OPERATIONAL IMPACT OF INTERNATIONAL BUSINESS ACTIVITIES
OPERATIONAL IMPACT OF INTERNATIONAL
BUSINESS ACTIVITIES
The relationship between international firms and societies has generated so many allegations and controversies that it is impossible to examine all of them in this chapter. A number of them deal not so much with whether international business should take place but rather with some specific practices. These latter allegations apply to specific operational areas of management and can, fortunately, be examined in later chapters of the text. They are no less important than the overall areas discussed in this chapter and are listed as follows to illustrate the wide range of criticisms:
1. In transferring technology to LDCs, prices are set too high and sales are restricted too stringently (Chapter 15).
2. If a country attempts regulation, MNEs merely divest and move where regulations are less stringent (Chapter 16).
3. The centralization and control of key functions by MNEs in their home countries perpetuate a neocolonial dependence of LDCs (Chapter 17).
4. Sensitive information about countries is disseminated internationally by MNEs' global intelligence networks (Chapter 17).
5. MNEs introduce superfluous products that do not contribute to social needs and perpetuate class distinctions (Chapter 18).
6. MNEs avoid paying taxes (Chapter 19).
7. Through artificial transfer pricing, MNEs undermine attempts by governments to manage their economic affairs (Chapter 20).
8. The best jobs are given to citizens of the nation in which MNEs have their headquarters (Chapter 21).
9. Inappropriate technology is introduced by MNEs to LDCs (Chapter 21).
10. National labor interests are undermined because of the global activities of MNEs (Chapter 21).
LOOKING TO THE FUTURE As long as there is nationalism, societies will compete to try to
garner a larger share of the benefits from international companies. In the short term, most countries will probably welcome FDI. Debt problems limit the ability of LDCs and historically planned economies to access sufficient capital, except through investment inflows. Budget-deficit problems will likely make the United States take a positive stance toward receipt of FDI. The European Community will likely welcome investment inflows to attain the growth predicted from its unification. However, in the longer term, FDI may be less welcome. Historically, the attitudes toward foreign direct investment have tended to vary over time, with a tendency toward more FDI restrictions when economies are thriving. Yet, there is the possibility that if rapid growth does not occur in some of the LDCs and historically planned economies after receipt of substantial foreign investment, they may learn to regard as models such countries as Japan and South Korea, which have grown rapidly without much FDI.
The locus of MNE control will continue to be questioned. Some MNEs now have so many nationalities represented in their top management ranks (such as Nestle, SKF, ABB, ICI, CPC, Coca-Cola, and Heinz) that it is difficult to accuse them of following home-country interests. However, their internationalization opens them to the criticism of acting in their own, rather than national, interests. Some other MNEs have few shares held outside their home countries and include practically no foreigners in high-level corporate positions. These include Sandoz, Volvo, Michelin, Matsushita, and United Technologies.
BUSINESS ACTIVITIES
The relationship between international firms and societies has generated so many allegations and controversies that it is impossible to examine all of them in this chapter. A number of them deal not so much with whether international business should take place but rather with some specific practices. These latter allegations apply to specific operational areas of management and can, fortunately, be examined in later chapters of the text. They are no less important than the overall areas discussed in this chapter and are listed as follows to illustrate the wide range of criticisms:
1. In transferring technology to LDCs, prices are set too high and sales are restricted too stringently (Chapter 15).
2. If a country attempts regulation, MNEs merely divest and move where regulations are less stringent (Chapter 16).
3. The centralization and control of key functions by MNEs in their home countries perpetuate a neocolonial dependence of LDCs (Chapter 17).
4. Sensitive information about countries is disseminated internationally by MNEs' global intelligence networks (Chapter 17).
5. MNEs introduce superfluous products that do not contribute to social needs and perpetuate class distinctions (Chapter 18).
6. MNEs avoid paying taxes (Chapter 19).
7. Through artificial transfer pricing, MNEs undermine attempts by governments to manage their economic affairs (Chapter 20).
8. The best jobs are given to citizens of the nation in which MNEs have their headquarters (Chapter 21).
9. Inappropriate technology is introduced by MNEs to LDCs (Chapter 21).
10. National labor interests are undermined because of the global activities of MNEs (Chapter 21).
LOOKING TO THE FUTURE As long as there is nationalism, societies will compete to try to
garner a larger share of the benefits from international companies. In the short term, most countries will probably welcome FDI. Debt problems limit the ability of LDCs and historically planned economies to access sufficient capital, except through investment inflows. Budget-deficit problems will likely make the United States take a positive stance toward receipt of FDI. The European Community will likely welcome investment inflows to attain the growth predicted from its unification. However, in the longer term, FDI may be less welcome. Historically, the attitudes toward foreign direct investment have tended to vary over time, with a tendency toward more FDI restrictions when economies are thriving. Yet, there is the possibility that if rapid growth does not occur in some of the LDCs and historically planned economies after receipt of substantial foreign investment, they may learn to regard as models such countries as Japan and South Korea, which have grown rapidly without much FDI.
The locus of MNE control will continue to be questioned. Some MNEs now have so many nationalities represented in their top management ranks (such as Nestle, SKF, ABB, ICI, CPC, Coca-Cola, and Heinz) that it is difficult to accuse them of following home-country interests. However, their internationalization opens them to the criticism of acting in their own, rather than national, interests. Some other MNEs have few shares held outside their home countries and include practically no foreigners in high-level corporate positions. These include Sandoz, Volvo, Michelin, Matsushita, and United Technologies.
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