MNCs and the role or the state

MNCs and the role or the state

  • Submitted By: aljazbc
  • Date Submitted: 05/10/2016 10:17 AM
  • Category: Business
  • Words: 4360
  • Page: 18

University of Ljubljana – Faculty of Economics
Graduate Programme
Course: Globalization and Multinational Firms
Mentor: Črt Kostevc Ph.D.
Academic year: 2012/2013

Globalization and Multinational Firms
Seminar paper

MNCs and the role of the state

Aljaž Bešter Cerar – 19489662
Ljubljana, 10.6. 2013

The seminar paper is logically divided into two related parts. The first part of the paper looks
at a multinational corporation (MNC) as a principally passive object, more often than not simply
reacting to a given environment. The most important part of that environment is the host
government, in our case the government that hosts the MNC’s foreign venture. I present the
environment as two separate entities depending on the whether a MNC has a chance to influence
the changes that might bring uncertainty to its future. I then turn to the concept of country risk
to gain a better understanding of the relationship a MNC has with the host government. Usually,
country risks express the managers’ worries as to whether or not the present host government
or a successor government will one-sidedly change the "rules of the game" that will lead to a
loss of earnings or assets of his company’s venture in that country. I end the first part of the
paper with several strategies a MNC may use when dealing with country risk.
The following part of this document focuses on the notion that a MNC holds a predominantly
strong position towards a nation state. I look into the various ways a MNC might influence the
institutional workings of a host government. The theory examined distinguishes between three
different positive effects a MNC can have on government institutions. Regulatory pressure
effect describes how corrupt government officials face uncertainty when dealing with MNC
that are pressured by others to conduct business without bribes. Demonstration effect shows
how a legitimate and more efficient way of doing business demonstrated...

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