Restraint on development by transnational corporations

Other Names:
Negative development impact of transnational corporations

When transnational corporations introduce into a host developing country a package of resources and capabilities which they own or control, the impact may be such as to retard the development process. Foreign capital may divert profits into unjustifiably large outflows of dividends and service payments to the corporate headquarters. New technology and machine-intensive processes may not always be appropriate for local needs such as employment creation. Managerial and marketing decisions may divert resources from where they are most needed to where they are most profitably sold. Transnational corporations may serve as carriers of modernization, or they may place the host countries in a situation of even greater dependency. At the same time, increased competition among a few giant global firms, especially if they are free to use whatever unfair practices and restrictive business practices they wish on international markets, will inevitably eliminate new entrants, in particular smaller emerging firms from developing countries.

Related UN Sustainable Development Goals:
GOAL 17: Partnerships to achieve the Goal
Problem Type:
E: Emanations of other problems
Date of last update
04.10.2020 – 22:48 CEST