Demerits of MNCs

Alongside their benefits, MNCs have also been genuinely criticised on several grounds, and a balanced study of the topic must cover both sides.

• Repatriation of profits abroad. A large part of the profits earned by an MNC's subsidiary in the host country is eventually sent back ("repatriated") to the parent company in the home country as dividends, rather than being reinvested in the host economy — this is often cited as a leakage of the host country's wealth.
• Threat to domestic small-scale and local industry. Because of their vastly superior capital, technology and marketing strength, MNCs can out-compete smaller domestic and small-scale units, sometimes driving them out of business rather than allowing them to grow.
• Possible exploitation of cheap local labour and resources. Critics point out that some MNCs are drawn to a host country precisely because labour and raw materials are cheaper there, and may not always extend the same wage levels, safety standards or environmental care that they observe in their home country.
• Over-dependence on foreign technology. If a host country relies too heavily on MNCs for technology rather than developing its own research capability, it can remain permanently dependent on foreign firms for future upgrades.
• Influence over domestic economic and cultural patterns. Very large MNCs can, through aggressive marketing and sheer market share, influence local consumption habits, and their sheer economic size can give them disproportionate bargaining power with host governments on policy matters. …