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Edited by Alain Verbeke and Hemant Merchant
Chapter 23: Reconceptualizing the MNE–development relationship: the role of complementary resources
There is substantial controversy regarding the impact of multinational enterprises (MNEs) on host country development, particularly in less developed countries (LDCs). This controversy has generated substantial debate, not only in academia but among those engaged in international development, finance and global governance. On the one hand, some researchers have a positive view about the impact of MNEs on developing countries. MNEs are important actors, they argue, for promoting economic growth since they transfer technology and management skills, increase competition, stimulate entrepreneurship and have access to capital (Caves, 1974; Lowe and Kenney, 1999; Teece, 1977; Rugman, 1981). On the other hand, another group of researchers is more pessimistic, suggesting that MNEs are more likely to crowd out local firms, use technology that is inappropriate for local circumstances, actively constrain potential technology spillovers and reduce (rather than complement) the domestic capital stock and tax basis due to transfer price manipulation and excessive profit repatriation (De Backer and Sleuwaegen, 2003; Görg and Greenaway, 2002; Haddad and Harrison, 1993). Debate about the impact of MNEs on developing countries is not limited to economic effects alone. There has also been extensive research on the potentially damaging effects of MNE activity on host country society (Baran, 1957) and the natural environment (Daly, 1993; Clapp and Dauvergne, 2005). Scholars have argued that MNEs operating in developing countries may have inadequate safety standards, pollute the host country environment, employ child labor and create sweatshop conditions in their factories (Daly, 1993; Korten, 2001; Clapp and Dauvergne, 2005).
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