A comment on the multifaceted relationship between multinational enterprises and within-country inequality

Rajneesh Narula,Khadija Van Der Straaten

doi:10.1108/cpoib-10-2019-0080

Abstract

PurposeWhether by direct or indirect action (or by inaction), multinational enterprises (MNEs) can have both a positive and a negative effect on within-country social and economic inequality. This paper aims to comment on this multifaceted relationship between MNEs and within-country inequality.Design/methodology/approachGiven the absence of either robust theory or evidence in the neglected realm of MNEs and within-countries inequalities, this paper offers some general observations, highlights some of the key issues and illustrates possible avenues for future research studies.FindingsThe capacity of MNEs to upgrade economic activity in the host country is a key policy objective. MNEs have arguably contributed to reducing income inequalities between countries. However, the limited evidence available suggests that the gains of FDI are rarely evenly distributed within recipient countries, and many of the underlying dynamics need further investigation.Social implicationsThe authors broaden the engagement with inequality beyond income levels, as this is just one aspect of inequality that shapes or impedes human development. They believe it is necessary – for both MNEs and policymakers – to have a more nuanced understanding of how, and under what circumstances, the presence of MNEs affects inequality in host economies.Originality/valueThis paper relates the large literature on inequality (going beyond the mainstream focus on income inequality) to the mainstream understanding of MNE-assisted development.

Highlights

Inequality in its various forms lies at the heart of much of the contemporary discussion on the world economy over the past two decades, arguably best highlighted by the considerable attention in both the popular and academic press to the publication of Piketty (2013)
Like Oetzel and Doh (2009), we find initial research on the impact of FDI and multinational enterprises (MNEs) on host countries to excessively rely on spill-over arguments and present an overly rosy view of net outcomes for host countries
(2019) suggestion to explore the interaction between MNEs and national economies from this angle can generate important new insights

Summary

Introduction

Inequality in its various forms lies at the heart of much of the contemporary discussion on the world economy over the past two decades, arguably best highlighted by the considerable attention in both the popular and academic press to the publication of Piketty (2013). It is by no means a new theme for socio-economic thought, inspiring Adam Smith, David Ricardo and Karl Marx, to name but a few. MNEs sit at the heart of globalisation, being among the most visible (and tangible) players that shape the crossborder interdependence of economic actors

Objectives

Findings

Conclusion