meet a variety of consumer demands globally thanks
to e-commerce platforms and digital marketing.

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Data-driven Decision Making:

Big data analytics enables MNCs to collect and analyses enormous volumes of data, assisting
them in making well-informed decisions about entering new markets, developing new products,
and allocating resources.

Technology Transfer and Innovation:

Multinational corporations frequently transfer cutting-edge know-how to their affiliates and

international partners. This supports creativity and the growth of regional industries.

Automation and robotics:

MNCs use automation and robotics in the manufacturing sector and other sectors to boost
productivity, enhance product quality, and lower labor costs.

Cybersecurity:

As MNCs operate internationally and handle sensitive data, cybersecurity measures are essential
to safeguarding their proprietary information, client data, and business integrity.

Flexibility and Remote Work:

Thanks to technology, MNCs can now access a worldwide talent pool and offer their staff
members remote work options.

Global Market Access:

Digital platforms and e-commerce make it possible for MNCs to connect with customers in
distant places, opening doors for them to enter and grow new markets.

Multinational corporation role in the technology influence example:

Supply Chain Management:

To make their supply chains more efficient, MNCs use technology. To track shipments, track
inventory levels, and forecast demand, they make use of cloud-based platforms, advanced
analytics, and Internet of Things sensors. For instance, to effectively manage their extensive
logistics network, businesses like Amazon use complex algorithms.

E-Commerce and Online Retail:

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The retail sector has undergone a technological revolution, with MNCs like Alibaba, Amazon,
and eBay serving as notable examples. These organizations offer a wide variety of items and
flawless online shopping experiences thanks to their worldwide e-commerce platforms, which
enable them to connect with customers in many regions.

Digital marketing and personalization

Digital marketing and personalization are two strategies that MNCs use to target particular client
categories with tailored advertising campaigns. They can customize adverts and promotions
depending on clients' tastes and behavior using data analytics and artificial intelligence. Data-
driven marketing methods are used by businesses like Coca-Cola and Procter & Gamble in a
variety of markets.

Collaboration and communication:

The use of technology allows MNCs to work remotely with staff that are distributed all over the
world. Cloud-based project management platforms, virtual meeting tools, and video
conferencing enable seamless collaboration and knowledge exchange. These technologies are
used by businesses like Google and Microsoft to run effective international teams.

Artificial Intelligence and Automation:

MNCs use AI and automation in a variety of settings, including customer service, production,
and data analysis. For instance, Foxconn, a significant supplier to Apple, utilizes automation and
robotics.

Multinational corporation role in the environment impact:

Multinational companies' (MNCs) effects on the environment are a crucial issue that have
attracted more attention in recent years. MNCs have the potential to have a large impact on the
environment, both favorably and badly, as powerful global players. Among the major functions
of environmental effect in multinational organizations are as follows:

Resource Extraction and Consumption:

Multinational corporations (MNCs) operating in the mining, oil and gas, and agricultural sectors
can significantly affect natural resources. Their resource extraction and use may result in habitat
loss, deforestation, and non-renewable resource depletion.

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Greenhouse gases effect:

Emissions of greenhouse gases may be increased by MNCs with significant manufacturing,

transportation, and supply chain operations. These emissions, which include carbon dioxide
(CO2) and methane, may have a negative impact on the climate.

Trash Production:

MNCs' extensive industrial operations and production procedures may generate a significant
amount of trash, including hazardous waste. Air, water, and land pollution can result from
improper waste management.

Water consumption and pollution:

Some MNCs use a lot of water for their operations, which puts more strain on the nearby water
supplies. Furthermore, inappropriate wastewater discharge can cause water pollution and harm to
ecosystems.

Deforestation and Biodiversity Loss:

MNCs engaged in logging, agriculture, and land development may be a part of the deforestation
and biodiversity loss that affects ecosystems and puts species in danger.

Supplier Chain Responsibilities:

MNCs' supplier chains are also affected by their environmental impact. Indirectly contributing to
environmental damage, they might source raw materials from areas with inadequate
environmental rules.

Sustainable Practices:

On the plus side, some MNCs are making efforts to lessen their environmental effect after
realizing the value of sustainable practices. They make investments in renewable energy,
embrace green technologies, and put waste minimization strategies into practice.

Regulation and Environmental Compliance:

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MNCs work in a variety of regulatory contexts. They must abide by numerous environmental
laws and regulations in other nations, which has an impact on their business operations and
expenses.

Corporate social responsibility:

Environmental sustainability is becoming a key component of many MNCs' corporate social

responsibility (CSR) programmers. To show their dedication to ethical business practices,
companies participate in environmental preservation, community development, and eco-friendly
projects.

Stakeholder Pressure:

Stakeholders, such as investors, consumers, and advocacy groups, are pressing multinational
corporations to take environmental responsibility seriously. Public pressure has the ability to
affect corporate behavior and motivate businesses.

Multinational corporation role in the environment impact example:

There are numerous real-world examples that can be used to illustrate how multinational
corporations (MNCs) affect the environment. Here are some examples that illustrate how
environmental impact plays a part in MNCs:

Oil and gas sector:

MNCs in the sector have come under fire for their environmental impact, including ExxonMobil
and Shell. Oil spills have been caused by activities like offshore drilling and pipeline building,
seriously harming marine ecosystems and coastal habitats.

Fast-fashion industry:

Fast-fashion MNCs like H&M and Zara are well-known for their quick manufacturing and
consumption cycles, which add to high amounts of textile waste. Environmental pollution results
from the landfilling of used textiles and garments.

Operations in the mining industry:

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MNCs engaged in mining, such as BHP and Rio Tinto, have come under fire for their
environmental effects on communities and landscapes. Deforestation, water pollution, and
habitat degradation are all possible effects of mining.

Large agricultural multinational corporations

Large agricultural multinational corporations (MNCs), including Cargill and Nestlé, have been
connected to deforestation in places like the Amazon jungle. There has been significant
deforestation and biodiversity loss as a result of the growth of agricultural land for the
production of soy, livestock, and palm oil.

Electronics Manufacturing:

MNCs in the electronics sector, including Apple and Samsung, have come under fire for the
ways in which they manage their supply chains. Environmental contamination and health risks
can result from the extraction of rare earth minerals and the destruction of technological waste.

Automobile Industry: Multinational corporations (MNCs) in this industry, including Volkswagen

and General Motors, have had to address their carbon emissions and effects on air quality. Urban
pollution and greenhouse gas emissions are both influenced by the manufacture and use of
vehicles.

Forest and Timber Industry:

MNCs with ties to the forest and timber sector, such as International Paper and Asia Pulp &
Paper, have come under fire for allegedly engaging in illegal logging and deforestation.

Pharmaceutical Waste:

Pharmaceutical multinational corporations (MNCs), such as Pfizer and Novartis, have come
under fire for the effects of pharmaceutical waste on the environment, including inappropriate
disposal and the presence of drugs in water bodies.

Water Bottling Companies:

MNCs in the water bottling sector, such as Nestlé Waters and Coca-Cola (Dasani), have come
under fire for their methods of water extraction and the effects they have on the environment.

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Multinational corporations in GPE advantages:

Multinational corporations (MNCs) are important players in the Global Political Economy (GPE)
and benefit the global economy and the participating nations in a number of ways. Some of the
main benefits are as follows:

Foreign Direct Investment (FDI):

MNCs are significant sources of FDI, putting money into the economy of host nations.
Employment growth, technology transfer, and knowledge spillovers can all be facilitated by FDI.

Access to International Markets:

MNCs have the resources and know-how to enter and operate in international markets. They can
access a varied consumer base and benefit from economies of scale thanks to their global
presence.

Technology Transfer and Innovation: MNCs frequently offer cutting-edge management

techniques and technology to host countries, stimulating innovation and boosting the capacities
of local industries.

Efficiency and Productivity:

Through the use of best practices, process improvement, and access to international supply
chains, MNCs help local markets become more efficient and productive.

Infrastructure Development:

MNC investments in host nations may result in the construction of industries, ports, and
transportation systems, which can help the local economy as a whole.

Job creation:

MNCs significantly increase employment possibilities in their host nations by offering positions
in a range of fields and skill sets.

Global value chains:

MNCs are important players in global value chains (GVCs), which allow nations to specialize in
particular tasks and take part in the creation of complex commodities and services.

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Export Opportunities:

By integrating into international markets, MNCs can assist local businesses in gaining access to
such markets through supplier connections or production that is focused on exports.

Tax income and Economic Contributions:

MNCs provide economic contributions to their host countries by generating tax income, which is
then utilized to support infrastructure and public services.

Knowledge and Skill Transfer:

MNCs provide their employees with training and development opportunities, which helps to
transfer knowledge and skills to the local labor force.

Diversification and Risk Mitigation:

By operating in multiple markets, MNCs offer opportunity for home countries to diversify
investments and reduce risk.

Promoting economic liberalization:

MNCs frequently support open markets, free trade, and economic liberalization, which can result
in more global economic cooperation and integration.

Multinational corporations in GPE disadvantages:

In the Global Political Economy (GPE), multinational corporations (MNCs) can provide a
number of difficulties and drawbacks for both the host nation and the international financial
system. The following are some significant drawbacks:

Resource exploitation:

Some MNCs may harvest and exploit natural resources in their host nations, which could
degrade the environment, destroy habitats, and exhaust non-renewable resources.

Labor exploitation:

MNCs working in nations with lax labor laws may take advantage of inexpensive labor, resulting
in low wages, subpar working conditions, and a lack of worker safeguards and rights.

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Tax Avoidance: MNCs can employ intricate financial arrangements and tax havens to reduce
their tax liabilities, which lowers the amount of tax revenue that host governments can receive
and raises questions about tax equity.

Market Dominance:

Large multinational corporations (MNCs) with ample resources have the potential to develop
great market power, which could result in monopolistic or oligopolistic behavior that restricts
customer choice and competition.

Economic instability:

The decisions and activities of MNCs can have a significant impact on the economies of host
nations. Unpredictable changes, such disinvestment or relocation, can result in employment
losses and economic instability.

Dependency:

In order to create jobs and boost their economies, some host nations may become excessively
reliant on MNCs. A MNC's withdrawal or financial difficulties could have a significant influence
on the economy of the host country.

Cultural Homogenization:

As multinational corporations and international brands proliferate, local customs and cultures
may be displaced by a globalized consumer culture.

Negative Externalities:

MNC operations may result in negative externalities that impact local communities and
ecosystems, including as pollution, waste, and environmental deterioration.

Intellectual Property Rights:

MNCs may leverage their financial clout to include advantageous intellectual property rights
(IPR) clauses in trade agreements, potentially limiting developing nations' access to critical
technology and medications.

Capital Flight:

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MNCs occasionally engage in activities like capital flight, which involves shifting profits and
capital from host countries to places with lower tax rates. This can deprive host countries of vital
financial resources.

Conclusion:
Multinational corporations (MNCs) play significant roles in shaping the global economy. Despite
the prevalence of the economic activities of MNCs across the globe, few studies exist that
examine their political influence on foreign policy-making. This chapter develops a theoretical
framework for understanding how MNCs’ unique positions in the market affect their political
activities. Specifically, we argue that MNCs’ economic dominance reduces the relative cost of
engaging in political activities, while their large-scale transnational activities increase the
marginal benefits of influencing policy-making individually. To examine this empirically, we
first introduce a novel dataset of lobbying in the US encompassing lobbying activities of all
public firms from 1999 to 2019. We then employ the difference-in-differences identification
strategy to estimate the effect of MNC status on lobbying. We find strong evidence for an
increase in lobbying expenditures when firms become multinational. Furthermore, we find that
MNCs tend to lobby on a more diverse set of foreign policy issues. Our findings suggest that
MNCs are important political actors whose distinct interests and influence should be
incorporated into our understanding of foreign policy-making.

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https://www.jstor.org/stable/20039497

2-Walzenbach, G. (2018, August 5). Global political economy. E.

https://www.e-ir.info/2016/12/29/global-political-economy/

3-Economic role of mncs in developing countries: A case study of Pakistan. (2016).

http://ps.gcu.edu.pk/wp-content/uploads/2015/02/Ghani.pdf

4-CSUSB Scholar Works: Open Access Institutional Repository. Site. (n.d.).

https://scholarworks.lib.csusb.edu/

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