Multinational Enterprises and Sustainable Development in Emerging Markets

Abstract

Foreign direct investment (FDI) is often considered positive for the host countries in emerging markets as it brings in foreign capital and job opportunities. The relationship between MNEs and local governments has however seen its ups and down. Over the years, it has changed from a period of conflict after the World War II, where MNEs were investing for purposes felt to be detrimental to government policies, to a more co-operative nature. The 1980s and major part of 1990s saw the co-operative relationship leading to the danger of race to the bottom through excessive locational competition. In this paper, we examine the most influential literature from 1970s onwards and the current state of this relationship. Our analysis reveals that the increased tensions caused by anxiety due to 9/11 and subsequent development in the political economy, company strategies and government policies. We examine the changing relationship between multinationals and national governments. Thanks to globalisation MNEs are increasingly becoming more powerful and often this process is accelerated due to lack of any collaboration between MNEs and the governments. Thus, governments, particularly in emerging markets, are becoming more and more dependent on multinationals from the developed countries. In this study, we intend to evaluate whether MNEs can play a positive role towards problems of emerging markets such as poverty reduction and economic development.