A Critical Review of the Role Played by Multinational Corporations as the Major Agents of Foreign Direct Investment Using Zambia as an Example.

2153 WordsApr 12, 20159 Pages
Multinational Corporations (MNCs) are nowadays the focus of much attention as they are central players in the world economy. However, their scientific analysis constitutes a young discipline. Most studies on multinational corporations begun in the 1960s, a period in which foreign direct investment (FDI) was experiencing an enormous growth, which attracted economists’ attention. This was not, however, the first moment in which FDI had grown dramatically. This piece of writing aims to give a critical review of the role played by multinational corporations as the major agents of foreign direct investment using Zambia as an example. The piece of writing will start by defining key terminologies; it will then go further to examine the overall topic. Finally a conclusion shall be given based on the main body. A multinational corporation can be defined as an enterprise that controls and manages production establishments (plants) located in at least two countries. It is simply one subspecies of a multiplant firm. In other words the cardinal way of defining multinational corporations are: First, plants in at least two countries must be involved in the production process. Second, these plants must be controlled and managed by the same firm or what is called internalization part. (Craig, 2001) A corporation must acquire a controlling stake in a foreign firm in order to become multinational. It can do so either by newly creating a foreign firm or by acquiring an existing foreign firm. Either method involves an international capital flow referred to as FDI. In other words foreign direct investment is simply where Multinational corporations finance some portion of their overseas operations by transferring funds from the country of the parent firm to the country of the host firm usually an affiliate or subsidiary, but also possibly a joint venture with another firm. The purpose

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