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Foreign Direct Investment - Essay Example

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Foreign Direct Investment

In addition, the continuous change in technology also pushed for firms penetrating other markets. For most trans-national corporations (TNCs), the schemes associated with maximising foreign direct investment (FDI) are intricate. These processes are developed through time considering the environmental changes and other circumstantial elements. Logically, the methods in which FDI is maximised by TNCs can be attributed to their nature and existence.
Holistically, focusing on TNCs in discussing FDI requires the profound understanding of the two concepts. It is imperative to establish relationships and determine useful trends regarding the subjects. In this process, the extraction of empirical evidence is a necessity and has to be manifested with high level of credibility. Moreover, in-depth analysis will be provided to ensure that the desired outcomes will be realised.
The most qualifying description of a firm to consider as a trans-national is its operations. Accordingly, corporations that function in two or more countries are defined as TNCs. Moreover, the general view of TNC is divided into three subgroups. First, horizontally integrated TNCs administer production in different locations to manufacture similar products. Second, vertically integrated TNCs use other countries as inputs for their production. Finally, diversified TNCs operate in different firms that manage production in a manner neither explained by the previous two sub-groups.
McLean and McMillan (2003) stated that TNCs became popular in the 1890s. Usually, TNCs are based in highly industrialised countries and expand in different economies. It is being contended that TNCs are influential in the policy making of host countries. This is because TNCs have the capacity to boost an economy and move capital from locations to the other. In addition, some firms control the exchange of goods and services to ensure that tax liability and other forms of unwarranted costs are reduced. Furthermore, the marketing arm of TNCs has been critical in affecting cultural fibres and social foundations.
Despite of these criticisms, TNCs remained solidly backed by several countries especially developing nations (Wettstein, 2005). It has to be noted that most of these states have difficulties in improving their economies because of the lack of adequate capital. Several countries, in fact, have depended on the manner in which TNCs operate in their respective economies through the employment and income that these corporations provide.
The global character of TNCs is already an established notion. Through decades, these institutions have continued to expand and defy state barriers. Bakan (2004) described TNCs as dominant entities in the global setting. Their capacity to influence economic and political policies is proven. This character can be viewed with a negative connotation. TNCs, however, consider this description as a complement and a prime motivation to pursue further expansion. In some countries, TNCs determine the outcome of economic performance instead of being purely a facilitator of growth and development. The extent of impact attributed to TNCs is so vast that their failure will be detrimental to economies.
For some economists, some of the largest corporations can even surpass the economic outputs of some states. This discrepancy ...Show more

Summary

The global economies have become highly dynamic operating extensive through trade partnerships and unions. Indeed, the notion that cooperation can spell success has become the prime motivator for economies to open their markets. Through this vision, trade agreements were propagated and the barriers that limit international exchange were gradually reduced…
Author : corrine07
Foreign Direct Investment essay example
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