Critique of the Impacts of MNCs on Developing Nations

The second article analyses the relationship between the Multi-National Corporations (MNCs) and the developing nations. The author argues that there has been a general acceptance in developing nations to foreign investment unlike in the past where there was much hostility towards them. This is attributed to the discoveries by the developing nations on the many benefits of these MNCs to the economic, political, and technological development of the developing nations. However, the effect of the MNCs on the socio-cultural environment in developing nations is perceived to be negative (Al-Daeaj et al, 1999). This paper takes a critique of the study on the impacts of MNCs on developing nations.

The third world countries (Al-Daeaj et al, 1999), offer good investment grounds for the International companies since they have low cost production and labor as well as large potential markets. Through technology and information networks, the MNCs could help achieve the host county’s development goals and needs and bring about growth and development. The study found six sources of conflicts between the MNCs and the nations; local unemployment; ownership; transfer of technology; bribery; foreign exchange shortages, and exploitation of natural resources. According to the study (Al-Daeaj et al, 1999), the host countries have more benefits from the international companies which are economic based however notes that there is inappropriate transfer of technology to these nations. The study fails to critically analyze the environmental impacts of the MNCs to host countries and the transfer of technology by MNCs to these countries.

The study (Al-Daeaj et al, 1999), postulates that MNCs exploit the natural resources of host nations and employ capital-intensive instead of labor- intensive technology creating mass unemployment. The impacts on the local companies are also negative as the MNCs dominate and control the local markets. In Kuwait, for instance, the MNCs involvement in the oil industry brought about commercial capitalist economy. It also resulted to increase in crime rates, social inequalities, and decay of the cultural fabric of the people through introduction of western goods.

The author, however, acknowledges the limitations of this study in the view that it was based on perceptions and cannot be used to draw deductions on the topic. The study used a questionnaire method of data collection to find out the perception of Kuwait’s managers perception on the impacts of MNCs to the development of their country (Al-Daeaj et al, 1999). The findings showed that the managers perceived MNCs to have positive effects in bringing about change in Kuwait. The managers verified the proposition that MNCs have positive effects on the political, economical, and technological development of Kuwait. The study also verified that the only negative effect of MNCs was perceived to be on the socio-cultural environment. Another limitation of the study could be that of the failure by some managers to respond to questionnaires thus resulting to non-response bias (Al-Daeaj et al, 1999).

In conclusion, the author has focused on the analysis of the perceptions of Kuwait managers on the impacts of MNCs to the development of that country. The deductions made supported the earlier findings that MNCs have a positive impact on the economic, political, and technological development. The only negative impact was found to be on socio-cultural environment. In general, the study is subjective as it focuses on the more positive impacts and fails to look at other aspects of MNCs to developing nations such as the environmental impacts.

References

Al-Daeaj, H. S, Ebrahimi, B. P, Thibodeaux, M. S, & Nasif, E. G. (1999). Perceptions of managers in Kuwait about multinational corporations’: International Journal of Commerce & Management. 9, 3/4;