Business Studies

What motivates a host country to give entry to multinational companies?


SOLUTION
There are quite a number of benefits for the host country if they give entry to multinational companies. They are:
  • Employment generation: The government usually lets MNCs to work in areas with unemployment issues or with greater supply of labour. Hence, local people will be recruited in the firms which will lead to employment generation.
  • Research and development: The companies might bring new technology to the host country. The employees would learn the new technology and would therefore enhance their technical knowledge.
  • Increase in GDP and BOP: MNCs help in increasing GDP(Gross Domestic Product) of the host country through their investments and transactions with local suppliers. The BOP (Balance Of Payments) situation of the host country improves due to the flow of FDI Foreign Direct Investment) into the country.
  • Tax revenues: MNCs bring significant tax revenues for the host country's economy.
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