Question

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

Select one:

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

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

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

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

e. When the state is responsible for regulating productive decisions

Answer 1

Answer:

ans =option C

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.