Multinational Firms as the Most Significant Kind of Non-State Actor - Thesis Proposal Example

Table of Contents Introduction 2 Background 3 Problem ment 4 Literature Review 5 Research Objectives 8 Research Question 9 Hypotheses 9 Importance/Benefits of Study 10 Research Design 11 Limitations and Assumptions 13 Scheduling 14 Facilities and Resources 14 References 15 Multinational Firms are a Force for Progress Introduction Multinational firms appear to be the most significant kind of non state actor during the last 2 to 3 years. These companies distribute their products and services across their national boundaries and spread the ideas, transfer technology and skills worldwide. Since these companies buy the foreign assets with an aim to expand and explore opportunities, therefore, the term foreign direct investment is being commonly used for these companies. In the previous years, almost seventy five percent of FDI used to go to the industrial states such as Germany, France etc. However, nowadays, countries are seeking to attract foreign direct investments. Interestingly, most of the investments are being made in the economies with abundant of resources, cheap labour and market demand. If these organisations, at one end, bring prosperity and development in the host countries, then at the other end, they are being considered as a threat to national identity of the economy. Therefore, this report will focus on the role of MNCs in the host countries with an aim to prove whether they are the forces for progress or not. Background Multinational firm is an organisation which operates and delivers its services in more than one country. The question of whether these firms are the heroes or villains has been always debatable and even more important today because of the expansion of these firms. Although these firms are speeding up the economic growth of countries, however, they are being considered as threatening to the national identity and local industries. Therefore, the governments who initially seek to attract foreign investments in their states, start complaining about these companies later on. Therefore, it is very interesting to root out what these firms are actually doing. The aim of this report will be to explore whether these firms are a force for progress or not. If yes then how and if not then why not? Problem Statement The increasing expansion of multinational firms is apparently bringing positive changes in countries; however, the existence of these organisations is also being considered threatening to these countries. Therefore, conducting this research is important to learn whether these multinational companies are a force for progress or not. In the absence of such a research, various stakeholders will be at loss. This research will surely help the government, policymakers, and companies to learn about the impact of multinational companies on home and host countries. Literature Review Most of the researchers agree that Multinational companies appear as a strong force, however, the divergence of views raise when it comes to decide whether this force is a force for progress or not. The high growth of multinational companies and their popularity is the evident to the fact that these companies are becoming the dominant power in the economies because they influence the economic policies. Various researches have been conducted to determine the kind of influence these firms have. Hijzen and Swaim (2008) in their research argued that the emergence of multinational companies is not a new phenomenon and they have been a force for progress for a century now. The critics of multinational companies argue that these firms are the engines of destruction because they exploit the people, natural resources and poor labour force whereas, the supporters of these firms argue that these firms are a force for progress because of their ability to raise the living standards, increase employment opportunities, transfer technological innovations and enhance cultural understanding (Ferrant, 2005). In fact, the Multinational companies contribute positively not only in the host country but they also positively affect their home economies. United States and Japan are the countries which are both acting as sources and beneficiaries of FDI and the multinational companies of these states and those working in these states are directly influencing the decisions of policy makers of these states (National Academic Press, n.d.). According to Chick et al (2002), Kenichi Ohmae views the brave world dominated by successful multinational companies which are a source of efficiency and progress at the turn of millennium. Moreover, globalisation is the result of the activities of these multinational companies, which is an unstoppable and force for progress and efficiency phenomenon (Chick et al, 2002). Actually in reality, we cannot make one evaluation to apply on all multinational companies. For example, Ladou (1996) argued that multinational companies have been exerting strong force in the developing countries especially in the sector of health and safety. The evidences provided by multinational companies regarding the impact of multinational corporations in developing countries show that these corporations have played a key role in bringing the large improvements in the developing countries over the last forty years and the countries which are still lacking FDI such as Sub Saharan Africa and South East Asia are persistently showing severe poverty rates and little signs of improvements (Quinlivan, 2009). Houghton (2002) gives a very different perspective regarding the role of multinational companies. He argues that multinational companies are more a friends than a foe however; the policy makers and the firms have to be smarter to maximize the role of these firms. In his study on multinational firms in Australia, he finds that Australian economy can capitalise on skills and knowledge transfer by encouraging these firms to set their deep roots in the areas such as product development, innovation and research. Multinational companies account for all foreign direct investments and they are very active in trade as it is evident from the fact that one third of world trade takes place within the companies (Fatima, 2007). Liberals and Marxist also have different views regarding the MNCs impact. Liberals argue that foreign direct investments increase the competition, economic growth, innovation and employment thereby, increasing the efficiency whereas; Marxists argue that these organisations are predatory monopolists which limit the flow of technology and increase the dependency of the host countries (VWL Website, n.d.). Another view is that to reduce the negative influences of these organisations, the government should regulate their operations. According to Moran, the regulation of multinational companies is a complex process because it is technical as it involves the regulations of the giant financial institutions and it is political as it relates with the relations between the state and corporations (Moran, n.d.). Most of the researchers agree that MNCs are a force for progress but they argue that to being a positive change controlling these firms is very important. MNCs are highly dependent for their survival on the host countries, therefore, they desperately seek the ways such as full support from customers, communities etc (The National Academies, n.d.). MNCs may create various problems for the host nations such as problem of dumping, the decline in the economic sovereignty and control of host country over its economy and exploitation of labour (Gupta, n.d.). Countries have adopted different ways to influence these MNCs such as import-substitution industrialisation. The government of Japan has been successful in protecting its electronic industry from MNCs (Patel, 2003). The general arguments of opponents of MNCs are that these corporations negatively influence the local industries and have a negative impact on businesses in the long run. Therefore, it is being argued that even if these companies provide opportunities and developments in the short run, then do have negative impact in the long run. Based on this argument, the opponents of these firms do not agree with the statement that multinational firms are a force of progress. In short, the conflicting views of the researchers create a gap which needs to be filled by conducting a good research like this. Therefore, in this research report, the reality of multinational companies will be evaluated. Research Objectives The objectives of this research are primarily directed towards identifying the extent to which the multinational companies are acting as a force for progress for the host countries. One of the major objectives of this research is to find out if multinational companies have sufficient power and influence. Another chief objective of carrying out this research is to learn whether the international companies positively influence the host countries or not. One more objective of this research is to evaluate the reasons because of which most of the countries tend to attract foreign direct investments The fourth key objective of carrying out this research is to identify the positive and negative contributions made by these firms. Research Question The research question that will be investigated in this report is as follows: “Do multinational firms appear as a force for progress for the home and host countries?” Hypotheses In order to investigate the mentioned research question, the following hypotheses have been developed. Foreign Direct Investment has a positive influence on the employment rate of the host country Foreign Direct Investment has a positive influence on Gross Domestic Product of an economy Foreign Direct Investment has a positive influence on economic growth rate Importance/Benefits of Study The several benefits of this research that have been aimed to achieve through this research are as follows: The policy makers will be able to understand the importance of foreign direct investments in an economy through this research The research will also help to understand the importance of regulation of multinational companies This research would lead to the better understanding of the ways through which countries can capitalise on the opportunities brought by these organisations This research will also benefit its readers in gaining an insight into how multinational companies influence the host countries Research Design The research paper has been designed to study the impact of multinational force on the host countries. The methodology that has been followed to investigate the question under investigation is both qualitative and quantitative. To test the hypotheses, the data will be collected from official online sources only. There will be total four variables including three dependent and one independent. Since the aim of this paper is to investigate the impact on multinational companies therefore, foreign direct investment will be used as an independent variable. The other three dependent variables are employment rate, gross domestic product and economic growth rate. For each dependent variable, regression analysis will be done and regression models will be developed. Finally, I will come up with three regression models, which will be significantly explaining the relation between the dependent and independent variables. The three specific dependent variables have been selected because the idea is to study the impact of foreign direct investments on macroeconomic indicators of the countries. To increase the reliability of this research, total five countries will be selected including China, India, Japan, United States and Pakistan. These countries are representing the developed, developing and under developed economies, therefore, the results drawn through this research can be generalised. For data analysis, regression analysis will be used to interpret the results. The coefficient sign and values, R square, f stat and other possible ways will be used for the analysis of data. In the qualitative research, an industry will be selected from one the states mentioned above. The country which will be showing the largest impact of multinational firms will be chosen for this part. For example, if Indian economy is found to be the most affected by multinational companies then a specific industry of India will be selected. It will be taken into consideration that the selected industry will be having the largest inflow of foreign direct investments. The data about the industry will be taken from online reliable sources. After giving a brief historical analysis of the industry, the current FDI trends will be evaluated. Moreover, the data regarding the employment, sales and industry growth will be collected. All data will be qualitatively analysed with critical analysis. The graphs and tables will be used for the interpretation of results drawn from data. To increase the significance and reliability of this research paper, the secondary research and theoretical concepts will be also used. The time scope for this research paper will be medium term, which means that data selected for each country will be five years. However, the time period can be adjusted depending upon the availability of data. With a very organised and detailed research design, I expect to come up with a great research paper. Limitations and Assumptions This study is concerned with foreign direct investments therefore; the countries selected for the analysis are those that are the major beneficiaries of foreign direct investments. It has been assumed that foreign direct investments primarily represent the investments made by multinational companies. Since collecting monthly data for foreign direct investments and other macro economic variables will be not possible therefore, yearly data will be used. It has been assumed that foreign direct investments primarily influence gross domestic product, employment rate and economic growth while the other factors are constant. Moreover, it has been also assumed that multinational companies appear as strong force regardless of the nature of force. Although maximum efforts will be made to increase the reliable of this research paper however, few limitations need to be mentioned here. First, the scope of this project is very limited as I have only selected five countries. The number of countries can be increased to increase the reliability of results. Second, although the data will be collected from official sources however, hundred percent accuracy of the data cannot be guaranteed. Scheduling The following schedule shows the different tasks that will be done until the final submission of the project. Number Task Start Date Finishing Date Duration   Defining the research question         Defining the goals and objectives         Scope and limitations         Formulation of hypotheses         Selection of Variables         Data collection         Crosschecking the data         Arranging and organising the data         Regression analysis         Inference of the findings         Interpretation of the result         Presentation of the conclusion         Identification of implications         Recommendations         Gathering the report material         Detailed review of the research         Submission                 Facilities and Resources The Facilities and Resources that will be used to complete this research project are as follows: Internet Jstor or other journals Library Microsoft Excel for regression analysis Microsoft Office References Fatima, S. (2007) MNCs and Globalisation. [Online] Available from: http://internationalbusiness.suite101.com/article.cfm/mncs_and_globalization [Accessed 3 May 2010]. Hijzen, A. & Swaim, P. (2008) Do Multinationals Promote Better Pay and Working Conditions. [Online] Available from: http://oecdobserver.org/news/fullstory.php/aid/2767/Do_multinationals_promote_better_pay_and_working_conditions_.html [Accessed 3 May 2010]. Houghton, J. (2002) Friend or Foe? Leveraging Foreign Multinationals in Australian Economy. [Online] Available from: http://www.abfoundation.com.au/research_knowledge/research/94 [Accessed 3 May 2010]. Ferrant, J. (2005) Sociology: A Global Perspective. [Online] Cengage Learning. Available from: http://books.google.com.pk/books?id=X5L3yoePIM0C&dq=multinational+companies+are+a+force+for+progress&source=gbs_navlinks_s [Accessed 3 May 2010]. Chick, V. et al (2002) Essays in Honour of Victoria Chick: Methodology, microeconomics, and Keynes. [Online] Routledge. Available from: http://books.google.com.pk/books?id=CQyK2wwqdQYC&dq=multinational+companies+are+a+force+for+progress&source=gbs_navlinks_s [Accessed 3 May 2010]. Gupta, R. (n.d.) Negative Impacts of MNCs in Indian Markets. [Online] Available from: http://www.slideshare.net/rajeevgupta/negative-impact-of-mnc27s [Accessed 3 May 2010]. Ladou, J. (1996) The Role of Multinational Corporations in Providing Occupational Health and Safety in Developing Countries. International Archives of Occupational and Environmental Health. [Online] pg. 363-366. Available from: http://www.springerlink.com/content/k24533124h677263/ [Accessed 3 May 2010]. Moran, M. (n.d.) Business Politics and Society. Oxford University Press. National Academic Press. (n.d.) Multinational Corporations and Changing Global Environment. [Online] Available from: http://www.nap.edu/openbook.php?record_id=6113&page=16 [Accessed 3 May 2010]. Patel, R. M. (2003) Eclipse of the State Multinational Corporations In the Third World. [Online] Available from: http://www.helvidius.org/files/2000/2000_Patel.pdf [Accessed 3 May 2010]. The National Academies Press. (n.d.) MNCs Case Studies. [Online] Available from: http://www.nap.edu/openbook.php?record_id=6113&page=94 [Accessed 3 May 2010]. Quinlivan, M. G. (2009) Multinational Corporations: Myths and Facts. [Online] Available from: http://www.acton.org/publications/randl/rl_article_364.php [Accessed 3 May 2010]. VWL Website. (n.d.) Multinational Corporations. [Online] Available from: http://www.vwl.unibe.ch/studies/3215_e/Multinational_Corporations.pdf [Accessed 3 May 2010]. Read More