Review Flashcards on Multinational Corporations (MNCs) and Foreign Direct Investment (FDI)

Flashcards to review key concepts related to MNCs, FDI, and their impacts on host countries.

Foreign Direct Investment (FDI)

Investment by a Multinational Corporation (MNC) in businesses in other countries through acquisitions, mergers, or establishing a new operation.

MNC Investment Scale

The scale of investment by an MNC in a host country is often in the millions of dollars.

Government Incentives for MNCs

Governments may offer grants, subsidies, and tax breaks to attract MNC investment.

Balance of Payments

The difference between all money flowing into a country and the outflow of money to the rest of the world in a particular period.

Impact of Inward Investment on Balance of Payments

Inward investment by an MNC can improve a country's balance of payments through direct capital flow, export promotion, and import substitution.

Export Promotion (related to MNCs)

When a multinational uses its production facility in a host country as a base for exporting goods.

Import Substitution (related to MNCs)

When products previously imported are now bought domestically due to MNC production in the host country.

Technology and Skills Transfer

The process by which MNCs introduce new technology, production methods, and business knowledge to the host country, training workers and benefiting domestic firms.

Impact of MNCs on Consumers

Consumers benefit from a wider choice of goods and services, potentially at lower prices, with enhanced designs and services from more industrialized nations.

Impact of MNCs on Business Culture

The presence of many MNCs in a developing nation can dilute local customs and traditional cultures.

Transfer Pricing

The practice of multinational corporations shifting profits to tax havens to avoid tax in developed countries.

Impact of Transfer Pricing on Developing Countries

Developing countries lose an estimated $160 billion of tax revenue annually due to transfer pricing.