Multinational enterprises (MNEs) have gone through a cycle in their encounters with host-country governments. They have at times met hostility and resentment in all countries hosting substantial foreign investment, but nowhere more than in the developing countries from World War II through the 1970s. They were blamed for the national economy's manifest shortcomings, not to mention the historical sins of colonial domination, as well as genuine clashes of economic interest. With the waning of socialism and the coming of debt crises in many developing countries, much of the acrimony vanished, but the issues that it raised continue to dominate the research literature. In contrast the Eastern European economies in transition largely welcomed MNEs with open arms, to clear away the wreckage of state-owned enterprises.

The normative appraisal of MNEs' activities in developing countries could be controversial even without this political background. Advocates of diverse policies toward development seem to concur on a diagnosis that key markets are malfunctioning, or important prices are misaligned to their shadow equivalents, so that saving and investment, the foreign-exchange rate, wage rates, returns to human capital, and other such important magnitudes can be far off the mark. Appropriate levels for them may therefore differ greatly from what the market signals to private decision-makers, and not necessarily in unambiguous directions. The MNEs' allocative decisions both respond to and affect these imbalances and distortions. Does the MNE's presence mean more capital formation or productivity growth than otherwise?