The International Transmission of Knowledge by Multinational Firms: Impacts on Source and Host Country Skilled Labor

Abstract

The effects of multinational firms are often assessed with casual arguments, sometimes tainted with political prejudices and nationalistic biases. In the 1960’s and 1970’s for example, there seemed to be a vague view among many developing countries that multinationals are exploitative in nature, and that they may undermine both economic development and political independence. The developed countries tended to take the opposite point of view, and naturally resisted developing countries’ attempts at expropriation and excessive taxation. Beginning in the mid-1980’s, these views seemed to reverse themselves. Many developing countries radically liberalized their foreign investment and foreign ownership policies, actively seeking to attract foreign capital. Direct foreign investment is now seem as a means not only to attract capital and provide jobs, but as a major source of technology transfer and learning-by-doing. Curiously, many developed countries (or at least political constituencies within those countries) have also reversed their view, now seeing multinationals as “exporting jobs” and thus a threat to domestic labor and engaging in “environmental dumping” to avoid high standards in their home countries.