Direct foreign investment by transnational enterprises as a restrictive business practice

The preference of foreign business when investing in developing countries is undoubtedly for equity-based control. The aversion of international enterprises for shared ownership has lessened, particularly in the face of threats of nationalization, or legal requirements for significant local equity participation. However, where the transnational enterprise holds less than 50%, it can still possess control if the other equity is distributed in smaller shares among several interests. Export oriented industries having a large foreign exchange component, and industries requiring a steep investment in research and development, and operations needing support from high-technology and other specialists, are more readily dominated by the transnationals. A particular device favoured to extend control is the construction of a vertically integrated chain from raw material supply, through distribution to final sale point, with the transnational enterprise being able to manipulate every step and exert a compelling leverage on operations where it is technically a minority presence.