International Factor Movements and Multinational Enterprises
6 important questions on International Factor Movements and Multinational Enterprises
Three types of international joint ventures are:
· The formation of a joint venture with local private interests.
A joint venture where the local government participates
Reasons to start a joint venture are:
· Avoiding governmental restrictions that foreign companies face when doing business abroad. When setting up a joint venture with the domestic company of a particular country, they avoid the governmental restrictions.
· Minimize dividend transfers abroad, which will contribute to a positive development of a nation’s balance – of – payments.
· International joint ventures are a mean of preventing protectionism against foreign imports.
· The rationale for protecting domestic output and jobs from foreign competition is lessened.
Disadvantages to starting a joint venture are:
· Control is divided.
· Success of failure depends on how well companies can work together despite having different objectives, corporate cultures, and ways of doing things.
· Corporate goals and personnel can be changed within each organization.
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Joint ventures lead to welfare gains when:
· The newly established business is able to enter new markets than neither parent could have entered individually.
· The business yields costs reductions that would have been unavailable if each parent performed the same function separately.
Joint ventures lead to welfare losses when:
The consequences of immigration: labour mobility:
· The country that has been left by workers that emigrated suffers losses.
· The workers that stay in a particular country earn higher wages as there is a shortage of personnel.
· Native workers fear labour immigrants as they the latter is willing to work for lower wages and, therefore, will “steal” jobs.
· Yet, lower wages result in lower equilibrium product prices, which is beneficial to consumers.
· Immigrants contribute to economic growth, which is beneficial to the whole nation.
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