Academic research on the operation of

Multinational company in the development

of developing countries

Student’s name:
Students ID:
Contents
1.0 Introduction................................................................................................................................3

2.0 Part 1: Critical Portfolio Analysis..............................................................................................3

2.1 Interesting elements found in the research item....................................................................3

2.2 Reason for being interesting......................................................................................................4

2.3 Usefulness to the studies and development...............................................................................4

3.0 Three key arguments from the research paper...........................................................................5

Impact on employment creation..............................................................................................5

Transfer Pricing.......................................................................................................................6

Poverty and dependence..........................................................................................................6

4.0 Part Two: Reflective report.......................................................................................................7

4.1 Learning outcomes from the module.....................................................................................7

4.2 Importance of the learning from the module.........................................................................7

4.3 Implication in the area of interest..........................................................................................7

5.0 Conclusion.................................................................................................................................8

Reference.........................................................................................................................................9

Appendix........................................................................................................................................10

2|Page
1.0 Introduction

Research papers are structured form of knowledge. By conducting proper analysis on them, one
can get vast knowledge on a specified issue by conducting research. This research paper is
conducted in order to satisfy academic requirement. This report is provides a holistic view about
the economic impacts of multi-national company on the development of developing nation. This
cadmic report is subdivided into total two parts. First part provides critical analysis of the
research journal related to the “Economic impact of MNC’s on the development of developing
nation” published in International Journal of Scientific and Research Publications, Volume 4,
Issue 9, September 2014 ,written by Ondabu Ibrahim Tirimba and George Munene
Macharia,,PHD Finance Candidate of Jomo Kenyatta University of Agriculture and technology
and the following second part provides a view on the learning outcomes that one has obtained
from this particular research Item.

2.0 Part 1: Critical Portfolio Analysis

2.1 Interesting elements found in the research item
In this research paper of “Economic impact of MNC’s on the development of developing nation”
the author has tried Illustrate the true effects that an economy of development country face due to
the operation of MNC’s (Nell and Larsen, 2019). BY the theoretical framework and the overall
concept of this research paper which makes it interest is that, the operation of MNC has both
positive and adverse effect on the growth of lower developed country. For example here the
Author conducted such study in the context of lower developed country such as Kenya, an
African nation (Drogendijk, 2015). Multinational company have some strong point to increase
the sustainability in the economy. MNC’s for their dynamic operation creates employment which
is very essential step in eradication of unemployment which is common issue in the lower
developed countries. It also helps country to fight against poverty .Which creates a long term
dependency on MNC’s by the local economy. Operation of such multi-national companies
promotes foreign direct investment that substantially promotes the overall development in any
fast growing developing country.

3|Page
In this report the author has given emphasis on the adverse effect that is by product of the
operation of such MNC’s. The biggest fact that the operation of MNC results in is transfer
pricing and capital flight which means a large number of outgoing of money from any nations
economy. This also hampers the local industry. This research is conducted in descriptive style
and methodology. The main fact that covered in this report is the contribution of MNCs as an
agent of development. In this report the role and characteristic of MNC’s in the context of lower
developed country is explained in a refined new dimension.

2.2 Reason for being interesting

Multinational company are those companies which by using the large scheme of investment and
efficient labour force can enter any existing supply chain of any geographical market (Eriksson
Kovalainen 2019). They are capable of shaping consumer choices to the great extent. As any
organization needs a proper balance of his resources MNCs in which market they operate uses
the local labour and local resources. This usage creates employment in a huge scale of people
and contributes to the growth of the economy in which it operates. MNC by having a strong
monitoring and cross border foreign direct financial investment is a strong development agent in
the economy. MNC’s activity can sometime destroy the local industry because markets are being
too much competitive in changing business context. It true that MNC’s makes a lot of
employment opportunity to promote rapid growth but its harsh reality that most of the gains are
again being lost by transferring them to the main branch of operation. The research also states
about the contribution of MNC’s toward various corporate social activity also. Understanding
those facts and what makes the operation more effective in case of development is the key
concern which is a point of interest. The information and the methodology stated in the research
journal will helps academic student to gather information which will help the developing their
research project.

2.3 Usefulness to the studies and development

In this report the author has illustrates the every possible characteristics that MNC’s hold as a
developing agent. Various model and analytical research that has been conducted on the context
of Lowe developed or developing country gives us an insight view that how along with the
4|Page
local industries MNC’s have facilitated the unemployment problem and eradicated poverty along
with the adverse multiplier effects like transfer pricing and Creating more domestic dependency
(Bell and Harley 2018). In this research the author has illustrated in some point MNC”s as
development agent which means that they are one of the massive determinant in the economy in
host country whose contribution is much more in altering the prevailing structure which
underlies in an economy. The author has emphasized that even though they have some adverse
effect a country needs to maintain sound political, social and stable economic condition which
will provide a greater opportunity to work as bigger supportive agent (Anon, 2018). The
contribution, which MNC’s discharge in the form of corporate philanthropy must not be
obstructed.

Learning those theoretical and analytical methods of study, which author has used to illustrate
the overall impacts of MNC’s in the development of developing countries will facilitate the
academic research methods of students. All the aspects covered by this research journal by the
author will be a great use by the future researcher and academic students to get a broaden
knowledge about the operations of MNC’s in the context of developing countries.

3.0 Three key arguments from the research paper

In this research report we have found some key points of arguments. Those are MNC’s
contribution on employment creation, transfer pricing and elevating poverty and dependency.
They are illustrated below:

Impact on employment creation

The profit that multinational company makes by their operation in host countries is basically a
larger share of foreign capital that inflows between the host and the country in which their main
branch is located. In lower developed country there is potential risk which also in term provides
higher benefit (Dávila,2018). Multinational company as they operate in various geographical
background their operation needs skilled and work efficient labour force which can comply with
the technology and have enough skillset to peruse the normal production related activity. So to
meet that reason MNC’s employees local labour force, gradually train them and make them

5|Page
efficient for the work. Multinational company has a group of product segment to produce which
they will require larger labour force. To meet the demand of labour force the local people of any
host country gets employed which create a lager scope of employment. Bell, E., Bryman, A. and
Harley, B., in their book published in 2018 named” Business research methods” argues that even
though they create employment the lager profits share is being transformed from the host
country.

Transfer Pricing

MNC’s by transfer pricing strategy they tries to lower the tax rate which they needs to pay to the
lower country immensely. By this strategy they always tries to show lower production and lower
profit earnings ratio so that they would require to pay lower rate of tax to the host country. In
manatee lower developing country the tax revenue is a basic Income source for the government.
By such strategy, the government of the host country is being deprived of getting such profit. So
the development in such country becomes hampered. They in their operation shows intra sales
and cost of good in such manner which shows profit very insignificant to be taxed. Williams, C.
and Lee, S, in their journal” Political Heterarchy and Dispersed Entrepreneurship in the MNC.
Journal of Management Studies, 48(6), pp.1243-1268” published in 2017, argued that lower
developed or developing countries should tend to prevent the strategy of revenue leakage of
revenue to get the proper tax revenue.

Poverty and dependence

The operation by the MNC’s helps the government of its host country to implement its plan
regarding the poverty elevation. But the point of argument is that the operation of MNC”s are
also a competitive force against the local technology. If peoples becomes too much dependent on
the production of MNC’s the local industry and technology of that particular geographical area
will be demolished (Anon, 2017).. The entrance of such larger businesses causes serious damage
to the growth of local venture, as they lack proper skilled labour and foreign direct investment
like those MNC’s. AS a result in spite of having much economic policy the lower developed
country performs so poorly. In is published article on the website by Anon, in 2018 named
“What are the Advantages and Disadvantages of Multinational “ argued that MNC’s uses the
labour force of the host country at a very cheaper rate and even though it eliminates poverty in

6|Page
the short run but in the long run peoples becomes dependent on it. Sudden shift by the MNC’s
results incremental change in the unemployment rate.

4.0 Part Two: Reflective report

4.1 Learning outcomes from the module
MNC’s are most dominant business entity in the ever changing global context. In this era of
industrialisation MNC’s are the most efficient business with having efficient pool of labour and
resources. By the critical study on this research journal one can understands the dynamics of
MNC’s operation an d their effects in a lower developing nation paly the key role to bring about
a massive change in the host country (Nell and Larsen, 2019). Even though they work as an
agent of development they have some adverse multiplier effect. The students by perusing this
module can conduct the further research on how to shape the effects which are good for the
economy and by critical thinking they can find ways to regulate the adverse effect and ways to
prevent such leakage. This will develop their academic writing skills and also they will enriched
with the methods of conducting both subjective and analytical study on any specific research
material.

4.2 Importance of the learning from the module

Learning which obtain from the research procedure and the methodology provides a future
ground of development both in academics and practical life issues. As a business student it is
necessary to have adequate knowledge regarding the Operations of MNC’s and the effects they
have on any certain economy (Williams and Lee 2017). To devise or invent policy in future, the
methodology used in research and learning of them helps to conduct critical analysis regarding
any phenomena. Study on MNC’s and government’s policy to lessen the adverse effect of
operation will increase the business acumen of academic student and will provide them enough
ground of study in future.

4.3 Implication in the area of interest

As a student of business background one may have the desire to work in MNC’s as they are
becoming the globally leading business entity. To operate business successfully one requires
enough understanding and business acumen to understand the subtle economic effects that a

7|Page
businesses’ operation have on the economy of a country. Conducting study on the research
journal has given a broader picture and the impacts that the MNC’s have on the operation of
business (Anon, 2017). This vast knowledge has rated a base of understanding that MNC’s as
they create employment in any economy sudden shift of them will have a massive negative
impact on the economy. So it is a special area of concentration. MNC’s operation is also a cause
of capital flight. This transfer of huge amount of profit op the main branch will induce any
government to change or alter its policy which can hamper the operation of government. So
along with employment creation and poverty elevation should also take care of the fact regarding
the transfer pricing and capital flight.

5.0 Conclusion

MNC’s operation is no doubt important for any nation . Reason behind this is that they bring new
technology, methods, new production process and increase the skillset of labour. They also have
contribution in employment creation and offering society with product and corporate
philanthropy. Therefore they have enough power to exert in an economy. As they work as
development agent the government must try to eliminate the political clout and set some policy
to make the operation of MNC’s much easier. Besides they should also look for the adverse
effects like transfer pricing and capital flight. Because it’s unethical if a host country is being
deprived of legal tax revenue. This area seeks a special concentration.

8|Page
Reference

Anon, (2017). Multinational Corporation (MNC) Definition. [online] Available at:

https://www.investopedia.com/terms/m/multinationalcorporation.asp [Accessed 2019].

Anon, (2018.). What are the Advantages and Disadvantages of Multinational .... [online]
Available at: http://www.preservearticles.com/business/what-are-the-advantages-and-
disadvantages-of-multinational-corporations/17525 [Accessed 2019].

Dávila, C., 2018. The Current State of Business History in L atin A merica. Australian Economic
History Review, 53), pp.109-120.

Bell, E., Bryman, A. and Harley, B., 2018. Business research methods. Oxford university press.

Eriksson, P. and Kovalainen, A., 2019. Qualitative methods in business research: A practical

guide to social research. Sage.

Nell, P. and Larsen, M. (2019). MNC Headquarters as Activity Systems: The Consequences of
Differentiating and Relocating MNC Headquarters. SSRN Electronic Journal.

Drogendijk, R. (2015). The Development of Network Relations of MNC Subsidiaries: How

Internal MNC and External (Local) Relations Evolve. SSRN Electronic Journal.

Williams, C. and Lee, S. (2017). Political Heterarchy and Dispersed Entrepreneurship in the
MNC. Journal of Management Studies, 48(6), pp.1243-1268.

9|Page
Appendix

10 | P a g e
11 | P a g e