Management of Multinational Corporations

Globalization is a two way process. Initially, countries allow the inward flow of FDI and restrict or prohibit outward FDI. Gradually countries implement more liberal policies, permitting both inward and outward FDI. Exchange rate stability, balance of payments, level of technological and manpower development are among the many considerations for restricting outward FDI. Countries like US and UK have open economies; they do not restrict trade and capital flows. India is conservative in its approach towards outward FDI. Over the years, US dominance in world trade and capital flows has been decreasing.

Developing nations are emerging as favorable sources and destinations for foreign investment. Through FDI, home countries benefit by gaining access to new markets and efficient locations. This enables them to capture large marketshare. The FDI recipient countries benefit through technology transfer, improved management capabilities, increased employment opportunities and faster economic growth and development. By stipulating local content requirements, the host country is also able to improve its balance-of-payments position.