3.4.3 controlling mncs Flashcards
How can regulations be used to control an MNC?
Could try and raise the costs of firms. Firms which fail to follow regulations could face heavy fines, acting as a disincentive to break the rule.
Why may some developing nations not want to control MNCs?
They could be a useful source of FDI and they might fear that if they control them, they will lose this source. This could mean they miss the opportunity to develop economically.
Why is a legal system of controlling MNCs likely to be more effective in a developed country rather than developing?
The government is less likely to be corrupt and consequently may be able to have bigger influence.
What is self regulation?
When a firm monitors its own behaviour, especially in relation to ethical or legal standards.
Why may it be in the interest of a firm to act ethically?
In order to preserve a good public reputation.
Where is self-regulation likely to be more effective?
In developing countries, where mechanisms to enforce laws are weak or missing.
What do OECD Guidelines encourage?
Firms to adhere to principles of human rights and to practice good conduct for the environment. They are encouraged to regulate their own behaviour against international standards.
What is a limitation of self regulation?
Firms are overly concerned with adhering to global standards and might lose out in a competitive market.
How can self regulation be more efficient?
Since firms can use their knowledge and access to information to control their behaviour, rather than relying on a less efficient external body.
