The proliferation of MNCs began 200 years back, but then, foreign investments were quite limited. Investments were made through portfolio and long-term Greenfield or joint venture investments were low. Globalization, however, has led MNCs to become more dominant players in the global economy.
The end of the cold war that brought the idea of liberalization of the developing markets and opening of their economies has played a major role in international investments. With the vanishing of foreign investment barriers, privatization of the state economic organizations and development of FDI policies, MNCs have started investing aggressively.
FDI has become by far the single largest component of the net capital inflows. It also has effects on the human capital of the economies. Countries benefit substantially from the investment. Investments in developing countries have integrated the developing economies with other countries of the world. This is often referred to as economic openness.
Note − Seventy percent of world trade is controlled by just 500 of the largest industrial corporations. In 2002, the combined sales volume of the top 200 companies was equivalent to 28% of the overall GDP of the world.
