Chapter 8
The Future of the Transnational:
An Evolving Global Role
True/False
1. The World Bank estimates that approximately one-tenth of the world’s population subsides
on less than $2 per day.
2. Government-funded aid programs flowing between developed and developing countries have
failed to reduce global poverty primarily due to the creation of overly-detailed accountability
systems and the excessive volume of feedback.
3. Experience has shown that encouraging foreign direct investment by MNEs in developing
economies has been less effective than government-funded aid programs in efforts to reduce
global poverty.
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4. Progress in reducing global poverty has been observed to be more closely associated with
investments by MNEs than it has with the foreign aid efforts of national governments and
non-governmental organizations that have historically demonstrated a lack of business
experience.
5. MNEs have successfully insulated themselves from the accusations associated with entering
regulatory environments that permit sweatshops by outsourcing manufacturing to arm’s–
length suppliers.
6. The primary difference between transactional MNEs and exploitative MNEs is that the
former employs an approach that tends to be legally compliant and non-oppressive in its
emerging market dealings.
7. In the past, many MNEs exhibited behaviour that was significantly exploitative or
transactional.
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8. The relationship between transactional MNEs and non-governmental organizations (NGOs)
is frequently characterized by confrontation and accusation.
9. Some transformative MNEs go beyond commercial relationships with their consumers and
offer their products and services to those who most desperately need them, regardless of their
ability to pay.
10. Transformative MNEs are sensitive and responsive to the problems and the needs of the
developing world but the freedom of these MNEs to lead broad-scale efforts to deal with
their root causes is often limited by governance issues and the need to generate profits.
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11. The exploitative approach to managing MNEs is now considered to be a relic from the past
and has been essentially non-existent since the late 1980s.
12. Responsive MNEs act in a way that is sensitive and responsive to the needs of all its
immediate stakeholders.
13. Transformative MNEs commit to leading initiatives to bring life-enhancing changes to their
home countries.
14. A short-term challenge for MNEs is to determine whether they are willing to take a
leadership role in dealing with the problems that are the underlying causes of the anti-
globalization movement.
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15. The Global Compact is a legislated and enforceable code that provides a way for MNEs to
have a more responsive and constructive role in the developing world.
Multiple Choice
16. To buttress the arguments of activists who have demonstrated against increasing
globalization, a former chief economist at the World Bank has argued that the actions and
policies of all the following groups have often damaged developing countries’ economies
more than they have helped them, except:
a. the International Monetary Fund (IMF).
b. the United Nations Global Compact (UNGC).
c. the World Trade Organization (WTO).
d. the World Bank.
17. Which of the following four adjectives are not typically used to describe the manner in which
MNEs might respond to developing world needs:
a. transformative.
b. transactional.
c. exploitative.
d. compensatory.
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18. MNEs that internationalize in developing countries have encountered all of the following
differences pertaining to the labor force, except:
a. lower wages and fewer restrictions on living standards.
b. greater number of hours worked per week.
c. higher standards with respect to working conditions.
d. lower standards for human rights.
19. In the 1970s, Nobel economist Milton Friedman advocated all of the following behaviours by
MNEs, except:
a. focusing only on the interests of shareholders.
b. avoiding pollution.
c. maximizing profits.
d. leveraging cross-country differences in wages.
20. Excessive pressure from all of the following groups has caused exploitative MNEs to close
down manufacturing operations and move to a new location, except:
a. governments.
b. non-unionized employee interest groups.
c. nongovernmental organizations (NGOs).
d. consumers.
21. Exploitative MNEs are often able to extract substantial concessions from host country
governments because host countries are eager to secure which of the following in connection
with new investments made by MNEs:
a. access to the MNEs’ sources of international commercial credit.
b. employment and increased tax bases.
c. business intelligence pertaining to the nature of concessions being offered by other host
countries.
d. complex financial instruments developed in first-world financial markets.
22. Which, if any, of the following business activities are likely to be acceptable to business
ethicists:
a. following local custom and paying bribes to local government officials to secure legal
concessions and subsidies.
b. negotiating aggressively with suppliers to secure low input costs.
c. relentlessly pursuing low-cost labor by investing in countries with weaker labor regulations
and standards.
d. seeking market expansion, regardless of the likely resulting economic, social or cultural
damage.
23. Which of the following accusations is least likely to be levied against exploitative MNEs
e. they may collude with political elites.
f. they may be willing to ignore the welfare of employees.
g. they may subvert the interests of their shareholders.
h. they may violate environmental norms.
24. Which of the following characteristics are not typically associated with transactional MNEs
a. they are generally sensitive not to promote socially or economically unsuitable products
towards emerging market consumers.
b. they tend to conform to labor laws and workplace regulations but avoid sweatshop-like
conditions.
c. they strive to employ non-exploitative attitudes towards the local communities in which they
operate.
d. they acknowledge the need to restrain their profit-maximizing behaviour when engaged in
negotiations with indigenous suppliers.
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25. Responsive MNEs contribute to the development of the poorest nations by engaging in all of
the following activities, except:
a. creating jobs and wealth.
b. focusing on maximizing profitability.
c. catering underserved customers.
d. investing in developing markets.
26. Which of the following principles are not consistent with the behavioral standards advocated
by the United Nations’ Global Compact
a. businesses should uphold the freedom of association and the effective recognition of the
right to collective bargaining.
b. businesses should support a precautionary approach to environmental challenges.
c. businesses should work against all forms of corruption, including bribery and extortion.
d. businesses should comply with their legal duty to act in the best interests of their
shareholders and maximize profitability.
27. MNEs that subscribe to the Labor Standards advocated by the United Nations’ Global
Compact could be expected to do each of the following except
a. prohibit any children from being employed by the company.
b. prohibit unruly or militant employees from trying to convince other employees to join a labor
union.
c. prohibit workplace discrimination.
d. prohibit managers from engaging unemployed individuals in compulsory labor.
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28. Which of the following are not characteristic of the attitudes of transactional MNEs in the
context of their relationships with stakeholders
a. obeys local laws and regulations but uses country differences to gain competitive advantage
b. makes product adaptations if they are economically viable and can increase market share
c. defers responsibility for its social or environmental impact
d. focuses on shareholder returns.
29. Which of the following are not characteristic of the attitudes of transformative MNEs in the
context of their relationships with stakeholders
a) develops products or services specifically to meet local needs.
b) persuades investors of the need for the corporation to be part of the solution.
c) committed to upgrading the lives of its employees inside and outside the workplace.
d) willing to unilaterally make decisions against the best interests of the shareholder where they
conflict with the interests of other stakeholders.
30. A transformative MNE looks at NGOs as
a. An adversary
b. A watchdog
c. A partner
d. An observer
31. Unilever’s development of a simple laundry bar for the rural community can be considered
a. Transformative
b. Responsive
c. Transactional
d. Exploitative
Essay
32. You are employed by a large national chemical manufacturing firm that is considering its
first investment in an emerging market. Your boss is concerned – while she senses an
unprecedented opportunity to grow the firm, she is also mindful of the demonstrations
surrounding a recent gathering of world leaders in which activists voiced a wide range of
concerns over the perils of globalization. She appreciates the need to position the chemical
manufacturing firm in the eyes of prospective stakeholders, but is unsure where to target. In
the hopes of establishing a position that is neither overly exploitative, nor overly
transformative, your boss has asked you for a report detailing the two most extreme positions
that the chemical manufacturing firm could occupy. Compare and contrast these two
characterizations of the MNE-stakeholder relationship in emerging markets, providing
examples you think will illustrate your position.
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33. As the geographic (country) manager for a rapidly expanding multinational industrial
manufacturer, you are responsible for managing the manufacturing operations in a
developing economy. Business is fantastic. Pursuing the mandate given to you by your boss
(“your job is to win at any cost”), your annual bonus alone has grown at a compounded
annual rate of 50% over the past three years. Yet, your conscience has also been growing
heavy. You have come under increasing local pressure as a consequence of an indigenous
newspaper reporter’s efforts to investigate the following incidents associated with your
operations: (i) the high incidence of infant mortality experienced in households situated
adjacent to a lake into which your plant is discharging effluents; (ii) the recent attempted
suicide of two employees who were told that they would lose their jobs if they did not agree
to extend their workday by four hours, despite already working eleven hours per day during a
six day work week; and, (iii) the allegation that your domestic managers regularly secure
expedited customs clearance for the raw materials needed at your manufacturing plant by
taking local officials on jaunts to a nearby casino. A telephone conversation with a trusted
mentor-professor from the college where you earned your business degree leads to the
professor urging you to consider either leaving the company or, initiating an appeal to
headquarters to change its exploitative ways in favour of becoming more responsive in its
foreign business dealings. You choose to accept the challenge of appealing to headquarters
and decide to write a memo to initiate your efforts. However, you are cognizant that while
you are familiar with the distinction between exploitative and responsive approaches adopted
by MNEs, headquarters may dismiss these terms as “academic mumbo jumbo.” What should
you say in your memo to headquarters?
34. While the two extreme characterizations of the MNE-stakeholder relationship (exploitative
and transformative) tend to garner the most media attention, it is the more moderate
perspectives of the MNE-stakeholder relationship (transactional and responsive) that tend to
predominate in the context of FDI in emerging markets. However, given that these two
perspectives represent the middle ground along the spectrum between exploitative and
transformative, the distinctions between transactional and responsive characterizations of the
MNE-stakeholder relationship in emerging markets are occasionally blurred. Clarify the
differences between the transactional and responsive perspectives by comparing and
contrasting the two characterizations, using examples that you think illustrate your position.
Answer:
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