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Multinational Corporations have emerged as one of the principal sources of foreign direct investment since the late 1970s by the worlds major industrialized nations These firms allocate many different theories to achieve the status of a multinational Internalization product cycle obsolescing bargain and oligopoly theories along with the tariff-jumping hypothesis shed light on how these foreign operations continue their path of vertical integration However even with these lucrative investment strategies it is difficult to distinguish help or hurt to the host country Because of this proponents and critics of these practices have argued to whom is the greater advantage and why A critique of these arguments will help in discussing the effectiveness of MNCs to illicit the policy goals of local governments economic efficiency growth and improvement in the standard of living A multinational corporation MNC is an enterprise that engages in foreign direct investment FDI and that owns or controls value-added activities in more than one country Spero Hart 1997 96 Firms are considered to be more multinational if 1 they have many foreign affiliates or subsidiaries in foreign countries 2 they operate in a wide variety of countries around the globe 3 the proportion of assets revenues or profits is high 4 their employees stockholders owners and managers are from many different countries 5 their overseas operations are much more ambitious than just sales offices including a full range of manufacturing and research and development R D activities Ibid 96 Four theories and one hypothesis provide explanations of how structural goals are achieved by the MNCs The internalization theory contends that firms expand abroad in order to internalize activities in the presence of market imperfections just as they expand domestically for similar reasons Ibid 109 There are three prerequisites that must be met by the MNC to contend with the local firms even though the disadvantages of the former as a foreigner 1 it must have market power that
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