Impact of MNCs on host countries
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Flip to reveal answersState one benefit of an MNC to a host country.
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All 40 Flashcards — Impact of MNCs on host countries
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Question
State one benefit of an MNC to a host country.
Answer
Job creation (direct jobs in the MNC and indirect jobs through suppliers and services).
💡 Hint
Think: employment.
Question
How can MNC investment affect local suppliers in a host country?
Answer
Local suppliers may get more orders and learn higher standards, boosting local business growth.
💡 Hint
Linkages to suppliers.
Question
What is “profit repatriation” and why is it a drawback for a host country?
Answer
Profits are sent back to the home country instead of being reinvested locally, limiting local economic benefit.
💡 Hint
Money leaves the host economy.
Question
How can an MNC exploit workers in a host country?
Answer
By paying low wages or offering poor conditions compared to home-country standards, especially where regulation is weak.
💡 Hint
Labour standards gap.
Question
Give one positive impact of an MNC on its home country.
Answer
Profits can flow back, boosting shareholder returns and the home economy.
💡 Hint
Profit inflow.
Question
Why might an MNC increase national prestige for the home country?
Answer
Global success can strengthen the country’s brand image and reputation for innovation or quality.
💡 Hint
“National champion” effect.
Question
Host-country benefit: MNCs can create ______.
Answer
Jobs.
💡 Hint
Employment is a key benefit.
Question
State one host-country positive impact of MNCs.
Answer
Investment and technology transfer can raise productivity and wages over time.
💡 Hint
Investment spillovers.
Question
How can MNCs damage local businesses in a host country?
Answer
They may outcompete smaller local firms using lower prices, stronger branding and bigger budgets, forcing closures.
💡 Hint
Unequal competition.
Question
Give one “trade-off” example of home-country impact from offshoring.
Answer
Home country may lose jobs (negative) while shareholders gain higher profits from lower costs (positive).
💡 Hint
Winners and losers again.
Question
How can an MNC improve productivity in a host country?
Answer
By bringing investment, modern equipment and technology that local firms may not have.
💡 Hint
Capital + tech transfer.
Question
Why can MNCs have political influence in host countries?
Answer
They may lobby for favourable laws or tax breaks due to their investment and job creation power.
💡 Hint
Economic power = influence.
Question
Why can MNCs increase competition in host countries?
Answer
They raise competitive pressure, pushing local firms to improve efficiency, quality and innovation.
💡 Hint
Competition effect.
Question
State one host-country negative impact of MNCs.
Answer
Local firms may be driven out by stronger competition from the MNC.
💡 Hint
Local business pressure.
Question
Give one negative impact of offshoring on the home country.
Answer
Jobs may move overseas, increasing unemployment and reducing local incomes.
💡 Hint
Jobs shift abroad.
Question
Host-country drawback: Profits sent back to the home country is called ______.
Answer
Profit repatriation.
💡 Hint
Profit leaves host.
Question
Home-country drawback: Moving production abroad is known as ______.
Answer
Offshoring.
💡 Hint
Jobs can move.
Question
State one home-country positive impact of MNCs.
Answer
Profits and dividends returning to shareholders can increase national income.
💡 Hint
Profit inflow.
Question
How can MNCs contribute to “cultural erosion” in a host country?
Answer
Local traditions and businesses may be replaced by global brands and standardised products.
💡 Hint
Global brand dominance.
Question
How can multinational profits support the home economy?
Answer
They can increase dividend income, investment, and spending within the home country.
💡 Hint
Profits recycle back.
Question
Why is weak regulation a risk with MNCs in host countries?
Answer
It can allow poor labour conditions or environmental harm because enforcement is limited.
💡 Hint
Weak rules = higher harm risk.
Question
How can MNCs improve a host country’s balance of payments?
Answer
Producing for export earns foreign currency and can increase export revenues.
💡 Hint
Exports bring FX.
Question
How do MNCs increase host-country government revenue?
Answer
Through corporation tax and employee income taxes that fund public services.
💡 Hint
Tax base expands.
Question
How might consumers in the home country benefit from multinational operations?
Answer
They may get cheaper goods if production costs fall and prices drop (or more choice).
💡 Hint
Cost savings can pass through.
Question
Why might host-country workers benefit beyond wages?
Answer
They may gain training, career development and transferable skills that increase future earnings.
💡 Hint
Human capital gains.
Question
Give one environmental drawback of MNC activity in a host country.
Answer
Pollution, resource depletion or deforestation from production, especially if standards are low.
💡 Hint
Environment can be externalised.
Question
Why is “profit repatriation” a common exam point for host-country drawbacks?
Answer
It explains why GDP/jobs can rise but long-term local wealth creation may be limited if profits leave the country.
💡 Hint
Benefits can leak out.
Question
Why might the home country lose tax revenue from MNC activity?
Answer
Profits may be booked in low-tax countries rather than taxed fully at home.
💡 Hint
Tax base can shift.
Question
Why is “tax revenue loss” a common evaluation point for home-country impacts?
Answer
Even if the firm is “from” the home country, profits may be taxed elsewhere, reducing public revenue.
💡 Hint
Where profits are taxed matters.
Question
State one home-country negative impact of MNCs.
Answer
Domestic jobs may be lost if production is offshored to lower-cost countries.
💡 Hint
Offshoring risk.
Question
Give one infrastructure benefit an MNC may create in a host country.
Answer
Improved roads, power, communications, or logistics networks linked to the investment.
💡 Hint
Spillover benefits.
Question
Why is MNC impact not always positive?
Answer
Because the impact depends on regulation and how responsibly the MNC behaves (benefits vs exploitation).
💡 Hint
Context + behaviour.
Question
Exam skill: How do you write a strong “host-country drawbacks” point?
Answer
State the drawback, explain the mechanism, then show a consequence for a stakeholder (workers, local firms, government).
💡 Hint
Drawback + mechanism + consequence.
Question
One sentence evaluation: What determines whether MNC impact is “good”?
Answer
The balance depends on regulation, stakeholder outcomes, and how the MNC manages ethics and reinvestment.
💡 Hint
Regulation + behaviour + stakeholders.
Question
What is “dependency” as a drawback of hosting an MNC?
Answer
If the MNC leaves, the local economy can suffer sharply due to job losses and reduced demand for suppliers.
💡 Hint
Too reliant on one investor.
Question
Exam rule: What makes a top answer on MNC impact?
Answer
It balances positives and negatives for host and home countries and applies to the case context.
💡 Hint
Balance + application.
Question
How can MNCs support skills transfer in a host country?
Answer
By training local workers and managers, raising human capital and employability.
💡 Hint
Training = skills.
Question
Exam skill: In “impact on home country” answers, what must you do?
Answer
Balance positives and negatives and link them to specific stakeholders (workers, consumers, government, shareholders).
💡 Hint
Balance + stakeholders.
Question
Exam skill: How do you score well on “benefits to host country” questions?
Answer
Name a benefit and explain the mechanism (HOW it helps), then apply to the specific country and industry.
💡 Hint
Benefit + mechanism + application.
Question
How can MNC offshoring affect domestic suppliers in the home country?
Answer
Domestic suppliers may lose contracts when production moves abroad, reducing local business activity.
💡 Hint
Supplier demand falls.
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Topic 1.6 hub
Multinational companies (MNCs)
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