Question

According to Theodore Moran, when do the greatest spillovers on the local economy occur?

Select one:

a. When the state is responsible for regulating productive decisions

b. When there is an appropriate balance between multinational corporations and the state in productive decision-making

c. None of the choices given (above/below)

d. When the multinational corporation is free to make the productive decisions

e. When the UN is responsible for regulating productive decisions.

Answer 1

ans =option d

MNCs may have efficiency & other ‘spillover’ impacts on local

competitors (i.e. horizontal spillovers) as well as on upstream & downstream domestic

companies (vertical spillovers). The spillover (broadly described as a transfer of managerial

procedures, production methodologies, marketing techniques or any other know-how embodied

in a product / service) may happen thru a multiplicity of channels. Local corporations may for

example learn to imitate a new procedure/ enhance the quality of their products /

services thru observation, or find out about better procedures / marketing methodologies

thru interaction with foreign managers in corporate chambers & from former

personnel of MNCs. Local companies may also gain from the entry of new suppliers/ professional services as an outcome of the MNC entry. Foreign corporations may act as catalysts for

local suppliers to enhance quality / time efficacy by demanding greater standards.

On the other hand, foreign corporations may have a negative impact on local firms’ output

& efficacy if they ‘steal’ their market share / best human capital. If domestic companies cut production in the face of international competition, they may encounter a greater AC as fixed costs are spread over a smaller scale of production

. Similarly, if the best personnel leave for foreign companies, efficacy declines.