The social responsibility of transnational companies in developing countries

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MM 4342 – Global Business Management Individual Assessments Student Name: LIU Yumeng Student ID: 14110852d Group ID: LTL001 The social responsibility of transnational companies in developing countries Abstract Since 1990s, transnational companies have occupied an unprecedented important position in the world. However, the public power of government in developing countries which promotes the development of economy and society is weakened greatly. To check and balance the market power of transnational companies, transnational companies should focus on fulfilling social responsibility in developing countries, which could coordinate development between desire for wealth and social justice (Bondy & Starkey,2014). Because transnational companies and developing countries both have their particularity and complex interest relationship, it is especial
for transnational companies to fulfill social responsibility in developing countries, which is different from developed countries. Introduction In the era of globalization, transnational companies operate all over the world, while developing countries still limit territorial boundaries. When transnational companies’ operation space and resource capability go beyond developing countries’ control, there exists complicated conflict of interest and cooperation relationship. In this situation, one of the core challenges developing countries government faces is how to adjust host country’s institutional system and supervision method. Then, the local resident and social development could get more efficient protection and avoid the potential harm from transnational companies’ unscrupulous investment expansion. Therefore, intensifying transnational companies’ social responsibility consciousness could be an efficient way to cope with the situation mentioned above. 1.The conflict of interest and cooperation relationship between transnational companies and developing countries. Under the background of globalization, transnational companies use technology, captain and management experience to transfer and spread to developing countries, which influences all aspects of developing countries economic development. There are four main reasons why transnational companies have outward foreign direct investment. First, market driven investment pursues larger-capacity new market with growth potential in order to enlarge the global market share. Secondly, efficiency driven investment pursues to lower production cost to increase production efficiency. Thirdly, natural resources driven investment pursues to benefit from natural resources development. Lastly, strategic assets driven investment pursues to occupy strategic resources which could promote future competitiveness. Transnational companies stand for strong market power. Its outward direct investment is driven by market competitiveness, access resources, increase of efficiency and cost reduction. For developing countries, what attract transnational companies to investment is acquiring

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