Abstract
Globalization gives companies access to new markets, thus facilitating a process wherein one can choose to produce, buy resources or sell in different countries according to their specific attributes.
Multinational company outsourcing creates jobs in countries where the wages are lower compared to the country where the products are manufactured. Both the new employees and the company benefit from this situation as the company saves money and the workers can avail of pay packages in tandem with the current industry rate or even one that exceeds the average.
Paul Glewwe's study shows that Vietnamese people working in foreign –owned companies are often paid twice the average salary. If we think about it, we realize that the savings enable the company to be more competitive on the global market, and thus earn more profits and develop itself. Development of a company is often synonymous with hiring, which can be executed at the headquarters of the company or in any country where the company runs its operations.
Outsourcing is a type of foreign direct investment that economically strengthens the country receiving the money. The choice of the countries where the companies invest depends on the trust the companies have in that particular market: the political situation and the business opportunities. Countries do everything in their power to gain political stability and create economic advantages such as lower taxes for foreign companies on their soil.
In 2006, the most significant flows could be observed between the European Union, which received €421 billion in 2006 according to the CNUCED, the United States, €136 billion, (the same year) and Japan. Tradewise, they constitute the leading countries or region; China (€54 billion in 2006) is positioned fourth. Trade agreements between countries such as the European Union (EU) or the North America Free Trade Agreement (NAFTA) encourage foreign direct investment as a firm in a country A is more likely to invest in country B when both A and B conclude agreements on tariffs regarding raw materials or manufactured goods.
