Multinational Firms

Theory and Evidence Assess the Extent to Which Multinational Firms Are a Force for Progress

Theory and Evidence Assess the Extent to Which Multinational Firms Are a Force for Progress

Introduction

Faced with increased competition on production costs, more business organizations adopt complex retaining only the ownership of the centers decisions and design centers otherwise known as pulse. At the same time globalization is pushing more and more companies to seek employment outside the country. These reorganizations are not a novelty as from the 70 France has its first competitive relocation. However, two facts new deserve our attention. The first emphasized by Bigay (1999) lies in the fact that globalization is the growing medium-sized companies, but also small businesses, particularly in high technology sectors. Therefore, this vast movement of internationalization of production factors does only more multinational companies. Another development, there is growing internationalization of R & D resulting in the development of international strategies for location of these activities. But unlike the activities of production, companies try to maintain control of strategic activities (Harrod n.d, p.3-4).Theories

Growth

Multinational companies tend to be increasingly global as to be competitive and have a better market share, must be present in more countries, a process known as globalization. These companies are active in several countries have decisive weight in international trade. Through subsidiaries located throughout the world generate economies of scale. In addition, new technologies now allow much better control transaction costs improves the benefits of internationalization ( Casson ed.al 1982, p.21-25). Communication is more fluid, especially using the Internet, which allows better channel the information from all areas of the company to make more accurate decisions as required by the market ( Navaretti and Venables 2004, p.2-6).

Multinational companies have an additional benefit is that prices can be used to transfer or internal transfer for greater territorial expansion. Therefore, they have become an essential tool for financial policy of these companies. Obviously, to maintain growth rates, companies are forced to expand into other markets. Another strategy for growth of multinationals is good management of tax policy tax, i.e. try their benefits taxed in the country where having a subsidiary and tax expense (income tax) is less.The great economic growth in the country is made through rapid development and mammoth size. This makes the foreign investors to direct foreign investment. This investment later generate stable and quality employment. ( Navaretti and Venables 2004, p.7-12).

Market power theory

In economics, a firm has market power if it is able impose a pr ix different from that which would result from perfect competition. In theory, perfect competition, market power is not a problem because no firm or group can determine prices. All companies are Takers price (price taker) they do not control the price and they react taking investment decisions and production. More generally, a firm has market power if it can profitably deviate unilaterally and prices. Any attempt to measure or understand the market power, actual or potential, begins a clear definition of the relevant market, both geographically ...